John Lothian Newsletter: U.S. options clearinghouse CEO to retire after year in top spot; Bats to launch trade reporting service for ETFs; Wall Street regulator unveils proposals for dark pools, bond markets

Sep 22, 2014

First Read

Graduate Announces Largest-Ever Gift to University of Dayton
A 1977 University of Dayton graduate and his wife are pledging a $12.5 million gift — the largest single gift in the school’s history. The gift, from the George and Amanda Hanley Foundation, is intended to “establish the University as a national leader for innovation in sustainability education.”

***** This was a great day for the George and Amanda Hanley family. It is a combination of both of their passions into one incredible concrete expression of generosity towards the University of Dayton and its students. Congratulations to both.

More coverage:

University of Dayton gets $12.5 million gift
Arundi Venkayya – Dayton Daily News

UD receives $12.5M gift to create sustainability institute
Tristan Navera – Dayton Business Journal


LME opens first clearing house in its 137-year history
Philip Stafford – Financial Times
The London Metal Exchange will open the first clearing house of its 137-year old history on Monday, with the GBP50m project intended to underpin the bourse’s tilt at opening Chinese markets.

***** No time like the present to try something new, or try something old anew.


LSE’s Xavier Rolet talks of marriages and kings
Margareta Pagano – Financial News
A cup of tea with Xavier Rolet is the jolliest of affairs. Rare among corporate bosses, the Frenchman who runs the London Stock Exchange always has something new to say about everything – why a Scoxit would have made a Brexit from the EU almost inevitable, that Marine Le Pen could become the next President of France by default because French political life is so rotten, and why doubling teachers’ pay is the only way to cure the “education deficit” in this country. Oh, and interest rates are not about to go up.

***** Are you sure that was a cup of tea?


John Ruth, CEO – ABN AMRO Clearing Chicago – Career Builder

“If you want to get noticed in your organization, be someone who can solve problems.”

It’s your first day at a new company. You have yet to learn the ropes and you need to get yourself acquainted with the basics. You’re not ready to make an immediate impact on your organization, right? Wrong. John Ruth, CEO of ABN AMRO Clearing Chicago, believes that everyone in an organization – from interns and new hires to the company’s established veterans – can make a positive impact. Ruth says that problem solvers are extremely important assets for an organization. Those are the people who get noticed quickly and can unlock more possibilities in their career advancement. Along with managing career development, Ruth discusses the importance of adapting to change and what it can mean for not just an individual, but an entire organization.

Watch the video »


Crain’s Chicago Business 2014 Tech 50
You can see all fifty people here, but it’s been pointed out that Sanjib Sahoo of tradeMonster made the list this year…

***** OptionMonster’s CTO makes the list.


CBOE Wins “Equities Exchange of The Year” Award
The Chicago Board Options Exchange today was named “Equities Exchange of the Year” at GlobalCapital’s Global Derivatives Awards ceremony in London.

***** Has the awards season started again? I thought CBOE should have won best in show too.


NYSE Two-for-Two on Mega Tech IPOs as Alibaba Goes Smoothly
Sam Mamudi – Bloomberg
The New York Stock Exchange notched another victory with Alibaba Group Holding Ltd. (BABA), successfully getting its shares trading after the Chinese e-commerce company’s $21.8 billion initial public offering.

***** It should have gone well, they worked on it for one thousand and one nights.


Retirement fund managers behave ‘like lemmings’
Chris Flood – Financial Times
Pension fund managers are threatening to destabilise financial markets by behaving like a herd of lemmings. Although long regarded as safety-conscious investors, pension funds tend to herd together as they move in and out of asset classes, threatening market stability, according to research by Cass Business School.

***JM: They breed in explosive numbers, overwhelm the food supply and then scatter into the countryside, not to re-emerge again for years? Or… uh, was that some other kind of lemming behavior, maybe…


Profit & Loss Presents: The Fundamentals of Benchmarking and the FX Fix
Tuesday, September 23, 2014 8:00am-12:00pm — Mid-America Club, Aon Centre, 200 E. Randolph Drive, Chicago
Profit & Loss’ workshop “The Fundamentals of Benchmarking and the FX Fix” delves into methods of benchmarking in its first session: FX Fixings. Moderated by George Dowd, Senior Director and Head of Foreign Exchange Sales, Newedge USA, this panel will look back at the widespread allegations of collusion and rate manipulation by traders and then focus on the ramifications.

Forex Network Chicago registrants: Register for free. Please register by September 17, 2014. Click here to see the complete schedule and register today – limited space available!


Rocktoberfest from A Leg to Stand On is close at hand
A Leg To Stand On is a non-profit that provides free prosthetic limbs and corrective surgery to children in developing countries who have lost their limbs in traumatic accidents or suffer from congenital limb disabilities. ALTSO’s annual fundraising benefit, Rocktoberfest Chicago, is moving into its 3rd year after having originated 11 years ago in New York. Rocktoberfest unites leaders from the finance industry for a night of Rock & Roll music performed by industry professionals. Rocktoberfest Chicago will be held on October 8th at City Winery. Hedgefund Rocktoberfest in New York will be on October 22 at Capitale.

Watch the video »



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Lead Stories

U.S. options clearinghouse CEO to retire after year in top spot
Tom Polansek – Reuters
The chief executive of the clearinghouse for all U.S. stock options will retire from the company at the end of the year after one year in the role, the company said on Friday.

***** Mike Cahill will march forth into retirement, or whatever lights his candle.

Bats to launch trade reporting service for ETFs
Philip Stafford – Financial Times
Bats Chi-X Europe, the stock exchange, is to begin a trade reporting service for exchange traded funds (ETFs) in a bid to bring more order and transparency to the fragmented market.

Wall Street regulator unveils proposals for dark pools, bond markets
Sarah N. Lynch – Reuters
Wall Street’s self-funded regulator unveiled a list of proposals on Friday to bolster rules governing alternative trading platforms like “dark pools,” computerized high-speed trading, and price transparency in the corporate bond market.

SEC quants find signs of ‘cherry picking’ at US hedge funds
Kris Devasabai –
Tools developed by the Securities and Exchange Commission’s (SEC) recently formed quantitative analytics unit have identified potential evidence of ‘cherry picking’ at 13 hedge funds – the practice of assigning winning trades to personal accounts or favoured clients, while losing trades are sent elsewhere.

****** One of the oldest tricks in the books finds a new iteration.

The Rise of Ultracheap Financial Advisers
Jason Zweig – WSJ
In a world in which the expected long-term return on stocks after taxes and inflation is 3% to 4% a year at best, financial advisers still typically charge 1% a year for their services. Why, when you take all the risk, does your adviser take up to one-third of the reward?

Slamming a Door on Hedge Funds
Looking for better returns, public pension funds in recent years have been socking away money in those lightly regulated vehicles. Some pension overseers have criticized this trend, but they have been few in number and have often been drowned out by hedge fund proponents. Those overseers’ arguments, however, are sound: Hedge funds, with their high fees, secrecy and recent underperformance, are inappropriate investments for most funds charged with providing retirement and other benefits to former workers.

Financial Elite’s Offspring Start Their Own Hedge Funds
Rob Copeland – WSJ
For the young man who has everything: a hedge fund of his very own. The scions of a number of wealthy families, including the sons of prominent Wall Street figures Howard Marks and Ken Moelis, have either recently launched hedge funds or plan to do so soon, according to people familiar with the matter.

Goldman admits cultivating ties with Gaddafi-era Libya fund
Caroline Binham and Jane Croft in London – Financial Times
Goldman Sachs has admitted in court documents that it used an internship, training, small gifts, occasional travel and entertainment to cement a “strategic partnership” with the Libyan Investment Authority under the former Gaddafi regime.


Bridging the Week: More Swaps Margin Rules; Manipulation Settlement; HFT Capital Violation; FX Futures Block Thresholds; Eating Evidence
by Gary DeWaal – Katten Muchin Rosenman
Risk mitigation was a common theme last week underscoring proposed margin rules for uncleared swaps by the Commodity Futures Trading Commission for certain swap dealers and major swap participants, and minimum risk standards for uncleared swaps proposed by the International Organization of Securities Commissions. In addition, the settlement of net capital violation charges against a high-frequency trading firm was particularly notable for separate charges levied against its chief operating officer for contributing to his firm’s violations. And did you hear the one about the alleged insider trader middleman who supposedly ate the evidence?

Regulators adopt draconian approach to financial crime
Madison Marriage – Financial Times
Long prison sentences, hefty fines and social pariah status are the likely outcomes for fund management staff tempted to break the rules for personal gain as regulators around the world take a tougher stance on financial crime.

Finra shines light into dark pools
Gina Chon in Washington – Financial Times
The board of the Financial Industry Regulatory Authority has approved proposals aimed at increasing transparency in high-frequency trading and dark pools, amid an intensifying crackdown by US authorities.

FINRA Board Approves Series of Equity Trading and Fixed Income Rulemaking Items
Press Release

FIA PTG Comments on FINRA Rulemakings
The FIA Principal Traders Group today issued the following statement in response to the issuance of several proposed rules by the Financial Industry Regulatory Authority.

Key Justice Official Stirs Concern by Urging Companies to Aid Crackdown
Samuel Rubenfeld – WSJ
The Justice Department recently called for more cooperation from corporations in cracking down on financial crime. So far, however, lawyers who represent companies in such cases aren’t giving the idea rave reviews.

Anti-Abacus, anti-BISTRO and anti-balance sheet synthetic securitisation
Tracy Alloway – Financial Times
Close your eyes, lay back and imagine yourself as a regulator at the US Securities and Exchange Commission (do we have to? -ed). The year is 2011 – three years after the subprime boom and bust brought the financial system to its knees. You want to impress your superiors so you’ve decided to take a deep dive into synthetic CDOs à la the Abacus deal put together by Goldman Sachs.

Research underway by Canadian securities regulators into mutual fund fees
The Canadian Securities Administrators (CSA) announced today that two research contracts have been awarded that will further the review of Canada’s mutual fund fee structure. This research marks an important step in advancing a policy decision on mutual fund fees and follows a request for proposals by the CSA for independent third-party research to evaluate whether regulatory action is needed regarding these fees.

CFTC Staff Provides Time-Limited No-Action Relief for Swap Execution Facilities from Certain Block Trade Requirements

EU Supervisory Authorities Update On Risks In EU Financial System

Exchanges & Trading Facilities

ICE Seeks Participants in Commodities Warehousing Survey
Leslie Josephs – WSJ
Intercontinental Exchange Inc. on Friday said it was asked by a U.S. regulator to solicit responses from market participants to a survey on the effect of warehousing on commodity prices. The survey is being conducted by the International Organization of Securities Commissions, a global body of securities regulators.

Intercontinental Exchange Completes Sale Of NYFIX And Metabit To ULLINK
Intercontinental Exchange, the leading global network of exchanges and clearing houses, announced today that it has completed its previously announced transaction with ULLINK for the combined sale of NYFIX and Metabit, both units of NYSE Technologies. The transaction closed on September 19 and terms were not disclosed.

Liquidnet introduces new Asian platform
Simon Osborne – The Trade
Institutional trading network Liquidnet has begun the roll-out of its new Asian platform and is introducing it to local clients this month.

Euronext To Partner With Degiro On Dutch Retail Investor Services
Press Release
Euronext today announces an agreement on its retail investor activities in Amsterdam with online broker DEGIRO in order to improve its communication to this key audience. DEGIRO, a member of the Euronext cash and derivatives markets, will be the first online broker to distribute a range of Euronext’s retail services via its direct channel to its client base, ensuring more efficient and effective communication to the end user.

Alibaba’s IPO, By the Numbers
Steven Russolillo – MoneyBeat – WSJ
Alibaba Holding Group Ltd.’s initial public offering was one for the record books. Here’s a rundown of all the stats and trends you need to know about the Chinese e-commerce giant’s trading debut.

NYSE listings chief says options for more Alibaba shares to be exercised -CNBC
A top New York Stock Exchange executive said on CNBC on Friday that the so-called “green shoe” option will be exercised for underwriters to buy additional shares in the Alibaba Group Holdings Ltd. initial public offering.

BRIEF-TD Ameritrade premarket orders for Alibaba surpassed Facebook

TOM MTF Statistics Week 38, 2014

MIAX Options Exchange: Decrease Maximum Price Setting For Quotes And Orders To $1,999.99

MIAX Options Exchange: Priority Customer And Professional Interest Order Summary

Hedge Funds & Managed Futures

Buy-side forced to act on new OTC confirmation rules
Jon Watkins – The Trade
Buy-side firms are facing increasing pressure to start complying with new trade confirmation rules for OTC derivatives, as regulators look set to take a harsher stance on those failing to meet new requirements.

Hedge fund exit requests decline in September
Investor requests to take out money from hedge funds fell in September, data from SS&C showed on Friday.

Blackstone to pull out of Russia
Henny Sender in New York and Anne-Sylvaine Chassany in London – Financial Times
US private equity group Blackstone is “giving up on Russia”, highlighting how even well-connected western investors are shying away from doing business in the country.

Gold Bulls Extend 2014 Exit as Slump Erases $6.7 Billion
Debarati Roy – Bloomberg
Hedge funds extended this year’s longest exit from bullish gold bets as slumping prices and investor outflows since June erased $7.16 billion from the value of exchange-traded funds backed by the metal.

Aberdeen cuts fees on two short-term bond funds
Anna Fedorova – Investment Week
Aberdeen Asset Management is set to cut fees on two of its offshore short-term bond funds, Investment Week can reveal.

Skandia name to disappear as group rebrands to Old Mutual Wealth
Julia Rampen – Investment Week
The Skandia name is to disappear as the group rebrands as Old Mutual Wealth across all UK operations.

Franklin Templeton’s Ball: Value can outperform until 2020
Dan Jones – Investment Week
Franklin Templeton’s Dylan Ball has predicted an equity market rotation to value stocks can continue for another six years at least.

Hedge funds face growing investor revolt against high level of fees
Mike Foster – Financial News
The “two and twenty” fee structure that has richly rewarded hedge fund managers over the years is under fresh attack from investment consultants.

IMA: Seeking a bigger voice for fund managers
Andrew Pearce – Financial News
Helena Morrissey says she has never been one to go back.

Banks & Brokers

Goldman Sachs Defends Actions Surrounding Libya’s Wealth Fund
Justin Baer – WSJ
Goldman Sachs Group Inc. defended its actions in seeking business from Libya’s wealth fund during the Gadhafi regime, arguing in court documents that the fund’s managers weren’t “financially illiterate” and understood the risks that accompanied trades they hired the Wall Street firm to execute.

Stockholm office in the works as Jefferies eyes feet on the ground in Europe
Lucy Burton – Financial News
Jefferies International has hired the former head of Nordic investment banking at Credit Suisse to run a planned office in Stockholm, as it considers selectively adding to its on-the-ground presence in Europe.

Teenage dreamers look to JP Morgan
Philip Georgiadis – Financial News
For most teenagers living outside of London, a first visit to the capital is often a trip to take in the sights, perhaps Big Ben or the London Eye.

Upstart Bank Aldermore to List Shares in London
Chad Bray – Dealbook – NY Times
Aldermore said on Monday that it intended to pursue an initial public offering later this year, becoming the latest “challenger” bank to Britain’s traditional financial powers to seek to list its shares in London.

Deutsche Bank Says Currency Trader Dismissed on Misreporting
Candice Zachariahs – Bloomberg
A Deutsche Bank AG (DBK) currency trader was dismissed earlier this year after internal checks uncovered irregularities around how he recorded trades, the bank said. Andy Donaldson was suspended in June and dismissed shortly after, Sydney-based Adrian Cox, a Deutsche Bank spokesman, confirmed by phone today.

Clearing & Settlement

LME Clear Announces Successful Launch
Press Release
LME Clear, the new clearing house of the London Metal Exchange (LME), announces its successful launch today, migrating 100% of the positions of LME members from previous clearer LCH.Clearnet Ltd to its own risk and clearing system, LMEmercury.

Copper premium swap launch due for Shanghai free-trade zone
Xiao Wang –
Shanghai Clearing House (SCH) will launch the first copper premium swap in the Shanghai free-trade zone by the end of the year. The instrument can be used to hedge fluctuations in copper premium based on the London Metal Exchange (LME) copper price, according to Han Xun, innovative products developer at SCH in Shanghai.

FCA to defy Europe on forex forwards reporting
Cecile Sourbes, Fiona Maxwell –
The Financial Conduct Authority (FCA) plans to defy European consensus on the regulation of foreign exchange derivatives until it is forced to abandon its stance in 2017 – the latest development in a nine-month feud between the European Commission and the UK regulator, and one that affects what trades have to be reported and cleared by UK-regulated firms.

It wasn’t QE that caused a collateral scarcity this summer
Izabella Kaminska – Financial Times
The Liberty Street Economics blog of the Federal Reserve Bank of New York provided a good analysis this week of the summer’s UST settlement fails spike.

Oslo Børs VPS: Delta – Millennium Exchange: T+2 – Questions And Answers To The New Settlement Cycle

Indexes & Products

Passive fund rankings under scrutiny
Emma Dunkley – Financial Times
The City watchdog is eyeing fund rankings after receiving complaints that index trackers are being excluded from performance tables.

Experts sound warning on Chinese ETFs as funds close to new money
Anna Fedorova – Investment Week
Investors have been warned against buying into Chinese tracker funds in the near term as growing interest prompts some groups to close products to new investment.

ISE ETF Ventures’ Kris Monaco to Participate in “Partnering with an ETF Consultant” Panel at ETF Boot Camp
Kris Monaco, Head of ISE ETF Ventures, will participate in the “Partnering with an ETF Consultant” panel at the inaugural ETF Boot Camp. Insight will be provided on the various strategies emerging managers entering the exchange traded fund (ETF) industry can use to bring their idea to market.

Nairobi Securities Exchange Joins FTSE Mondo Visione Exchanges Index

Four New UBS ETFs Launched On Xetra – Four New UBS ETFs Launched On Xetra

Ten Thai Listed Companies Selected For Dow Jones Sustainability Indices


Trading Technologies Supports Yield Trading of CME’s Eurodollar Bundle Futures
Trade Talk
CME Group will launch the Eurodollar Bundle futures and options at the start of the Sunday evening session (22-September-2014). Trading Technologies’ X_TRADER is ahead of the curve with full support for the Bundle Yield Index and the ability to trade yield spreads with a single click.

Paradigm Shift As Real-Time Clearing Becomes A Reality In Europe
Press Release
The London Metal Exchange (LME) has announced the successful launch of its brand new clearinghouse, LME Clear. Swedish supplier and long-term partner, Cinnober Financial Technology, is providing the core technology for real-time, multi-asset clearing and risk management to the exchange.

Interactive Data Launches Continuous Fixed Income Pricing Service
Becca Lipman – Wall Street & Technology
Interactive Data, a global provider of independent pricing and reference data, recently announced the launch of continuous fixed income evaluated pricing service.

SunGard Introduces APT Enterprise
Timothy Bourgaize Murray – WatersTechnology
The technology mainstay says its updated buy-side offering, APT Enterprise, now includes a risk dashboard for a single view of market and liquidity risk that can incorporate multiple trading strategies and metrics covered under several global reporting regulations.

BCS Financial Taps Horizon’s Market-Making Platform
Marina Daras – WatersTechnology
Russian broker BCS Financial Group has selected Horizon Software’s derivatives market-making capabilities and exchange connectivity throughout Europe.


Man Pleads Guilty to Passing Tips in ‘Post-it’ Insider Trading Ring
Matthew Goldstein – Dealbook – NY Times
A former mortgage broker from Brooklyn admitted on Friday to being the glue that held together an insider trading ring that involved the passing of stock tips on Post-it notes and napkins in meetings at restaurants in Midtown Manhattan and at Grand Central Terminal.

U.S. judge awards $40.7 million in SEC case over bitcoin Ponzi scheme
A U.S. federal judge in Texas ordered Bitcoin Savings and Trust and its owner to pay a combined $40.7 million after the Securities and Exchange Commission established that the company, which sold investments using the virtual currency, was a Ponzi scheme.

[AMF Canada] Penal proceeding against André Harvey withdrawn

[AMF Canada] Assurances Crédit Virage inc., Assurexperts inc. and Chantal Thibodeau to pay total of $77,000 in administrative penalties

Environmental & Energy

‘No’ vote sparks questions over Scotland’s energy future
Jessica Shankleman, BusinessGreen
Like Scottish voters, the renewable energy industry was largely divided between yes and no. And even though the country rejected independence, power over Scotland’s future energy market remains up for grabs.

Russia says Ukraine gas talks preliminarily agreed for September 26
Russian Energy Minister Alexander Novak said Russia, Ukraine and the European Union had preliminarily agreed to hold new talks on resolving a gas-pricing dispute between Russia and Ukraine on Sept. 26, Russian news agencies reported on Friday.

What the sharing economy can learn from fleets
Mira Inbar,
Leaders of the sharing economy are disrupting traditional industries such as transportation and hospitality, but what if they played an equally disruptive role in reducing our consumption of natural resources such as water and gas.

***LB: Also in this story “UPS used 1.3 million gallons less fuel in 2012 than the year prior, in large part by using efficient routing systems and incentivizing drivers to change behavior.”


Hedge Funds Keen on China Exchange Link, Goldman Sachs Says
Bei Hu – Bloomberg
Hedge funds may drive initial demand for Shanghai-listed stocks through a linkage of the city’s bourse with that in Hong Kong, which opens up a new route for foreign investors to buy Chinese shares, according to Goldman Sachs Group Inc. (GS)

Singapore Exchange Sees End to Hiatus for China IPOs
Jonathan Burgos – Bloomberg
Singapore Exchange Ltd. (SGX) is forecasting an end to a two-year hiatus for Chinese listings after regulators made it easier for companies from Asia’s biggest economy to sell shares in the city-state.

Chi-X Japan Launches Chi-Match VWAP Cross
Chi-X Japan Limited, a wholly owned subsidiary of market operator Chi-X Global Holdings LLC, has successfully launched Chi-Match VWAP Cross (Volume Weighted Average Price) on September 1, 2014. Chi-Match VWAP Cross offers participants a broker neutral morning, afternoon and full-day cross. Chi-X Japan trading participants access Chi-Match through existing connectivity.

SGX launches stock and company information portal StockFacts for investors
Singapore Exchange (SGX) today launched a new research and company fundamentals portal on its website.

SGX Reports 1Q Results On 21 October

Monetary Authority Of Singapore: Public Consultation On Proposed Regulations To Help Financial Institutions Comply With US FATCA

Frontier Markets

Pimco leads charge into Chilean pension market
Madison Marriage – Financial Times
Pimco, Legg Mason and Vanguard are among a growing number of international fund houses to have returned in force to Chile, three years after the local regulator froze Irish-domiciled mutual funds out of its sizeable pension market.

South Africa sukuk draws in Middle East and Asia
Kanika Saigal – Euromoney Magazine
South Africa issued its long-awaited debut sukuk on Wednesday in a bid to diversify away from conventional means of fundraising and attract investors in growth markets in the Middle East and Asia.

Dubai International Financial Centre to Issue Islamic Bond
Asa Fitch – WSJ
The Dubai International Financial Centre, the emirate’s main financial free zone, is planning to issue an Islamic bond worth around $700 million by the end of October to refinance old debt and fund infrastructure development, the business park’s governor said Sunday.

U.S. court tosses Argentina, Citigroup appeal in bond case
A U.S. appeals court on Friday dismissed an appeal by Citigroup Inc (C.N) and Argentina of a judge’s order blocking the bank from processing payments on $8.4 billion in bonds issued under the country’s local laws following its 2002 default.

Agricultural Bank Of China Celebrates Listing One Billion Renminbi Bond On NASDAQ Dubai

FTSE Annual Country Classification Review – 2014

John Lothian Newsletter

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