John Lothian Newsletter: SEC plans tougher oversight of large asset managers; CME readies energy launch amid FX delay; China to streamline securities watchdog in efficiency drive

Feb 24, 2014

First Read

About all that trading after the bell…
Arash Massoudi | FT Alphaville
High-speed traders may no longer be able to count on Warren Buffett’s Business Wire for direct feeds to market-moving information. But that doesn’t mean the problem of trades taking place with after-market press releases but before the US market is officially closed has been solved.
***** There is an answer to this that has nothing to do with technology.


CME Group Named “Best Futures Exchange” by Markets Media Magazine for the Second Year in a Row
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the company was named “Best Futures Exchange” by Markets Media’s 2014 Market’s Choice Awards, as voted by peers and customers. The award recognizes CME Group’s excellence in client service and education, technology design and execution, and diverse and innovative products.
***** And the winner is….. Markets Media.


Old School/New School: Mark de Souza says County Cork blends experience with technology
The managed futures space is always producing new managers with new takes on the market.

County Cork LLC, a managed futures firm, is looking to bring experience to its clients with traders in the agriculture and equity markets who’ve seen it all. John Lothian News sat down with Mark de Souza, president of County Cork to talk about what sets the firm apart from other funds at the Emerging Manager Forum in Miami in December. “The uniqueness of what County Cork has brought to the marketplace in terms of those discretionary programs is our managers don’t come from trading backgrounds,” de Souza said. “The come from production backgrounds, hedging backgrounds. They are true industry experts whether its in production, supply chain management, even procurement. They bring a real understanding of supply and demand.”

Watch the video »


Old School/New School: Mark de Souza says County Cork blends experience with technology
John Lothian News

The managed futures space is always producing new managers with new takes on the market.

County Cork LLC, a managed futures firm, is looking to bring experience to its clients with traders in the agriculture and equity markets who’ve seen it all. John Lothian News sat down with Mark de Souza, president of County Cork to talk about what sets the firm apart from other funds at the Emerging Manager Forum in Miami in December. “The uniqueness of what County Cork has brought to the marketplace in terms of those discretionary programs is our managers don’t come from trading backgrounds,” de Souza said. “The come from production backgrounds, hedging backgrounds. They are true industry experts whether its in production, supply chain management, even procurement. They bring a real understanding of supply and demand.”


LME, listing challenges ahead for HKEx
Enoch Yiu | South China Morning Post
Hong Kong Exchanges and Clearing, which will announce financial results on Wednesday, is facing the twin challenges of capturing more listings and devising strategies to turn the London Metal Exchange into a growth engine, according to brokers and analysts.
***** They are Jonesing for some growth from the LME.


Mt. Gox CEO Resigns From Bitcoin Foundation Board
Mark Karpelès, chief executive officer of Mt. Gox, the embattled Tokyo-based bitcoin exchange, resigned on Sunday from the board of the Bitcoin Foundation, according to a person familiar with the situation.
*****  At least the foundation was taking withdrawals.  


Tea Party Father Santelli Calls His Rant ‘The Best 5 Minutes Of My Life’
Huffington Post
Five years after his diatribe helped launch the tea party movement in American politics, CNBC rant stylist Rick Santelli called the episode “professionally the best five minutes of my life.”
***** The amazing thing about the “Rant” and Rick’s other made for television tantrums is that in person he is a pleasant and upbeat person.  He always has a smile and a kind thing to say.


TribU: Money Milestones — Financing Your Life’s Dreams
The Chicago Tribune is holding an educational series under the “TribU” name titled  “Money Milestones—Financing Your Life’s Dreams.” TribU: Money Milestones will help guide you through financial issues important to families young and old, big or small.
*****  The Tribunes financial advice is unrelated to their efforts to get out of bankruptcy.


Gary DeWaal’s Bridging the Week: February 17 to 21 and 24, 2014 (Korean Broker Default Reverberates Globally; Fed Tells Foreign Banks to Shape Up)
The default of a Korean broker in December 2013 related to its erroneous trading of certain derivatives is not new news, but the reverberations from this default continue to echo loudly worldwide.
***** Hopefully Gary has some sunnier news for us when he reports from Boca Raton in few weeks.


Erratum: OptionsCity’s award article
OptionsCity software won “Best Options Technology” last week from Markets Media, for the second time in a row.  JLN reported the award, but linked to last year’s press release instead of this year’s, which you can find here in the link below.


MarketsWiki Page of the Day
CBOE Stock Exchange (CBSX)

MarketsWiki Recent Updates


Peter Reitz; Marianne Brown; Paula Sausville Arthus; Mary Jo White; Stephen Luparello


Omgeo; U.S. Securities and Exchange Commission; CBOE Stock Exchange (CBSX); European Energy Exchange AG


OptionsCity Metro; CME Group Oats; CME Group Corn; CME Group CBOT 30-Year Interest Rate Swap


Binary options


47,233,576 pages viewed, 7,820 articles, 179,598 edits
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Lead Stories

U.S. SEC plans tougher oversight of large asset managers
The U.S. Securities and Exchange Commission is developing a plan to step up its scrutiny of the country’s largest and riskiest asset managers, SEC Chair Mary Jo White said on Friday.

CME readies energy launch amid FX delay
Anish Puaar – Financial News
A regulatory hold-up may force US futures giant CME to open its European exchange with energy futures, not foreign currency trading as planned. The switch would put the exchange, CME Europe, head to head with the dominant European energy futures exchange, Ice Futures Europe in London, owned by IntercontinentalExchange.

China to streamline securities watchdog in efficiency drive
China plans to overhaul its securities regulator, merging some departments and creating four units to fill existing gaps, as it looks to reduce unnecessary red tape and create more effective oversight of its fast-developing markets.

Citadel sees volume surge in its Citadel Connect dark pool
Citadel Securities, one of the top market makers in U.S. stocks and listed stock options, said on Friday that volume on its off-exchange trading platform, Citadel Connect, has nearly tripled in the past year, making it one of the largest U.S. dark pools.

Trustee Seeks to Question Peregrine’s Imprisoned Founder
Jacqueline Palank – MoneyBeat – WSJ
The official tasked with repaying customers of Peregrine Financial Group Inc. wants to have a talk with defunct brokerage’s founder, who’s behind bars after pleading guilty to fraud.

Fed Failed to See Lehman’s Fallout for Economy, Transcripts Show
Joshua Zumbrun – Bloomberg
The day after Lehman Brothers Holdings Inc. declared the largest bankruptcy in U.S. history in 2008, Federal Reserve officials remained unsure whether the financial crisis would do lasting damage to the U.S. economy.

Deutsche Bank to slash U.S.-based assets by $100 billion: FT
Deutsche Bank has laid out plans to reduce its U.S. balance sheet as the U.S. Federal Reserve adopts new rules to shield the country’s taxpayers from costly bailouts, the Financial Times reported on Sunday.

G20 aspires to faster economic growth, roadmap sketchy
The world’s top economies have embraced a goal of generating more than $2 trillion in additional output over five years while creating tens of millions of new jobs, signaling optimism that the worst of crisis-era austerity was behind them.

Madoff victim fund receives over 9,000 claims, extends deadline
More than 9,000 claims from people who say they were defrauded by Bernard Madoff have been submitted to a $4.05 billion fund set up by the U.S. government, and victims of the swindler’s Ponzi scheme were given two more months to seek compensation.

Time for central banks to step back
George Magnus –
Central banks have been on the back foot recently. The Federal Reserve has been criticised for its tapering strategy. Forward guidance in the US and UK has become a little discredited. Higher policy rate expectations are played down but are no longer an academic issue. The European Central Bank’s unused lender-of-last-resort policy tool for sovereign governments may have been rendered unusable.

UBS Said to Seek Immunity in FX-Rigging Probes by EU, US
Lindsay Fortado, Keri Geiger and David McLaughlin – Bloomberg
UBS AG, trying to reprise its success in limiting fines in a probe of interest-rate rigging, is seeking immunity in the U.S. and European Union as part of the global investigation of currency markets, two people with knowledge of the case said.


US SEC to press ahead with tick size study, Chair White says
The U.S. Securities and Exchange Commission will press ahead with a test program that would allow the stocks of small-cap companies to trade in wider increments, SEC Chair Mary Jo White announced Friday.

SEC’s Aguilar sees cyber-threat risk to ‘transfer agents’
The U.S. Securities and Exchange Commission should consider updating its rules to protect against technology failures or cyber attacks of “transfer agent” firms charged with maintaining millions of shareholder accounts, SEC Democratic Commissioner Luis Aguilar said Friday.

U.S. SEC reviewing if some high-speed traders should register
U.S. securities regulators are studying whether more proprietary high-speed trading firms should register as broker-dealers, which would subject them to greater oversight, a U.S. Securities and Exchange Commission official said on Friday.

A Surprise Guest at the S.E.C.’s Annual Gathering
In a room overflowing with suited lawyers scribbling handwritten notes, the man live tweeting in a hooded sweatshirt stood out.

Reaction to EU derivatives competition rules “overblown” – Goldman Sachs
Anish Puaar – Financial News
The reaction to new rules designed to create competition among European futures bourses is “overblown”, with the incumbent exchange groups set to be less affected than first thought, Goldman Sachs analysts say.

If HFT is here to stay it needs to be regulated
Paul Murphy –
Mark Cuban, the cigar-tugging media entrepreneur and owner of the Dallas Mavericks basketball team, was in the news last week, railing against the seeming failure of American regulators to get to grips with what Mr Cuban reckons is the Number one threat to US national security: high frequency market trading (HFT), of course.

Lombard Risk annual regulatory update conference attracts 100+ City firms as COREP submission deadlines approach
Lombard Risk Management plc, a leading provider of integrated regulatory reporting, compliance and collateral management solutions for the financial services industry, reports over 100 firms in attendance at last week’s annual regulatory update conference.

Chairman’s Address At SEC Speaks 2014, Chair Mary Jo White, Washington, D.C., Feb. 21, 2014

An Open Letter To The SEC Staff, Commissioner Daniel M. Gallagher, U.S. Securities And Exchange Commission, Washington, D.C., Feb. 21, 2014

Addressing Known Risks To Better Protect Investors, Commissioner Luis A. Aguilar, U.S. Securities And Exchange Commission, SEC Speaks, Washington, D.C., Feb. 21, 2014

Remarks At The “SEC Speaks” Conference, Commissioner Kara M. Stein, U.S. Securities And Exchange Commission Washington, D.C., Feb. 21, 2014

Exchanges and Trading Facilities

BATS Global Markets Named “Best Exchange Technology” at 2014 Market’s Choice Awards
BATS receives industry award for 2nd consecutive year.

CME Eyes Summer Data Protocol Switch
Faye Kilburn – WatersTechnology
CME Group is preparing to launch a new version of its market data platform later this year, MDP 3.0, which will feature a binary market data protocol designed to reduce the bandwidth required to deliver CME market data.

BATS–Direct Edge to Equalize NY4, NY5 Latency, Post-2015 Equinix Move
BATS Global Markets will ensure that trading members of its BATS and Direct Edge exchanges will experience the same latency whether they co-locate in datacenter provider Equinix’s Secaucus, NJ NY4 or NY5 facilities

Share Of Investors In Financial Instruments Trading On Warsaw Stock Exchange In 2013

BM&FBOVESPA Publishes 2013 Annual Report

Lively Trading On Oslo Børs During The Sochi Winter Olympics

TOM MTF Statistics Week 8, 2014

Moscow Exchange To Retire Quasi-Treasury Shares

Hedge Funds and Managed Futures

Hedge fund exit requests rise slightly in February
Hedge fund investors asked to pull out just slightly more money in February than they did the previous month, largely sticking with their managers to help them navigate financial markets, data showed on Friday.

Cargill-Owned Hedge Fund Posting Gains in 2014
A hedge fund owned by Cargill Inc. made money trading energy this year, even as another unit at the commodity firm reportedly racked up losses in the power market.

Douglas Hodge: The new man with a plan at Pimco
Mike Foster – Financial News
Douglas Hodge is a little less relaxed than when I met him last June at Pimco’s modern offices, fittingly close to Bond Street in London.

FX hedge funds’ underperformance to reverse as macro trends shift
Simon Watkins – Euromoney magazine
Global macro trends will normalize, boosting volatility and FX returns, argue analysts, despite the unflattering returns of FX hedge funds, the fall in AUM of currency-specific funds last year – even as the industry received bumper inflows – and recent high-profile failures.

The ABCs of Investors’ DNA
Some people become value investors. Some might be born that way. Consider Benjamin Graham, Warren Buffett’s mentor and the author of “Security Analysis” and “The Intelligent Investor.”

Two Sigma Hedge Fund Has Twice Accused Chinese Nationals Of Stealing Quant Secrets
Nathan Vardi – Forbes
Two Sigma Investments, the New York hedge fund firm that manages some $18 billion, has previously accused a Chinese national who worked at the firm of stealing confidential information related to its secretive quantitative trading business.

BNP Paribas hopes to pick up fiduciary mandates
Mike Foster – Financial News
BNP Paribas Investment Partners is among a new breed of managers seeking to break into the UK fiduciary market as a glut of mandates falls due.

Coffee to Soybean Wagers Climb on Brazilian Drought
Elizabeth Campbell – Bloomberg
Hedge funds boosted bullish commodity bets to the highest since 2012 as extreme weather threatened global crops and a polar blast increased U.S. demand for heating fuel.

CFTC Commitments Of Traders Reports Update

Banks and Brokers

Dealers Seek U.S. Treasury’s Help in Regaining Grip on Debt
Daniel Kruger, Kasia Klimasinska and Caroline Salas Gage – Bloomberg
The Masters of the Universe immortalized by Tom Wolfe in his 1987 novel “The Bonfire of the Vanities” are feeling like mere mortals. The Wall Street banks known as primary dealers because they get to trade with the Federal Reserve and raise the money that the U.S. government needs to operate are concerned they are being marginalized because of advances in technology.

Banks struggle to fill staff gaps in FX rigging row
A void is appearing in the upper reaches of the world’s biggest and most powerful financial market as banks struggle to replace currency traders suspended or fired during a global investigation into allegations of foreign exchange rate-rigging.

Fannie Mae Posts Profit That Sets a Record
The mortgage giant Fannie Mae passed a symbolic milestone at the end of the fourth quarter, generating profits that will push its total payments to the federal government higher than the amount it received in the 2008 bailout, the company reported Friday.

The Online Challenge for Banking
Francisco González, chairman of BBVA, recently said that banks needed to take on Amazon and Google or die. He aims to be one of the survivors.

Merrill executive loses regional sales post in western U.S.
Chandler Root, Merrill Lynch’s market executive for the U.S. southwest region, is being transferred to a new post in an apparent demotion, according to people with knowledge of the situation.

Citi appoints new FX chief
Chiara Albanese, WSJ Moneybeat – Financial News
Citigroup has found a new leader for its foreign exchange business: Nadir Mahmud.

Transition management in spotlight after fine
Brian Bollen – Financial News
It was not a great start to the year for State Street UK.

‘Death by 1,000 cuts’ for RBS investment bank
Richard Partington and Nick Kostov – Financial News
Royal Bank of Scotland’s investment bank is likely to bow out after a “death by 1,000 cuts” and reform as a corporate banking operation.

RBS, the secret investment bank with no secret to hide
Matt Turner – Financial News
“Investment banking wouldn’t really fit with our style”, the Royal Bank of Scotland executive said. “Our approach is rooted very strongly in commercial banking-style relationships, to which we seek to bring a wide range of products and services to differentiate ourselves.”

HSBC welcomes former SEC Commissioner to its board
Kathleen Casey, who occupied the top seat at the regulator between 2006 and 2011, will become a member of the audit committee and the Financial System Vulnerabilities committee for an initial period of three years.

Clearing and Settlement

Why is Deutsche Börse setting up an Asian clearing house?
Michelle Price – Financial News
Yesterday, the usually tight-lipped Deutsche Börse executive team engaged in a rare moment of straight-talking.

Euroclear Bank Selected For Settlement Of US Stocks By EuroCCP
EuroCCP, the pan-European central counterparty (CCP) which clears over 4,000 securities, has chosen Euroclear Bank, the Brussels-based international central securities depository (ICSD), as sole settlement provider for all US-listed equities transactions struck on Turquoise, the pan-European trading venue.

Trayport’s Complete Successfully Enables Clients To Meet Their EMIR Trade Reporting Obligations.
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced that 10 of its clients are successfully using the Complete reporting solution to report OTC derivative trades under EMIR.

Banks’ hopes rise for clearing capital reprieve
Michelle Price – Financial News
Rules that looked set to severely affect European banks’ ability to trade across Asia are likely to be delayed, in a development that will offer relief to a swathe of the institutions active in the region.

The Trouble With Brazil’s Post-Trade Automation in a Global Economy
Sheldon Warrick – Wall Street & Technology
As Brazilian trade volume grows, asset managers adopt technological solutions to reduce risk and improve efficiency

Banks have done too little, for too long on counterparty data
David Rowe –
Regulators recently published the findings of a study of counterparty risk data at the world’s largest banks – it makes for depressing reading, says David Rowe, and is symptomatic of deeper problems plaguing the field of enterprise risk management.

Indexes and Products

ETFs cash in by copying hedge fund stock picks, but some see risks
When big name U.S. hedge fund managers disclosed their fourth-quarter stock holdings last week, a couple of exchange-traded fund companies took particular note.

Barclays ETN follows Nobel strategy
Yakob Peterseil –
When it teamed with 2013 Nobel laureate Robert Shiller to build an ETN based on the Cape ratio, Barclays became just the latest bank to partner with a celebrated academic.

ETF roundup: BAML reports big rise in high-yield ETF inflows
9.8% increase in flows year on year; equity redemptions hit ETPs in January; North American ETFs suffer worst quarter for five years; iShares lists Europe’s first fund to use international security structure


Perseus High Precision Time Scores A Win – Most Innovative New Product 2014
Markets Media Presented The 2014 Markets Choice Awards, Recognizing Excellence In Institutional Markets Awarding ICE, Credit Suisse, Equinix, Fidelity Investments, Deutsche Bank, Bloomberg, Allianz Global Investors, And Barclays LX


Credit Suisse to Pay $197 Million in SEC U.S. Client Case
Tom Schoenberg and David Voreacos – Bloomberg
Credit Suisse Group AG agreed to pay $197 million to regulators and admitted servicing thousands of U.S. clients without approval, leaving unsettled a criminal probe of whether it helped Americans evade taxes.

Ex-Evercore Managing Director Charged With Insider Trading
It might have been little more than a tabloid curiosity: A married New York investment banker has a child with a woman in Austin, Tex., and the couple goes through a breakup.

Ex-Madoff aide on trial in N.Y. wins dismissal of two counts
One of five former Bernard Madoff aides on trial for abetting his massive Ponzi scheme will face two fewer counts when the case goes to a jury, after a judge agreed to throw out charges that he arranged for his son to get a no-show job at the firm.

Investors with investments linked to Bernard Madoff
Financial Conduct Authority
Investors with investments linked to Bernard Madoff may have the opportunity to claim compensation.

New Zealand’s Financial Markets Authority: Settlement Reached For Lombard (In Receivership) Claims

Environment and Energy

EU Carbon Permits Have Longest Weekly Rising Streak Since 2010
European Union carbon permits had their longest weekly rising streak since 2010 as the bloc’s lawmakers were poised to give final approval on Feb. 24 for the market’s first intervention to fix a record glut. December carbon allowances advanced 8.2 percent since Feb. 14 for a sixth week of gains, the longest period since September 2010, according to prices from ICE Futures Europe exchange compiled by Bloomberg.

Supreme Court weighs EPA authority to regulate greenhouse gases
The Hill’s E2 Wire
The Supreme Court on Monday will hear challenges to an Obama administration greenhouse gas regulation. The program in question is the Environmental Protection Agency’s permitting process for industry sources, which includes coal-fired power plants, chemical facilities and oil refineries.

Environmental Groups Resort to Suing Industries Directly
The New York Times/Texas Tribune
Starting Monday, a federal judge in Waco will hear arguments from the Sierra Club that Luminant Generation Company, the state’s largest electric generator, has been spewing far more pollution into the air from an East Texas coal plant than is allowed by federal and state law.


China banks strike back against threat from Internet finance
China’s brick-and-mortar banks are launching a counter-attack against the assault on their business from Alibaba and other Internet heavyweights, in a bid to staunch the outflow of bank deposits into high-yielding online investment products.

Thailand Futures Exchange To Suspend And Terminate 6M THBFIX From March 17, 2014 Onwards
Thailand Futures Exchange PCL, under The Stock Exchange of Thailand group, announced the Securities and Exchange Commission has approved the cancellation of six-month interest rate futures THBFIX, effective from March 17, 2014. The last trading day for this futures contract will be on March 14, 2014.

Exchange to receive millions
Eddie Morton – Phnom Penh Post
Cambodia’s stock exchange will receive a $2.5 million funding injection from the South Korean government in an attempt to draw more corporate interest from companies who may want to go public, according to a recent report on state media site AKP.

By-laws necessary to launch Yangon Stock Exchange
Eleven Myanmar
The Stock Exchange Commission will be formed this year if the government manages to enact security exchange by-laws in time, according to Daiwa Securities Ltd.

[OSE] Futures & Options Trading Rules upon Derivatives Markets Integration (Information Sheet)

Launch Of Tokyo Stock Exchange And JASDEC’s Joint Service Enhancement Of Corporate Action Information Service

Tokyo Financial Exchange: Rollover Of Leading Contract Month For Three-month Euroyen Futures – Effective From 20 February 2014

Frontier Markets

Indonesia Commodity And Derivatives Exchange Partners With Deutsche Börse Backed GMEX Group And ECC
Indonesia Commodity and Derivatives Exchange, also known as PT. Bursa Komoditi dan Derivatif Indonesia  has signed a Memorandum of Understanding with Deutsche Börse backed Global Markets Exchange Group International LLP.

Insurers, MFs await regulatory go-ahead for bond trading
Business Standard
Mutual funds and insurance firms are awaiting go-ahead from their respective regulators — Sebi and IRDA — with regard to their participation in the newly launched Interest Rate Futures on stock exchanges.

Greece in banking sector stand-off with bailout lenders
Peter Spiegel in Brussels and Kerin Hope in Athens –
The Greek government and its bailout lenders are locked in a new stand-off over the health of Greece’s banking sector, with Athens contending its financial system requires less than €6bn of new capital, while international monitors insist it needs at least three times that amount.

CAMAC Energy Lists On The JSE

The Saudi Stock Exchange (Tadawul) Inaugural Meeting Of The Board Of Directors

Tehran Stock Exchange Weekly Digest – 19 February 2014

Nigerian Stock Exchange Weekly Report For The Week Ended 21-02-2014

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