John Lothian Newsletter: State Street set to begin trading futures for rival institutions; BOE Suspends Staff Member in Forex Probe; GBP75 Trillion Payment Systems Industry To Have New Regulator

Mar 5, 2014

First Read

The Snow Takes Its Toll
John and many thousands of others are taking their time on the way to work today, enjoying the delightful new snow and expressing their gratitude at having been chosen to receive another generous helping of the stuff. He’ll return tomorrow for commentary; meanwhile, ***JM will throw in a few today to brighten your day even further.


CME Group’s turn to move into Asian commodities markets
Chiara Milioulis – Medill Reports Chicago
It’s now the “Merc’s” turn to make a move. CME Group Inc., locked in a race to extend its global footprint against rival IntercontinentalExchange Inc., found itself outflanked in Asia by ICE’s just completed takeover of the Singapore Mercantile Exchange

***JM: NSEL – now that would a jewel for the crown. Wonder if it’s for sale yet.


S&P ratings “like car reviews”
LEO SHANAHAN | The Australian
STANDARD & Poor’s has compared its credit ratings to Top Gear car reviews and weather reports that should be used only as a guide as it defends a post-global financial crisis lawsuit being watched around the world. In its appeal against a ruling that found S&P liable for tens of millions of dollars after it gave its coveted AAA rating to toxic financial products, lawyers for the agency told the Federal Court in Sydney yesterday “triple A does not mean anything hanging out there as a concept”.

***JM: Maybe they could just start posting their ratings on Yelp.


TABB: Bulge Bracket Brokers Losing Ground In Stock Trading To Smaller Houses
Dan Strumpf – MoneyBeat – WSJ
Among Wall Street’s stock trading desks, the playing field is getting more level. Over the past year the biggest stock brokerages on Wall Street have been losing ground to smaller competitors, according to a survey of big institutional investors from TABB Group


JLN/MarketsWiki 2014 Annual Survey – Please Give us 30 Seconds of Your Time
John Lothian News
We say “annual” but, quite frankly, it has been three years since we’ve conducted one, so the last one is getting a little, shall we say, stale. Please click the link below and answer five simple questions. 30 seconds of your time once every three years? It isn’t too much to ask, right? Besides, you might win a valuable prize.


R.J. O’Brien Named Best FCM – Client Service At CTA Intelligence U.S. Services Awards 2014
R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, announced that the company was named “Best FCM – Client Service” at the CTA Intelligence U.S. Services Awards 2014 ceremony late last week.

***JM: So now the press release intros need to read, “the oldest and largest – and gosh darnit just the best – independent futures brokerage…”


BM&FBOVESPA Reinvents the Client Experience
Candyce Edelen – TabbFORUM
To attract and retain market volume in the current environment, exchanges must improve the quality of service they offer clients. But this can strain an exchange’s budget. Brazilian exchange BM&FBOVESPA has enhanced the user experience while lowering operational costs by automating its certification processes.

***JM: Wouldn’t “rediscover” be a little better than “reinvent” if we’re talking about the idea of improving service quality?


SGX Asian Index Futures Contracts Gain CTFC approval
SGX’s newest three index futures contracts, which are based on the MSCI Thailand Index, the MSCI Philippines Index and the MSCI India Index have been certified by the U.S. Commodity Futures Trading Commission (CFTC) and can now be directly offered and traded in the U.S.


The Most Dangerous Man In Bitcoin Isn’t A Criminal
Max Chafkin – Fast Company
U.S. Attorney Preet Bharara has busted Wall Street insiders and dark web drug dealers. Now he’s setting out to do what Marc Andreessen, the Winklevoss Twins, and cryptocurrency nuts can’t: clean up bitcoin

***JM: There we go; a little regulation keeps existing currencies and payment systems clean, so I’m glad to hear that very shortly the Bitcoin house will be in order.


The A,B,C’s: Ian Morley’s Tips for Emerging Managers
Emerging managers have always faced challenges getting their firms off the ground. From establishing a track record to building the infrastructure needed to grow, firms are now faced with a new regulatory regime in the US and Europe that puts additional hurdles in their way.
Ian Morley, chairman of Wentworth Hall Consultancy in London spoke with Jim Kharouf, editor-in-chief of John Lothian News at the Emerging Manager Forum in Miami in December
about the challenges that managed futures funds face today. He said that Dodd-Frank and European rules have made compliance and reporting more onerous on managed futures firms and hedge funds, but that is only one part of the problem.

Watch the video »



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Lead Stories

State Street set to begin trading futures for rival institutions
Philip Stafford –
State Street Corporation, the US financial services group, is poised to begin trading futures for rival institutional investors, in a move that may curb investment banks’ role as intermediaries in trading.

BOE Suspends Staff Member in Forex Probe
The Bank of England said Wednesday that it has suspended a member of staff in relation to an investigation into whether its officials “were informed of manipulation in the foreign exchange market or the sharing of confidential client information.” The central bank didn’t name the suspended staff member.

GBP75 Trillion Payment Systems Industry To Have New Regulator
A new regulator to oversee UK payment systems will be introduced by April 2015. Payment systems make every payment to or from UK consumers possible, by allowing funds to be transferred between people and businesses. Today the Financial Conduct Authority (FCA) has asked for views on the key issues facing the payments sector.

London gold-fix banks accused of manipulation in US lawsuit: report
Barclays, Deutsche Bank and three other banks have been accused in a lawsuit of manipulating the London gold fix, a benchmark used throughout the $20 trillion market for the metal, Bloomberg reported.

HKEx says rejects one-third of IPO applications as tougher rules bite
Hong Kong Exchanges and Clearing Ltd has rejected a third of all companies applying to list on the city’s stock market since it introduced tougher measures in October, the exchange operator’s chief regulatory officer said on Tuesday.

Japan Said to Be Ready to Impose Bitcoin Rules
Japan is drawing up a plan to regulate Bitcoins, officials said Wednesday, including clauses the Nikkei business daily said would tax Bitcoin transactions and ban banks and securities firms from handling the digital currency.

Bitcoin bank Flexcoin shuts down after theft
Bitcoin bank Flexcoin said on Tuesday it was closing down after it lost bitcoins worth about $600,000 to a hacker attack.

A Standoff of Lawyers Veils Madoff’s Ties to JPMorgan Chase
It remains one of Wall Street’s most puzzling mysteries: What exactly did JPMorgan Chase bankers know about Bernard L. Madoff’s Ponzi scheme?


Financial Regulator Calls Obama Budget ‘Woefully Insufficient’
The country’s top derivatives regulator is making clear that it is unhappy with President Obama’s 2015 budget proposal.

Statement On Proposed SEC Budget For Fiscal 2015 – SEC Chair Mary Jo White

Ethics and Economics
Speech by Martin Wheatley, Chief Executive of the FCA, to the Worshipful Company of International Bankers, London 4 March 2014

Statement Of CFTC Commissioner Bart Chilton On The President’s FY 2015 Budget

UK’s Financial Conduct Authority: Interest Rate Hedging Products Redress Scheme: Monthly Update

Canadian securities regulators encourage Canadians to be proactive in preventing investment fraud

Exchanges & Trading Facilities

ICE Reports February Daily Volumes
ICE’s February average daily volume (ADV) for global derivatives was 10.7 million contracts, a decrease of 9% compared to February 2013.

CME Group Volume Averaged 14.0 Million Contracts per Day in February 2014, Up 2 Percent from February 2013 and Up 8 Percent from January 2014

BATS Global Markets Reports February Volume and Activity
U.S. Equities Market Share Totals 20.4%, BATS Chi-X Europe Posts Another New Record in Spain

BOX Options Exchange Price Improvement Activity For February
In the month of February, price improved contracts on BOX Options Exchange (“BOX”) averaged 107,060 per day, which represented a 10% increase over the previous month.

SGX Commodity Activities Grow In February

ASX Group Monthly Activity Report – February 2014

ASX Compliance Monthly Activity Report – February

NZX February 2014 Shareholder Metrics

Warsaw Stock Exchange Derivatives Market In February 2014

TOCOM Monthly Summary – February 2014

EnterNext welcomes Eandis’ bonds on Alternext Brussels

Hedge Funds & Managed Futures

Pimco Gets Brush-Off Close to Home
Pimco is starting to get hit in its own backyard. When the county pension fund serving cities and towns including Pacific Investment Management Co.’s headquarters of Newport Beach, Calif., met in November to decide how to put $100 million in new funds to work in the bond market, members of the investment committee made a surprising decision: They chose Swiss fund-management firm GAM Holding AG.

Falcons in the gyre, or something. A second coming and how Pimco works
Dan McCrum | FT Alphaville
Given that a certain Secretariat of the world’s biggest bond fund has attracted some attention of late, lets give the newest investment outlook from Pimco’s Bill Gross the once over.

BlackRock special situations manager Richard Plackett to take leave
Joe McGrath – Financial News
Richard Plackett, BlackRock’s star manager responsible for over GBP2.4 billion in assets, is to take six months’ sabbatical from April 1.

‘We won’t know the consequences of a yes vote until there’s been one’
Mark Cobley in Edinburgh – Financial News
The impact of Scottish independence on the country’s financial services industry is not only unknown, but probably unknowable until a Yes vote actually happens, representatives from the pension fund industry were told last night.

International push gains momentum at LGIM
Vivek Ahuja – Financial News
Legal & General Investment Management’s net inflows from international investors – earmarked a year ago as a key target constituency – more than doubled to record levels last year. The UK fund manager, which last month announced its first US acquisition, is confident such inflows will accelerate.

Danish pension fund turns financier in Nordic Capital exit
Alec Macfarlane – Financial News
PensionDanmark has provided long-term loans for the acquisition of outdoor playground maker Kompan from private equity firm Nordic Capital, highlighting the increasingly sophisticated roles of pension funds in the European M&A process.

Banks & Brokers

Six banks team up in plan for shared customer data register
JPMorgan, Citigroup and four more major banks have signed up with an industry group to develop a central register of information on other banks they deal with to help to meet increasing compliance demands and costs.

Final Rules, and a Warning, on Banker Bonuses in Europe
The European Commission adopted rules on Tuesday that finalize the details for limits on banker bonuses, and a top official cautioned against efforts that have cropped up to circumvent the new restrictions.

Deutsche Bank Hires Consultancy to Review Gold Fix Role
Deutsche Bank AG has brought in outside consultants to examine its part in the London gold “fix,” a key benchmark for the metal that is under scrutiny from regulators amid a broader probe into possible price-rigging in several major financial markets.

Jefferies Increase Stake in Market Market KCG to 20%
Zeke Faux – Bloomberg
Jefferies Group LLC boosted its stake in KCG Holdings Inc. to 20 percent as the investment bank purchased an additional 6 million shares in the market maker it helped rescue in 2012.

Daily FX volumes on EBS dip in Feb after strong start to 2014\
Average foreign exchange spot volumes traded on the EBS platform fell 5 percent in February from January, parent company ICAP said on Wednesday.

Guggenheim Poaches Tech Banker from Evercore
Eric Mandl, who specialized in cloud computing and big data deals at Evercore, jumped to Guggenheim Securities on Tuesday.

Jefferies profit rises on higher investment banking income
Investment bank Jefferies Group LLC, owned by Leucadia National Corp, reported a 23 percent jump in first-quarter profit as investment banking revenue grew.

Clearing & Settlement

SIX accelerates settlement
SIX shortens the time period between the execution of a trade and its settlement in Switzerland from three (T+3) to two (T+2) business days. As of 6 October 2014, this new settlement cycle covers all securities tradable on and SIX Structured Products Exchange and settling through the Swiss Central Securities Depository, SIX SIS AG.

Indexes & Products

Euronext launches PEA PME family of indices
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, welcomes publication of the implementing decree introducing PEA PME savings accounts in France, and today announced the launch of its new CAC PME index.

Definitive selection AEX,AMX and AScX
Euronext, a wholly owned subsidiary of IntercontinentalExchange Group, today announced the annual reweighting of the AEX, the AMX and the AScX that will take place after close of the markets on Friday 21 March 2014.

New Japan Index Prompts Chase for Higher Equity Returns
Some of Japan’s cash-rich firms are starting to take action to gain prominence on a new stock-market index that highlights the 400 companies offering the highest investment returns.


Reversing History, Trading Technologies Goes Live with Nasdaq OMX’s eSpeed
Ivy Schmerken – Wall Street & Technology
With traders demanding access to e-fixed income markets, TT connected with Nasdaq OMX’s newly acquired eSpeed, mending a rift that blocked access to liquidity in Treasury securities.

Former BondDesk CEO Joins Algomi as Strategic Advisor
Marina Daras – WatersTechnology
London-based fixed-income technology provider Algomi has appointed Howard Edelstein, former chairman and CEO of BondDesk Group, as strategic advisor.

SSgX Adds Futures Execution to FCM Solution
Waters Technology

Former Merrill advisers launch firm on Dynasty Financial platform
Dynasty Financial Partners said three veteran financial advisers formerly with Bank of America Corp’s Merrill Lynch unit have chosen its platform to launch their independent investment advisory firm.

Insurance Services Provider REG (UK) Selects DataArt As Sole Technology Partner For Regulatory Compliance Platform
DataArt And REG (UK) Cut Insurance Industry’s 1-4 Week Business Agreement Processes (TOBA) To 24 Hours Or Less

smartTrade Technologies Appoints Lalit Nathwani As Business Development Director

Broadridge Delivers JASDEC 2014 Market Change Upgrade
Implements First In Series Of Timely And Efficient Post-Trade Processing Responses To ISO 20022 Standards

Calypso Demonstrates 5X Performance Improvement With Oracle Exadata Database Machine – Calypso Achieves Oracle Exadata Optimized Status

Connectivity In A Box Joins IPC’s Connexus Financial Extranet


Madoff aides used ‘avalanche of lies’ to hide fraud: prosecutor
Five former aides of infamous swindler Bernard Madoff used an “avalanche of lies” to help him carry out his decades-long Ponzi scheme, each with a specific role to ensure that investors, auditors and regulators were kept in the dark, a prosecutor said on Tuesday in the closing phase of their trial.

Ex-Jefferies trader Litvak wraps up TARP fraud defense
Lawyers for Jesse Litvak wrapped up their defense of the former Jefferies Group Inc trader on federal fraud charges without his taking the stand, putting the case on track to go to the jury by late Wednesday.

New York Attorney General Schneiderman Announces Arraignment Of Wall Street Advisor For Stealing $4.3m From Investors
Wing K. Lim, A.K.A. Kent Lam, Owner Of Wall Street Investment, LP, Arraigned On 31-Count Indictment Charging Securities Fraud, Grand Larceny, Money Laundering – Schneiderman: My Office Will Hold Accountable Investment Advisors Who Dupe Unsuspecting Clients

Antitrust: European Commission Fines Two Power Exchanges EUR 5.9 Million In Cartel Settlement
The European Commission has imposed fines totalling EUR 5 979 000 on the two leading European spot power exchanges, EPEX Spot (“EPEX”) and Nord Pool Spot (NPS) for having agreed not to compete with one another for their spot electricity trading services in the European Economic Area (EEA).

Environmental & Energy

Pimco: Companies Combating Climate Change Could Climb
Sarah Krouse – MoneyBeat – WSJ
Pacific Investment Management Co.’s global head of equities sees blue skies ahead for companies that could benefit from efforts to mitigate climate change.


[JEG] Today’s Temporary Trading Halt of Futures and Options Trading
Today, Nikkei 225 futures trading, Nikkei 225 mini futures trading and Nikkei 225 options trading(hereafter Nikkei 225 futures trading etc.”) were suspended for about 25 minutes due to operational error.We would like to express our deepest apologies to investors and market users for the inconvenience.

China signals focus on reforms and leaner, cleaner growth
China sent its strongest signal yet that its days of chasing breakneck economic growth were over, promising to wage a “war” on pollution and reduce the pace of investment to a decade-low as it pursues more sustainable expansion.

‘Financial tourists’ check in and out of Japan stock market
Ben McLannahan in Tokyo –
Last year in Japan was a record one for tourism. More than 10m tourists came and went, many doing the rounds of the Zen gardens of Kyoto, the fish market at Tsukiji and the fleshpots of Roppongi. But the problem for Shinzo Abe, prime minister, is that the stock market is seeing traffic of a similar kind: big macro funds checking in and out, pushing up prices as they arrive and sending them down when they leave.

Commodities’ Base is Crumbling
Abheek Bhattacharya – MoneyBeat – WSJ
Commodity bulls live and die by metrics of Chinese demand. So the analytical folks at Sanford C. Bernstein reviewed the scope of that demand through another, less-used indicator: China’s completion and announcement of infrastructure projects.

Bond Market in China May See First Local Default
Zhou Xiaochuan, the longtime head of China’s central bank, has tended not to mince his words when it comes to the potential dangers in his country’s immature market for corporate debt.

HKFE Announces Revised Margins for RMB Currency Futures

Frontier Markets

Turkey keen to grow Islamic finance: Borsa Istanbul chief
The global financial crisis has highlighted the potential for Islamic financial products, an industry which has achieved the rapid growth in the last decade, the head of the Istanbul Stock Exchange said on Monday Anadolu Agency reported.

South Africa at the centre of the sell-off
Dominic O’Neill – Euromoney magazine
Pravin Gordhan says that he has given a counter-cyclical boost to South Africa and built up its underlying growth potential. But with capital flowing out, what more can the finance minister do to cut the country’s twin deficits?

Emerging, but No Longer a Mother Lode of Profits
When it comes to investing in emerging markets, few companies have been as gung-ho as Diageo, the British maker of the Guinness, Johnnie Walker and Smirnoff brands. But now that troubles are cropping up in many such countries around the world, Diageo has turned from cheerleader to excuse-monger.

Value in emerging markets is eroding fast
John Authers –
Emerging markets have been through the mill: a sharp sell off in January that prompted emergency rate rises, followed by a bounce, and now, a renewed bout of geopolitical tension centred on Crimea.

Palestine Exchange Monthly Investor Newsletter- February 2014

Malawi Stock Exchange Monthly Market Performance Report – February 2014

Palestine Capital Market Authority (PCMA) A Member Of The International Organization Of Securities Commissions (IOSCO)


University of Chicago Pulls Plug on ‘Fabulous Fab’ Teaching Gig
Steven Russolillo – MoneyBeat – WSJ
Fabrice Tourre’s teaching gig stopped before it ever started. Mr. Tourre, the former Goldman Sachs Group Inc. trader found liable for defrauding investors, will no longer teach an honors economics course to undergraduate students at the University of Chicago.

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First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff We have a new and improved version of The Spread today. We have overhauled our approach to this video series and have the whole JLN team contributing to it. Suzanne Cosgrove has...

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