John Lothian Newsletter: Prosecutors Suspect Repeat Offenses on Wall Street; Cargill Makes Ex-Jefferies Hire to Start Metals Trading; Bats Chi-X Europe eyes auction play

Oct 30, 2014

First Read

SEC Warned Before About Early Release Weak Spot
Scott Patterson and Ryan Tracy – MoneyBeat – WSJ
Securities and Exchange Commission officials were tipped off earlier this year that some traders could be getting regulatory filings shortly before they’re published on the agency’s website, according to people familiar with the discussions.

***** I once earned some CTA execution business by refreshing my browser repeatedly on the hour to get a trading signal published on the Internet on the hour rather than wait for the browser to automatically refresh itself. My trade executions were a tick better than the competitions. Getting the first look can make a difference, but there was nothing illegal or wrong about what I did. It was just smart.


CME profit rises 22.5 pct on higher trading volumes
CME Group Inc, the world’s largest futures market operator, reported a 22.5 percent rise in quarterly profit, helped by strong trading volumes.

***** The words “strong trading volumes” are music to my ears.


MGEX Board Appoints Public Directors, Officers, Committee Assignments
At its October 28, 2014 Organizational Meeting, the MGEX Board of Directors named 2014-2015 public directors, Board officers and approved committee assignments. Four public directors were appointed by the Board: Steve Fanady and William R. Power will each serve one year terms while Michael V. Dunn and Alan J. Swimmer will each serve two year terms.

***** Wasn’t Mike Dunn on the KCBT’s board before they got bought by the CME Group?


Euronext Launches Rapeseed Derivatives Complex
Euronext, the leading exchange in the Euro zone, is announcing the launch on 14 November 2014 of a full Rapeseed derivatives solution. The only product of its type to include such a wide range of products, it will allow the industry to trade individual futures and options contracts for rapeseed grain, meal and oil. Euronext is the first exchange in the world to offer this combination of hedging instrument for rapeseed.

***** Euronext gets bigger into commodities and futures, giving hedgers and traders better tools to manage their specific rapeseed risk. And this creates the rapeseed crush.


Charlotte Crosswell, CEO, Nasdaq OMX NLX – Startups Aren’t Just Found in Garages

“When people are sitting there talking about you and criticizing you or doing something against you, that means they’re taking notice.”

Charlotte Crosswell, CEO of Nasdaq OMX NLX, talks about her introduction into the financial industry and how she found herself in her current role. Beginning with a temporary position at Goldman Sachs, Crosswell assisted a salesperson who needed someone who understood French. She later moved on to the London Stock Exchange and has been in the exchange world ever since. Because of her own experiences, Crosswell emphasizes the importance of work experience versus just having a degree. Crosswell also discusses startup companies and how despite having the Nasdaq name, Nasdaq OMX NLX is still considered a startup in which she still works persistently to keep relationships with investors. Finally, Croswell discusses how being tough and having “the skin of a rhino” is necessary, especially in startups, to keep yourself protected from critics and opposition.

Watch the video »


Do Financial Experts Make Better Decisions Than the Rest of Us?
Bourree Lam – The Atlantic
There are experts, and then there’s everybody else. In finance, experts have studied the subject and follow the markets closely, so you’d expect that they’d be superior at betting on the stock market as well as on other financial matters, right? Well, perhaps not so much. As the psychologist Philip Tetlock—who did a 20-year study on the subject—famously said: Experts are poorer at predictions than dart-throwing monkeys.

***** For the record, dart-throwing monkeys get a lot of practice throwing those darts. They are especially accurate after a couple of beers.


Fidelity Survey: Mobile Financial Apps Bring Higher ROI
Ivy Schmerken – Wall Street & Technology
A Fidelity survey found that investors relying upon mobile finance apps are more engaged with their finances, with over 40% earning a 20%-plus return over the past 12 months.

***** They also found that investors using an app, while in a Starbucks drinking an espresso, had even bigger outsized returns. Who knew?


The Pimco Food Truck Lives On
Erik Holm – MoneyBeat – WSJ
The guy who quit his finance job to start a food truck is going back to managing money. But don’t fret: His food truck will live on. Jeremie Banet left Pacific Investment Management Co. in May after a three-year run as a portfolio manager there.

***** And if you got your espresso from this food truck, you did even better, but only if you brought your pet monkey.


CME Group to Host Seventh Annual Global Financial Leadership Conference
CME Group will host the seventh annual Global Financial Leadership Conference (GFLC) Nov. 17-19, 2014, at the Ritz-Carlton Beach Resort in Naples, Florida. The GFLC is an exclusive event that brings together decision-makers from the world’s leading financial institutions to discuss the global investment climate and outlook, debate critical economic issues and share insight and analysis of geopolitical trends and the global financial landscape.

***** Some year I will open my Wonka Bar and find that golden invitation to the CME’s GFLC.


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Lead Stories

Prosecutors Suspect Repeat Offenses on Wall Street
Ben Protess and Jessica Silver-Greenberg – Dealbook – NY Times
It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave.

***JM: When has it EVER worked to count to “two-and-three-quarters” before starting to count over again while yelling about being really disappointed?

Cargill Makes Ex-Jefferies Hire to Start Metals Trading
Joe Deaux and Shruti Date – Bloomberg
Cargill Inc., the biggest closely held company in the U.S., hired the former head of metals trading at Jefferies Group LLC to begin buying and selling industrial metals on behalf of clients.

Bats Chi-X Europe eyes auction play
Tim Cave – Financial News
Bats Chi-X Europe, Europe’s largest equity exchange, is to introduce an opening and closing auction for its ETF listings and may expand the service to stocks at a later date, heralding a potential new front in its six-year battle with incumbent exchanges.

Iosco warns on data challenge to risk oversight
Jeremy Grant – Financial Times
The top body representing global markets watchdogs has issued a warning over the proliferation of data collection systems in the $700tn derivatives markets, saying regulators will be unable to spot risks building up in the financial system unless data are aggregated properly.

Tokyo Exchange Lures Speed Traders With Cost-Cutting Plan
Eduard Gismatullin – Bloomberg
The Tokyo Stock Exchange should further reduce price increments for the shares of its biggest listed companies to defend its market share, according to a research firm that found previous cuts lowered trading costs.

Fed Closes Chapter on Easy Money
Jon Hilsenrath – WSJ
The Federal Reserve said it would end its long-running bond-purchase program, concluding a historic experiment that stirred disagreement among policy makers, economists and investors about its impact even though the central bank said it helped accomplish its goal of reducing unemployment.

Blow to asset managers in ETF arena
Tracy Alloway in New York – Financial Times
The long-running war between the mutual fund industry and the burgeoning exchange traded fund sector appears to have reached a turning point. Asset managers who run mutual funds have watched with envy as ETFs have grown into a $2.6tn global asset class by offering investors cheaper products that trade like stocks but passively track indices or other baskets of securities.

‘Coffin corner’ threat to financial stability
Satyajit Das – Financial Times
Modern financial markets increasingly operate at what aviators term “coffin corner”, flying at the edge of structural integrity. This is because the nature of risk within markets has changed. Exogenous risk, exposure to external shocks such as economic or political events, is increasingly exacerbated by endogenous risk. New institutional arrangements and banking regulations have altered market structures in ways likely to amplify shocks in a future financial crisis.


SEC Tried to Make Markets Fair. Here’s What Happened.
Nick Baker and John Detrixhe – Bloomberg
Two decades ago, a system for sending U.S. corporate filings over the Internet was hailed as a victory for transparency. Today, the Securities and Exchange Commission’s Edgar website is engulfed by concern over opacity.

FIA PTG Blog: Equal and Instant Access to Government-Released Data
The government’s release of data that has the potential to move markets is an important issue to FIA PTG members. Delays and inaccuracies are problematic for everyone because they decrease confidence in the fairness and integrity of our markets. That’s why FIA PTG advocates for accurate and simultaneous release of all government released data.

Depository Trust Drops Remaining Data Claims Against CFTC
Andrew Harris – Bloomberg
Depository Trust & Clearing Corp., having had most of a lawsuit over data-reporting requirements thrown out, agreed to drop the rest of its claims against the U.S. Commodity Futures Trading Commission. The regulator and New York-based DTCC, which acts as a transaction data repository, agreed to the dismissal of the remaining claims, they said today in a federal court filing in Washington.

CFTC Staff Provides No-Action Relief for Victoria University of Wellington, New Zealand, to Operate a Not-For-Profit Market for Event Contracts and to Offer Event Contracts to U.S. Persons

Remarks by Executive Vice President, Regulatory Operations Susan F. Axelrod From the SIFMA Complex Products Forum

MiFID II/MiFIR: Europex Calls Upon ESMA And The European Commission To Set A Proportionate, Activity-Based Definition For Commodity Derivative Contracts “That Must Be Physically Settled”

Remarks To The SIFMA Complex Products Forum, Norm Champ, Director, SEC Division of Investment Management, New York, NY, Oct. 29, 2014

Exchanges & Trading Facilities

FCA: EU dark pool caps ‘clunky
Tim Cave – Financial News
A senior official from the Financial Conduct Authority has branded proposed EU caps on dark pool trading as a ‘clunky’ policy measure, in a sign of the growing tensions between the UK and European regulators on new trading rules.

ASX improves back office operations with GoldenSource
The Australian Securities Exchange (ASX) and GoldenSource, a leading independent provider of Enterprise Data Management (EDM) solutions for the securities and investment industry, today announced the successful re-architecting of ASX’s core back office systems.

CBOE Holdings Declares Fourth Quarter 2014 Dividend
CBOE Holdings, Inc. announced today that its Board of Directors has declared a quarterly cash dividend of $0.21 per share of common stock payable on December 19, 2014, to the unrestricted common stockholders of record on November 28, 2014.

LME fee increase could widen HFT bid/offer spreads – Westgate
Metal Bulletin
The London Metal Exchange’s decision to increase fees by an average of 34% from next year could mean that high-frequency traders will need to change their strategies if costs are passed on, according to Standard Bank analyst Leon Westgate.

Warsaw Stock Exchange: Key Assumptions Of The Updated Strategy GPW.2020

WSE Group In Q3 2014: Net Profit Increase By Over 46% QoQ Driven By Improved Revenue And Cost Discipline

Moscow Exchange: Initial Margin Change In FX Market Starting From October, 31 2014

Hedge Funds & Managed Futures

Bad Bets Rock Fortress’s Macro Fund
Gregory Zuckerman and Rob Copeland – WSJ
For over a decade, Fortress Investment Group LLC co-founder Michael Novogratz has shared his market predictions in television appearances and high-profile investment conferences.

Norway’s Oil Fund Held Back by Losses on European Stock
Kjetil Malkenes Hovland and Tommy Stubbington – WSJ
European stocks proved a sore point for Norway’s huge oil fund in the third quarter of this year, as it reported a drab 0.1% profit on its investments.

Carlyle sees profit climb, top expectations
RyanDezember –
Carlyle Group L.P. on Wednesday said its third-quarter profit rose compared with a year ago, though each of its business lines were chilled by markets pulling back from their prime conditions earlier this year.

Banks & Brokers

Barclays Says Dark Pool Suit Hurting Investment Bank
Stephen Morris – Bloomberg
The lawsuit alleging Barclays Plc (BARC) lied to customers about its U.S. dark pool is damaging revenue and having a broader impact on the lender’s investment-banking business, according to Finance Director Tushar Morzaria.

Barclays Takes $800 Million Provision Related to Forex Probes
Margot Patrick – WSJ
Barclays PLC on Thursday reported a fresh GBP500 million ($800 million) legal provision related to investigations into the alleged manipulation of the foreign-exchange market.

Realigning J.P. Morgan’s Stars
David Reilly – MoneyBeat – WSJ
That didn’t last long. For a few days, Facebook’s market value, taking into account newly issued shares to fund its purchase of WhatsApp, surpassed that of J.P. Morgan Chase, the largest U.S. bank by assets. The social network’s third-quarter earnings call late Tuesday, which spooked investors due to guidance of lower revenue growth and higher spending, changed that.

Meet the Best Banks in the U.S.
Sarah Krouse – MoneyBeat – WSJ
Wondering which bank is the best in the U.S.? Turns out it’s one from north of border, according to Money Magazine. The publication’s annual Best Banks in America list is out Wednesday and TD Bank takes top honors as the best big bank.

Moelis Keeps Boutique Winning Streak Alive – MoneyBeat
Sarah Krouse – MoneyBeat – WSJ
Moelis & Co. continued a third-quarter winning streak among independent M&A advisory firms, posting a 30% year-on-year increase in revenues as the volume of announced deals also ticked up.

German rainmaker switches roles at Goldman Sachs
Philip Georgiadis – Financial News
Goldman Sachs’s operations in Germany are facing a new era, as one of the country’s best known bankers steps down from his role heading the bank’s German and Austrian business.

ECB Says Banks Continue Easing Loan Standards
Todd Buell – WSJ
Eurozone banks marginally eased loan standards to the private sector in the third quarter, potentially signaling their increased willingness to offer funds to credit-starved firms and households.

Raymond James reports profits rise, slower than prior quarter
Elizabeth Dilts – Reuters
Brokerage and investment bank Raymond James Financial Inc said on Wednesday its revenues climbed to a record high $1.29 billion in the fiscal fourth quarter, up 14 percent from last year, while profits climbed more slowly than the previous quarter.

BGC Announces the Appointment of Phil Cramp as Head of Credit, Repo and EGBs in London

Clearing & Settlement

Three firms ready to clear Eurex’s variance futures
Futures & Options World
Three clearing members are now ready to clear Eurex’s variance futures but ABN Amro Clearing remains unable to offer the product to clients.

Trade processing “a technological backwater”
Futures & Options World
Derivatives trade processing is “languishing in a technological backwater” resulting in increased costs and risks, a leading industry figure has warned. In a whitepaper released today, Steve Grob, director of group strategy at Fidessa, said that the derivatives industry needs to catch with the equity market in terms of post-trade automation.

***JM: If you want to get that document directly from Fidessa, see here (free registration required)

Indexes & Products

Semi – Annual Review Of FTSE/Athex Index Series


AlphaGen Securities selects Orc Flow Control risk management tech
Orc, the global leader in derivatives trading technology, today announced that AlphaGen Securities LLC, a broker/dealer headquartered in Chicago, has chosen the award-winning Orc Flow Control as its pre-trade risk management system.

Options city previews rebranded trading platform, new functionality
OptionsCity Software, which building trading solutions for futures and options traders, is taking a new approach with its Metro trading and market-making platform. Once rebranded, the solution will be called Metro Now and it is available through a web deployment.

Numerix takes on “sleeping giant” of model risk
Futures & Options World
Analytics provider Numerix has launched a new technology aimed at helping firms manage risk across the enterprise through a better understanding of quantitative models.


$1.5 Million Sent in Error to Money Manager (Both Are Missing)
Matthew Goldstein – Dealbook – NY Times
In the board game Monopoly, when the bank makes an error in your favor, the player gets to keep the money. A hedge fund manager is acting as if he has drawn that lucky card for real, a lawsuit against him contends.

Banker in Middle of Fight Between Goldman Sachs and Libya
Jenny Anderson – Dealbook – NY Times
As an analyst at Goldman Sachs, Jaber George Jabbour learned the intricacies of sophisticated financial products by helping to create derivatives bets for big investors like pension funds.

SEC Announces Charges Against Investment Advisory Firm and Top Officials for Custody Rule Violations
The Securities and Exchange Commission today announced charges against an investment advisory firm and three top officials for violating the “custody rule” that requires firms to follow certain procedures when they control or have access to client money or securities.

NFA Regulatory Actions
Belvedere Asset Management LLC and Keith D. Pagan

Roditi & Roditi LLC

Leviathan Asset Management LLC

Back Bay FX Services LLC and Paul C. Towne

Environmental & Energy

Climate change could spark conflict in emerging economies, study finds
Will Nichols, BusinessGreen
Climate change vulnerability and food insecurity could damage economic growth and amplify the risk of conflict in India, Bangladesh, and a number of other major emerging markets, according to risk analysts Maplecroft.

Chinese vice premier meets Obama’s adviser on climate change
Chinese Vice Premier Zhang Gaoli met with U.S. President Barack Obama’s adviser John Podesta, vowing to make their cooperation in countering climate change a highlight of bilateral relations in Beijing on Tuesday.

Beijing Zeroes In on Energy Potential of South China Sea
Chris Horton, The New York Times
For the past several years, China has been throwing its weight around the South China Sea, a body of water studded with coral reefs that laps at the shores of not only China but also Vietnam, Malaysia, the Philippines, Brunei and Taiwan.


KRX should follow global trend and go public: JPX CEO
Kim You Jin – Yonhap
South Korea’s state-run bourse operator should follow its worldwide peers and go public in order to boost performance amid dull stock market trading, the head of Japan Exchange Group (JPX) Inc., Japan’s main bourse operator said Wednesday.

SGX exploring crowdfunding platform for startups: sources
The Singapore Exchange (SGX) is exploring the feasibility of an equity crowdfunding platform for early-stage companies, and has formed a team focused on small and medium-sized enterprises (SMEs), industry sources told The Business Times.

SGX welcomes secondary listings with streamlined rules
Singapore Exchange (SGX) is streamlining rules for secondary-listed companies to further enhance its stock market.

Thailand Settrade Launches New Mobile Trading Application For iPhone 6 And iOS 8 With Advanced Functions

HKFE Announces Revised Margins For Futures Contracts

Frontier Markets

Abu Dhabi hires regulatory chief to oversee financial centre
Simeon Kerr in Dubai – Financial Times
Abu Dhabi has hired Singapore Exchange’s chief regulatory officer to head up the oil-rich emirate’s new financial centre regulatory authority. Richard Teng has been named by Abu Dhabi Global Market to oversee the development and administration of a regulatory framework to govern the centre.

Nigerian Bank Debt Taps Turned Off by Oil-Price Slump
Emele Onu and Paul Wallace – Bloomberg
Central bank rules to curb foreign-currency borrowing by Nigerian lenders threaten to halt Eurobond sales by banks in Africa’s biggest oil producer as lower crude prices heighten risks to the naira.

eVestment: Investment Booming In Brazil – Investment Exposure Up, Tops In Latin American Hedge Funds

John Lothian Newsletter

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

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Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

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When Americans Took to the Streets Over Inflation

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Gensler says SEC to review payment for order flow

Gensler says SEC to review payment for order flow

First Read $42,376/$300,000 (14.1%) ++++ Hits & Takes John Lothian & JLN Staff The new CME Group micro Treasury futures contracts are not the basis point futures I have suggested, but they are very close and maybe better. Certainly the micro name will enhance...

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