How to make money as an FCM
Alun Green – SunGard
It is a great pleasure to be sitting in for John this week. I will never be able to fill his shoes literally, but I will do my best to meet his high standards each morning. I can’t recall the first time I read the newsletter, but I believe AOL bought Time Warner and the Summer Olympics were held in Sydney that year – a real testament to the endurance of this remarkable publication.
Endurance is not easy for anyone to achieve these days, especially FCMs. As low interest rates and increased spending on regulations eat away at profits, some are looking to charge for auxiliary services such as collateral transformation or single currency convenience margining but few are willing to raise the price of clearing. The existing business model of going for volume just isn’t sustainable for many FCMs. So what to do?
FCMs will need to differentiate themselves, find their niche, segment clients and price accordingly. Perhaps tiered operational services or a utility would help pave the way to differentiation by spreading out the cost of basic services, giving FCMs the chance to set the right prices for premium ones like collateral transformation. Other industries have done this successfully for years. Sometimes adversity and just pure pain can be the biggest driver for change.
Appeal for an NPO
I am making an appeal on behalf of my daughter. Katherine has joined AmeriCorps, a national community service organization. She is serving with the Greater Gallatin Watershed Council (GGWC) in Bozeman, MT. GGWC is a small 501(c)3 nonprofit organization that works to protect and enhance the Gallatin Watershed, which begins in Yellowstone National Park and is the headwaters of the Missouri and Mississippi Rivers. GGWC’s efforts include restoration projects, water quality monitoring, and community education. (More information is available at greatergallatin.org.)
The GGWC needs to replace its very outdated computers. Using its limited grant operating funds to buy new computers would restrict the Council’s ability to focus on watershed restoration, education and outreach. I have offered to assist GGWC in acquiring two computers. I am hoping that your readers will interested in helping this small organization improve its ability to deliver on its mission. If anyone can assist by donating new or refurbished laptops, I can be contacted at email@example.com
Four Chicago Nonprofit Leaders Awarded Fellowships at Harvard Business School
HBS Club of Chicago
The Harvard Business School Club of Chicago and HBSCC Charitable Fund are delighted to name four Chicago-area non-profit executive directors as 2014 Fellows, who have been accepted to the Harvard Business School’s Strategic Perspectives for Non-Profit Managers program to be held on the school’s Boston campus this summer. The following four leaders were selected following a rigorous application and interview process.
***ADG: Good to see business, local government and non-profits coming together to help the local community.
#TTturns20: TT Thanks You
Trading Technologies – YouTube
We’re officially 20 years old! Thanks for helping us get here.
Hedge funds haunted by deflation spectre
Stephen Foley – FT.com
There was an incongruity to the warnings of European deflation and grindingly disappointing US growth that were sounded from the stage at the SALT conference, when the evenings were spent at lavish poolside parties, replete with masked ball-style costumes, fire-eaters and a revival performance by Lenny Kravitz. One would have worried about the cognitive dissonance, if one’s cognition were not made fuzzy by the delicious cocktails.
Man and Machine Must Work Together to Revive Traditional Brokerage Services
Rebecca Healey – TabbFORUM
European equities volumes are at a six-year high, confidence is booming, and block trading has returned. But market participants must adjust to depleted desks and decreased capital. Only the combined interaction between man and machine will enable traditional brokerage services to re-emerge in a cost effective and efficient manner and deliver new sources of liquidity to the buy side.
***ADG: Sounds like a challenge to the sell side to start offering more to their customers. Or is that just an opportunity ?
Markit to list on NASDAQ
FTSE Global Markets
Financial data provider Markit has confirmed it will pursue a listing for its upcoming initial public offering on NASDAQ. Earlier this month London-based Markit unveiled plans for its IPO, opting to list in New York instead of London. However it was unclear whether this would be on NASDAQ, or the IntercontinentalExchange-owned New York Stock Exchange.
Convicted of Felonies, Banks Are Allowed to Stay in Business
FLOYD NORRIS – NYTimes.com
Two large international banks — Credit Suisse and BNP Paribas — are expected to plead guilty to criminal charges within the next few weeks. If that happens, they will pay large fines and officially be felons. Should anyone care?
China relaxes rules for IPOs, share issues on Nasdaq-style stock board
China has relaxed rules for firms to list or issue shares on its Nasdaq-style board in Shenzhen, which will support the growth of cash-short smaller companies and the continued outperformance of the so-called ChiNext market over blue chip stocks.
Bridging the Week: HFT on a Big Stage; LIBOR Redux; Reefer Madness Investments
Gary DeWaal – Katten Muchin Rosenman
No sparks flew during last week’s Senate Committee on Agriculture, Nutrition and Forestry’s hearing held to better understand low-latency and other forms of automated trading in the derivatives markets. However, while the focus at this event was on modern forms of electronic trading, the emphasis in simultaneous enforcement actions by the US Commodity Futures Trading Commission and the UK Financial Conduct Authority, as well as a disciplinary action by multiple US securities exchanges, was old-fashioned manipulation.
***DA: For a full report of the week’s regulatory news, go to Katten’s Corporate and Financial Weekly digest. jlne.ws/1n93tdV
MarketsWiki Page of the Day
Trading Technologies International
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Thomas Wittman Appointed NASDAQ EVP, Global Head of Equities
The NASDAQ OMX Group, Inc. today announced that Thomas A. Wittman has been appointed Executive Vice President, Global Head of Equities, reporting directly to Hans-Ole Jochumsen, President, Global Trading & Market Services, NASDAQ OMX. Mr. Wittman will oversee the global cash equities and equity derivatives businesses.
ASIC says dark pool rules are working
Georgia Wilkins – SMH.com
The corporate regulator says new rules designed to tackle dark pools are working. The Australian Securities and Investment Commission said on Monday the rule changes, introduced last year, had succeeded in reducing the amount of smaller trades made through dark pools, and prevented dark pool traders from getting an advantage over other traders.
RBS to wind down swaps clearing unit
Philip Stafford – FT.com
Royal Bank of Scotland is to wind down its interest-rate trading operations as rising regulatory costs squeeze the unit’s profitability. Staff learnt of the bank’s plans to reduce both its rates prime broking and over-the-counter clearing businesses last week, and customers were informed on Friday.
Grain group urges pit trade halt if CME electronic platform crashes
CME Group should temporarily suspend open-outcry trading if its electronic trading platform crashes and reopen for a brief after-hours session if the system is restored later that day, a grain industry group said.
Death of silver fix heralds overhaul for precious metal benchmarks
London’s precious-metal price benchmarks, including silver, the century-old gold “fix” and platinum group metals are on the verge of major transformation, industry sources say, as regulatory scrutiny and lawsuits hasten action.
U.S. states take lead in writing bitcoin rules
A task force of U.S. state regulators is working on the first bitcoin rule-book, the head of the group said, hoping to protect users of virtual currency from fraud without smothering the fledgling technology.
Rise of the regulators threatens innovation
Vivek Ahuja – Financial News
Regulation has become the number one topic for heads of banks in the UK, Europe and the US alike. Large institutions have spent the years since the eruption of the financial crisis trying to cater for and react to the ever-expanding scope of rules both at home and elsewhere.
ASIC Reports On Dark Liquidity Rules
ASIC today released the results of a review of rule changes affecting ‘dark trading’ and their impact on market quality. The meaningful price improvement rule and changes to block tier thresholds were introduced in May 2013, following an ASIC taskforce set up to examine the impact of dark liquidity on Australia’s financial markets.
Sifi status for funds could spark legal challenges
Regulators are preparing to label some mutual funds and hedge funds as systemically important – a tag that brings with it the possibility of heavy-handed intervention by bank supervisors. Buy-siders are already raising the prospect of legal retaliation.
SEC to Investors: Don’t Bogart Those Pot Stocks
MoneyBeat – WSJ
When it comes to some marijuana stocks, the Securities and Exchange Commission has a message for investors: Just say no.
ESMA Announces Creation Of Consultative Working Group For The MDRWG
Leading Banks Back Lambert Proposals For New Standards Body
Bank Of England Governor To Chair Independent Panel To Appoint Chairman
Exchanges & Trading Facilities
IntercontinentalExchange Announces 2014 Annual Meeting Results
WSE Launches Exchange Investment Promotion Campaign
An image campaign of the Polish capital market, in particular the exchange market, has been launched today. The purpose of the campaign is to highlight the special role played for more than two decades by the Polish public capital market in systemic transition and development of a free-market economy in Poland. The Capital City of Warsaw is the patron of the campaign.
NYSE to Immediately Suspend Trading in American Depositary Shares of Ambow Education Holding Ltd. and Commence Delisting Proceedings
TOM MTF Statistics Week 20, 2014
OneChicago Holiday Notice – Memorial Day 2014
NZX Congratulates Hi-Tech Awards 2014 Winners
Deutsche Börse: Subscription Starts For HanseYachts AG Bond
Hedge Funds & Managed Futures
At SALT, Hedge-Fund Stars Look Far Afield for Investments
MoneyBeat – WSJ
As U.S. stock-market volatility catches some hedge-fund managers flat-footed, a number of them looked to wager farther afield at an annual investing confab winding down today in Las Vegas.
Should you buy in to the private equity buyout kings?
For individuals, investing in private equity – especially some of the bigger players – is more difficult. In three decades, private equity has grown to become a global industry managing $2.6tn in assets, spreading into all sectors of the economy and almost all regions – all while keeping retail investors mostly at bay.
Blackstone to Sell Boston Office Buildings for $2.1 Billion
The Blackstone Group has agreed to sell five office properties in the Boston area for $2.1 billion, disposing of part of a sprawling real estate portfolio it bought before the financial crisis, a person briefed on the matter said on Sunday.
The debt that’s only for those on the A-list
Ayesha Javed – Financial News
Nobody likes gate-crashers. Least of all private equity firms keen to keep a firm grip on portfolio companies that are at risk from aggressive debt holders.
Two new funds boost European CLO market
Ayesha Javed – Financial News
The European market for collateralised loan obligation funds continues to see an uptick with two managers launching vehicles.
Pimco first off the mark after reforms to UK pensions
Mark Cobley – Financial News
Pimco has become the first investment firm to respond to the UK’s radical reforms of the pensions market, with a new fund launching today.
Maitland Launches AIFMD Fund Platform in Luxembourg
Maitland has received approval from the Luxembourg regulator (CSSF Luxembourg) for its Alternative Investment Fund Manager Directive (AIFMD) compliant management company and its specialised investment fund. This together provides fund managers with a solution to the regulatory and supervisory burden associated with the AIFMD, enabling them to focus on their core fund management activities.
CFTC Commitments Of Traders Reports Update
AIAF admits to trading a bond issue by La Caixa under British Law
Banks & Brokers
Goldman fears fallout if rivals plead guilty
Tracy Alloway in Dallas and Kara Scannell and Tom Braithwaite in New York – FT.com
Lloyd Blankfein, chief executive of Goldman Sachs, has warned that guilty pleas from Credit Suisse and BNP Paribas would have an unpredictable effect on markets, but that he would try to keep trading with both banks.
Deutsche Bank Plans to Raise $11 Billion in Fresh Capital
Deutsche Bank, the largest German bank, said on Sunday that it would raise roughly $11 billion in new capital from existing shareholders and the royal family of Qatar, responding to regulatory pressure on banks to reduce risk.
Major investment banks’ revenue falls 9 percent in first quarter
Revenue at the world’s 10 largest investment banks fell nine percent to $42.8 billion in the first quarter, new data showed on Monday, as tough new rules forcing banks to hold more capital led to a retreat from riskier types of trading.
Major banks Q1 commodities revenue jumps 26 pct
Commodities revenue at the top 10 investment banks climbed 26 percent in the first quarter after years of declines, due to higher U.S. power and gas turnover as well as stronger investor interest, a consultancy said on Monday.
Replacing VAR: smaller banks fear expected shortfall workload
Regulators sparked a lively theoretical debate at the biggest banks by proposing the use of expected shortfall as the trading book capital metric in place of the simpler incumbent measure, value-at-risk. But for small to medium-sized banks, the issue is a practical one – do they have the resources to implement it?
Getting the Silent Treatment from J.P. Morgan Chase
John Carney – MoneyBeat – WSJ
The folks running Wall Street’s biggest banks may think of themselves as masters of the universe. But they aren’t always masters of the webcast.
US insurance: compliance officers turn sights to risk
Compliance teams at US insurance companies are growing fast and looking to anticipate compliance risk before it materialises as well as fulfil their traditional role
U.S. private lenders not ready to replace Fannie, Freddie: regulator
The regulator of government-controlled mortgage finance firms Fannie Mae and Freddie Mac said on Sunday he would not oppose them having a smaller presence in the market but private capital had to be ready to take over first.
Credit Suisse CEO faces more calls to quit in U.S. tax dispute
Credit Suisse Chief Executive Brady Dougan came under further pressure to resign on Sunday, with a key figure in Switzerland’s largest party becoming the latest politician to call for a change in the bank’s leadership over its role in helping rich Americans dodge tax.
Clearing & Settlement
Bank of England urges more transparency in clearing
Philip Stafford – Financial Times
The Bank of England has urged clearing houses and large broker-dealers to publish their derivatives risk calculations, warning that more transparency was necessary to avoid future potential systemic risks.
SGX Clears Over USD 3 Billion In Non-Deliverable Interest Rate Swap
Singapore Exchange (SGX) has cleared more than USD 3 billion notional worth of Malaysian Ringgit (MYR) and Thai Baht (THB) Non-Deliverable Interest Rate Swaps (NDIRS) since its launch a month ago on 7 April 2014.
7ticks Supports NYSE Liffe Product Migration to ICE
In preparation for the rationalisation of the post trade and clearing systems of the London markets of NYSE Liffe (including Clear) and ICE Clear Europe, ICE has determined that it will only retain/operate a single trading and single clearing technology. Consequently, ICE will undertake a migration of post trade and clearing processing for NYSE Liffe products from the existing NYSE Liffe platforms comprising UTP (Universal Trading Platform and Bclear) and UCP (Universal Clearing Platform) to the ICE Trading and Clearing Platforms.
ICAP launches UK SEF – IGDL, The First Global SEF, Regulated By The CFTC & FCA
Indexes & Products
Keeping ETF prices on track
Sarah Krouse – Financial News
High-frequency traders have seen their reputation under siege by the Michael Lewis book Flash Boys. But in one corner of the market they are seen as a key part of market infrastructure.
New Constructs Revises Mutual Fund, ETF Rankings
Max Bowie – WatersTechnology
New Constructs, a Nashville, Tenn.-based provider of independent research and stock recommendations based on analysis of footnotes in financial statements, has revamped the way it rates mutual funds and exchange-traded funds to deliver more value to traders, investors and investment advisors.
SG offers hedge fund strategies in new LSE-listed ETN
SG is offering professional and sophisticated retail investors in the UK an ETN that goes long stocks in the FTSE 100 and 250, and short the two indexes. Hinde Capital is the strategy manager for a product that is collateralised in a similar way to an ETF
Third China A Shares ETF Lists On London Stock Exchange This Year
Spinaris Capital Selects OptionsCity to Trade on CME and Eurex
OptionsCity Software, a global provider of electronic trading solutions for professional futures and options traders, today announced that London-based Spinaris Capital will expand its FX and energy options trading utilizing OptionsCity’s Metro and Freeway platforms.
20 Years of Trading Technologies
Rick Lane – Trade Talk
Today, as we celebrate 20 years of building trading software for our customers, I thought it was worth a look back at how the industry, and subsequently TT, has evolved over the past two decades and take a look at what’s ahead for our customers and TT.
Metamako announces its eagerly-anticipated 48-port switch
Australian-based Metamako, supplier of ultra-low latency devices to exchanges and the trading community, has now released MetaConnect 48, the 48-port version of its switch. Metamako’s switches are unique in combining ultra-low-latency performance with high levels of functionality, usually only available on much slower devices.
FREE XBRL-Checker to help resolve validation errors in EBA / FCA GABRIEL regulatory submissions
Lombard Risk Management plc, a leading provider of integrated regulatory reporting, compliance and collateral management solutions for the financial services industry, offers firms a FREE, on-line facility to help resolve XBRL validation errors encountered when submitting EBA regulatory reports to FCA or CBI.
Ex-Trader at SAC Fund Is Sentenced to 3 Years
A federal judge seemed pained at times on Friday in sentencing the former hedge fund trader Michael Steinberg to three and half years in prison for his conviction last year on insider trading charges.
U.S. prosecutors drop two more charges against Rajaratnam’s brother
U.S. prosecutors have dropped two insider trading-related charges against former Galleon Group hedge fund portfolio manager Rengan Rajaratnam, the second time in two weeks the government has whittled down its case against him.
2 other CAVAC Centres sign agreement in support of victims of financial crime
Cyber-surveillance – AMF takes action against solicitations
Environmental & Energy
Russia and Ukraine gas talks stall
Jack Farchy, Kathrin Hille and Roman Olearchyk
Russian president Vladimir Putin made a fresh appeal to European countries to step up efforts to resolve a gas dispute with Ukraine, highlighting the lack of progress less than three weeks before a threatened supply cut.
Cold-shouldered by West, Putin will hope for some China sympathy
Ben Blanchard and Thomas Grove, Reuters
Increasingly isolated by the West over Ukraine, Russian President Vladimir Putin will hope for a sympathetic ear on a visit next week to China, which is also being more assertive in its territorial disputes with smaller neighbours.
Canada trimmed Russia sanctions to protect business interests
David Ljunggren and Euan Rocha, Reuters
Canada broke with the United States and did not impose sanctions on two key allies of Russian President Vladimir Putin because the pair had Canadian business interests, according to sources familiar with the matter.
***LB: Also in this story “Canada has not moved against Sergei Chemezov, who heads state-owned industrial and defense conglomerate Rostec, and Igor Sechin, CEO of oil giant Rosneft. Both men, who are close to Putin, have business ties to Canada.”
Chanos: Japan’s Shinzo Abe Is ‘Most Dangerous Figure In Asia’
Rob Copeland – MoneyBeat – WSJ
Jim Chanos has long had a target fixed on China. Now he’s moving his scope across the East China Sea to Japan.
Hedge funds prepare for Hong Kong to become gateway to Chinese savings
James Williams – Financial News
The mutual recognition scheme that will allow Hong Kong to become a gateway to the whole of China has stirred interest among international hedge funds. Eyeing the country’s untapped $6.6 trillion retail savings market, several major hedge fund managers say they are preparing to take advantage of a the scheme when it’s launched.
Citic Group multiplies shadow banking exposure to $52bn
Tom Mitchell in Beijing – FT.com
China’s largest conglomerate by revenue has invested more than $50bn in shadow banking products over the past three years, highlighting the proliferation of riskier financing channels in the world’s second-largest economy.
Egypt to launch first domestic ETF
Chris Flood – FT.com
Egypt is planning to launch its first domestically listed exchange traded fund. It is part of efforts to attract capital into a country that has been battered by political and economic instability after the toppling of Hosni Mubarak as president in February 2011.
SunGard joins Dubai Financial Market (DFM) Vendor Registration Program
SunGard has joined the Dubai Financial Market (DFM) Vendor Registration Program, which regulates the provision of order management systems (OMS) and online trading solutions to DFM-licensed brokerage firms.
DGCX Polypropylene PP Futures performance
Compared to two week ago, the PP futures price movement saw DGCX PP July contract moving sideways with trading range of 1,444 to 1,474 per tonne.
ADIB Securities Joins NASDAQ Dubai’s Expanding Market As Equities Trading Member
MCX Weekly Market Report – May 09, 2014 – May 15, 2014
Nigerian Stock Exchange Weekly Report For Week Ending May 16, 2014
Ex-Trader’s Pilgrimage Culminates in Jail Cell
Two days after suspending what he had billed as an almost spiritual trek from Vatican City to Paris, the convicted rogue trader Jérôme Kerviel crossed from Italy into France on Sunday and turned himself in to the French authorities, minutes before a midnight deadline.