John Lothian Newsletter: Open for business: Government shutdown, default averted; Knight Capital Agrees to $12 Million Settlement for 2012 Errors; Fed Weighs Surcharge on Banks' Commodity Businesses

Oct 17, 2013

First Read

Welcome Back to Work
I would like to welcome back to work the employees of the U.S regulatory agencies in Washington, DC. In a sports related note, I wanted to mention another controversy in Washington about the name of the professional football team there. The Washington Redskins are under increasing pressure to change their name due to the derogatory nature of it. So the team has decided to change their name and will henceforth be called just the Redskins.

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Connecting the Dots
John J. Lothian
My friends at the National Futures Association asked me to connect the dots about my new managed futures newsletter offering from John J. Lothian Managed Futures, LLC. So here goes.

I am going to publish a daily newsletter with the trading signals from the Maple Sugar trading program that is listed in the disclosure document of John J. Lothian Managed Futures, LLC (see the disclosure document at johnlothian.com/cta). This is the same program that was offered and traded with real customer funds by John J. Lothian & Company, Inc. from 2004 to 2011 when it was registered with the NFA as a Commodity Trading Advisor. We will offer it for FREE for six months. We are aiming to start November 1, 2013.

I withdrew John J. Lothian & Company, Inc. from registration as a CTA back January of 2012 and had registered John J. Lothian Managed Futures, LLC with the NFA in July of 2011. My intent was to transfer the managed futures business from the first company to the second in order to keep cleaner lines and minimize conflicts between my growing media business and my much smaller CTA business. A few things got in the way, including the collapse of MF Global and the growth of the rest of my media business.

To read the rest of the story, visit the JLN website at http://jlne.ws/GZSDDE

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Sign Up for John J. Lothian Managed Futures, LLC Trading Signals
Email me at johnlothian@johnlothian.com

Wolfgang Eholzer

We Have Liftoff: Wolfgang Eholzer on the New Eurex Trading Platform
JohnLothianNews.com

Wolfgang Eholzer, head of Eurex Trading IT, has seen his share of technology changes to exchange platforms. The latest, and biggest of his career, was the creation of a brand new trading platform for Eurex, called T7. Eholzer spoke with John Lothian News editor-in-chief Jim Kharouf about building the new system and the thought process that went into the project, which has been rolled out gradually beginning in December 2012 and is now complete.

Watch the video »

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Nicole Rohr Runs for Crohn’s & Colitis Foundation (CCFA)
John Lothian News
From (former JLN editor) Nicole Rohr:
Thank you for supporting me in my personal challenge to complete the Rock & Roll Las Vegas Half Marathon, while raising money and awareness for the Crohn’s & Colitis Foundation (CCFA)! Through Team Challenge, I have committed to raising $3,800 to help the estimated 1.4 million Americans living with Crohn’s disease or ulcerative colitis. A minimum of 82 cents per dollar raised by CCFA goes directly to research and patient support. Your tax-deductible contribution will go toward curing Crohn’s and ulcerative colitis, and improving the quality of life of children and adults affected by these diseases.
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***** With my new knees I was told not to take up running, so it is good to have young people like Nicole getting out there and supporting such worthy causes. Please help her reach her goal. It is times like that I really mis Mel Falis. He was such a persistent and cheerful giver of good causes.

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Knight Capital Agrees to $12 Million Settlement for 2012 Errors
Bloomberg
Securities regulators fined Knight Capital Americas LLC $12 million for the trading malfunction that roiled the U.S. stock market in August 2012, saying the firm ignored dozens of error messages before its computers bombarded exchanges with millions of unintended orders.
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CFTC split over JPMorgan ‘whale’ deal
FT.com
One commissioner insisted that the Commodity Futures Trading Commission should have tried to prove that the bank intentionally manipulated a key index
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***** I have this vision of Commissioner Chilton dressed up like Captain Ahab giving a speech about all the whales of Rock N Roll.

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Warren Buffett on Driving Violations, Baseball and Jamie Dimon
NY Times DealBook
Warren E. Buffett offers an unusual defense of Jamie Dimon, comparing the billions of dollars that JPMorgan Chase has paid in fines to state troopers handing out a speeding ticket.
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***** I would hate to see how fast JPM would have to be driving to get a fine that big.

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CPM Group: Silver “Manipulation” Claim Based On Lies & Misrepresentations-GATA Responds!
Yahoo Finance
Cambridge House International is pleased to announce the world’s upcoming premier silver investment conference, The Silver Summit 2013, to take place at a time in which, according to CPM Group’s founder and managing director Jeffrey Christian—silver manipulation claims are now all proven to be based on “lies and misrepresentations”.
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***** You tell them Jeff!!! I remember specifically sitting next to Bill Murphy at the CFTC hearing on metals a few years back and calling the likes of GATA “rent seekers.” I was branded a ‘banker b*tt-buddy.”

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Brokers Often Allowed to Scrub Complaints
WSJ.com
Stockbrokers are being routinely allowed to scrub some customer complaints from their public records, leaving investors in the dark about potentially troubled advisers, according to a study of more than 1,600 arbitration cases.
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***** This is a horse hockey policy. If I asked Dan Roth, CEO of the NFA, to do the same thing for me (assuming I needed it done), he would break a rib laughing me out of the building. We need some harmonization here and it should be the futures industry’s tune.

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Bernanke Won’t Have to Testify in AIG Case—For Now
WSJ.com
Fed Chairman Ben Bernanke doesn’t have to testify under oath about the government’s 2008 decision to bail out American International Group, at least as long as he holds his current position.
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***** I really wanted to see him show up in his helicopter for the trial.

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GlobalRisk Releases Interest Rate Swap Valuation Module
WatersTechnology
Chicago-based risk analysis technology provider GlobalRisk has launched a new interest rate swap (IRS) valuation component of its FirmRisk risk management platform, dubbed the GRC SwapEngine, to provide traders, hedge funds, brokerages, futures commission merchants, interdealer brokers, clearing firms and exchanges with the ability to value IRS portfolios under various market conditions such as stock market crashes and defaults.
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***** Make sure you get this in time for the next default party in February.

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China’s Dagong Takes Aim at U.S.
WSJ MoneyBeat
China’s Dagong Global Credit Rating Co. on Thursday downgraded its view on U.S. government debt, saying the country was on the verge of default, despite an 11th hour deal that ended the budget standoff.
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***** Dogone that Dagong!

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Occupy London: two years on
Financial News
This week marks the two-year anniversary of the anti-capitalist Occupy movement crossing The Pond and spilling over into the City of London
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***** You are welcome London!!

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Tom Regazzi

Single Minded: Tom Regazzi of UBS Finds a Niche with Single Stock Futures
JohnLothianNews.com

Single stock futures in the United States were launched in 2001, but are often forgotten since their big splash introduction twelve years ago.

Quietly, however, single stock futures have been growing nicely at OneChicago, the sole marketplace for the instrument. Through the first nine months of 2013, its volumes are up 49 percent, with 6.96 million contracts traded, topping total volumes posted in all of 2012.

This market has also caught the eye of UBS and Tom Regazzi, managing director at the firm’s Global Synthetic Equity department. He spoke with JLN editor-in-chief Jim Kharouf about how UBS uses single stock futures and the potential for the product going forward.

Watch the video »

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MarketsWiki

MarketsWiki Page of the Day
Debt ceiling
jlne.ws/oUETNR

MarketsWiki Recent Updates

People

Fernando Centelles; Tom Regazzi; Garry Jones

Companies, Organizations and Groups

OptionMONSTER Holdings Inc; London Metal Exchange; OneChicago, LLC

Miscellaneous

Flash Crash; Debt ceiling

Statistics

44,382,152 pages viewed, 7,861 articles, 166,481 edits
MarketsWiki Statistics

Lead Stories

Open for business: Government shutdown, default averted
CBS News
After 15 days of a government shutdown and on the eve of when the country was set to lose its borrowing authority, Congress passed legislation to fund the government and avert a default Wednesday night. President Obama later signed the bill, officially reopening the government and allowing federal employees to head back to work.
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Fed Weighs Surcharge on Banks’ Commodity Businesses
WSJ.com
Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical commodities assets.
jlne.ws/1gmDdZR

U.K. FCA Opens Formal Probe Into Foreign-Exchange Trading
Bloomberg
The U.K. markets regulator opened a formal investigation of currency-rate trading amid allegations of manipulation in the $5.3 trillion-a-day market that have triggered similar probes in the U.S. and Switzerland.
jlne.ws/1gmDdJu

French government against intra-day financial trading tax
Reuters
The French government opposes extending a financial transaction tax to intra-day trades, a move backed last week by the finance committee of the lower house of parliament, France’s budget ministry said on Wednesday.
jlne.ws/1aQNTZG

European dark pool equity trading jumps
FT.com
Share trading on controversial off-exchange venues in Europe has risen 45 per cent in the last six months, underlining their growing popularity with the region’s institutional investors, according to new research.
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Rising Tide Lifts Money Managers
WSJ.com
Big banks are suffering from slumps in mortgage lending and bond trading, but the asset-management business is booming.
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Madoff Employees Lied, Prosecutor Says
WSJ.com
Five former employees of Bernard L. Madoff’s former firm generated “millions of pages of lies” that allowed the convicted financier’s Ponzi scheme to continue, prosecutors told a jury on the first day of a criminal trial.
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Regulatory

Shutdown Complicates CFTC’s ‘Whale’ Settlement
By Jamila Trindle – WSJ MoneyBeat
The Commodity Futures Trading Commission had to call in extra hands to help process its $100 million settlement with J.P. Morgan Chase & Co. Wednesday morning. The enforcement division has had only eight permanent staffers working during the shutdown, in addition to people kept on to work on specific ongoing legal cases.
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Regulators set to round on data providers
FT.com
The data centres that house modern day securities trading resemble unremarkable high security barns, but they have been labelled by one of the US’s chief legal officers as high-tech insider trading hubs.
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U.K., Hong Kong Widen Forex Probe
WSJ.com
An investigation by global regulators into potential manipulation of currency markets appears to be widening, with confirmation that more regulators are taking part. The U.K.’s financial-services watchdog said Wednesday for the first time that it is working with other domestic agencies on the inquiry. The Financial Conduct Authority, or FCA, also confirmed that it is cooperating with several agencies overseas.
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Lack of cross-border swaps clarity starts to bite
Financial News
Buyside firms are moving their trading in privately negotiated derivatives away from US banks to avoid being caught by aggressive US derivatives reforms. The development follows a series of warnings by European institutions and trade bodies who have long feared that the US Dodd-Frank reforms could adversely affect European institutions. The situation has also been exacerbated by the shutdown of the US federal government.
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Bankers follow the ‘big tobacco’ guide to lobbying
Financial News
The industry has used diversionary tactics and deliberately misleading arguments to drag out the process of regulatory reform
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Veteran Securities Litigator Appointed Chief Of New York’s Investor Protection Bureau
MondoVisione
Attorney General Eric T. Schneiderman today announced his selection of Chad Johnson to serve as Chief of the Attorney General’s Investor Protection Bureau. In that role, Mr. Johnson will be charged with enforcing New York State Securities laws and overseeing the bureau that has spearheaded critical financial industry reforms on behalf of New Yorkers. Mr. Johnson has more than 20 years of experience litigating securities cases on behalf of both shareholders and financial institutions.
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Statement From US Treasury Secretary Jacob J. Lew
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Statement Of CFTC Commissioner Scott D. O’Malia Regarding JPMorgan’s Use Of Manipulative Device
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Concurrence Of CFTC Commissioner Bart Chilton In The Matter Of JPMorgan Chase, N.A. (JPMorgan)
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Exchanges & Trading Facilities

BME Expands the Information on ETFs
Bolsas y Mercados Espanoles
BME has expanded the ETFs content on its corporate websites and has created a specific mini-site for this financial product. On www.bmerv.es/etfs, all the relevant information on ETFs listed on the Spanish stock exchange is thus available through a single point of access.
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Question marks surround Dalian iron ore futures contract ahead of launch
Risk.net
Although the market is excited about the new contract’s possibilities, uncertainties remain over physical delivery capabilities and liquidity levels
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Twitter tussle highlights exchanges battle
FT.com
The $1bn Twitter initial public offering enhances NYSE’s technology franchise and comes as 83 companies have raised $32bn on the exchange this year
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Hedge Funds & Managed Futures

For hedge funds, debt crisis largely business as usual
Reuters
Hanging tough seems to have been the right strategy for a good number of money managers now that it appears a stop-gap deal to avoid a federal debt default and reopen the U.S. government is on the verge of passing.
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Banks & Brokers

Advisers Hear Crickets During Debt-Ceiling Drama
WSY.com
Amid the turmoil in Washington this month, investment advisers have been hearing something unusual from their clients: nothing. “I don’t think I’ve gotten a single call about this,” said Julius Ridgway, an investment adviser at Medley Brown, based in Jackson, Miss. “It is a little bit odd.”
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Pact Unveils New Details on ‘Whale’ Trades
WSJ.com
A probe into J.P. Morgan Chase’s “London whale” trading debacle sheds new light on aggressive moves the bank’s traders used to mitigate ballooning losses.
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The biggest banks just keep getting bigger
Financial News
It is sometimes said to be tough at the top. But as the number of investment banks that can be considered bulge-bracket narrows, it is tougher still for those in the middle and at the bottom.
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Authorities prepare ConvergEx charges
FT.com
One of the biggest brokers that serviced public pension funds and large institutional traders in settlement talks over allegations of overcharging
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Banks cut holdings in Markit
Financial News
Goldman Sachs, JP Morgan and RBS were among the biggest selling shareholders in data giant Markit earlier this year
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Robert Smith exits as KCG’s European chief
Financial News
Former Getco trader is first executive to leave KCG’s London business since it initiated a review of its headcount last month
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BNY Mellon flooded by $10bn in cash
FT.com
Bank is one of just two that act as middlemen in $2tn tri-party repo market, where financial institutions pawn assets in exchange for short-term loans
jlne.ws/1gmDego

U.S. prosecutors grill ex-Countrywide exec in BofA mortgage trial
Reuters
U.S. prosecutors grilled a former executive of Bank of America Corp’s Countrywide unit in federal court on Wednesday, seeking to show she pressed employees to churn out thousands of substandard loans with little regard for their quality.
jlne.ws/1gmDg7W

Clearing & Settlement

LCH.Clearnet SA and NYSE Euronext enter into long-term agreement for clearing of continental derivatives
LCH.Clearnet SA, the Paris-based clearing house of LCH.Clearnet Group Ltd, and NYSE Euronext today announced they have signed a new five-year contract for LCH.Clearnet SA to clear NYSE Euronext’s continental listed derivatives until December 2018. It replaces the current clearing services terms and contract, which were due to expire on 31 March 2014.
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DTCC’s Bodson Appointed Omgeo Board Chairman
WatersTechnology
The Depository Trust and Clearing Corporation’s president and chief executive officer will align the business strategies of DTCC and Omgeo, following DTCC’s 100% acquisition of Omgeo
jlne.ws/1gmDegp

HKEx moves derivatives clearing and trading platforms to Genium Inet
Finextra
Hong Kong Exchanges and Clearing Limited (HKEx) has upgraded the trading and clearing systems for its derivatives market – HKATS (Hong Kong Futures Automatic Trading System) and DCASS (Derivatives Clearing and Settlement System) – to Genium INET, a new technology platform that provides better performance and supports the further development of the market.
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Technology

Custom House To Offer Compliance Portal
Wall Street & Technology
Custom House Global Fund offers regulatory and compliance portal for alternative investment funds.
jlne.ws/1gmDegq

Bats Chi-X Europe Rolls Out Trade Reporting Services
WatersTechnology
European multilateral trading facility (MTF) Bats Chi-X Europe has announced the introduction of BXTR, a suite of trade reporting services for the pan-European trading community.
jlne.ws/1gmDg81

Squawker’s Algorithms-Free Platform Has Successful Pan-European Launch
Wall Street & Technology
Squawker has completed their initial European launch with great success, according to this morning’s press release. The sell-side block negotiation platform is the world’s first to exclude algorithms and high frequency trading, driven by negotiation and interaction through private chats.
jlne.ws/1gmDg83

Instinet Launches ‘Indigo’ Trade Analytics Platform
WatersTechnology
Instinet has added a new web-based trade analytics platform ? dubbed Indigo ? to its analytics suite.
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Enforcement

Statement on foreign exchange market investigation
Financial Conduct Authority
We can confirm that we are conducting investigations alongside several other agencies into a number of firms relating to trading on the foreign exchange (forex) market.
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Environmental & Energy

U.S. Remains Vulnerable Despite Potential Energy Independence
The Wall Street Journal
Forty years ago this week, when big oil producers in the Middle East slapped an embargo on oil exports to the U.S., the shock was severe: Crude-oil prices spiked, fuel lines snaked behind gas stations and years of stagflation followed. Starting with Richard Nixon, eight presidents have urged the country to strive for energy independence as a way to forestall a repeat of 1973.
jlne.ws/1hXcH4G

California poised to adopt first-in-nation energy storage mandate
San Jose Mercury News
A California law that requires utilities to get 33 percent of their electricity from renewable sources like solar and wind is widely credited with accelerating the state’s cleantech economy. Now state regulators are poised to compel utilities to invest in “energy storage,” which could jump-start technology long considered the holy grail of the electricity industry.
jlne.ws/16OByX2

TransCanada Expects U.S. Decision on Keystone XL by End of March
Bloomberg
TransCanada Corp. (TRP), Canada’s second-largest pipeline company by market value, expects a U.S. ruling on the Keystone XL pipeline in the first quarter of 2014.
jlne.ws/19RpgO7

Merkel Backs EU Carbon Fix in First Post-Election Speech
Bloomberg
German Chancellor Angela Merkel came out in favor of a European Union proposal to bolster the region’s carbon market, triggering the biggest jump in emission prices in more than three months.
jlne.ws/GYJLOo

Asia-Pacific

China warns of slowing demand from emerging markets
Reuters
China’s exporters face a difficult time in coming months as demand from emerging markets slows, the Chinese trade ministry warned on Thursday after the latest trade data showed sales to Southeast Asia slowed sharply in September.
jlne.ws/1gmDg86

There Will Be Mud
WSJ.com
Oil is murky, not least because it’s hard to get decent information about what’s going on with supply and demand. And it is getting harder, according to a man who knows a thing or two about the business. China will overtake the U.S. as the world’s largest importer of crude oil. And China doesn’t exactly bombard the markets with timely, reliable figures on its oil usage.
jlne.ws/1gmDg87

Japan toughens up on loans to mobsters
FT.com
Bankers association to work with police agency to share data in bid to deny customers with links to criminal groups access to credit
jlne.ws/1gmDegu

Corruption watchdog slams Chinese firms’ lack of transparency
Reuters
The anti-corruption watchdog Transparency International has admonished Chinese companies for their opaque business practices while praising Indian firms’ relatively high standards, in a survey of emerging market multinationals released on Thursday.
jlne.ws/1gmDg88

Frontier Markets

PE firms’ emerging markets buyout dreams unrealised
Financial News
The emerging markets gold rush may not be over but fears surrounding exits and returns indicate a significant slowdown. The mood in many emerging market economies appears to be cautious.
jlne.ws/1gmDegx

Africa turns to sukuk to fund infrastructure
FT.com
Use of Islamic finance is likely to increase as countries in sub-Saharan Africa tap into Middle East investors to fund large infrastructure projects
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John Lothian Newsletter

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