John Lothian Newsletter: Sao Paulo-based exchange eyes stakes in Latin American rivals; Slow start fails to dim Stock Connect prospects; Call to close loophole that allows shadowy short selling

Nov 24, 2014

First Read

IEX Winning Support from Investors as Orders Get Routed Its Way
Sarah Krouse – MoneyBeat – WSJ
Leading U.S. brokers have agreed to help clients automatically send a percentage of their orders to IEX Group, a sign that investors are eager to use the year-old stock trading venue.

***** Whoa! Slow down there boys.


FIA Elects Two New Board Members
Press Release
FIA today announced the election of two new members to its board of directors: Tom Kadlec, president of ADM Investor Services, and George Simonetti, managing director and head of Markets Clearing and Futures Execution in Wells Fargo Securities’ Markets Division.

***** Well, the FIA Board meetings just got more interesting.


FIA lobbies against Basel treatment of segregated margin
Jon Watkins – The Trade
The Futures Industry Association (FIA) has written to the Basel Committee on Banking Supervision asking them to reconsider the inclusion of segregated margin in its leverage ratio calculations.

***** The FIA would like to have more than three members, but if these rules happen there will be fewer and fewer banks to clear derivatives trading through.


Simon Puleston Jones, CEO of FIA Europe – In pursuit of Happiness

“Try to find someone who does things right that you really aspire to be over the course of your career.”

Simon Puleston Jones, CEO of FIA Europe, gives advice for balancing personal life with career life. Jones begins his presentation with an acronym for “DREAM”, discussing how happiness and achieving your goals is related to Diligence and drive, Relationships and recruitment, Education and ethics, Adjustments and appreciation, and Mistakes and mentors. He stresses that your career should be something you truly enjoying waking up for and how some perks such as fancy cars and large boats can be outweighed by having a family and raising children. Jones shows that happiness is not about materialistic possessions, but rather the relationships you build with others and the experiences you have throughout your life.

Watch the video »


CME Group to Start New Iron-Ore Futures Contract From December
James Poole – Bloomberg
CME Group Inc., the world’s largest futures market operator, will start trading iron ore with 58 percent content from next month, it said in a statement. The cash-settled contract will have January 2015 as the first listed month with a size of 500 dry metric tons and pricing based on ore delivered to China, it said.

***** This is actually a swap futures contract, you get iron ore something else.


ICAP’s Ferreri to Leave Brokerage
Katy Burne – WSJ
Chris Ferreri, head of e-commerce in the Americas for brokerage ICAP PLC, will depart the U.K.-listed firm, according to people familiar with the matter. He remains an employee at the so-called interdealer broker while negotiations about his exit are being finalized, and will be consulting, the people familiar with the matter said.

***DA: Chris has done an excellent job as industry ambassador and emcee of the annual SEFCON. I could see him as a full-time spokesman for IDBs, SEFs, OTFs and the like.

***** JJL: I think Chris Ferreri and Tom Kadlec should go into business together.


CFTC Reinstates NASDAQ Futures, Inc. as a Designated Contract Market
The Commodity Futures Trading Commission (CFTC) today approved the application of NASDAQ Futures, Inc. (NQF) for reinstatement as a designated contract market (DCM). NQF is a Delaware corporation and is a wholly-owned subsidiary of NASDAQ OMX Group, Inc.

***** Get ready for some innovation and competition.


Bridging the Week: Reg MAR, Reg SCI, ETFs; Peregrine; ATS; Spoofing
Gary DeWaal – Katten Muchin Rosenman
The adequacy (or inadequacy) of critical technology underlying firms’ operations was the undercurrent of important developments in the worldwide financial services industry last week. Also, another week passed, and yet another commissioner at the Commodity Futures Trading Commission indicated that some amendments might be necessary in connection with the agency’s swap execution trading rules.


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Lead Stories

Sao Paulo-based exchange eyes stakes in Latin American rivals
Samantha Pearson in São Paulo – Financial Times
Brazil’s BM&FBovespa is planning to buy up to 15 per cent of every significant stock exchange operator in Latin America in its boldest move yet to assert its influence in the region.

Slow start fails to dim Stock Connect prospects
Josh Noble in Hong Kong – Financial Times
Global investors had the chance to do something completely new last week – put up to $10.5bn into the Shanghai stock market without a special licence. But when opportunity knocked, many decided not to answer.

Call to close ‘loophole’ that allows shadowy short selling
Miles Johnson, Sam Flemming and David Oakley – Financial Times
The legal “loophole” that allowed one of the world’s largest hedge funds to make anonymous bets against listed companies must be closed, according to one of the senior European lawmakers who framed the current rules.

Foreign-Exchange Scandal Raises Odds of Restructuring
Michael J. Casey – MoneyBeat – WSJ
If we can draw any hope from the recent revelations of price rigging by banks’ foreign-exchange trading desks, it is that they open the door to a long overdue restructuring of the world’s biggest, most important market.

Report reveals breadth of banks’ commodities activities
Neil Hume, Commodities Editor – Financial Times
The 403-page report published by the US Senate last week on Wall Street’s involvement in physical commodities is a treasure trove of information. It shows just how deeply Goldman Sachs, Morgan Stanley and JPMorgan pushed into raw materials over the past decade.

Trading’s brightest and best honoured
Last night saw the very best in the industry honoured at The TRADE’s annual Leaders in Trading awards ceremony at the Savoy Hotel in London.


New York Fed Is Criticized on Oversight
Peter Eavis – Dealbook – NY Times
The government agency that watches over Wall Street came in for repeated rounds of criticism on Friday at a Senate hearing into its regulatory track record.

New pensions chief Lelsey Titcomb will have a full in-tray
Mark Cobley – Financial News
After an interregnum of 20 months, the UK’s Pensions Regulator will soon finally have a new chief executive. Lesley Titcomb, formerly chief operating officer at the Financial Conduct Authority, takes over from March 2 – and she will have a full in-tray.

The FCA’s new competition powers: what do they mean for the financial services industry?
Speech by Deb Jones, director of competition at the FCA, at a Scottish Financial Enterprise lunch, hosted by Maclay Murray & Spens LLP, Edinburgh.

In support of victims of financial crime in Quebec – AMF and 6 other CAVAC Centres sign agreement

AMF contributes to G20 discussions on derivatives reform
The Autorité des marchés financiers (“AMF”) is contributing to the work of the Over-the-Counter Derivatives Regulators Group (ODRG).

Remarks To The American Bar Association’s Business Law Section Fall Meeting, Andrew Ceresney, Director, SEC Division Of Enforcement, Washington D.C., Nov. 21, 2014

Keynote Address At Columbia Law School Conference On Current Issues In Securities Regulation: The ‘Hot’ Topics SEC Commissioner Kara M. Stein, Columbia Law School, New York, NY

TOM MTF statistics Week 47 2014

Exchanges & Trading Facilities

CME Group Announces the Launch of New Iron Ore Futures Contract
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the launch of trading and clearing services for the Iron Ore 58% Fe, Low Alumina, CFR China (TSI) Futures contract. Pending CFTC review, this new cash-settled futures contract will be listed on CME Globex and the NYMEX trading floor, and will be available for clearing on CME ClearPort for trade date 8 December 2014. This contract will be listed with and subject to the rules and regulations of NYMEX.

Innovation spotlight: Dividend futures
Jon Watkins – The Trade
Dividend futures have been gradually rising in popularity among the buy-side since the financial crisis, gaining pace rapidly on their OTC equivalents. Eurex launched the first set of exchange-traded dividend contracts back in 2008, before releasing single-stock offerings in 2010. Similar products are also offered in Europe on NYSE Liffe and Borsa Italiana.

***** Nice marketing pitch for dividend futures.

Levin says will meet CFTC to discuss scope of LME oversight
U.S. Senator Carl Levin plans to meet with the U.S. commodities regulator to discuss the scope of its oversight of the London Metal Exchange, the world’s biggest and oldest metal market, in the United States, he told reporters on Friday.

Start-up FX platforms squeeze data fees
Joel Clark – Financial News
Changes to the foreign exchange market are bringing a new focus on the prices charged for market data.

Charles Li Direct: Taking stock and looking forward

Vienna Stock Exchange And Zagreb Stock Exchange To Cooperate In Data Vending

Direct Edge Trading Notice #14-54: BATS Releases Direct Edge Integration Port Attribute Matrix

Hedge Funds & Managed Futures

Where Did Pimco’s European Outflows End Up?
Sarah Krouse – MoneyBeat – WSJ
Some investors who jumped out of Pacific Investment Management Co.’s European funds last month appear to have put their money in U.S. dollar bond funds run by Schroders PLC, Pioneer Investment Management and J.P. Morgan Chase & Co.

Bain Capital Raises $4.3 Billion for European Fund
William Alden – Dealbook – NY Times
Bain Capital has raised a fresh fund for private equity buyouts in Europe. The private equity firm attracted the equivalent of $4.3 billion from investors for the fund, its fourth on the Continent, according to a regulatory filing on Thursday.

October shorts put new dent in flagship Odey fund
Joe McGrath – Financial News
Crispin Odey’s flagship EUR1.8 billion hedge fund remains down by more than 10% this year, after fresh losses in October undid the gains of late summer.

A new-look Pimco, net of Gross
Mike Foster – Financial News
Daniel Ivascyn, who succeeded Bill Gross as Pimco’s chief investment officer in September, insists that size really does matter in the world of global bonds.

Hedge Funds Bet on Coal-Mining Failures
Timothy Puko, Matt Wirz and Matt Jarzemsky – WSJ
Hedge funds are betting that some of the largest U.S. coal companies are heading for the financial slag heap.

Old Mutual Wealth sets out bulk-conversion plans
Julia Rampen – Investment Week
Old Mutual Wealth, the UK’s third largest adviser platform with funds under administration of GBP30bn, will begin bulk converting any remaining clients in bundled share classes to unbundled in February 2015.

Consultants “a one-way challenge” to funds of hedge funds
As funds of hedge funds’ assets have plunged, few want to criticise their rivals in investment consultancy. Other market players find much to criticise At the time of the financial crisis, funds of hedge funds’ (FoHF) assets under management fell from around $800 billion in 2007 to $590 billion in 2008. It has barely recovered since

Banks & Brokers

Fed Plans to Tighten Commodities Rules for Banks
Nathaniel Popper – Dealbook – NY Times
The Federal Reserve is preparing to unveil new restrictions aimed at making it harder for Wall Street banks to make big bets in the commodities markets, according to testimony on Friday from the Fed governor Daniel K. Tarullo.

The day Deutsche Bank learnt to speak Englisch
Vivek Ahuja – Financial News
Twenty five years ago this week, Deutsche Bank made a move that would change it forever and put it on the path to being a global force in investment banking.

RBS on What Went Wrong in the European Stress Tests
Phillipa Leighton-Jones – MoneyBeat – WSJ
It’s a mistake no bank ever wants to make. Royal Bank of Scotland PLC on Friday said it made a mistake calculating its capital base for last month’s European stress test results. The bank counted deferred tax assets as good quality capital, skewing the ratio by which it passed the European Banking Authority’s “adverse scenario” test.

Schwab’s replaces co-head of retail brokerage
John Clendening, co-head of Charles Schwab Corp ‘s retail brokerage, has stepped down from his role.

Architect of Barclays’ research build-out retires
Matt Turner – Financial News
Barclays has appointed a new head of equity research in Europe, following the retirement of Lehman Brothers and Barclays veteran Tim Whittaker, who presided over the bank’s build-out of the business.

Bankers brace for bonus blues
Nick Kostov – Financial News
A showdown is looming between bankers expecting improved bonuses after a busy year and banks keen to improve their profitability.

Clearing & Settlement

Central Counterparty Recovery And Resolution – Keynote Speech By Benoît Coeuré, Member Of The Executive Board Of The ECB, At Exchange Of Ideas #2 “Central Clearing – Guarantee Of Stability Or New Moral Hazard?” Organised By Eurex Clearing, London, 24 November 2014

Indexes & Products

Irish stock exchange says fáilte to active ETFs
Chris Flood – Financial Times
The Irish stock exchange last week cleared the way for more active mutual fund managers in Europe to enter the rapidly growing exchange traded fund industry. The ISE will allow active managers to keep their trading strategies hidden after dropping its requirement for the daily disclosure of the portfolio constituents of actively managed ETFs.

Nasdaq Bets on ETFs Joining Hong Kong-Shanghai Stock Link
Eduard Gismatullin – Bloomberg
Nasdaq OMX Group Inc. (NDAQ) is betting that Chinese authorities will let investors buy exchange-traded funds over the new link between Hong Kong and Shanghai. The New York-based exchange operator is partnering with fund managers in Hong Kong as it prepares for a future phase of the link to include ETFs, the company’s vice president for global indexes, Robert Hughes, said.


Parabellum Markets Chooses FlexTrade For White Label FX And Liquidity Aggregation
Deploys MaxxTrader, A Turnkey ASP Front-End, For Trading Spot Currencies, Forwards, NDFs, Swaps & Precious Metals


SEC Charges CEO and Close Friend With Insider Trading Ahead of Company Sale
The Securities and Exchange Commission today announced insider trading charges against a then-CEO and a close friend he provided with confidential details about his New Jersey-based company’s nonpublic merger discussions that enabled the friend to make $164,260 in trading profits after it was sold to a private equity firm.

SEC Charges Penny Stock Company Executives in New Jersey With Issuing False Press Releases to Inflate Stock Price
The Securities and Exchange Commission today charged father-and-son executives at a New Jersey-based penny stock company for issuing false and misleading press releases while secretly selling thousands of their own stock shares into the market. They agreed to pay nearly $325,000 and accept officer-and-director bars to settle the SEC’s charges.

Martoma Starts Serving 9-Year Sentence for Insider Trading
Matthew Goldstein – Dealbook – NY Times
Mathew Martoma has started his nine-year prison term for insider trading at a “low security” federal prison in Miami at a time that most of the former hedge fund traders and analysts also convicted in the federal government’s long-running investigation have paid their debt to society.

[AMF Canada] Illegal operation of money-services business – Penal proceeding against Sylvain Brochu

[AMF Canada] Penalties imposed on Giguère, Morin, Services financiers inc. and its responsible officer

Environmental & Energy

Senate Rejection of Keystone XL Measure Sets Up 2015 Showdown
Keystone XL pipeline backers came up one vote short in the Senate and vowed to try again in January, when they expect to have enough support to send a bill to President Barack Obama.

Senate effort to approve Keystone XL falls one vote short
The US Senate voted by 59 votes to 41 to approve the controversial Keystone XL tar sands pipeline yesterday, falling just short of the 60 vote majority needed to pass the bill.

Could Obama cut deal on Keystone pipeline? Don’t rule it out
Steve Holland and Roberter Rampton – Reuters
President Barack Obama might be open to using the Keystone pipeline as leverage with Republicans if they cooperate on other aspects of his long-stalled domestic agenda, such as investing in infrastructure, closing tax loopholes or reducing carbon emissions.


Survey Shows Chinese Financial Services Firms Invest More in Compliance Compared to Global Firms
New research from SunGard has highlighted that Chinese financial services firms have invested more in compliance than their global counterparts over the past two years. There are concerns that regulatory failure can lead to loss of clients, reputational damage and closer regulatory scrutiny.

HKFE Announces Margin Rates For London Aluminium, London Copper And London Zinc Mini Futures To Be Introduced 1 December 2014

HKEx’s After Hours Futures Trading Session Continues To Grow
HKEx is pleased that it set several records in After Hours Futures Trading session last Friday night, which are highlighted in red in the table below.

Accelerate Development Of Multi-tiered Capital Market For The Real Economy – Speech By Shenzhen Stock Exchange President Song Liping At The 10th Capital Market Conference For Local Governments On November 13, 2014

Frontier Markets

No takers yet for the subsidiary route amongst foreign banks | Business Standard News
Business Standard News
Even a year after the Reserve Bank of India released the final guidelines for foreign banks to convert their Indian branches into wholly owned subsidiaries (WoS), it is yet to find any takers.

The Egyptian Exchange (EGX) Chairs With Unanimous Elections The Federation Of Euro-Asian Stock Exchanges (FEAS)

Tehran Stock Exchange To Host FEAS General Assembly 2015

Nigerian Stock Exchange Weekly Market Report For Week Ended 21 November 2014

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