John Lothian Newsletter: SEC chief says undertaking comprehensive US stock market review; CME Europe eyes Q1 swap future launch; Brokers Attack SEC’s Plan as Trojan Horse Designed to Hurt Them

Nov 11, 2014

First Read

New York Bound
Jim Kharouf
John Lothian and Doug Ashburn are off to New York for the next couple days to attend SEFCON, the annual SEF Conference. It will be the first SEFCON for Chris Giancarlo as a commissioner at the CFTC, who has an op/ed piece in today’s Financial Times. We’ll see what else is new from the guys and whether I Love NY T-shirts will be brought back, with I Love SEFs on the back.

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A Perfect Ten? CBOE’s Latest Vol Contract Could Be A Stunner
Sarah Rudolph – JLN
The CBOE Futures Exchange announced it will launch futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index on November 13. It is calculated by applying the CBOE Volatility Index (VIX) methodology to futures options data from CME Group’s 10-year U.S. Treasury note contract — one of CME’s most actively traded interest rate options products. CBOE calculates and disseminates the VXTYN Index values as part of an agreement between CBOE and CME Group.
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Comment: Flawed US rules fragment swaps market
J. Christopher Giancarlo – Financial Times
Over the past several decades, regional and national markets for financial products have expanded into a truly global marketplace benefiting economies around the world. This expansion has included trading markets for derivatives products such as swaps, futures and options that promote price stabilisation for everyday goods like groceries, gasoline and winter heating fuel.
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**JK – Words from the new commissioner.

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Technology & Compliance Biggest Setback in Social Strategy
Becca Lipman – Wall Street & Technology
Wells Fargo says better social aggregation and search technology will help financial firms put their people back into the social realm.
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***JM: Put more cat pictures on your sites, too. Investors love cat pictures.

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FIA Expo 2014 – Day 2
Chuck Mackie – Maven Wave
The day got off to a rousing and contentious start with the “Market Data: A Valuable Asset” panel. The panelists included FCM representation from Matthew Rees at RJO (who also served as moderator), Tayloe Draughon from Newedge, and Chris Monnery of Citi, along with vendor reps Rod Giffen from CQG and Tatiana Potekhina of Trading Technologies. There was no representation from the exchanges and that was likely by design because their absence gave the panelists the freedom to point out the myriad flaws in the new market data pricing regime that the CME fully kicks in come January 2015, just 8 short weeks away.
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**JK – This may seem a bit dated, but the subject of market data fees is as fresh as it can be.

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The Case for the Defense: Steve Grob Says the World Needs the Financial Markets
JohnLothianNews.com
Financial markets have taken a beating by legislators, regulators and in the press over the past several years. But Steve Grob of director of group strategy for Fidessa Group, says that much of the criticism is unfounded. Jim Kharouf, editor-in-chief of John Lothian News, spoke with him about his defense of the financial industry.

“The idea that there is a real economy on one side and a financial economy that is separate, isn’t really valid,” Grob argues. “The idea that the financial economy has been sent to the back of the classroom because its been beating up on the real economy is equally untrue.”

Watch the video »

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FN Extra Mile 40: Celebrating the true heroes of finance
Graeme Kerr – Financial News
Generosity, selflessness and goodwill are not exactly the first words that spring to mind when describing the City. But the FN Extra Mile 40 list may just start to challenge those preconceptions.
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**JK – There are many heros in this industry who deserve credit.

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New York’s Top Bank Regulator Considering Exit in 2015
Greg Farrell – Bloomberg
New York’s top banking regulator Benjamin Lawsky, who used his leverage to stiffen penalties against some of the world’s largest financial institutions, will probably step down next year to take a job in the private sector, said a person familiar with the matter.
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***JM: “I think my job here is finished,” he drawled, hitching up his gun belt and surveying the financial landscape with his steely gray eyes.

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Hugh Vyvyan, Saracens Rugby Team – Transitions: Lessons on a career change
JohnLothianNews.com

“You have to work incredibly hard to survive. That’s a fact of being a rugby player, and that’s a fact of life.”

Hugh Vyvyan, former player of the Saracens Rugby Team, discusses the importance of working as a team and what individuals need to do to better both themselves while contributing to their group, whether it be a sports team or financial firm. Vyvyan uses his own personal experiences with the Saracens team to illustrate how successful organizations focus more on its people rather than being driven by achieving results. Vyvyan noted how the Saracens organization did a complete overhaul on its philosophies by taking better care of its players and getting them to buy into a system where everyone contributes, whether or not their contributions were noticed during every game. However, all this begins with the individual. Hard work, making oneself well-rounded and becoming focused on the team first is what drives organizations to be great for years to come.

Watch the video »

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31st Annual CBOE Risk Management Conference U.S.
The Chicago Board Options Exchange (CBOE) and CBOE Futures Exchange (CFE) will host the 31st Annual CBOE Risk Management Conference (RMC), from March 4 through 6, 2015, at the Park Hyatt Aviara in Carlsbad, California.
jlne.ws/1u4EavC

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Sponsored Content
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SEFCON V: One Year In – November 12, 2014, Grand Hyatt New York
JohnLothianNews.com

Watch the video promo and register to join us this Wednesday as dealers, traders, exchanges and regulators offer this once-a-year snapshot of the state of the SEF world.

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Lead Stories

SEC chief says undertaking comprehensive U.S. stock market review
John McCrank – Reuters
Regulators are undertaking a comprehensive data-driven review of the rules underpinning the U.S. equity markets, including the pricing and rebate system used by exchanges, the head of the Securities and Exchange Commission said on Monday.
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CME Europe eyes Q1 swap future launch
Luke Jeffs – Futures & Options World
CME Group plans to launch a European swap future contract early next year, a move that will position CME Europe among the ranks of exchanges eyeing this new market. The world’s largest derivatives exchange group launched CME Europe in late April with a range of currency futures and energy contracts but has always said it will expand the platform’s product coverage over time.
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Brokers Attack SEC’s Plan as Trojan Horse Designed to Hurt Them
Dave Michaels and Sam Mamudi – Bloomberg
Wall Street brokers are in rebellion against a plan to test ways of encouraging more trading of the smallest U.S. stocks, saying the effort was hijacked by exchanges seeking an edge over their rivals.
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More Bank Settlements Coming in Widening Currency Case
Ben Protess and Jenny Anderson – Dealbook – NY Times
As authorities in the United States and Britain ready actions this week against giant banks suspected of manipulating the foreign currency market, both the number of government agencies involved and the cost of settling the cases continues to grow.
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Dissenting From an SEC Windfall For Lawyers
Daniel M. Gallagher And Michael S. Piwowar – WSJ
Earlier this month reports circulated that the Securities and Exchange Commission may set up a $600 million “fair fund” to distribute money collected from defendants to purportedly harmed investors in the insider-trading case SEC v. CR Intrinsic Investors.
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Lehman Brothers’s Europe archives could be destroyed
Alicia Clegg – Financial Times
PwC, the administrator charged with mopping up the European operations of the failed investment bank Lehman Brothers, has said that it might order the destruction of trading data and records once all of the bank’s affairs have been settled.
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Regulatory

SEC’s White: High Frequency Trading May Need New Rules: Video
Bloomberg
SEC Chairman Mary Jo White speaks with Stephanie Ruhle about bank and market regulation under the governance of Dodd-Frank legislation, the market impact of high-frequency trading, and what the commission is focusing on in 2015. She speaks from the SIFMA conference on “Market Makers.”
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CFTC Further Implements Trade Execution Requirement
The Commodity Futures Trading Commission’s (CFTC or Commission) Division of Market Oversight (Division) announced today further implementation of the trade execution requirement for certain interest rate and credit default swaps.
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FCA reassures fund managers on new EU sales rules
Mark Cobley – Financial News
The Financial Conduct Authority, the UK market regulator, has moved to reassure asset managers and financial advisers over new European Union rules that could redesignate GBP125 billion of standard UK retail funds as “complex investment products”.
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Regulators round on EU budget cuts
Walter Hemmens – Financial News
Europe’s three financial watchdogs have appealed directly to the region’s finance ministers not to support reductions in the budgets they requested for 2015.
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ESMA Agrees To Renewal Of Short-Selling Measures Introduced By Italian CONSOB
Press Release
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Exchanges & Trading Facilities

CME Group Announces Record Open Interest for NYMEX Brent Futures
CME Group, the world’s leading and most diverse derivatives marketplace, today announced its NYMEX Brent (BZ) crude oil futures contracts set an open interest record on Thursday, November 6, 2014. Open interest for NYMEX Brent set a record of 155,713 on November 6, surpassing the 150,000 contracts milestone for the first time ever. The previous open interest record of 149,955 contracts was set on November 5, 2014.
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ICE Futures Europe Sets Daily Volume And Open Interest Records In Low Sulphur Gasoil Related Contracts
Press Release
A new total daily volume record for ICE Low Sulphur Gasoil futures across ‘G’ and ‘ULS’ code contracts was set on Friday, November 7, 2014 with 86,289 contracts traded. The previous total daily volume record of 67,110 contracts was established on October 14, 2014.
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LME launches consultation into warehousing
Luke Jeffs – Futures & Options World
The London Metal Exchange has launched consultations into its warehousing agreements as a court case over the British exchange’s warehousing plans drags on.
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Deutsche Börse: Business Information Publishing Veteran Suzanne Petren Moritz Tapped As New CEO Of Market News International
Deutsche Börse Market Data + Services today announced that Suzanne Petren Moritz will serve as the new chief executive officer of subsidiary Market News International (MNI), effective today. Ms. Petren Moritz brings more than a decade of experience in the areas of market intelligence solutions and business information publishing to MNI. She will be based in New York.
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Two BATS Exchanges Resume Routing to Nasdaq
Josh Beckerman – WSJ
Two BATS Global Markets exchanges have resumed routing to Nasdaq, after declaring “self help” earlier Monday and suspending routing.
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October 2014 FIF Market Dynamics Report – Executive Summary
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Moscow Exchange Monthly Market Report: October 2014
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Hella KGaA Hueck & Co. AG IPO In The Prime Standard
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Hedge Funds & Managed Futures

Newedge: CTAs Push On Higher In October With More Positive Returns
Newedge, a global leader in multi-asset brokerage and clearing, today announces the October performance data for its CTA performance indices. October saw all the Newedge managed futures indices post positive returns for the third consecutive month, extending the positive performance in 2014 YTD.
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Bets gone awry push John Paulson event-driven fund to loss
Miles Johnson, Hedge Fund Correspondent – Financial Times
John Paulson’s $3bn event-driven hedge fund swung to a 14 per cent loss last month as the investor known for making billions betting against US subprime mortgages fell deeper into the red for 2014.
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Janus Oct net inflows largest of 2014 after Gross joins
Jennifer Ablan and Ross Kerber – Reuters
Janus Capital Group Inc posted $1.1 billion in net inflows in October, the largest net deposits this year, after hiring Bill Gross, one of the bond market’s most renowned investors.
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Ex-Jupiter stewardship director rejoins in consultancy role
Andy Pearce – Financial News
Jupiter Asset Management’s stewardship director has been re-employed on a consultative basis, as part of moves by the company to refocus its approach to corporate governance and sustainability strategies.
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Fund fees droop at Allianz
Mike Foster – Financial News
German insurer Allianz’s asset management business suffered a two-thirds drop in performance fee income to EUR126 million in the nine months to September, including a 4.8% drop in the third quarter.
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Hedge funds ‘cannot be too paranoid’ on reputational risk
Risk.net
Hedge funds cannot be too paranoid about reputational risk, say lawyers, who advise counter-striking against dirty tricks campaigns is the best policy
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Andrew Balls’ rise at Pimco continues unabated despite bond giant’s strife
Andrew Pearce – Financial News
Pimco may have endured a rocky 12 months but the progress of its new chief investment officer for global fixed income at the bond giant has been impressive.
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‘Unnecessary’ Irish SME lending constraints hit hedge funds
Risk.net
Central Bank of Ireland’s disqualification of hedge funds with equity positions, debt securities or derivative exposures from originating loans challenged as unnecessary
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Banks & Brokers

Can You Really End ‘Too Big To Fail’?
Alen Mattich – MoneyBeat – WSJ
Taxpayer bailouts of banks will be a thing of the past once rules being hammered out in Switzerland are implemented. Or so regulators would have us believe.
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Wells Fargo lands JP Morgan broker team managing nearly $1 billion
Reuters
Wells Fargo Advisors, Wells Fargo & Co’s brokerage unit, landed a three-person team from JP Morgan Private Bank where they managed $972 million in client assets and deposits.
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Former Kames CEO to chair JPM Japanese trust
Anna Fedorova – Investment Week
Andrew Fleming, former CEO of Kames Capital, will replace the retiring chairman of the JP Morgan Japanese investment trust next month.
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Liquidity concerns still haunt Ficc
Risk.net
Market participants are growing increasingly concerned about liquidity conditions in fixed-income, currencies and commodities (Ficc), with US Treasuries and corporate bonds seen as most at risk, as regulatory changes have squeezed banks’ market-making abilities.
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Investment consultants under pressure to change
Mike Foster – Financial News
They advise on billions – but their advice is not regulated. So it was hardly a surprise when, in July, the UK’s Law Commission raised the question of whether the world of investment consultants needed to change.
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Schwab to Host Online, Interactive Trader Education Day on November 13
For the first time, Schwab Trading Services is hosting an all-day educational event featuring both in-person and online seminars offering real-time trading insights and in-depth educational workshops.
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Clearing & Settlement

OCC Announces Tracy Raben As New Chief Human Resources Officer
OCC announced today that Tracy Raben has joined OCC as Senior Vice President and Chief Human Resources Officer. She will report to Mike McClain, President and Chief Operating Officer.
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Rethinking investor protection in central clearing revolution
Risk.net
Central clearing is seen as the cornerstone in drives to reduce systemic risk and take investor protection to new heights. However, fresh thinking, continued innovation and much greater collaboration across the industry will all be required if central clearing is to deliver what it promises, says Hans-Ole Jochumsen, president of global trading and market services at Nasdaq
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Regulators Must Harmonise on FX NDF Clearing
Profit & Loss
European authorities must coordinate any future clearing mandate for FX NDF products with regulators in other jurisdictions, say market participants, although they remain divided on whether such a mandate is needed at this point in time
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BRIEF-CME raises initial margins for soybean meal futures (06)
Reuters
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ESMA Consults On Revised EMIR Standards On The Reporting To Trade Repositories
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Indexes & Products

Currency hedged ETFs outperform, pick up inflows as dollar gains
Ashley Lau – Reuters
U.S. investors who believe the dollar’s 2014 surge will continue are pouring money into exchange-traded funds that invest in foreign markets but hedge the currency part of the bet.
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ETFs break annual inflows record…with two months to spare
Anna Fedorova – Investment Week
European exchange traded funds (ETFs) have enjoyed a record year for net inflows, taking in $56.2bn by the end of October, according to consultancy ETFGI.
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Nasdaq Buyback Index Launched As ETF In Europe
Nasdaq Aligns With Invesco PowerShares To Expand Smart Beta Buyback Line-Up
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Technology

Moscow Exchange Chooses DataSpace As Primary Data Center Services Provider
Moscow Exchange, Russia”s leading exchange platform for equities, bonds, derivatives, currencies, money market instruments and commodities, today announced that it has chosen Moscow-based DataSpace as its primary data center facility and services provider.
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Gravitas Predicts 2015 Trends for Alternative Investment Industry
Gravitas, a collaborative outsourcing platform provider to the alternative investment industry, hosted the 9th annual Gravitas Trends thought leadership event on October 22 at the Andaz Hotel in New York. The theme of this year’s event, “Growth. The New Drivers,” brought together CEOs, founders, COOs and CTOs to discuss the critical operational issues and trends that will impact hedge funds and other alternative investment vehicles in 2015.
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Lime squeezes more from activ
WatersTechnology
Agency broker Lime Brokerage has added market data covering exchanges in Canada, Europe and Asia-Pacific from market data and ticker plant provider Activ Financial to its Lime Strategy Studio software suite to provide customers with broader access to real-time data for developing, testing and deploying automated intraday trading strategies.
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TABB Group And Thomson Reuters Reveal Technology Costs And Opportunities For Capital Markets Firms
Reuters
A new report from TABB Group, commissioned by Thomson Reuters, has found that capital markets firms can be spending up to $460,000 per front office employee on technology related costs every year.
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MOVES-Deutsche Bank appoints first chief data officer
Reuters
Deutsche Bank has appointed JP Rangaswami as its first-ever chief data officer, a role that will involve standardising the firms’s processes, tools and governance around information to support its digital strategy.
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Sumitomo Mitsui Finance and Leasing Company Extends Reach to the US with SunGard Ambit Asset Finance
Sumitomo Mitsui Finance and Leasing Company Limited (SMFL), a leading corporate leasing and financing company headquartered in Japan, has gone live with SunGard’s Ambit Asset Finance solution to support their service extension to clients in the US.
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FlexTRADER Chosen As Best Buy-Side Algorithmic/DMA Product In This Year’s Buy-Side Technology Awards
FlexTrade Systems, Inc., a leader in multi-asset, algorithmic trading systems, today announced its FlexTRADER algorithmic trading platform has grabbed the top spot in the Best Buy-Side Algorithmic/DMA Product or Service category of this year’s Buy-Side Technology Awards, which was held at The May Fair Hotel in London on Friday, November 7.
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Yuanta Securities Go Live On Calastone Network
Calastone Automation Of Funds In Taiwan Continues To Grow
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Enforcement

Supreme Court Denies Hedge-Fund Manager’s Appeal of Insider Trading Conviction
Brent Kendall – WSJ
The U.S. Supreme Court on Monday declined to consider a former Northern California hedge-fund manager’s challenge to his 2012 insider-trading conviction related to Google Inc. and other technology securities.
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Environmental & Energy

EEX Extends Its Trade Registration Service With Greek Power Futures
The European Energy Exchange (EEX) continues to extend its Trade Registration service on the Power Derivatives Market. Together with its clearing house, the European Commodity Clearing (ECC), EEX will offer the registration of power trading transactions concluded off the exchange for the Greek market for clearing from 1 December 2014.
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Apec: China blocks access to US air pollution data for Beijing
Tania Branigan, The Guardian
They banned the burning of funeral offerings, closed restaurants and factories, halted deliveries and took millions of cars off the roads.
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G20 Spends $88 Billion a Year on Fossil-Fuel Exploration
Alex Morales, Bloomberg News
The G20 group of major economies spend $88 billion a year on fossil-fuel exploration, five years after pledging to phase out industry subsidies, a study showed.
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Asia-Pacific

Dalian Commodity Exchange eyes oils growth
Luke Jeffs – Futures & Options World
The Dalian Commodity Exchange has outlined plans to boost trading of oils and oilseeds, a commodity that has been one of the Chinese exchange’s top performers this year.
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Fund managers hail new China access
Judith Evans – Financial Times
The opening of a trading link between the Hong Kong and Shanghai stock exchanges will sweep away the barriers to outside investors wanting to gain exposure to undervalued Chinese stocks, fund managers said.
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Shanghai to Trial Same-Day Trading
MoneyBeat – WSJ
Shanghai Stock Exchange said it will reintroduce a stock trading system that allows investors to buy and sell stocks on the same day on a trial basis after a 19-year ban. The move comes as Beijing seek to bring its equity market more in accordance with international practices by further opening up its stock markets to foreign capital.
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HKEx CEO says tax regime for Shanghai stock link to be announced before Nov. 17 launch
Reuters
Hong Kong Exchanges and Clearing Ltd (HKEx) CEO Charles Li said on Monday that a tax regime for a landmark stock connect scheme linking the Shanghai and Hong Kong bourses will be announced before the launch of the scheme.
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HKEx, SSE offer free data to support shanghai – hk stock connect launch
WatersTechnology
Hong Kong Exchanges and Clearing (HKEx) is offering free Level 1 market data to members of the Shanghai Stock Exchange (SSE) in mainland China, to support the launch of Shanghai-Hong Kong Stock Connect, the new trading link between the two Chinese exchanges.
jlne.ws/1Ex5OEk

SGX welcomes ZICO Holdings to Catalist
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HKFE Announces Revised Margins For HKEx Futures
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Frontier Markets

BlackRock Plans Saudi Arabia ETF Ahead of Foreign Access in 2015
Arif Sharif – Bloomberg
BlackRock Inc. (BLK) plans to start an exchange-traded fund for Saudi Arabian shares as the biggest Arab bourse prepares to open its market to foreigners.
jlne.ws/1Ex6xWa

U.S. judge says Citigroup can process Argentina’s next bond payment
Nate Raymond and Daniel Bases – Reuters
A U.S. judge ruled on Monday that Citigroup Inc could process an $85 million interest payment by Argentina on bonds issued under its local laws following its 2002 default.
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Thomson Reuters To Host The Third Indonesian Regulatory Summit In Jakarta
64% Of Respondents Felt That A Market Or Regulatory Breach Was Widely Perceived As The Most Significant Governance Risk, According To The Thomson Reuters And EY 2014 Governance Survey
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A New Qatari Stock Joins MSCI Emerging Market Index And Weights Of Other 4 Stocks Increased
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BSE: Revision Of Scrips In Trade To Trade Segment
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