John Lothian Newsletter: SEC Has Launched Examination of Alternative Mutual Funds; Banking Lobby Backs Stricter Codes of Conduct for Currency Traders; Banks wait on sidelines of new silver benchmark

Aug 13, 2014

First Read

Bits & Pieces
by John J. Lothian
John Lothian News will launch its first Summer Intern Education Series video later today. We are a little later with this than we wanted due to a fried graphics card.

Look for the video of IIT Stuart School of Business professor Ben Van Vliet’s presentation later today and in tomorrow’s newsletters.

Also, so far we have confirmed seven of our original speakers for our October 14-15 Intern Education Series. Confirming are John Parry, Clive Furness, Veronica Augustsson, Adrienne Seaman, Bill Templer, Hirander Misra and Steve Grob.

If you have interns or newer employees in London who you think would be interested in attending our program, please contact me at

If you have a job you are looking to fill, please consider posting it to our Jobs Board on MarketsWiki.

Finally, thank you again to the interns who attended, the firms who sent them, the speakers who presented and the sponsors who supported our Summer Intern Education Series.

I hope you will take time to watch each of the videos as they come out and share them with those who would find them interesting and useful.


CME to launch Eurodollar Bundle futures and options
Jon Watkins – The Trade
Global derivatives exchange operator CME plans to launch Eurodollar Bundle futures and options to provide investors with a cost-effective alternative to trading OTC products, a practice becoming increasingly expensive due to new regulations.

***** You have to provide your own rubber bands for the bundles.


EMIR reporting offers more opportunities for vendors and service providers
The Trade
With new reporting requirements for the European Market Infrastructure Regulation (EMIR) now in effect, technology vendors and service providers have more opportunities to offer solutions to clients.

***** Have I shown you my latest vaporware? It is going to do this. And that. When it is done.


Singapore Management University Integrates X_TRADER In Master Of Science In Quantitative Finance Program
Press Release
Trading Technologies International, Inc. and the Singapore Management University today announced that TT’s X_TRADER software is now being used in the university’s Master of Science in quantitative finance program within the market microstructure course curriculum.

***** I hear TT has a patent on university outreach programs.


Fund managers turn gumshoe as forensic short-selling pays off
Francesco Canepa – Reuters
Fund managers are increasingly turning to investigative tactics, detailed accounting analysis and corporate sleuthing in a bid to uncover skeletons in company closets that can offer an investment edge in a low-yield world.

***** We call this good old fashioned qualitative research.


‘Skills’ the world can manage without
Andrew Mitchell. – Financial Times
Sir, Your report on hedge fund manager Christopher Rokos is amusing and breathtaking in equal measure (“Rokos asks court not to deprive world of his skills“, August 11). In what Walter Mitty world would the loss of the services of a hedge fund manager (one of sadly far too many) be seen to be to the detriment of the public interest?

***** I can make the case. Each trader is unique. You never know when the markets will demand the type of trading this hedge fund manager utilizes, which might mean that the markets become less efficient as his style of trading is not present. Then again, most of the world does not give a hoot about efficiency, which is why all kinds of trading styles are outlawed. Someday, and it has already occurred, this will cost us dearly. Then again, his absence opens up an opportunity for someone else, maybe with a little smaller ego.



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Lead Stories

SEC Has Launched Examination of Alternative Mutual Funds
Juliet Chung and Kirsten Grind – WSJ
The Securities and Exchange Commission has launched a broad examination of alternative mutual funds, according to people familiar with the matter, kicking off regulatory scrutiny of one of the hottest and most controversial investment products to be offered to small investors.

Banking Lobby Backs Stricter Codes of Conduct for Currency Traders
Katie Martin – WSJ
A lobby group for the biggest banks in the foreign-exchange market is backing tougher codes of conduct for traders, while seeking a cautious approach to tweaking currency benchmarks that are at the center of a yearlong regulatory investigation.

Barclays Seen Facing $2 Billion in Misconduct Costs
Stephen Morris – Bloomberg
Barclays Plc (BARC) faces costs of as much as 1.2 billion pounds ($2 billion) for its alleged rigging of currency markets, lying to clients about its U.S. dark pool and mis-selling interest-rate swaps, Sanford C. Bernstein Ltd. said.

Banks wait on sidelines of new silver benchmark
Neil Hume, Commodities Editor – Financial Times
Build it and they will come. Or that is what participants in London’s $1.6tn-a-year silver market will be hoping. There are just three trading days before the new, electronic replacement for the 117-year old silver fix goes live and there is still considerable uncertainty over who will be participating on Friday.

LME Clear passes key legal hurdle to launch
Luke Jeffs – Futures & Options World
The London Metal Exchange has cleared the penultimate regulatory hurdle ahead of the planned launch of its first clearing house next month.

New on Messaging App Line: Stock Trading
Takashi Mochizuki – MoneyBeat – WSJ
In Asia, people are using messaging apps to do a lot more than just send messages. Popular Asian apps like Line, WeChat and Kakao Talk all offer many additional features like photo-sharing, games and online shopping. Now, you can add one more to the list: stock trading.

Newedge indices underline poor July trading
Futures & Options World
French broker Newedge said all of its futures indices that track the performance of hedge funds and traders posted losses last month. Newedge Commodity Trading Advisor (CTA) Index fell 0.91% in July but remains in positive territory for the year-to-date with a performance of +0.14%.


Preet Bharara takes on Andrew Cuomo in battle of New York
Kara Scannell in New York – Financial Times
It is a public showdown with little precedent in the rough-and-tumble history of New York. Preet Bharara, a federal prosecujtor known for his pursuit of Wall Street miscreants, has turned his sights on the office of the state’s governor, Andrew Cuomo, and local politics may never be the same.

Robert Keyes, Senior Officer in New York Regional Office, to Retire After Nearly 22 Years of Federal Service
The Securities and Exchange Commission today announced that Robert J. Keyes, a senior officer in the New York Regional Office, will retire at the end of this month following 22 years of federal service, including the past 18 at the SEC.

FCA says firms must do more to ensure financial promotions do not mislead
The Financial Conduct Authority (FCA) has found that some promotions for financial products are still falling short of its rules and firms need to do more to ensure that advertisements do not mislead consumers.

Military Spouses Receive Fellowships to Conduct Financial Counseling
Fifty military spouses throughout the United States and overseas have been awarded the FINRA Investor Education Foundation’s 2014 Military Spouse Fellowship.

Caution regarding on-line trading platforms
The Autorité des marchés financiers (the “AMF”) is cautioning Québec investors about the use of Internet-based trading platforms, primarily in the currency markets (also known as FOREX), and the use of binary options.

Germany finds Emir enforcement fix
Fiona Maxwell –
Derivatives users in Germany are set to face stricter supervision of their reporting obligations than their counterparts elsewhere, thanks to a unique system that turns external auditors into the eyes and ears of the regulator – and forces companies to pay for the new checks.

Exchanges & Trading Facilities

TMX extends CEO Kloet’s contract by 2 months
TMX Group Ltd has extended the contract of its retiring chief executive officer until the end of October, the owner of Canada’s main stock exchange operator said on Tuesday.

CME Group to Launch Eurodollar Bundle Futures and Options
Press Release

Hedge Funds & Managed Futures

Macro funds in the firing line as top-down calls fail to pay off
Anna Fedorova – Investment Week
Funds with a top-down macro approach have struggled to beat bottom-up stockpickers this year, with many dropping into the fourth quartile of their respective sectors.

EXCLUSIVE-Life after Pimco: how bond manager Seidner beat his old boss Gross
Jennifer Ablan – Reuters
Marc Seidner, who left Pimco earlier this year just as the fixed income powerhouse was about to be roiled by internal strife, is beating his old boss Bill Gross at a game Gross used to dominate: calling the bond market.

Brevan Howard’s Flagship Hedge Fund Posts First Monthly Gain in 2014
Laurence Fletcher – WSJ
Brevan Howard’s flagship $26.5 billion hedge fund made its first monthly profit this year in July, as it tries to avoid posting a first-ever year of losses. The Brevan Howard Master Fund, run by Alan Howard and one of the world’s biggest hedge-fund portfolios, posted an estimated 0.7% gain in July, according to a letter to investors reviewed by The Wall Street Journal.

BlackRock launches multi-manager alternatives fund for retail investors
Ashley Lau – Reuters
BlackRock Inc, which has been heavily promoting alternative investments to retail investors, intensified that effort on Tuesday with the launch of a new multi-manager fund.

Schroders launches onshore version of QEP Global EM fund
Anna Fedorova – Investment Week
Schroders is launching an onshore version of its ISF QEP Global Emerging Markets fund, to be managed by the QEP investment team headed by Justin Abercrombie (pictured).

BlackRock removes intermediary charge on Hibbert’s European Dynamic fund
Nick Paler – Investment Week
BlackRock has scrapped the 1% initial charge for intermediaries investing in Alister Hibbert’s European Dynamic fund after assets under management fell to a more manageable level.

Hargreaves cuts minimum investment level as it targets lower net-worth clients
Alasdair Pal – Investment Week
Hargreaves Lansdown is reducing the minimum investment required to open an account from £500 to £100 in a bid to entice low-value clients.

Former Martin Currie income manager joins Saracen after five-year break
Anna Fedorova – Investment Week
Former Martin Currie manager Scott McKenzie has joined Saracen Fund Managers, after taking a five-year break from the industry.

Banks & Brokers

ANALYSIS-Brokerages face exodus as advisers get better deal in indie firms
Elizabeth Dilts – Reuters
The four biggest U.S. brokerage firms are facing an exodus of employees who are finding they can make more money and save on taxes by taking their clients and starting an independent firm before they retire.

One Financial Markets Deploys Tradable Platform
Marina Daras – WatersTechnology
Online broker One Financial Markets has partnered with Tradable and launched a new trading platform to attract new clients.

Conduct risk rush a worry, says State Street op risk head
Jessica Meek –
Banks’ reaction to industry events means that conduct risk offices may be set up too quickly and affect other areas of the organisation’s operational risk framework

JP Morgan names global custody head
Matt Turner – Financial News
JP Morgan has promoted its head of fund services to lead its $21 trillion custody business globally, Financial News learned.

Simon Winn Joins EBS As Head Of Sales For Asia Pacific
EBS, ICAP’s market-leading electronic FX business, announces today that Simon Winn has joined as Head of Sales Asia Pacific, based in Hong Kong.

Clearing & Settlement

Traiana Launches Enhanced Cross-Asset Matching Engine
Traiana, the leading provider of pre-trade risk and post-trade processing solutions, announces today it has launched the next generation of its post-trade cross-asset allocation, matching and confirmation service for both buy- and sell-side firms.

Indexes & Products

Rimes Adds Dow Jones Commodity Index
Max Bowie – WatersTechnology
Benchmark index and economic data provider Rimes Technologies has added Dow Jones’ Commodity Index series to its Benchmark Data Service, providing buy-side clients with processed and validated access to the data.

BOJ Steps Up ETF Purchases as Shares Slump
Megumi Fujikawa – WSJ
As Tokyo shares fall back from their recent highs, the Bank of Japan has been significantly stepping up its purchases of domestic exchange traded funds.


Eyeing the Full Wallet, Markit Integrates Commission Manager With Broker Vote
Ivy Schmerken – Wall Street & Technology
Buy-side firms want access to their full commission wallet so they can leverage the data in their broker vote software and factor in research related events, according to Markit.

Thomson Reuters Introduces New Buy-Side Focused App to its Financial Markets Desktop Thomson Reuters Eikon
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the launch of Watchlist Pulse, a new buy-side focused application for its flagship financial market desktop, Thomson Reuters Eikon

Markit Signs Options to Collaboration Services
Faye Kilburn – WatersTechnology
Infrastructure-as-a-service provider Options has integrated federation and directory elements of Markit’s Collaboration Services – including the Markit Directory “phone book” of validated identity and contact data, and the Federated Chat platform – into its Options Pipe Core enabling technology platform.


Second Ex-Citadel Worker Guilty in Trade-Secrets Case
Andrew Harris – Bloomberg
A former Citadel LLC employee whose job was to research and develop high-frequency trading strategies pleaded guilty to obstructing a probe into the theft of trade secrets from the Chicago-based investment firm.

Ex-MIT Professor, Son to Plead Guilty in Hedge Fund Scam
Christie Smythe – Bloomberg
A former Massachusetts Institute of Technology professor and his son agreed to plead guilty to running a $500 million hedge-fund scam that was uncovered by investigators probing Bernard Madoff’s Ponzi scheme.

Environmental & Energy

Global warming: Rapid rise in Arctic temperatures linked to changes in extreme weather and global wind patterns
Steve Connor, The Independent
Scientists have linked the rapid rise in Arctic temperatures over the past two decades to weather extremes in the northern hemisphere such as heatwaves in the US and flooding in Europe.

Great Barrier Reef’s greatest threat is climate change, says new report
Australian Associated Press
Warmer ocean currents are also likely to remain a threat to the Queensland coral ecosystem for many years, the Great Barrier Reef Outlook Report 2014 said.

***LB: Also in this story “It is already affecting the reef and is likely to have far-reaching consequences in the decades to come,” the 300-page report said.”

Keystone XL Will Spike Oil Demand and CO2, Study Says
Bobby Magill, Climate Central
The proposed Keystone XL Pipeline and the greenhouse gases that would be released because of it have been at the heart of the debate over whether the pipeline should be built in the U.S. since it was first proposed in 2008.


CIC Pays “Astonishingly Low” Money Management Fees – Z-Ben
Mia Lamar – MoneyBeat – WSJ
China Investment Corp., one of the largest sovereign wealth funds in the world with about $600 billion under management, on Friday reported a 9.3% return on its overseas investments in 2013, compared with a 10.6% return in 2012. Consulting firm Z-Ben Advisors has drilled into the report and found some depressing news for money managers: the fees CIC is paying for its money to be managed are “astonishingly low.”

HKEx Launches The Application Service Provider Programme
Hong Kong Exchanges and Clearing Limited (HKEx) announced today the establishment of a framework to support Application Service Providers (ASPs). ASPs play a vital role in HKEx’s market ecosystem by providing services to Exchange Participants (EPs) and connecting investors to HKEx’s markets through EPs.

JCCH SPAN Parameter Update effective Aug. 18

SGX welcomes IREIT Global to Mainboard

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