John Lothian Newsletter: TMX to Change Equity Exchange Rules to Slow Speed Traders; Shanghai exchange ready for options rollout; ‘Humongous’ Treasury Future Surge Suggests Math Error

Oct 24, 2014

First Read

What is your Super Bowl Commercial?
By John J. Lothian
As I was travelling across Europe and heard the Chicago Bears had lost another (American) football game at home, this time to the Miami Dolphins, I started to think about the Super Bowl.

No, the Bears will not be in the Super Bowl this year. Yes the only thing I have to look forward to is this year’s crop of humorous or emotionally moving Super Bowl television commercials. And that got me thinking. What if we had a contest in this industry for the best Super Bowl commercial?

Think about it. Produce your own Super Bowl commercial and post it to your website and various social media outlets. We can hold a poll here in this newsletter about which was the best. If you can’t have some fun with swaps regulation, well, you are just not trying.

Pick your subject. Pick your style. If you need some help, we can provide it or recommend someone who can.

What is your Super Bowl commercial? Think about it. It could be a lot of fun.


Pat Kenny, vice president of client relations, CQG – Transition from the floor to electronic trading, where are the opportunities?

“Build those relationships because those relationships last forever.”

Dubbed “The Most Interesting Man in the World,” Pat Kenny, vice president of client relations at CQG, discusses his transition as a trader to his current role. After working as a water skiing instructor and bartender, Kenny found himself with an opportunity to become a runner on the floor of the Chicago Board of Trade. From there, Kenny took a position as a phone clerk and took customer orders. Eventually, he found his true passion of being involved with the sales side of the business. His experiences, combined with the network of several individuals helped lead Kenny to his current role at CQG. Kenny’s key message was that it’s not always what you know that may help lead to new opportunities, it’s also a matter of who you know that can help open up new doors and unlock different paths in your career.

Watch the video »


‘Humongous’ Treasury Future Surge Suggests Math Error
Matthew Leising and John Detrixhe – Bloomberg
It looks like a Treasury futures trader failed to do his or her homework. The price of 30-year Treasury futures expiring in June traded for less than 145 for about two hours yesterday before shooting up to more than 150. The 7.3 percent surge in their price yesterday, on the first day these particular contracts were traded, was unprecedented for 30-year Treasury futures, according to data compiled by Bloomberg.

***** Oops!


The European market data debate
Philip Stafford – Financial Times
Few topics in European exchanges stir the passions like price and access market data. Often a delicate subject, it’s particularly acute right now as everyone tries to find ways to economise and authorities finalise the rules of Mifid II.

***** Phil Stafford needs to get out more if price and market data are stirring his passions.


Haunted by Inflation, He Snapped Up Silver at $2, Made a Fortune and Lost It
Bob Ivry – Bloomberg
To Nelson Bunker Hunt, the world was full of enemies. There was inflation. It was running as high as 13 percent in the 1970s, like a thief threatening to steal the family fortune earned by his father, H.L., in the oil fields of East Texas.

***** The silver run up was the first macro market event I witnessed in this industry.


Figure from LME Sumitomo scandal returns
Paul Murphy – Financial Times
It is eighteen years since Norma Cohen, a Financial Times reporter, introduced this newspaper’s regular commodities column at the time in unconventional fashion. Recent gyrations in the price of copper on the London Metal Exchange, Ms Cohen revealed, had led to emergency ministerial-level meetings between the British and Japanese governments.

***** Welcome back?


Is Turkey voting for Christmas?
Steve Grob – Fidessa Fragmentation Index
The recent announcement from BATS Chi-X Europe that it intends to list Turkish stocks got the phones ringing here at Fidessa Towers. Both local Turkish brokers and pan-European houses wanted to know if, how, and when Turkish stocks might fragment like their European counterparts. A colleague mentioned to me that surely the local Istanbul exchange and its immediate members would prefer just to keep the cosy status quo in place and would not welcome direct competition from across Europe. An understandable view, but the truth is somewhat different.

***** Fidessa has made fragmentation synonymous with its brand.


PanXchange Concludes Successful Pilot Launch for Web-based Grain Trading in East Africa
PanXchange concluded a successful pilot launch for the online negotiation and matching of physical maize and wheat in East Africa. The pilot fine tuned the customization of the Kenyan domestic grain market and illustrated the system’s benefits for the regions’ major physical market participants.

***** And there it started.

***JM: Grain matching requires negotiating a MAIZE of complexity! C’mon, laugh with me, that was funny.


How to become an equity fund manager
So you want to be a fund manager, sit on a pile of money, move it from here to there and from there to here. Wear a suit everyday to work, a silk tie and maybe have one of those heavy Swiss watches on your wrist. Sounds nice, right? Well I have good news for you. Being an equity fund manager is the easiest job on the planet. All you need is to read this article and you will be ready to manage millions and millions of other people’s money.

***** If life were only so easy.


Commodities: A partial pump primer
Chris Giles – Financial Times
Few economic forces are more important than commodity prices. When they rise they transfer riches and power from consumers to producers; when they fall, it is as near as anything in economics to a free lunch for consumers. With so much at stake, turning points are important for the global economy. Such a moment appears to be at hand.


[Video] Hedge fund ‘Rocktoberfest’
FM trader Tim Seymour and CNBC’s Steve Liesman joined the hedge fund community Wednesday night at the 11th annual “Rocktoberfest” to benefit “A Leg to Stand Foundation.”

***JM: A look back on the recent Rocktoberfest event popped up on CNBC. I’m assuming that the event was a lot better than CNBC’s coverage of it.


Michael Gorham, professor and director, Illinois Institute of Technology – How to Regulate When You Don’t Really Understand the Industry

“There’s a lot of problems out there; there’s global warming, there’s the whole Ukraine thing…and then there’s the issue of getting better regulators.”

Michael Gorham, professor and director of IIT Center for Financial Markets at the Illinois Institute of Technology, discusses the regulatory environment in the financial markets. Gorham explains problems regulators have in the industry today and why there are still many things in the industry that the regulators do not understand, such as the issue of Dodd-Frank. He also discusses disruptive and positive forces in today’s market structure, as well as the CFTC’s Technology Advisory Committee (TAC) and what key problems the TAC handles.

Watch the video »



MarketsWiki Page of the Day
Bombay Stock Exchange (BSE)

MarketsWiki Recent Updates


Christine M. Cumming; Patrick J. Kenny

Companies, Organizations and Groups

Bombay Stock Exchange; Turquoise; GFI Group Inc; BGC Partners, Inc.; London Metal Exchange; Hong Kong Exchanges and Clearing Ltd


54,516,006 pages viewed, 8,055 articles, 186,640 edits
MarketsWiki Statistics

Lead Stories

TMX to Change Equity Exchange Rules to Slow Speed Traders
Eric Lam – Bloomberg
TMX Group Ltd. (X), the operator of Canada’s largest stock exchange, announced a plan to slow down high-frequency traders and simplify the nation’s equity markets. TMX will introduce minimum order sizes for brokers and a speed bump on its Alpha Exchange from next June.

Shanghai exchange ready for options rollout
Gabriel Wildau in Shanghai – Financial Times
The Shanghai Stock Exchange has completed technical preparations for stock options trading and is awaiting final approval from regulators to launch the first new equity derivative product to debut in China since the global financial crisis, an exchange official said on Friday.

Nasdaq lifts share buyback limit by $500m
Philip Stafford in London – Financial Times
Nasdaq, the US exchanges operator, has raised the total amount of stock it can buy back by a further $500m after meeting a target this year to pay down debt.

Three major nations absent as China launches World Bank rival in Asia
Australia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.

Bank Breakup Plan Hits More EU Hurdles as Danes Reject Idea
Peter Levring – Bloomberg
Denmark won’t back a proposal to split Europe’s biggest banks as the region’s first country to enforce bail-in rules questions the value of more regulation.


Between Bridges: CFTC Proposes New Rule Amendments Setting Standards to Bar Accountants
Gary DeWaal – Katten Muchin Rosenman
The Commodity Futures Trading Commission proposes to amend one of its rules (Rule 14.8) to provide more guidance regarding the circumstances when accountants may be barred from practicing before the Commission.

Regulators Ramp Up Bond Fund Reviews Due to Volatility
Silla Brush and Lisa Abramowicz – Bloomberg
Surging market volatility is making regulators increasingly concerned that bond funds have loaded up on hard-to-sell assets.

Emir reporting rules set for stronger enforcement
Tim Cave – Financial News
The European Securities and Markets Authority is launching a crackdown on derivatives trade reporting breaches, in response to concerns over the poor quality of data collected under major reforms to the market.

CFTC chairman offers hope to derivatives end-users
Mark Pengelly –
Timothy Massad, the new chairman of the US Commodity Futures Trading Commission, seems to be steering the agency towards a more deliberate and pragmatic approach to Dodd-Frank regulation

Esma discusses AIFMD prime segregation today
Likely final decision on AIFMD prime broker asset segregation will need to be ratified by Esma’s board on November 6 – unless decision drags out until mid-December

CFTC Staff Issues Interpretative Guidance Regarding Customer Margin Deposits Submitted Using Automated Clearing House Payment Processing Systems

ASIC Statement On Government Response To Senate Economics Committee

Exchanges & Trading Facilities

Nasdaq OMX Nordic joins weekly equity options trend
The Trade
Nasdaq OMX has launched weekly equity options expirations for the largest Stockholm-listed stocks to cater for a growing demand of shorter-term exposure among investors.

Canada’s TMX plans anti-HFT model ahead of Aequitas launch
The operator of Canada’s biggest stock exchange plans to launch a trading option for investors not using speed-based strategies, in what appears to be a direct response to the threat presented by incoming player Aequitas.

UPDATE 2-Euronext introduces higher quality criteria for wheat futures
Sybille de La Hamaide and Valerie Parent – Reuters
Euronext will introduce new quality terms for its milling wheat futures with effect from its September 2017 contract, it said on Thursday, after a rain-hit crop this season highlighted the inadequacy of the current criteria.

TMX Group To Streamline Its Equities Trading Offering
TMX Group today announced that it is restructuring its equities trading offering to strengthen Canada’s capital markets and meet its customers’ evolving needs. Over the coming months, changes will be made to the Toronto Stock Exchange (TSX), TSX Venture Exchange (TSXV), TMX Select and Alpha Exchange offerings.

The LME Week Dinner: The Most Opulent Metal Update in The Kingdom
Contrary to the generally depressed view of most participants at last night’s annual London Metal Exchange Dinner, the LME itself and Hong Kong Exchanges and Clearing Ltd’s CEO Charles Li in particular, was in barnstorming mood. In a robust and thankfully concise dinner speech, Mr. Li listed out the progress the LME had made in the 2-and-a-half years since it’s been taken over by HKEx often in the face of doubts from without and within as to whether they would succeed.

Frankfurt Stock Exchange: TLG Immobilien IPO In The Prime Standard

Reminder – Direct Edge Trading Notice #14-43: SIFMA Industry-Wide Business Continuity Test On Saturday, October 25, 2014

Bucharest Stock Exchange Is Promoting Romania’s Capital Market Among Institutional Investors In London

Hedge Funds & Managed Futures

Nascent Macro Hedge Fund Recovery Stalls
Laurence Fletcher – WSJ
October’s market turmoil has stopped a long-awaited recovery in macro hedge funds in its tracks.

U.S. SEC official praises Blackstone decision to stop some fees
Greg Roumeliotis – Reuters
A senior U.S. Securities and Exchange Commission official on Thursday urged private equity firms to follow Blackstone Group LP’s decision to stop a controversial fee practice in its portfolio companies.

New Manager of Pimco’s Flagship Fund Sticks to View on Low Interest Rates
Landon Thomas Jr. – Dealbook – NY Times
In an environment of growing concern about trading conditions in global debt markets, the new manager of the largest bond fund in the world – Pimco’s Total Return Fund – defended his outsize holdings in European government bonds and other high-yielding securities at an investment conference on Wednesday.

Janus CFO says compensation ratio could rise with Gross hire
Janus Capital Group Chief Financial Officer Jennifer McPeek said on Thursday that the company’s ratio of compensation to revenue could rise to around 45 percent if newly hired bond fund manager Bill Gross attracts a large flow of new assets.

K.K.R. Profit Falls on Slower Growth in Private Equity
William Alden – Dealbook – NY Times
Kohlberg Kravis Roberts posted lower third-quarter profit on Thursday, as its private equity portfolio grew more modestly than in the past.

AXA Wealth sales up in Q3 as platform assets climb
Retail sales at AXA Wealth were up 3% to GBP2.5bn in the third quarter, with funds under management hitting GBP27bn, while the group’s platform saw assets grow by over a quarter year-on-year.

Aberdeen’s Russian Bond Trade for 2015 Joined by Goldman
Maria Kolesnikova and Lyubov Pronina – Bloomberg
Aberdeen Asset Management Plc says Russian bonds will rebound in 2015, and is putting money on it.

Banks & Brokers

Buy-side firms slam broker Sefs over lack of anonymity
“When I trade in a Clob I want to be anonymous,” says Eaton Vance’s O’Brien. But broker-run platforms claims users want to keep name give-up

Here’s How the European Bank Stress Tests Work
Gabriele Steinhauser – MoneyBeat – WSJ
This coming Sunday, regulators in Europe will reveal whether 150 of the biggest European Union banks have proved they are strong enough to weather another financial crisis.

What Volatility Did to Europe’s Bank Fees
Lucy Burton and Nick Kostov – MoneyBeat – WSJ
After an Indian summer, things have cooled off dramatically for Europe’s investment bankers.

J.P. Morgan Discussed Pitfalls to ‘Princeling’ China Hiring in 2006
Emily Glazer and Dan Fitzpatrick – MoneyBeat – WSJ
The potential pitfalls to an overseas hiring push at J.P. Morgan Chase JPM +1.06% & Co. were raised as early as 2006 when the program was formally beginning to get off the ground, according to documents reviewed by The Wall Street Journal and people familiar with the matter.

Advisory Fees Help Raise Profit by 44% at Lazard
Michael J. de la Merced – Dealbook – NY Times
The independent investment bank Lazard said on Thursday that its third-quarter profit jumped 44 percent as it continued to win large advisory assignments.

Cost to Trade: Hey, Banks, It’s Time to Face the Music
David Oxenstierna – Wall Street & Technology
Why is calculating the cost to trade so difficult for banks? The answer is as complex as the calculations themselves.

Clearing & Settlement

Australia proving pricy for clearing and settlement
Simon Osborne – The Trade
A report on clearing costs in Australia has been published by Market Structure Partners. It finds that the country is one of the world’s most expensive developed markets in which to clear and settle equities.

Brokers eye “unthinkable” Clearing Cliff
William Mitting – Futures & Options World
Failure to solve the prospect of punitive capital charges for European firms with positions at foreign clearing houses before the December 15 deadline would have “unthinkable consequences” and lead to significant market disruption, brokers have warned.

Indexes & Products

SEC Wants Exchange-Traded Funds to Be Easy to Trade
Matt Levine – Bloomberg
Classically an exchange-traded fund is a derivative: It’s a contract whose value is based on the value of a basket of underlying stocks. (Bonds, whatever.) The contract trades on an exchange — thus the name — and so it has a trading price, but it also has a value that you can calculate.1 You can replicate it by buying the underlying stocks, or hedge it by selling them. So the value of the ETF is very well defined and transparent, and its price should closely reflect that value. That’s nice!

As ETF M&A heats up, industry wonders who is next
Jessica Toonkel – Reuters
When it comes to expanding in the $1.9 trillion U.S. exchange-traded fund market, which some forecasts say will pass the traditional mutual fund industry in size within 10 years, some companies have concluded it’s better to buy than to build.

Low-Volatility ETFs Deliver, but See Little New Cash
Chris Dieterich – MoneyBeat – WSJ
So-called low-volatility exchange-traded funds proved their mettle in recently choppy trading. But if any investors noticed, few seem to have plunked new money the funds.

UPDATE 1-Inflows to U.S.-based stock mutual funds outpace ETFs – Lipper
Luciana Lopez – Reuters
Investors in U.S.-based stock funds added net new cash to mutual funds in the week ended Oct. 22, a sharp contrast to the net withdrawals from exchange-traded funds over the same period, data from Thomson Reuters’ Lipper service showed on Thursday.

Deutsche Börse: DAX Has Been Licensed For An Exchange-Traded Fund In The U.S.
Index Now Available In The European, Asian And North American Regions For The First Time


Barchart’s Cloud Service Delivers On-Demand Equity Options Market Data, Inc., a leading provider of market data and information, today announced the availability of US and Canadian equity options price data through Barchart OnDemand. Barchart OnDemand is a cloud-based service developed for accessing and delivering market data and information using web services APIs.

Cyber Risk Is a Top Concern, 84% Tell DTCC
Ivy Schmerken – Wall Street & Technology
DTCC released its recent “Systemic Risk Barometer” survey showing that cyber risk is among the global financial industry’s top five concerns, along with the impact of new regulations.

New eXtremeDB Financial Edition Version 6.0 Ramps Up
Database System’s Speed, Scalability And Development Simplicity – Access To Vector-Based Functions Via SQL And Python Boosts Programming Speed And Productivity – Distributed Query Processing And RLE Compression Tackle Big Data In Capital Markets Analytics


Rengan Rajaratnam Agrees to Settle Insider Trading Charges
The Securities and Exchange Commission today announced that former hedge fund manager Rajarengan “Rengan” Rajaratnam has agreed to pay more than $840,000 and accept securities industry bars in order to settle the agency’s insider trading case against him.

NFA takes emergency enforcement action against Orlando, Florida firm Emini Experts LLC and its principal, Dante Stephen Giovannetti
National Futures Association (NFA) announced today that it has taken an emergency enforcement action against Emini Experts LLC (Emini), an NFA Member commodity trading advisor (CTA) located in Orlando, Florida, and Dante Stephen Giovannetti (Giovannetti), a principal and associated person (AP) of Emini.

Environmental & Energy

Home Solar Power Discounts Are Worker Perk in New Program
Diane Cardwell, The New York Times
Expanding the notion of corporate benefits beyond discounted health club memberships and low insurance rates, a group of major companies is set to offer employees access to cheaper solar systems for the home.

***LB: Also in this story “Under an arrangement announced Wednesday, employees of the companies — Cisco Systems, 3M, Kimberly-Clark and National Geographic — will be able to buy or lease solar systems for their homes at rates substantially lower than the national average, executives said.”

Energy group: Midterm voters dislike EPA climate rule
Tim Devaney, The Hill
The Environmental Protection Agency’s (EPA) climate rule is particularly unpopular in heavy coal production states that would be hit the hardest, a new industry-backed study finds.

***LB: Also in this story “The poll from the Partnership for a Better Energy Future (PBEF) released Wednesday finds that more than half of voters around the country would not be willing to pay even $1 more in monthly household energy costs because of the climate rule. In fact, 40 percent would be less likely to vote for candidates who support the climate rule, according to the poll.”

Report: Energy-producing states fared better after recession
Laura Barron-Lopez, The Hill
Energy-producing states have been able to bounce back faster and more successfully from the 2009 recession than states that import a majority of their energy, according to new research from a group aligned with Republicans.


HKEx eyes link to China’s commodities markets
Luke Jeffs – Futures & Options World
Hong Kong Exchanges and Clearing said it plans to extend its trading link with Shanghai to offer international investors access to China’s vast commodities exchanges.

TORA upgrades for Stock Connect
The trading technology provider Tora has announced enhancements to its order and execution management systems that will accommodate the new Shanghai-Hong Kong Stock Connect.

SGX To Launch Iron Ore 58% FE Fines Derivatives
Singapore Exchange (SGX) will introduce two SGX Iron Ore CFR China (58% FE Fines) derivatives that will be separately cash settled against (1) an aggregate of the Metal Bulletin MBIOI 58% and 58% Premium indices; and (2) the TSI Iron Ore 58% index, in early 2015, subject to regulatory approval.

SLI closes Ignis China fund
Anna Fedorova – Investment Week
Standard Life Investments is closing the Ignis China fund managed by Magdalene Miller as it continues to cull the range of products acquired via its takeover of the group.

Shenzhen Stock Exchange Market Bulletin 20 October, 2014, Issue 33

Frontier Markets

Investors Are Eager for African Sovereign Debt, Despite Plenty of Risks
Danny Hakim – Dealbook – NY Times
Five men in dark business suits gathered before Maria Kiwanuka in a semicircle. They were international bankers and they had a pitch to make.

Malawi Stock Exchange Weekly Trading Report For Week Ending 24th October, 2014

John Lothian Newsletter

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CEO, Trading Technologies

Past JLN Newsletters

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CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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