First Read

The Boys Are Back In Town
The boys are back in town. Jim Kharouf, Doug Ashburn and I returned to Chicago yesterday from our tour of Europe, while Patrick Lothian returned last week after our successful MarketsWiki World of Opportunity Education event in London.

A big thanks to our sponsors for the events, Premiere Sponsor CME Group and Contributing Sponsor Turquoise. We could not have pulled off the events at the CME Group’s offices at the London Stock Exchange without their help.

A big thanks too to all our London speakers. We had some great performances. The last session was led off by a terrific presentation from former rugby player Hugh Vyvyan and ended by an inspirational one by FIA Europe CEO Simon Puleston-Jones. We are in the process of editing the videos and will feature them in the newsletter and on within the coming weeks.

We moved from London to Paris to Frankfurt. We had great visits with the enterprising people at Euronext in Paris. We then moved to Frankfurt for a complete briefing on Deutsche Boerse from members of their very deep team. Both exchanges left me impressed, but for different reasons. Euronext for their entrepreneurial spirit and Deutsche Boerse for their very complete set of services and an impressively deep team.

On another note, before I left on this trip, I was on another Boy Scout campout. At this Ranchoree event, my troop defended their pumpkin chuckin’ title successfully. We were again the class of the event, throwing a one pound pumpkin 143 feet, some 43 farther than the closest rival.

Also, I have not mentioned this before this year, but Robby Lothian is selling popcorn for Boy Scouts. If anyone is interested, I can put you in touch with him. I am sure he would appreciate the business.

~John J. Lothian


More derivatives launches on the way from Eurex
Jon Watkins – The Trade
Eurex plans to add to its recent wave of product launches with new derivatives contracts and functionalities in the coming months.

***** Jon Watkins recently moved from FOW to The Trade News.


Interest rate turmoil leads to Chicago Mercantile Exchange trading record
Michael Mackenzie, Gregory Meyer and Tracy Alloway – Financial Times
While Wall Street watched with trepidation as markets whipsawed violently last week, 800 miles away the mood at the Chicago Mercantile Exchange was rather lighter. Interest rate turmoil has been a boon for the largest US futures exchange, providing further evidence of an evolving shift in how America’s markets function in an era of tougher financial regulation.

***** CME Group shares would make a nice hedge to a portfolio. Consider it an interest rate volatility hedge, butt with a dividend.


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 »


Barclays Dark Pool Won’t Regain Ranking, Bernstein Says
Stephen Morris – Bloomberg
Barclays Plc (BARC) will never recover its second-place ranking among U.S. dark pool operators because a lawsuit alleging it lied to customers has permanently damaged its reputation, according to Sanford C. Bernstein Ltd.

***** What does permanent mean?


In Turnabout, Former Regulators Assail Wall St. Watchdogs
Jesse Eisinger – Dealbook – NY Times
Last week, I visited an alternate universe. The real world sees a pandemic of bank misconduct, but to the white-collar defense lawyers of Washington, the banks are the victims as they bow beneath the weight of regulators’ remarkably harsh punishments.

***** When I think of the SEC, fairness is not what comes to mind.


Levine on Wall Street: Bad Culture and Fake Factors
Matt Levine – Bloomberg
Are banks evil? Yesterday the Fed had a big conference to harangue banks to be less evil, with New York Fed President William Dudley sort of leading the charge by telling bankers that if they do not “do your part in pushing forcefully for change across the industry,” i.e. less evil, then “the inevitable conclusion will be reached that your firms are too big and complex to manage effectively.” So that’s fun.

***** Mr. Dudley says do right!



MarketsWiki Page of the Day
BGC Partners

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Christine M. Cumming; Patrick J. Kenny; Reto Francioni; Robert G. Pickel; Jennifer Ropiak; Edwin Marcial

Companies, Organizations and Groups

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


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Lead Stories

U.S. stock options markets agree to need for trading halts on big moves
John McCrank – Reuters
U.S. options market operators have agreed in recent months on the need for new automatic trading halts when stock options prices suddenly surge or plunge, in a bid to reduce excess volatility and blunt the impact of erroneous trades, according to five sources with knowledge of their discussions.

U.S. SEC plans to deny proposals for non-transparent ETFs
Ashley Lau – Reuters
U.S. regulators said they plan to deny proposals for a new breed of actively managed exchange-traded funds that want to keep their holdings secret for months at a time.

BSE shareholders approve deal with USE
Futures & Options World
BSE shareholders have approved a deal to acquire regional rival the United Stock Exchange of India. BSE, formally known as the Bombay Stock Exchange, began talks with USE in March this year over the possible deal that would strengthen its currency business.

HFT firms ‘learned a lot’ from Knight Capital loss
High-frequency traders “learned a lot” from the devastating $461 million trading loss suffered by Knight Capital in August 2012, according to Marc Vesecky, chief risk officer (CRO) of Tower Research Capital, a high-frequency trading (HFT) specialist.

How Quantitative Easing Contributed to the Nation’s Inequality Problem
William D. Cohan – Dealbook – NY Times
Janet L. Yellen, the chairwoman of the Federal Reserve, is regarded as a person of the highest integrity. And that is what’s so utterly confounding about the speech she gave in Boston last week about inequality. She did a wonderful job highlighting the growing disparity between rich and poor and how it is beginning to impinge upon what it means to be an American, but she ignored the fact that, in many ways, the Fed’s policies have compounded the problem.


Divided SEC adopts mortgage rule, decries lax lending
Sarah N. Lynch – Reuters
U.S. securities regulators adopted a rule on Wednesday designed to avert another financial crisis, but two officials dissented, saying it did not do enough to discourage banks from lending to borrowers with shaky credit and then passing the mortgage risk to investors.

EU’s Top Banker Warns of Rule Fixation ‘Going Beyond Reason’
Niklas Magnusson – Bloomberg
Christian Clausen, president of the European Banking Federation, said regulators need to rethink an approach he warned will bury the industry under a mountain of rules with little coherence.

Fines to rise as regulators continue to punish misconduct
Multibillion dollar fines against banks have largely become a norm, as supervisors seek to establish effective deterrent against repeated conduct failures

Statement By SEC Chair Mary Jo White At The SEC Open Meeting On Credit Risk Retention Chair Mary Jo White

Statement At Open Meeting: Credit Risk Retention, SEC Commissioner Kara M. Stein Commissioner Kara M. Stein

Skin In The Game: Aligning The Interests Of Sponsors And Investors, SEC Commissioner Luis A. Aguilar

Dissenting Statement Of SEC Commissioner Daniel M. Gallagher Concerning Adoption Of Rules Implementing The Credit Risk Retention Provisions Of The Dodd-Frank Act Commissioner Daniel M. Gallagher

Dissenting Statement At Open Meeting Regarding Final Rule On Credit Risk Retention, SEC Commissioner Michael S. Piwowar

New Zealand’s Financial Markets Authority Warns Consumers About Cold-Calling Investment Offers And ‘Big Win’ Scams

ESMA Publishes Latest Statistical Data On Prospectus Approval And Passorting In The EEA

Exchanges & Trading Facilities

Exchanges’ bond platforms in US push
Sarah Krouse – Financial News
Bond trading platforms run by Nasdaq and the London Stock Exchange are expanding operations in the US, as exchanges position themselves to benefit from structural changes to the markets for trading debt securities.

LME, HKEx agree fee waiver for members
Luke Jeffs – Futures & Options World
The London Metal Exchange and Hong Kong Exchanges and Clearing are seeking to forge closer ties between Europe and China with a reciprocal arrangement that will see both exchanges waiving membership fees for firms listed on the other exchange.

Hedge Funds & Managed Futures

Billionaire Ray Dalio’s Hedge Fund Sues Ex-Employees Over New Fund
Nathan Vardi – Forbes
Billionaire Ray Dalio’s Bridgewater Associates sued two former employees for falsely advertising their new hedge fund firm by exaggerating and misrepresenting their role at Bridgewater, the world’s largest hedge fund firm that manages some $160 billion.

BlackRock to revamp strategy on Balanced Income Portfolio
Anna Fedorova – Investment Week
BlackRock is set to overhaul the investment strategy of its Balanced Income portfolio to attract more investors as interest in the product has waned.

Janus Capital profit rises 25 percent on higher assets
Janus Capital Group on Thursday said third quarter profit rose 25 percent on higher assets.

Insurers weigh benefits of multi-asset funds
Asset managers are promising insurance companies that invest in multi-asset funds an equity-like return for a fraction of the capital, but is this the best way forward in the hunt for yield?

Buffett copycats risk a pounding as Berkshire portfolio suffers
Luciana Lopez – Reuters
It’s not been a good time for Warren Buffett wannabes. Sharp drops in many of the stocks owned by Buffett’s Berkshire Hathaway in recent weeks hit the sprawling conglomerate’s equity portfolio hard.

Banks & Brokers

JPMorgan was alerted of hiring concerns in China before U.S. probe: WSJ
JPMorgan Chase & Co (JPM.N) executives in New York were aware of potential problems tied to its recruitment practices in China well before U.S. regulators launched a probe into the issue, the Wall Street Journal reported, citing sources and documents it reviewed.

U.S. Court hears arguments on sex discrimination at Goldman Sachs
Mica Rosenberg – Reuters
Goldman Sachs Group on Wednesday attacked expert evidence offered by attorneys for former female employees in a U.S. federal sex discrimination lawsuit, arguing there was no pattern of gender-based pay and promotion disparities at the bank.

Goldman Sachs Says Australia Rates-Trading Head Corbett Has Left
Candice Zachariahs and Narayanan Somasundaram – Bloomberg
Goldman Sachs Group Inc. confirmed that the head of Australian dollar rates trading Chris Corbett has left the company.

ED&F hires former Icap broker Cotier
Luke Jeffs – Futures & Options World
ED&F Man, the British commodities specialist, has hired another senior broker in London as it looks to expand to compete with the world’s top investment banks in execution. ED&F hired at the start of October Karl Cotier, a direct market access broking specialist, who left Icap at the end of August.

New York and National Banks Jumpstart Green Bank
Vipal Monga – MoneyBeat – WSJ
New York State’s “Green Bank” is luring local and national banks to fund their first such projects in the state.

Bowley moves back to Nomura from Instinet
John Bakie – The Trade
Instinet Europe has confirmed its head of business operations and risk, Andrew Bowley, has transferred to the agency broker’s parent bank, Nomura, as part of the firm’s integration strategy.

Deutsche Bank CRO: derivatives becoming loss leader
New prudential rules have squeezed the profitability of interest rate derivatives to such an extent that even traditional pillars of the business may no longer be viable on a standalone basis, according to Stuart Lewis, group chief risk officer at Deutsche Bank.

Germany’s oldest bank to take on Wall Street
Giles Turner – Financial News
Founded when Wall Street was an avenue of trees, Germany’s oldest bank is now planning to launch a fully-fledged investment bank in the US.

Credit Suisse to make further cuts to investment bank
James Shotter in Zürich and Daniel Schäfer in London – Financial Times
Credit Suisse said that it would make further cuts to its investment banking division, as it beat expectations with its third-quarter results.

Lloyds expected to cut another 9,000 jobs in digital push
Anna Fedorova – Investment Week
Lloyds is expected to cut a tenth of its entire workforce, amounting to around 9,000 jobs, in a digital push over the next three years.

GFI’s Special Committee to Review Unsolicited Tender Offer from BGC Partners

Clearing & Settlement

Australia Top-Three Most Expensive Market In The World For Clearing
An Industry-Funded Report By Independent Research House Market Structure Partners Shows That Australia Is Amongst The World’s Most Expensive Developed Markets To Clear Equities, And Suggests That The Risk Management Model In Australia Is Unusual When Compared To Other Global Markets And Merits Further Examination

Traiana launches clearing solution for OTC equity trades
The Trade
Post-trade matching specialist Traiana has gone live with its automated central clearing system for OTC equity trades.

Shanghai launches renminbi derivatives clearing
Shanghai Clearing House (SCH) will finally launch its voluntary clearing service for renminbi foreign exchange forwards and swaps on November 3 but so far just three smaller foreign banks have committed to the service. After launching mandatory clearing for interest rate swaps (IRS) in July,

CCP resolution guidelines ‘a missed opportunity’
Measures set out by CPMI-Iosco and the Financial Stability Board last week are accused of not going far enough in specifying a standard approach to central counterparty recovery and resolution

Indexes & Products

Will — and Should — These ETF Ishtars Ever Catch On?
Eric Balchunas – Bloomberg
“Ishtar,” the 1987 movie starring Warren Beatty and Dustin Hoffman, seemed like a surefire hit on paper. At the box office? $14 million. It is the go-to emblem of disaster.

BATS Exchange Welcomes ValueShares
ValueShares U.S. Quantitative Value ETF Begins Trading Today on BATS Exchange

Nasdaq Lists The Recon Capital DAX Germany ETF – One Of The Leading Indices For Financial Products In The World


Speed-of-Light Trading Grows in Europe With McKay Network
John Detrixhe – Bloomberg
European trading is poised for an upgrade. McKay Brothers International, a Geneva-based provider of networks for trading firms, plans to activate a microwave data link covering the 370 miles (600 kilometers) between the London suburb of Basildon, where markets including Intercontinental Exchange Inc. house computers, and Frankfurt, another financial center where Eurex is based.

TriOptima’s triResolve Service Solves The Unmatched Trade Repository Data Problem Challenging Reporting Institutions

True ex taps cameron tec for fix based messaging tools
The swap execution facility will provide CameronTec’s MagniFIX monitoring and VeriFIX testing tools to clients. The pair of messaging applications can be used to improve pre-trade transparency and achieve more efficient execution for counterparties new to the rate swaps trading venue.

Neonet Partners With Commcise For Commission Management Solution
Neonet Securities, the independent agency broker and execution specialist, today announced that it has partnered with Commcise, the independent buy-side investment technology vendor, to broaden its service offering within commission management.


U.S. SEC slams tycoon Wyly’s bankruptcy budget as ‘staggering’
Joseph Ax and Nate Raymond – Reuters
Texas tycoon Sam Wyly, who filed for bankruptcy this week, is trying to exhaust his fortune through exorbitant spending to impede the U.S. Securities and Exchange Commission’s collection of a $198.1 million fraud claim against him, the regulator told a U.S. judge on Wednesday.

Federal Court Orders Boston Resident John B. Wilson and His Company, JBW Capital LLC, to Pay a Civil Penalty of More than $2.8 Million for Commodity Pool Fraud

NFA Regulatory Actions: Emini Experts LLC and Dante Stephen Giovannetti

Could Allen Stanford go free? Convicted fraudster appeals
Scott Cohn – CNBC
Jailed financier R. Allen Stanford, convicted in 2012 of running a massive global Ponzi scheme that rivals the Madoff scandal, says he is the victim of an illegal prosecution, and “the clearest of assaults on the U.S. Constitution.”

FBI — Connecticut Investment Adviser Admits Defrauding Clients Through Cherry-Picking Scheme
Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, today announced that NOAH L. MYERS, 43, of Lyme, waived his right to indictment and pleaded guilty yesterday before U.S. District Judge Stefan R. Underhill in Bridgeport to defrauding investment clients in a “cherry-picking” securities scheme.

UK’s Financial Conduct Authority Publishes Decision Notice Against Paul Reynolds Deciding To Ban Him And Fine Him GBP290,344

[AMF Canada] Robert Legault fined $89,000

Illegal practice – AMF sues Paul Apostolos Sigalos

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.


JPX flags trading capacity issues
Simon Osborne – The Trade
The Arrowhead trading system of Japan Exchange Group (JPX) handled less than ten million orders a day when it was launched in January 2010, but by May 2013, the system was handling 46 million orders per day.

HKEx Group And China Merchants Group Sign MOU
Hong Kong Exchanges and Clearing Limited (HKEx), HKEx Group companies the London Metal Exchange (LME) and LME Clear Limited, China Merchants Group Limited (CMG) and China Merchants Securities Co. Limited (CMS), signed a memorandum of understanding (MOU) on 22 October 2014 for a strategic alliance in product development and related services for market users.

SIX Financial Information services Hong Kong investors with SFC authorized investment products data
SIX Financial Information is expanding its vast regulatory coverage to include the Securities and Futures Commission (SFC) authorized products for Hong Kong clients.

CICC Chairman Jin Liqun Resigns
Prudence Ho – WSJ
The chairman of China International Capital Corp has resigned, marking the second top management change in less than two weeks.

Want to Invest in North Korea? China Hands Out New How-to Guide
Cabbage costs 42 cents a kilogram in North Korea, don’t clink glasses when toasting in Iran, and celebrate Chinese festivals with locals in the U.S. All these are handy hints in China’s latest handbook for businesses investing or trading abroad.

Frontier Markets

How MCX held on to its market despite the storm
Ashish Rukhaiyar –
The spot exchange is dead. The holding company is not fit and proper. The equity exchange runs on a conditional licence. And the group founder himself faces multiple charges.

U.S. court tosses Argentina appeal over funds held by BNY Mellon
Nate Raymond – Reuters
A U.S. appeals court on Wednesday dismissed Argentina’s appeal of an order directing Bank of New York Mellon Corp to hold onto $539 million the country deposited for its restructured bondholders.

Hedge Funds Expose Argentina to $14 Billion Payment Risk
Katia Porzecanski – Bloomberg
The relative calm in Argentina’s debt markets since its default in July may be shattered as the risk increases that holders of $14 billion in bonds will ask for their money back immediately, according to Bank of America Corp.

Africa bond rally halts amid Ebola fear
Elaine Moore – Financial Times
The rally in African debt markets has come to an abrupt halt as countries in the west of the continent battle to contain the spread of Ebola.

EGX Chairman Issues A Decision To Reduce The Listing Requested Documents By The Half
In A Step To Encourage Companies To List In The Egyptian Exchange – EGX Chairman Issued A Decision To Reduce The Listing Requested Documents To The Half

Dubai Financial Market Board Of Directors’ Meeting Monday 27 October 2014

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