John Lothian Newsletter: SGX approved for US derivatives clearing; Regulators Reviewing Volcker Rule Provision; Hong Kong, China Near Funds Deal

Dec 30, 2013

First Read

John Lothian News publication schedule for the week
Just a reminder that our secondary publications (JLN Environmental, Options, Financials, and Managed Futures) are on hiatus and will resume publication after the new year. This newsletter will be shut on New Year’s Day, but will continue to arrive in your inbox for the balance of the week.

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Eurex: Jürg Spillmann Finishes His Active Career
Long-standing Executive Board member Jürg Spillmann (62) has decided to retire at the end of the year from the Executive Boards of the Eurex companies. Spillmann served as Deputy CEO of Eurex Zürich AG and Eurex Frankfurt AG from their launch in 1998, and of the Eurex Clearing AG.
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Remarks Of CFTC Chairman Gary Gensler At Farewell Event
John F. Kennedy once said: “Let the public service be a proud and lively career.” What I’ve been most struck by these last five years is how all of you – the exceptional people of the Commodity Futures Trading Commission (CFTC) really embody this sense of public service as expressed by President Kennedy.
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***JM: I think you have to have a special curing process on your hide to do this kind of job. I’m definitely not cut out for it.

**JJL: Gary Gensler invokes John F. Kennedy in his Douglas Macarthur impersonation.

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Academics Who Defend Wall St. Reap Reward
DAVID KOCIENIEWSKI – NYTimes.com
Signs of the energy business are inescapable in and around Houston — the pipelines, refineries and tankers that crowd the harbor, and the gleaming office towers where oil companies and energy traders have transformed the skyline.
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***JM: NYT takes a rake to Craig Pirrong. Hey, do journalists get paid to write these articles? Feh. Bias. Can’t trust ’em. See how easy that is? It’s a dumb way by itself to determine the validity of a study… or an article.

**JJL: I have the highest respect for Dr. Pirrong’s integrity and ethics.

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Turkey Is Biggest Loser in Stocks as Erdogan Crisis Persists
Ye Xie and Katia Porzecanski – Bloomberg
The mounting power struggle between Turkish Prime Minister Recep Tayyip Erdogan and the judiciary is turning the stock market into the world’s worst performer and driving the currency to unprecedented lows.
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***JM: From promising up-and-comer to powder keg. “Mission Accomplished”? See our special report on Turkey from earlier this year.

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2013 TOP STORIES: Debunking 11 Bitcoin Myths
Nicholas Colas – TabbFORUM
In the rush to understand what bitcoin is – and isn’t – the public discussion on the topic has gotten a bit muddy. Here are 11 bitcoin myths and the reality under the hype and confusion.
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***JM: This is a great article, filled with neither hype nor doomsday moaning. It also contains the best explanation I’ve seen for why Bitcoin isn’t really a currency, and it makes sense to me; and that suggests where, if anywhere, virtual payment methods like that might find a legitimate home. Also, see our recent special report on Bitcoin for much more coverage of the subject.

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Bitcoin Buys Burgers to Beer as Shoppers Go Virtual
Natasha Doff – Bloomberg
What do a street-van burger, a wedding bouquet and a Beatles album have in common? They’re all on a growing list of products shoppers can buy over the counter using the virtual currency Bitcoin.
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***JM: The following quote appears at the end of the article. It’s one of those times when I’m so unsure of where to begin that my five-minute rant just dies out: “But I’m not yet confident enough to put all my savings into [Bitcoin], even though if I had done so earlier this year, I would now be very rich.”

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French ‘millionaire’s tax’ gets constitutional go-ahead
Reuters
France’s Constitutional Council gave the green light on Sunday to a ‘millionaire’s tax’, to be levied on companies that pay salaries of more than 1 million euros ($1.38 million) a year.
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***JM: Small violin time. In Norway, after they take half of your income, if there’s enough left over in your bank at the end of the year, they take more of it.

**JJL: Look for a number of French millionaires to establish trust accounts in South Dakota; see the Bloomberg article at jlne.ws/19VXvox

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MarketsWiki

MarketsWiki Page of the Day
Paul W. Hilgers
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MarketsWiki Recent Updates

People

Joseph Massey; Jignesh Shah; Paul W. Hilgers; Johann Kaemingk; Chadwick Campbell

Companies, Organizations and Groups

MCX Stock Exchange; Van der Moolen; Financial Technologies (India) Ltd; Optiver

Statistics

46,170,168 pages viewed, 7,727 articles, 170,176 edits
MarketsWiki Statistics

Lead Stories

SGX approved for US derivatives clearing
Jeremy Grant in Singapore – FT.com
The Singapore exchange has become the first Asian exchange to be allowed to offer clearing of over-the-counter derivatives to American customers after winning US regulatory authorisation.
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Regulators Reviewing Volcker Rule Provision
MATTHEW GOLDSTEIN – NYTimes.com
Federal regulators on Friday once again tried to quiet the controversy about the potential impact of a provision of the Volcker Rule on hundreds of community banks.
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Hong Kong, China Near Funds Deal
WSJ.com
Hong Kong and China will soon sign a deal where funds based in both markets can be sold to retail investors on either side, potentially allowing billions of dollars of cross-border investments in stocks and bonds.
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Taiwan Exchange Gets International Boost with Eurex Shareholding
Forex Magnates
The main derivatives exchange in Taiwan, the Taiwan Futures Exchange (TAIFEX) has started its internationalization process with Eurex exchange becoming a shareholder. The news comes as Yuanta Financial Holdings, one of Taiwan’s largest companies and a prominent shareholder in the exchange sold its stake to the European bourse.
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CFTC’s Gensler Says Regulators Reached ‘Right Balance’ on Rules
Cheyenne Hopkins – Bloomberg
U.S. regulators’ Dodd-Frank rules properly balance Wall Street’s pursuit of profits with the public’s need for a stable financial system, said outgoing Commodity Futures Trading Commission Chairman Gary Gensler.
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Passing the Fed’s Buck
David Reilly – MoneyBeat – WSJ
The Federal Reserve may be set to buy fewer bonds in the new year. But that doesn’t mean its balance sheet won’t keep expanding. That is good news for the U.S. government.
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Paul Krugman on Bitcoin, It’s Not A Stable Store Of Value
Tim Worstall – Forbes
As Bitcoin becomes ever more popular in the public eye we’re seeing two different things going on. One is the way that the regulatory regime is considering it and this ranges from outright bans in Thailand, through no bank should touch it in China, to India’s rather messy warning that it might breach money laundering regulations to the US view that it’s just fine but must obey all the other regulations about money transmission and so on. It’s a difficult terrain to navigate.
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Bitcoin Sites In India Start Shutting Down Over Regulatory Background
Tim Worstall – Forbes
Depending upon what you’re trying to do and where you’re trying to do it having regulations that don’t precisely describe your activities as legal can be as difficult to deal with as regulations that state that it’s positively illegal. At least in the latter case you know what you’re dealing with, in the former you’re left in a grey area. This is what appears to be happening with Bitcoin in India.
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Financial News’ Quotes of the Year – 2013
Financial News
FN revisits some of the most memorable soundbites from the financial services industry in 2013 – featuring Jamie Dimon, Crispin Odey and the Archbishop of Canterbury
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Regulatory

SEC pushes US insurers for details on ‘captives’: WSJ
Reuters
The U.S. securities regulator has asked life insurers to disclose the potential cost of forcibly winding down in-house insurance units known as ‘captives,’ whose business model has come under regulatory radar, the Wall Street Journal reported.
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U.S. Commodity Futures Trading Commission and Monetary Authority of Singapore Sign Memorandum of Understanding to Enhance Supervision of Cross-Border Regulated Entities
Today, leaders of the U.S. Commodity Futures Trading Commission (Commission) and the Monetary Authority of Singapore (MAS) signed a Memorandum of Understanding (MOU) regarding cooperation and the exchange of information in the supervision and oversight of regulated entities that operate on a cross-border basis in the United States and Singapore.
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SEC Removes References to NRSRO Ratings in Certain Rules and Forms
The Securities and Exchange Commission today announced that it has adopted amendments to eliminate references in certain of its rules and forms to credit ratings by nationally recognized statistical rating organizations (NRSROs).
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Statement Of SEC Commissioner Daniel M. Gallagher Regarding The Removal Of Certain References To Credit Ratings Under The Securities And Exchange Act Of 1934 And The Investment Company Act
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Agencies Reviewing Treatment of Collateralized Debt Obligations Backed by Trust Preferred Securities under Final Rules Implementing the “Volcker rule”
Press Release
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Graphene
Financial Conduct Authority
We are concerned about investments involving a man-made material called graphene. Find out more and how to protect yourself.
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Exchanges & Trading Facilities

Nasdaq to compensate firms on December 31 for botched Facebook IPO
Yahoo News
Nasdaq OMX Group Inc will compensate firms on December 31 for qualifying claims related to Facebook Inc’s botched May 2012 initial public offering, the exchange operator said in a note to traders on Friday.
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Program Trading Averaged 43.1 Percent Of NYSE Volume During Dec. 16-20
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Gorenje Newly Listed On WSE
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MICEX Stock Exchange Listing Rules To Come Into Effect
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TOM MTF Statistics Week 52 – 36% Market Share
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Hedge Funds & Managed Futures

SAC Portfolio Managers Moving to Rival In London
WSJ.com
LONDON–Three London-based SAC Capital Advisors LP portfolio managers agreed to join rival hedge-fund firm Balyasny Asset Management, as SAC employees splinter off following the closure of the firm’s U.K. office.
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KKR: Private Equity’s Busiest Buyer of 2013
Maureen Farrell – MoneyBeat – WSJ
In the private equity world, KKR has managed to find more companies to buy in 2013 than all of its competitors. The New York-based PE fund founded by Henry Kravis and George Roberts in 1976 invested in 34 companies in 2013, spending roughly $17.4 billion on these buyouts, according to data from Dealogic.
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End of year report card 2013: private equity
Dan Dunkley – Financial News
Financial News looks back at the private equity industry’s achievements during a year when public markets and the availability of credit rebounded, helping firms return capital to investors. However, it was also the year when the Alternative Investment Fund Managers Directive came into effect, causing headaches for the sector.
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Hedge-Fund Firm That Owns a Town in California
WSJ.com
Tucked away in a river bend behind a curtain of redwood trees, Scotia is an old-fashioned company town with a contemporary twist: The company that owns the town is a New York hedge fund.
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Fed getting it wrong tops list of investor concerns
Ralph Atkins in London – FT.com
Bears had a tough 2013. Too much went disappointingly right. Equities rose globally. The eurozone failed to fall back into crisis. Squalls in emerging markets faded. After initial missteps, the US Federal Reserve calmed investors’ worries about its plans to scale back, or taper, its asset purchases.
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Banks & Brokers

On Defensive, JPMorgan Hired China’s Elite
BEN PROTESS and JESSICA SILVER-GREENBERG – NYTimes.com
In a series of late-night emails, JPMorgan Chase executives in Hong Kong lamented the loss of a lucrative assignment. “We lost a deal to DB today because they got chairman’s daughter work for them this summer,” one JPMorgan investment banking executive remarked to colleagues, using the initials for Deutsche Bank.
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At Lloyds, a Bank and Its Boss on the Rebound
JULIA WERDIGIER and LANDON THOMAS JR. – NYTimes.com
António Horta-Osório was eight months into his new job as chief executive of the Lloyds Banking Group in 2011, wrestling with a plan to refocus the British lender, when he stopped sleeping.
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Weak Commodities Are Central Bankers’ Friends
David Cottle – MoneyBeat – WSJ
Developed economy central bankers were somewhat lauded before the financial crisis. Recently, though, they’re finding it harder to catch a break. Perhaps you don’t think they deserve one.
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Indexes & Products

Japan Exchange Group: The Retroactive Index Value oOf JPX-Nikkei Index 400
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Luxembourg Stock Exchange: Annual Revision Of The LuxX Index On 2 January 2014
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Bolsas Y Mercados Espaneoles Socdad Hldg : IGBM index new composition for the first half 2013
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Technology

Help is at Your Fingertips
Trade Talk
“Nobody reads the manual” is a common refrain when discussing documentation. For software, many users simply open the program, fumble around and begin using the application without looking at a setup guide or pressing F1 for help. And many users who search for a “getting started guide” are confronted with a vast repository of .pdf files, requiring a best guess at which tome contains the nugget of information they need. With mobile and desktop applications increasing in usability, the dusty old users’ manual seems more like a bygone artifact of antiquity than a required, helpful aid.
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Asia-Pacific

Shanghai starts simulated trade in equity options
Xie Yu in Shanghai ( China Daily)
The Shanghai Stock Exchange has started simulated trading in equity options, part of a drive by regulators to expand investors’ risk-hedging options. Simulated trading began on Thursday morning, the SSE confirmed to China Daily, and more than 60 securities firms took part.
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South Korea’s Banking Sector Gets Its First Woman CEO
Kanga Kong – MoneyBeat – WSJ
On Monday, Kwon Seon-joo took over as the CEO of state-owned Industrial Bank of Korea, 35 years after she first joined the bank.
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An Eventful Year in Hong Kong IPOs
Isabella Steger – MoneyBeat – WSJ
The year just ending has been a truly eventful one in Hong Kong initial public offerings. The city’s IPO market staged a strong comeback in the second half of 2013 as Chinese banks returned seeking funds—but even so, this has been a particularly grueling year for the head of the city’s stock-exchange operator.
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China’s Banks Are on the Rise
JOHN FOLEY – NYTimes.com
China’s banks are racking up foreign assets, driven by trade flows, and the country’s corporate diaspora. Even at the current slow pace, what today looks like “following the client” could soon become “following everyone’s clients.”
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China bourse investigates brokerages for foreigner investor trades-report
Reuters
The Shanghai Stock Exchange has criticized four Chinese securities brokerages for late trades on behalf of foreign investors that caused a sudden tumble in several blue-chip stocks two weeks ago, state media reported on Monday.
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Loan Sharks Smell Blood in China Waters
Jason Chow – WSJ.com
Sitting in an empty Papa John’s pizza restaurant, real-estate developer Yang Boqun said he would somehow catch up on loan payments for 150 million yuan ($24.7 million) he borrowed to finish a five-story shopping mall in the eastern Chinese city of Jinhua. But the mall’s only tenants are a Bentley car dealership, movie theater and the restaurant—and the loan’s interest rate is a steep 40%.
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Tokyo Shares Finish Best Year Since ’72
WSJ.com
Tokyo shares finished at their highest closing level in six years on the last day of trading in 2013, capping a stellar performance for a year that has seen the benchmark Nikkei Stock Average surge 57%.
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US CFTC authorises SGX as Asia’s first Derivatives Clearing Organization
Press Release
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[OSE] Terms for Calendar Spreads
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[OSE] Arrival of Last Trading Day for Futures & Options
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Frontier Markets

Bursa Malaysia Amends Timeframe For Issuance Of Annual Reports By Public Listed Companies – Shareholders And Investors To Receive Annual Reports In A More Timely Manner
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Lahore Stock Exchange To Make It’s Market Through Market Making Framework
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Tehran Stock Exchange Weekly Digest – 25 December
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Miscellaneous

My ‘Wolf of Wall Street’ Review
Joshua M Brown | The Reformed Broker
Real quick – I finally managed to see The Wolf of Wall Street today, thought I’d write up some impressions… For starters, I began in the business on Long Island at the tail-end of that era and I had met a lot of the guys depicted in the film while cold-calling at Duke & Company during the summer after my freshman year. They really were dumbasses and savage maniacs, but to the young guys who didn’t know any better, they were Ferrari-driving gods.
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John Lothian Newsletter

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