“Pork Bellies, I Knew It!”
Carl Gilmore, Managing Director, Head of Futures – KCG
Good morning everyone!
My name is Carl Gilmore and I am the guest editor while John and company are (obviously) hanging out at the beach for the holiday-shortened week. I am the head of futures for KCG Americas LLC. KCG is the firm resulting from the merger of Getco and Knight Capital.
Just like last week’s guest host, Rick Lane, my PR team tells me that I need to provide some information on my background and industry experience. So here we go: My first job in the industry was on the floor of the Chicago Mercantile Exchange in the late 1980’s running orders into the pork belly pit. I can still see clearly in my mind’s eye the CME meat complex and the swirl around the trading pits (and CME’s Chairman Duffy standing in the lean hog pit). On my first day on the job (I’d been on the trading floor for about ten minutes) a clerk was standing on a chair screaming at the top of his lungs and no one paid any attention. People were yelling and screaming all over the place. Suddenly, out of nowhere, a roar would erupt, and everyone went running toward it. At that point I knew I was in the right spot. I fell in love with the futures industry right then and there.
From there I went on to work for futures commission merchants and broker-dealers in a number of different operational, risk management, compliance, client-facing and executive positions. Oh…along the way I also became a lawyer (don’t hold that against me!). And that reminds me, everything I express here this week represents only my opinion.
Now, 25 years later, as a senior executive, I have had a front row seat to the events, scandals, disruptions, travails and world events that have affected us all. Sometimes it has been from a vantage point that was a little too close! However, throughout all of it, I have been impressed with the way that my colleagues and industry friends have responded. How they hung in there, and how they continued to work and do their jobs amidst uncertainty and stressful conditions. The resolve of the futures industry and everyone who works in it should not be underestimated.
That is why we have the greatest markets in the world, and that is why I love the futures industry! Now for today’s news…
Beckett’s Battle Continues
For the past two years we have told you about Beckett Ryba, the son of Mildred Ryba of the CME Group. Beckett’s Battle continues and so does the fundraising efforts to find a cure for pediatric brain tumors and specifically the oncology clinic treating Beckett.
Last year you all helped Beckett raise $8,000 in the Run For Gus, a 5K run/1 mile walk that supports the oncology and neurosurgery clinics at the Ann and Robert H. Lurie Children’s Hospital of Chicago. His was the number one fundraising team. This year he needs your help to meet his goal of $25,000 raised.
You can learn more and donate by going to foundation.luriechildrens.org/goto/BeckettsBattle
For more updates and the full story about Beckett, see the JLN blog post at jlne.ws/1lISxS6
***CG: Ok futures executives, here is your chance. This is a great cause and Lurie Children’s Hospital is a world-class facility.
Speed Reader: FIA Europe’s Simon Puleston Jones making his way through MiFID II
EU regulation continues to wind its way through the system. That’s keeping Simon Puleston Jones a busy man.
As chief executive of FIA Europe, he’s busy making his way through the EU’s 845-page consultation document that contains 860-plus questions, as part of a 10-week consultation process that ends on August 1 for the Markets in Financial Instruments Directive, or MiFID II.
John Lothian News spoke with him about what’s in it and what it means for the industry.
“That’s a hell of a lot of reading for the industry to do,” he said. “Part of the challenge for us is working out how we can get the feedback from the industry, package that up and put a nice bow around it and give it to regulators in a way that they are going to be able to understand in the time that is available.”
Dark Pools Here to Stay Says Broker Conflict Researcher
Doni Bloomfield and Sam Mamudi – Bloomberg
While money managers don’t always like what happens in the $23 trillion U.S. stock market, they’re too fond of dark pools to let them go extinct, according to a professor whose research was presented to the Senate. “Dark pools have existed forever,” Robert Battalio of the University of Notre Dame said in a phone interview last week. “You can shut down these dark pools and just new forms will arise somewhere else.”
***CG: Capital, like water, flows on the path of least resistance.
LSE deal heralds indexing overhaul
Chris Flood – Financial Times
Rapid changes are sweeping across the indexing industry, with ownership of some of the most important companies changing hands.
***CG: London loves their Harold’s
Singapore seizes on soaring Asia gold demand
Jeremy Grant in Singapore – Financial Times
Singapore is embarking on an ambitious plan to build itself up as an Asian hub for the refining and trading of gold, having abolished the tax in 2012. The refinery, operated by Metalor of Switzerland, opened last week a day after Singapore’s exchange announced plans for a futures contract based on a kilobar, or 25kg, of gold.
***CG: I remember Jeremy from his Chicago days, he was the chatty Brit that wore the corduroy jackets. Very good reporter.
Tech threat a warning for fund managers to step up
Simon Jessop – Reuters
Tech companies pose a growing threat to traditional asset managers and the financial services industry needs to up its game to meet the challenge, even though the hurdle of regulation is holding back rapid change, industry executives said.
***CG: I am convinced that Silicon Valley will eventually take over the entire world
Bridging the Week: SEC Cross-Border Rules; Red Flag to Broker Ripping Off NFL and NBA Players
Gary DeWaal – Katten Muchin Rosenman
Last week, the Securities and Exchange Commission issued its first rules governing cross-border transactions involving security-based swaps. Overall these rules are parallel to guidance previously adopted by the Commodity Futures Trading Commission, but differ in some important respects. Also last week, the Financial Industry Regulatory Authority issued a red flag to a broker-dealer and its CEO for engaging in fraud against many current and former US professional football and basketball players. Talk about unsportsmanlike conduct!
***GC: Fellow lawyer Gary DeWaal pulling the yellow card, or it is throwing the yellow flag?
For Email Newsletters, a Death Greatly Exaggerated
David Carr – NY Times
Here at the Media Equation, we pride ourselves on keeping our readers abreast of the newest technologies and approaches in reaching audiences. So it gives us great pleasure to reveal a radical publishing technology that is catching on in news media companies big and small. Ladies and gentlemen, behold: email. Email newsletters, an old-school artifact of the web that was supposed to die along with dial-up connections, are not only still around, but very much on the march.
***GC: As evidenced by you reading this word…
U.S. SEC weighs filing charges against BlackRock-filing
Sarah N. Lynch – Reuters
BlackRock Inc, one of the world’s largest asset managers, disclosed on Friday that it may face civil charges by a U.S. securities regulator over disclosures tied to a former portfolio manager whose personal investments suggested a possible conflict of interest.
Barclays Executive Removed From Daily Operations
Bradley Hope – WSJ
Barclays has removed a senior member of its equities-trading team from his day-to-day responsibilities in the wake of allegations that his group lied to clients about the operations of its dark pools, according to people familiar with the matter.
Europe calls on US to recognise overseas clearing rules
Philip Stafford – Financial Times
European markets authorities have called on their US counterparts to recognise equivalent standards for overseas clearing houses and head off a transatlantic regulatory turf war that threatens to fragment the derivatives market.
***CG: Can’t we all just get along?
Rise of asset managers may create new risks – BIS report
Huw Jones – Reuters
While banks are dumping risky assets as regulation bites, asset managers are plugging the funding gap and using their growing clout in ways that could harm markets, the Bank for International Settlements says.
***CG: There is no free lunch.
ANZ considers expanding physical commodity trading: source
Australia and New Zealand Banking Group (ANZ.AX) is considering expanding its physical commodity trading business as it aims to step into the gap left by the retreat of big Wall Street and European banks, a bank source with direct knowledge of the matter said.
Dark pool spotlight falls on Tradebot
Philip Stafford and Arash Massoudi – Financial Times
When the New York attorney-general sued Barclays this week, for allegedly misleading investors who use its anonymous “dark pool” trading venue, some of the world’s largest banks withdrew their business. But at the centre of the lawsuit was a small and little-known US algorithmic trading business, called Tradebot Systems.
Talking Dark Pools and HFT on NPR
Joshua M Brown – The Reformed Broker
Yesterday morning, I joined NPR’s On Point Radio program to discuss the recent charges levied at dark pool operators at the major brokerage firms. Scott Patterson, WSJ reporter and author of the book Dark Pools, has an interview at the top of the show and then I come in at the 15 minute mark.
James Gorman of Morgan Stanley, Going Against Type
NELSON D. SCHWARTZ – NY Times
He and Morgan Stanley are becoming the face of what may be Wall Street’s future: highly profitable, to be sure, but with fewer of the grand ambitions or larger-than-life personalities that have always characterized the place. “I’m pretty invisible, and that’s just fine,” he acknowledged.
***CG: I read this article in the NY Times yesterday. Not a bad treatment…
BNP Paribas CEO tells employees bank facing heavy U.S. penalties
BNP Paribas Chief Executive Officer Jean-Laurent Bonnafe in a message to employees seen by Reuters has warned that the French bank is facing heavy penalties following a U.S. investigation into breaking sanctions which should end “very soon”.
New Markets: A world of opportunity
Jonathan Watkins – Futures & Options World
Bourses located in Asia have experienced a particularly extended period of expansion, while new platforms in Dubai, Africa and parts of Europe have also gone from strength to strength in recent years. Rising interest from both their domestic markets and overseas have contributed to this growth during a time when the largest and more established venues have seen their volumes decline.
***CG: Is it a world or region of opportunity?
Geoffrey Aronow, Chief Counsel, Office of International Affairs, to Leave SEC
The Securities and Exchange Commission today announced that Geoffrey Aronow, the chief counsel and senior policy advisor in the Office of International Affairs, will leave the agency this month. Mr. Aronow joined the Commission in January 2013.
Enforcement Division’s Chief Operating Officer Adam Storch to Leave SEC
The Securities and Exchange Commission today announced that Adam D. Storch, chief operating officer and managing executive of the Enforcement Division, is leaving the agency next month.
New York AG Schneiderman finally flexes muscles against Wall Street
New York Attorney General Eric Schneiderman, long seen as a secondary force in policing Wall Street banks, is taking the lead in what may be the most ambitious case of his career: accusing Barclays Plc of favoring its high-frequency trading clients.
CFTC’s Division of Market Oversight Issues Time-Limited Extension of the No-Action Relief Provided in CFTC Letter No. 13-41
The Division is extending the expiration of the relief provided in CFTC Letter No. 13-41, without modification to the original terms and conditions, until the earlier of — the reporting party no longer holding the requisite reasonable belief regarding the privacy law consequences of reporting; or 12:01 a.m. EST on January 16, 2015.
CFTC Further Extends the Reopened Comment Period for its Rulemaking Proposals on Position Limits for Physical Commodity Derivatives and Aggregation
New Zealand’s Financial Markets Authority Publishes Annual Review Of NZX Regulatory Obligations; 11 Agreed Actions
Evaluating Pension Fund Investments Through The Lens Of Good Corporate Governance, Commissioner Luis A. Aguilar, Latinos On Fast Track (LOFT) Investors Forum, Hispanic Heritage Foundation. Washington, D.C.
Exchanges & Trading Facilities
ICE offers new rebate and fee cut on Liffe
Luke Jeffs – Futures & Options World
The IntercontinentalExchange has introduced a rebate and cut fees on its London-based Liffe exchange in a bid to boost trading in slower months. The US-based exchange group introduced this month a new rebate that promises clients £0.25 for each lot traded in specific months across Euribor, Sterling and Euroswiss futures.
***CG: Competition is good!
CME Europe plans natural gas launch
Luke Jeffs – Futures & Options World
CME Europe hopes to start trading natural gas in September subject to regulatory approval, marking the latest move by the nascent exchange as it looks to expand its range of products.
What the LSE could buy after Russell
Tim Cave – Financial News
The London Stock Exchange Group is much less about London, stocks, or even exchanges these days. The most appropriate part of its moniker now seems to be the word “group”.
UPDATE: LSE Eyes FTSE-Russell Index Data Combo
Giulia Lasagni, Max Bowie – WatersTechnology
The London Stock Exchange plans to consolidate the index calculation and data distribution platforms of its FTSE index subsidiary with those of US-based index provider Russell Indexes—and may migrate the index platforms to proprietary LSE technologies, industry observers say—after it completes the $2.7 billion (£1.59 billion) acquisition of Russell Investments from Northwestern Mutual Insurance Company, which is anticipated to take place either at the end of this year or early 2015.
***CG: Very interesting…
The Aequitas Neo Exchange Applies For Formal Approval With The Canadian Securities Administrators
Aequitas Innovations Inc. (“Aequitas”) is pleased to announce that a formal exchange application for its new marketplace – the Aequitas Neo Exchange – has been filed with the Ontario Securities Commission (“OSC”) and the other securities regulators in Canada. In response to the application, the OSC has published a copy of the application for information and comments by all industry stakeholders. The deadline for comments to the OSC is Tuesday, August 26, 2014.
First CNY bond listed on SIX Swiss Exchange
Today, a bond denominated in Chinese renminbi (CNY) with a listing on is tradable at our venue for the first time. The issuer of the CNY 1.25 billion three-year term bond is the China Construction Bank. The bank is one of the leading commercial banks in China, and has already listed a CHF 300 million five-year term bond on this year.
NYSE margin debt rises in May; first increase since February
The value of equities investors bought on the New York Stock Exchange with borrowed money rose 0.3 percent in May from the previous month, marking the first monthly increase since reaching a record high in February.
***CG: I’d be keeping a close eye on the VIX if I were them
Xetra/Börse Frankfurt: Subscription Starts For Beate Uhse AG Bond
NZX General Obligations Review
Direct Edge Trading Notice #14-26: EDGA And EDGX Fee Schedule Changes Effective July 1, 2014
TOM MTF statistics week 26, 2014
Hedge Funds & Managed Futures
Blackstone Readies Big-Bet Hedge Fund
Rob Copeland – WSJ
Blackstone Group LP is quietly laying plans to start a hedge fund that will make big, bold bets, an effort it hopes will eventually rival some of the largest firms in the business, according to people familiar with the plans.
***CG: See my previous VIX comment
BlackRock ETFs near $1 trillion as it loses market share to Vanguard
Even as BlackRock Inc is set to amass $1 trillion in exchange-traded fund assets in its iShares business, U.S. retail investors increasingly prefer to send their money to low-cost leader Vanguard Group, highlighting a weak spot for the world’s biggest money manager.
Private equity surfs to record first-half activity in Europe
Ayesha Javed – Financial News
In their scramble to take advantage of strong equities markets, private equity firms have this year carried out record values of flotations and debt issuance in Europe, despite a poor performance by some of the newly listed companies.
KKR Names Sole Leader of Americas Private Equity Business
Shasha Dai – WSJ
Kohlberg Kravis Roberts said it named Alexander Navab as sole leader of the firm’s Americas private equity business, which he previously co-headed with Michael Michelson, according to a memorandum sent to investors that was viewed by The Wall Street Journal on Thursday.
Ex-SAC officer plans Leucadia-backed hedge fund firm -WSJ
A former top executive of SAC Capital Advisors is planning to launch a stock trading hedge fund firm with much of the start-up capital to come from Leucadia National Corp., according to the Wall Street Journal.
Blackstone’s new hedge fund involves independent companies-WSJ
A direct investing initiative that Blackstone Group LP is working on in its hedge funds group involves independent management companies, the Wall Street Journal reported on its website on Sunday, citing people familiar with the plans.
Vanguard on the Myth of the Stock Picker’s Market
Joshua M Brown – The Reformed Broker
You’re hearing a lot this summer about how there is more opportunity for active stock pickers right now because of factors like dispersion and falling correlation. Vanguard’s Jim Rowley explains why this is a fallacy and how today is no better or worse than any other period of time for stock pickers in the aggregate
Federal Judge Says Argentina’s $539 Million Attempt at Payment Is ‘Illegal’
Dealbook – NY Times
A federal judge on Friday delivered a stern warning to Argentina after the country deposited $539 million with the Bank of New York Mellon for the purpose of paying its main class of bondholders.
Danish pension fund begins direct buyout deals
Jennifer Bollen – Financial News
Danica Pension, one of Denmark’s biggest pension funds, is to target Dkr 10 billion (EUR1.1 billion) of direct minority private equity deals over the next two years, said chief financial officer Jacob Aarup-Andersen as he gave details of the fund’s first significant buyout deal.
CFTC Commitments Of Traders Reports Update
***CG: Almost always a good read.
Banks & Brokers
Fear Thaws Out for Investors as Online Brokers Defy Funk
Joseph Ciolli – Bloomberg
With U.S. stocks stuck in the sleepiest funk since the dawn of the Internet, one group is waking up: online and discount brokers.
Goldman blurs lines with structured bond
Helene Durand and Anil Mayre – IFR
In a move some could see as a return to the bad old days of structured credit, Goldman Sachs is hoping to sell a highly complex transaction that blurs the lines between covered bonds and securitisations.
R.B.S. to Spend $1.7 Billion on Mobile Banking Growth
Dealbook – NY Times
The Royal Bank of Scotland is making a major bet that consumers in the future will do most of their banking on mobile phones or tablets.
***CG: And why not? We do everything else on them.
Morgan Stanley moves Morley to New York
Joe Parsons – Futures & Options World
Morgan Stanley has moved derivatives expert James Morley to New York to take up a new role as managing director, global head of currency and commodity operations.
Thomson Reuters Announces Winners Of 2014 StarMine Analyst Awards – Nordics: Nordea Markets Recognised As The Top Brokerage Firm.
StarMine, a Thomson Reuters company, today announced the winners of the 2014 StarMine Analyst Awards for the Nordics. This is the eleventh year that StarMine has presented its awards to the top stock analysts and brokerage firms across Denmark, Finland, Norway and Sweden.
Clearing & Settlement
France to set up renminbi clearing system
Adam Thomson in Paris – Financial Times
France’s central bank has taken the first step towards the creation of a Paris-based renminbi clearing and settlement system. The bank said on Sunday that it had signed a memorandum of understanding (MoU) with its Chinese counterpart to set up a payments arrangement in the French capital designed to facilitate and promote cross-border renminbi transactions.
***CG: Who’s holding the money?
ISDA fires warning shot over reporting issues
Jonathan Watkins – Futures & Options World
The International Swaps and Derivatives Association (ISDA) has warned an absence of counterparty consent for cross-border trade reporting could force firms to stop trading.
***CG: Same question. Who’s holding the money?
Korea wins CFTC support to file as US swaps clearer
Joe Parsons – Futures & Options World
The Korean Exchange (KRX) has been given an extension to register as a derivatives clearing organisation (DCO) to clear interest rate swaps for US persons.
Indexes & Products
Creator of ‘Fear Gauge’ Sounds Alarm Over Volatility-Linked ETFs
Chris Dieterich – MoneyBeat – WSJ
The man who created a widely watched measure of stock-market volatility is sounding the alarm over exchange-traded products that try to track his index.
***CG: How about an alarm about the lack of volatility?
The top ten ETFs of 2014 at the halfway point
The Reformed Broker
***CG: If you are playing at home, this is the third link from The Reformed Broker
SG launches six-year at-risk product based on FTSE 100
Suzi Hampson – Risk.net
Societe Generale has created a six-year income product that relies on the credit quality of four financial institutions as counterparties and links to the FTSE 100 for its quarterly returns
BME: IGBM Index New Composition For The Second Half 2014 – The Index Will Comprise 108 Stocks, After Five Inclusions And Two Exclusions.
NASDAQ Closing Cross Calculates U.S. Russell Indexes For The Eleventh Consecutive Year For Russell’s Annual Reconstitution
Xetra/Börse Frankfurt: Two New UBS ETFs Launched On Xetra – ETFs Provide Access To Stock Corporations Based In The UK And Europe
VWD Adds Tullett US Bonds Data to Terminal
Giulia Lasagni – WatersTechnology
Frankfurt-based market data vendor VWD has added data on US Treasury bonds from Tullett Prebon Information, the data arm of interdealer broker Tullett Prebon, to its VWD Market Manager real-time data desktop application, in response to increasing demand from German savings banks and private banking firms for additional information on the US market.
Markit Eyes Federated Chat Integration Capabilities
Faye Kilburn – WatersTechnology
Markit is building out the integration services component of its Collaboration Services initiative, an open messaging network for financial professionals to communicate and share information across any messaging platform.
Quincy Adds ICE Futures, eSpeed Treasuries to QED Microwave Data
Faye Kilburn – WatersTechnology
Low-latency market data provider Quincy Data has added equity and energy futures data from the IntercontinentalExchange (ICE) and US Treasury bond data from Nasdaq’s eSpeed electronic bond trading platform to its Quincy Extreme Data microwave service, to provide low-latency data to trading firms co-located at the exchanges’ datacenters.
***CG: Are we sure we can put ICE in the microwave?
Volta Data Centre Welcomes The SPN Alliance As A New Dark Fibre Network Provider
The SPN Alliance To Offer Their Member Networks Dark Fibre Connectivity From Volta’s Great Sutton Street Facility
Inaugural Meeting Of Global Legal Entity Identifier Foundation (GLEIF)
***CG: Can’t wait to attend this…
Prosecutors Seek Sentence of at Least 8 Years for Martoma in Insider Trading Case
MATTHEW GOLDSTEIN – Dealbook – NY Times
Federal prosecutors are recommending that Mathew Martoma, a former trader who worked for the billionaire investor Steven A. Cohen, be sentenced next month to at least eight years in prison for insider trading, if not significantly more.
SEC judge suspends two KPMG auditors over bank case
Casey Sullivan – Reuters
A U.S. Securities and Exchange Commission judge has issued suspensions for two KPMG auditors, temporarily barring them from practicing or appearing before the regulator after finding they did not properly vet the books of a Nebraska bank before it failed.
KKR’s Gardner Denver to pay $29 mln to settle suit-WSJ
Gardner Denver has agreed to pay $29 million to its former shareholders to settle allegations that the industrial pumps producer was undervalued in its $3.7 billion sale to private equity firm KKR & Co last year, according to the Wall Street Journal.
Environmental & Energy
EU Leaders to Pledge Focus on Cheaper Energy With Secure Supply
Ewa Krukowska, Bloomberg
The European Union must make security of energy supply, reduction of costs and the fight against climate change a priority for the next five years, the 28-nation bloc’s leaders are set to declare.
***LB: Also in this story “The EU heads of state and government will back efforts to speed the creation of a common energy market, develop infrastructure and diversify supply, according to a draft strategic agenda to be signed at a summit in Brussels today.”
EU Seen Curbing Coal Use by Quadrupling Carbon Price
Nidaa Bakhsh, Bloomberg
Europe could coax utilities to shift from burning coal to cleaner natural gas by quadrupling the price that financial markets place on carbon dioxide emissions, the head of Spain’s biggest power generator said.
***CG: They probably ought to quadruple the quadrupling
French proposal on 2030 EU energy goals could ease deadlock
Barbara Lewis, Reuters
A new French strategy on how to offset the economic impact of proposed 2030 climate and energy goals could help EU leaders to agree on them later this year, diplomats said on the sidelines of a meeting of European leaders in Brussels on Friday.
SGX Says More Retail Investors In Stock Market
Singapore Exchange (SGX) today said participation of retail investors in the stock market is growing. To further support awareness about share investing, SGX today launched its StockWhiz investing competition on a Tradehero app for mobile phones and tablets.
***CG: I’ve known a lot of stock whizzes over the years
SGX welcomes IPS Securex to Catalist
SGX welcomes SMJ International to Catalist
***CG: SGX is so welcoming.
Rothschild fund turns focus to Africa
Anne-Sylvaine Chassany, Private Equity Correspondent – Financial Times
Edmond de Rothschild has amassed $530m for its first private equity fund focusing on deals in Africa, in the latest sign of investors’ growing interest in the continent.
DIFC Engages With Global Fund Managers To Highlight Middle Eastern Investment Opportunities
Region’s Pre-Eminent Financial Centre Showcases Middle East, Africa And South Asia Offering At World’s Largest Asset Management Event
London Stock Exchange Welcomes UK Government’s First Islamic Bond Listing
Nigerian Stock Exchange Weekly Report For The Week Ended 27 June 2014