First Read

A Boca Oversight
Doug Ashburn – JLN

If you read last week’s newsletters, you know that we were publishing remotely from the FIA conference in sunny Boca Raton, Florida. Though I would say we, in general, did an admirable job pumping out the content amid all of the panels, side meetings and “extracurriculars,” a few few items may have slipped through the cracks.

One big news item we missed, due to a communications glitch, is the announcement Thursday that Société Générale Prime Services (formerly Newedge) is taking an equity stake in Eris Exchange. This move, aside from the fresh capital infusion, will be a welcome addition to Eris’ liquidity profile in voice and electronic markets for its swap futures products.

Read the press release that should have run Friday

Of course, adding a major European bank to the stable is important as Eris contracts prepare to launch in Europe. Last December, the IntercontinentalExchange announced a licensing agreement with Eris that will bring euro- and pound sterling-based interest rate and credit derivative futures contracts based on Eris’ methodology in 2015.

Read the December 5, 2014 ICE/Eris agreement

Meanwhile, Eris continues to forge ahead on the liquidity and connectivity fronts, having recently added Virtu as a market maker and, last week, added CQG as a platform provider. Last Friday, March 12, the exchange set a new record open interest of 159,741, and will soon post its 10th consecutive quarter of total open interest growth.

And as we learned from the other big story from Boca 2015, Basel III and other capital rules will continue to drive capital and margin efficiency, which will continue to drive standardization.

Coincidentally, the FT’s Phil Stafford just wrote a story pointing to the slow uptake of the swap futurization movement (“US swaps market resists futures model” in Lead section below). While some would view this as a headwind for Eris, CEO Neal Brady would view it as proof positive of the growth potential of swap futures.


Margaret McNally, 1929 – 2015; Margaret Kenny McNally, 85, Chicago Mother of 10, Including White House Aide, Oprah Producer, Carrier Pilot, Hollywood Actress, Spine Surgeon
Chicago Tribune
Chicago, IL. Mar. 11th: Margaret Kenny McNally, 85, an energetic red-haired Chicago beauty, for over 60 years the wife of one of the nation’s most respected plastic surgeons, and a Gold Star mother who used what one magazine called a “fail-safe formula for success” to raise 10 children who have achieved national prominence in an array of remarkably different fields across the U.S. – including politics, television, the military, Hollywood, medicine, business, and law – died at home beside her husband and family on Wednesday, March 11th as a result of complications from congestive heart failure and old age.

***** Condolences to my good friend Ryan McNally and family on the death of his mother. This is the most remarkable obituary I have ever read. What an incredible family.


Welcome to the world Drew Shields Jr.
Congratulations to Drew Shields at TT on his new baby, Andrew Calvin Shields Jr., born last Wednesday, 7.3 pounds, 20 inches.
(via email)


The Algorithm That Tells the Boss Who Might Quit; Wal-Mart, Credit Suisse crunch data to see which workers are likely to leave or stay
By Rachel Emma Silverman and Nikki Waller, WSJ
Employers want to know who has one foot out the door. As turnover becomes a bigger worry—and expense—in a tightening labor market, companies including Wal-Mart Stores Inc.,Credit Suisse Group AG and Box Inc. are analyzing a vast array of data points to determine who is likely to leave a post.

***** You are no longer fired or let go, you are ALGOed.


Robert Durst, Subject of HBO Series, Arrested on Murder Charge; Los Angeles officials say he fatally shot a friend in her home
By Melanie Grayce West, WSJ
Robert A. Durst—the eldest son of a late New York real-estate scion and the subject of an HBO documentary detailing his suspected involvement in the deaths of his first wife and a friend—was ordered held without bond Sunday in New Orleans in connection with the latter case, authorities said… A spokeswoman for the documentary’s director, Andrew Jarecki, wouldn’t comment on Mr. Durst’s arrest, nor would a spokesman for HBO.

***** The director of the HBO series is Andrew Jarecki, son of Dr. Henry Jarecki, according to a source at the FIA Boca Raton International Conference.


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Why Bankers Are Leaving Finance for No-Salary Tech Jobs
Bloomberg Business
It was February 2012 and banks, dealing with the fallout from the credit crisis, had culled more than 230,000 jobs the year before. Stu Taylor, the London-based global head of matched principal trading at UBS Group AG, figured he better get out. So he left his seven-figure salary and risked his life savings on a technology startup.

***DA: I met with Taylor and Stephen Gallagher, head of Algomi U.S., last week in Boca. They are helping reduce balance sheet exposures and efficiently matching the least liquid bonds out there. You’ve heard of smart order-routing? This is smart order-sniffing.


Bridging the Week
Gary DeWaal, Katten Muchin Rosenman LLP
The 40th annual FIA Boca Raton International Futures Industry Conference ended last Friday, but many of the topics discussed during the event will resonate for months. These include the profitability of futures commission merchants; capital; clearinghouse risk and what is the appropriate amount of clearinghouse capital that should be made available to the default waterfall; and new initiatives involving back-office outsourcing, Bitcoin and China. Meanwhile, another lawsuit involving spoofing was filed—but this time not by a regulator and not against a specifically named defendant! As a result, the following matters (including my reflections on the Boca conference and the state of the exchange-traded derivatives industry) are covered in this week’s Bridging the Week.


An Evening with G.H. Financials and Rick Santelli
Our friends at G.H. Financials are hosting a networking event and Q&A with CNBC’s Rick Santelli on March 18 from 4:30-7pm at Seven Lions on Michigan Ave. in Chicago. Those wishing to attend should contact Stephanie Young at


Lead Stories

S.E.C. Wants the Sinners to Own Up
For decades, the Securities and Exchange Commission has allowed companies and individuals to make settlements without admitting any wrongdoing. Even a company committing an egregious sin that cost investors millions of dollars could walk away from the proceedings without ever acknowledging its role.

US swaps market resists futures model
The $700tn global swaps market is proving resistant to attempts to remould it in the shape of its listed futures cousin, casting doubt over post-financial crisis reform efforts.

Dodd-Frank reforms face new assault
Barney Jopson in Washington, FT
The Obama administration is braced for a fresh assault on reforms implemented in the wake of the financial crisis as lawmakers ratchet up a search for changes acceptable to banks and politicians of both parties.

No, We’re Not in a Currency War
By The Editors, Bloomberg
Anyone paying attention to the financial media could easily get the impression that the world is hellbent on stealing the U.S. economic recovery. Central banks from Frankfurt to Beijing, the story goes, are pushing down their currencies’ exchange rates against the dollar — and against one another — in a craven effort to make their exports cheaper.

Banco de Madrid Files for Bankruptcy After Parent Accused of Money Laundering; Spanish unit of Banca Privada d’Andorra hit by client withdrawals
By Jeannette Neumann, WSJ
Banco de Madrid SA, the Spanish unit of an Andorran lender accused of laundering money for organized-crime groups, has filed for protection from its creditors, Spain’s central bank said Monday.

Nasdaq chief dismisses tech bubble fears
Josh Noble in Hong Kong
The president of exchange group Nasdaq OMX has dismissed suggestions of a new tech sector bubble, despite a multiyear rally that has returned internet stocks to the highs of the dotcom boom.

NYSE ex-manager sues over firing after ‘Daily Show’ appearance
By Daniel Wiessner, Reuters
A former New York Stock Exchange managing director has filed a lawsuit claiming he was fired for appearing on the satirical newscast “The Daily Show” to discuss Obamacare because his bosses objected to the program’s politics.

Trading firm sues rival, attacks CME
By Lynne Marek, Crain’s Chicago Business
Failing to get any traction in a CME Group arbitration process, Chicago trading firm HTG Capital Partners filed a federal lawsuit yesterday against another firm it says manipulated CME’s futures market.


JWG regulatory trading digest – The end of the beginning: conclusions from Paris
Automated Trader
This month, ESMA hosted a broad cross-section of market participants for a final ‘hearing’ on the MiFID II technical standards they will send to Brussels for approval this summer. Of course, many attendees were surprised to find that, while they were en route to Paris, another 355 pages of MiFID II technical standards consultation were issued for comment by 20 March.

FINRA Going After Firms For Unreported Judgments, Liens
Megan Leonhardt,
In its latest effort to authenticate its broker records database, the Financial Industry Regulatory Authority is cracking down on firms who have brokers with undisclosed liens and judgments.

A shift under way in Gazprom’s relations with Europe
By Alex Barker, Christian Oliver and Jack Farchy – Financial Times
For all its reputation as a monolith, Gazprom has not sat still in the three and a half years since the EU investigation started.

CFTC Responds to District Court’s Remand Order on Certain Cross-Border Swaps Rules
By Ross Pazzol, Paul C. Huddle, Katten Muchin Rosenman LLP via The National Law Review
On March 10, the Commodity Futures Trading Commission released an initial response to the order of the US District Court for the District of Columbia in SIFMA v. CFTC remanding eight swaps-related rulemakings to the CFTC. As reported in the Corporate and Financial Weekly Digest edition of September 16, 2014, various trade associations challenged the extraterritorial application of certain swaps-related rules promulgated under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the CFTC’s Interpretative Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations.

Corporate Insiders Charged for Failing to Update Disclosures Involving “Going Private” Transactions (Press Release No. 2015-47)

Remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation, by Commissioner Michael S. Piwowar

Regulatory Actions
Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fees Schedule (Release No. 34-74491; File No. SR-CBOE-2015-025; March 12, 2015); see also Exhibit 5
ISEGemini: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Schedule of Fees (Release No. 34-74505; File No. SR-ISEGemini-2015-06); see also: Exhibit 5
MIAX: Order Granting Approval to Proposed Rule Change, as Modified by Amendment No. 1 Thereto, to Adopt a “Risk Protection Monitor” Functionality Under Proposed MIAX Rule 519A and Amend the “Aggregate Risk Monitor” Functionality Under MIAX Rule 612 (Release No. 34-74496; File No. SR-MIAX-2015-03)
NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend NASDAQ Rules 7014 (Release No. 34-74506; File No. SR-NASDAQ-2015-020); see also Exhibit 5

Exchanges & Trading Facilities

HK exchange to upgrade China Stock Connect trading link
The Hong Kong stock exchange (HKEx) will roll out an upgrade to its equity trading link into China in the next few weeks, something analysts hope will give global asset managers the green light to start using the facility.

HKFE to Suspend Trading of its Gold Futures
Hong Kong Futures Exchange Limited, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), is suspending trading of its Gold Futures after the market close today (Friday). As of today’s market close, there were no contract months with open interest.

LME Wants More Electronic Trading, Deals With Aluminum Warehousing Fallout
The London Metal Exchange wants to grow its electronic trading marketplace. Executives at the world’s biggest and oldest market for industrial metals believe they can grow it quite rapidly if the right conditions are put in place. Paul MacGregor, the exchange’s head of sales, said at an LME event in Chicago that the group is in a position where it has a good electronic trading platform and good participation in it, but needs more volume.

FIA Conference, Boca Raton – TTC first to use Eurex Clearing’s Prisma
Automated Trader
Announced at the 40th Annual FIA Conference, The Technancial Company (TTC) is first to market with their Eurex Clearing Prisma 2.05 real-time margin methodology on TTC’s JANUS. Much of the talk at Boca this week is about the scheduled replacement – at the end of 2015 – of Eurex’s RBM (Risk-based Margining) with Prisma, the new, dynamic methodology for calculating and simulating Eurex Clearing margin requirements.

Exchange data revenues make positive start to 2015
Waters Technology
Exchanges worldwide reported gains in market data revenues in the latest round of financial results, and were largely able to offset lower revenues in some business areas with new revenues from acquisitions. The London Stock Exchange’s information services business generated £100 million in revenues in Q4, with its FTSE index business generating £48.2 million of that, compared to £48.3 million in the previous quarter, and up against £44.2 million for FTSE in Q4 2013.

Intercontinental Exchange Announces Launch of 44 New Contracts; Including Energy and Euro Cocoa Futures and Options
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced the introduction of 44 new contracts, including Euro Cocoa and energy futures and options contracts, on March 30, 2015, subject to the satisfactory completion of applicable regulatory processes.

ICE Futures U.S. Sets Back-to-Back Daily Volume Records in ICE U.S. Dollar Index
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. reported record daily volume in the ICE U.S. Dollar Index® (USDX®) on March 12, 2015.

APX goes live with Nasdaq technology
The Trade News
Australia’s Asia Pacific Stock Exchange (APX), a growth company-focused venue based in Sydney, has gone live with Nadsaq’s X-stream technology platform.

CME Group Notices
Listing of Physically-Delivered LOOP Crude Oil Storage Futures 13 Mar 2015

Delisting of two Single Stock Futures, B. Equity options: Change of standard contract size of Terna S.p.A.

Hedge Funds & Managed Futures

Hedge Fund That Made 167% on Japan Bonds Wagers on Policy Divide
by Komaki Ito, Bloomberg
GCI Systematic Macro Fund, which earned 167 percent on Japanese government bond futures in 13 months, is scanning computer models to profit further as global monetary policy diverges.

What’s the Damage From Switzerland’s Biggest Currency Shock This Century?
by Catherine Bosley, Andre Tartar, Bloomberg
Thomas Jordan is about to reveal the damage from Switzerland’s biggest single-day currency shock this century.

Video: How Interest Rates Keep Making People on Wall Street Look Like Fools
Will this be the year they get it right?

Hedge Funds Win as Euro Falls; Bets against the common currency augment returns
By Juliet Chung and Laurence Fletcher, WSJ
The euro’s plunge has given a much-needed lift to hedge funds that have been repeatedly frustrated by the world’s central banks.

How Many Mutual Funds Routinely Rout the Market? Zero
The bull market in stocks turned six last Monday, and despite some rocky stretches — like last week, when the market fell — it has generally been a very pleasant time for money managers, who have often posted good numbers

Banks & Brokers

BGC Announces Appointment Of Michael Turek As Head Of Its New York Base Metals Desk BGC Partners
BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets, today announced the appointment of Michael Turek as Head of BGC’s Base Metals desk in New York. This appointment complements the Base Metals team in London, which is co-headed by Bradley Marchant and Steven Bingley, and underscores BGC’s commitment to expanding its commodities business.

Authorities closing in on hackers who stole JPMorgan data – NYT
Federal authorities investigating the data breach at JPMorgan Chase & Co (JPM.N) are confident that a criminal case will be filed against the hackers in the coming months, the New York Times reported, citing people briefed on the investigation.

John McFarlane: Barclays Braced for ‘Mack the Knife’; Investment-bank restructurer becomes chairman of the scandal-prone lender next month.
By Max Colchester, WSJ
Barclays PLC is bracing for the arrival of “Mack the Knife.” John McFarlane, a former Citigroup Inc. executive with a penchant for feng shui and playing the guitar, earned his nickname as a fearsome restructurer of ailing financial institutions in Asia, Australia and the U.K, often slicing investment-banking jobs along the way.

Lloyds to bank £1.5bn if TSB sale to Banco Sabadell goes ahead
City A.M.
Lloyds is set to receive a final total of £1.5bn for TSB if the Banco Sabadell sale goes ahead – twice the £750m for which it had previously agreed to sell the lender to the Co-op Bank.
The giant bank was forced to sell off TSB under the terms of its 2008 bailout.

Clearing & Settlement

SunGard claims derivatives clearing utility will save clearing brokers from margin squeeze
A new industry utility is being launched by SunGard for post-trade futures and cleared over-the-counter (OTC) derivatives operations. The firm says the utility will enable clearing brokers to cut costs by creating economies of scale in middle and back office processing and technology. It will carry out some futures and over-the-counter derivatives operations and technology processes, as well as some regulatory reporting.

Chi-X says competition in clearing not viable, but split still needed
Sydney Morning Herald
Chi-X Australia concedes the local market is too small to sustain competition in share clearing, but wants the provision of clearing and trading services by its rival ASX to be separated to ensure fair access and predictable pricing decisions.

Lombard Risk enhances Colline
Securities Lending Times
Lombard Risk Management’s collateral management, clearing, inventory management and optimisation solution, Colline, now supports margin requirements on non-centrally cleared derivatives. The firm has stated that Colline maintains pace with global regulatory requirements by ensuring that each release includes functionality to enable clients to meet their regulatory obligations in a timely manner, for all capital market participants including clearing houses, banks, clearing brokers and derivatives end-users-both cleared and non-cleared businesses.

RMB trade settlement gains popularity in Gulf region
With the renminbi enjoying rising acceptance, banks and enterprises in the Persian Gulf region are seeking ways to catalyze the growing demand for conducting trade with the currency. “By the end of 2014, the yuan has become the world’s seventh largest payment currency and the ninth largest trading currency,” Tian Jun, general manager of the Abu Dhabi branch of Bank of China, said at a one-day seminar on Thursday.

Indexes & Products

Attack of the Algorithms!; Smart-beta ETFs use machines to outperform humans, but some can be less than brilliant.
by Anthony Effinger, Eric Balchunas
Few people have profited more from the so-called smart-beta craze than Tom Dorsey. A new exchange-traded fund that he runs using a century-old charting methods took in $1.2 billion last year. Then, in January, he sold his 22-person investment firm, Dorsey, Wright & Associates, to Nasdaq OMX Group for $225 million.

Big Changes for Some PowerShares ETFs
ETF Trends
nvesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. issuer of exchange traded funds, announced noteworthy changes for 10 of its ETFs, including index changes for nine that will see those funds drop Research Affiliates indexes for benchmarks provided by Russell Indexes.

Do Institutional Investment Consultants Add Value?
Results were noisy, but a new paper shows consultants overall struggle to add value through fund selection, writes Morningstar’s John Rekenthaler.

China stocks struggling for MSCI inclusion
Global Times
China must make bolder market reforms before Chinese-listed shares can be included in key MSCI emerging market benchmark indexes, leading global fund managers and MSCI insiders told Reuters.

How many funds routinely beat the market? Zero
Irish Times
The bull market in stocks turned six last Monday, and despite some rocky stretches — like last week, when the market fell — it has generally been a very pleasant time for money managers, who have often posted good numbers. Look more closely at those gaudy returns, however, and you may see something startling. The truth is that very few professional investors have actually managed to outperform the rising market consistently over those years.


SunGard claims derivatives clearing utility will save clearing brokers from margin squeeze
A new industry utility is being launched by SunGard for post-trade futures and cleared over-the-counter (OTC) derivatives operations. The firm says the utility will enable clearing brokers to cut costs by creating economies of scale in middle and back office processing and technology. It will carry out some futures and over-the-counter derivatives operations and technology processes, as well as some regulatory reporting.

Facebook revises rules over content banned from social network
Murad Ahmed
Facebook is clarifying what content is banned from its social network, expanding the categories that its 1.4bn regular users worldwide are not allowed to post about.

Startupbootcamp FinTech London returns | Financial Industry & Algorithmic Trading News | Automated Trader
Startupbootcamp FinTech, the accelerator focused on financial innovation, has opened the applications for its 2015 London programme. The 2014 programme comprised 10 startups from eight different countries, including the US, UK, Switzerland, Estonia and the Netherlands. The startups created 21 projects with the partners of Startupbootcamp FinTech, including Rabobank, Lloyds Banking Group, MasterCard, arvato financial and Intesa Sanpaolo, and many have gone on to raise funding and grow their revenues significantly since the programme.

Protecting customer data in the digital world
Enterprise Innovation
The Online Trust Alliance’s 2014 Data Protection & Breach Readiness Guide says that 89% of breaches and data loss incidents could have been prevented and 76% of breaches were the result of weak or stolen account credentials.


SEC charges eight insiders over ‘going private’ transactions
By Jonathan Stempel, Reuters
Eight corporate officers, directors and major shareholders were charged by the U.S. Securities and Exchange Commission on Friday with waiting too long to tell the investing public of material changes relating to their plans to take three companies private.

Environmental & Energy

The Top 10 Energy Storage Countries Are:
By Sandy Dechert – Clean Technica
As renewable technologies begin to mature, more and more attention is focusing on energy storage, which has tremendous implications for the current makeup and economics of energy grids.

Total puts North Sea gas stake on block
By Christopher Adams – Financial Times
French oil major Total is auctioning a stake in one of the UK’s most promising natural gasfields, sounding out possible buyers in what could be the first of a wave of deals in the North Sea.

Will Oxford University divest from fossil fuels?
By Jessica Shankleman – BusinessGreen
The University of Oxford will today become the latest educational establishment to decide whether to divest its £3.8bn endowment from fossil fuels, in a move that could follow the lead of high-profile investors such as the Rockefeller Brothers Foundation and influential organisations such as the British Medical Council.


Asia Pacific Stock Exchange Goes Live With New Trading Technology Powered by Nasdaq
Asia Pacific Stock Exchange (APX) and Nasdaq, today announced that APX has gone live with its new trading platform powered by Nasdaq’s X-stream Trading technology, as well as Genium FIX to power its APeX trading platform. The upgrade will strengthen the exchange’s technological performance using the most widely-deployed trading technology on the market.

Hong Kong exchange to upgrade China Stock Connect trading link
Josh Noble in Hong Kong
The Hong Kong stock exchange will roll out an upgrade to its equity trading link into China in the next few weeks, something analysts hope will encourage global asset managers to start using the facility.

Frontier Markets

Currency derivatives’ turnover falls over 33% in February
Economic Times India
Currency derivatives turnover at the nation’s three bourses fell by more than 33 per cent to Rs 4.80 lakh crore during February over the preceding month.

Bucharest Stock Exchange (BVB) Introduces Its Second Total Return Index, BET-XT-TR
Bucharest Stock Exchange (BVB) will introduce, starting March 23, 2015 its second total return index, BET-XT-TR, which reflects the price performance of top 25 most traded Romanian companies, as well as the gross dividends and cash distributions made by those companies. The introduction of the new index will give investors a broader picture of the opportunities available on Romanian capital market.

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