John Lothian Newsletter: The Unraveling of a Wall Street Scion; BM&F Bovespa sells CME stake ahead of planned Cetip purchase; The DTCC and 4 top banks used blockchain tech to trade credit swaps

Apr 8, 2016

First Read

2016 Exchange CEO Series: LME’s Garry Jones Looking At More Metals, More Clearing and More China

Last year represented the first full year in which London Metal Exchange was under the Hong Kong Exchanges & Clearing umbrella. Now the exchange is looking forward to expanding through new products, users and via its relatively new clearing house, LME Clear.

The LME battled some major commodity headwinds in 2015, with metals prices falling anywhere from 25 to 45 percent, and many firms pulling out of the market due to risk concerns, mine closures and various mining and banking staff reductions. LME’s volumes dipped 4.3 percent in 2015 to 169 million, down from 177 million a year earlier.

“Against that background, we ended up doing pretty well,” said LME CEO Garry Jones, who spoke with JLN at the FIA Boca conference. “We changed our pricing schedule to a more commercial level, fully in-sourced all the technology, and had a full year of LME Clear.” Watch the video »
***DA: In case you missed any of this year’s CEO Series from Boca, here they are:

CME’s Gill Looking For Customer Efficiencies, Part One and  Part Two
Jeff Sprecher Talks Data, Clearing and Growth for ICE
LSE’s David Weisbrod Talks Clearing And Openness
Hong Kong’s Charles Li Looks To Keep Building Bridges To China
SGX’s Boon Chye Expanding With New Products, New Platform in 2016


John Lothian News/MarketsWiki Survey 2016
Congratulations to Boon Yong Goh of Trading Technologies, the winning entry in this year’s John Lothian News/MarketsWiki survey and winner of an Apple Watch. We plugged all of our respondents’ names into a random selection generator on, and his number was chosen out of the hundreds of entries we received. Thanks to everyone who responded to the survey. We really appreciate the positive feedback, as well as the constructive criticism. Over the next few months, look for some bells, whistles and tweaks to our offerings and delivery, in response to the feedback we received.

But just because the survey season is over does not mean we are no longer accepting feedback. We always want to hear from you. Please direct all praise to John Lothian and all complaints to Jim Kharouf


Hamilton the Musical is a Market Obsession
By John Lothian
Since I first heard of Hamilton the musical I have wanted to see it. So have my kids. And my staff. I am a big Alexander Hamilton fan. There is a lot of demand to see this Broadway musical, and I confess that seeing it has become an obsession of mine. I was advised recently that I have included a few too many Hamilton references in the newsletter, and that I should concentrate more on the important issues of the day – market structure, market regulation, algorithmic trading, listed versus OTC markets, futures and options.
This is my rebuttal. The Hamilton phenomenon touches on all of the above.


FINCAD Names Parisa Golbayani Recipient of 2016 Women in Finance Scholarship
Traders News
FINCAD’s annual scholarship program is aimed at encouraging and supporting exceptional women in finance, particularly in the areas of derivatives and financial risk management. This year, the company received applications from over 200 deserving women from over 50 countries, but ultimately Golbayani’s outstanding qualifications positioned her as the scholarship recipient.

***** Parisa narrowly beat our Londona, Roma and Belfastina.


The Financial Industry Is Having Its Napster Moment; New rules and a shift toward passively managed funds could see revenues chopped in half.
Eric Balchunas – Bloomberg
Has the music stopped for the financial industry?
Just as record companies in the early 2000s had to deal painfully with the digitization of music courtesy of Napster and Apple Inc.’s iTunes, many asset managers are now facing a similar situation as more investors make the switch from high-priced, actively managed mutual funds to passive, low-cost, exchange-traded funds (ETFs) and index funds. When the dust settles in this sea change, the financial industry may be half of what it once was, simply because its revenues will be half of what they once were.

***** I love a good gloom story.


ICAP’s blockchain initiative would slim down middle and back office processes
Sarah Rudolph, JLN
Excitement about blockchain technology and debate about the potential uses for it were top of mind at last month’s FIA Boca conference, and one of the more likely possibilities for its use is to streamline post trade operations for banks and their FCMs.
ICAP, the largest broker for OTC trading, just completed a successful proof of technology test case using blockchain technology and the company believes it could transform the middle and back office, cutting down dramatically on the number of processes necessary and therefore on time and cost.


Thursday’s Top Three
Yesterday’s top click-getter was the Bloomberg View commentary on the Panama Papers, The Panama Papers Actually Reflect Pretty Well on Capitalism. We had a two-way tie for second place, between the two biggest regulatory stories of the day, the Bloomberg story about the one-year delay on MiFID II implementation and reformed broker Joshua Brown’s commentary in Fortune on the DoL’s fiduciary rule, Wall Street Dodged a Bullet on the Retirement Fiduciary Rule


MarketsWiki Spotlight
IOMA: WFE’s Clearing & Derivatives Conference, 17-19 April, Kuala Lumpur, Malaysia

The World Federation of Exchanges represents 64 regulated exchanges across the world, and acts on behalf of a total of 99 organizations including affiliate members and clearinghouses.


The WFE’s IOMA conference brings together clearinghouses, exchanges, regulators and other stakeholders from around the world to discuss the key market structure and business issues of the day. The focus of the 2-day annual conference is post-trade and derivatives market issues. For more on the WFE, visit its page in MarketsWiki HERE

***Also see this month’s WFE e-zine, hot off the presses.
This month’s theme is post-trade, with some of our members sharing their views on the big post-trade themes as they see them. Comments include distributed ledger, the supplemental leverage ratio, further regulation and further clearing initiatives.

is brought to you by:


Lead Stories

The Unraveling of a Wall Street Scion
Andrew Caspersen lost millions feeding a compulsive trading habit, including money raised from friends, siblings and even his mother
Andrew W.W. Caspersen was on the phone with an investor in the southwestern U.S. with what sounded like an enticing deal: Invest a few million dollars alongside sophisticated institutions—as well as Mr. Caspersen’s friends and family—and earn a 15% annual return with minimal risks.

BM&F Bovespa sells CME stake ahead of planned Cetip purchase
Philip Stafford – FT
BM&F Bovespa has sold its 4 per cent stake in CME Group, the US futures exchange operator, as the Brazilian group prepares a formal offer for Cetip, a rival domestic market infrastructure operator.

BM&F Bovespa acquires 4.1% stake of Mexico bourse
Brazil stock exchange and futures-market operator BM&F Bovespa SA said it acquired a 4.1% stake in its Mexican peer, Bolsa Mexicana de Valores, in a deal worth around 136 million reais ($37 million).

The DTCC and 4 top banks used blockchain tech to trade credit swaps
Ian Kar – Quartz
Bank of America Merrill Lynch, Citi, Credit Suisse, J.P. Morgan, and the Depository Trust & Clearing Corporation (DTCC) successfully traded credit default swaps on the blockchain, according to an announcement today.

Central Bankers Aren’t Superheroes; Janet Yellen, Mario Draghi, and others have limited powers to stimulate growth.
Michael Schuman – Bloomberg
No heart is immune from the uplifting tale of the Little Engine That Could—that plucky optimist who, against the odds, saved the day by chugging a stranded train over a mountain. In the world of economics, our central bankers have become this storybook overachiever. Ever since the 2008 Wall Street meltdown, they have tried, tried, and tried again to pull the broken global economy into happier times, undaunted by setbacks, criticism, or the sheer weight of their burden. At times that unstinting effort has made them heroes, too. The now-legendary 2012 pledge by Mario Draghi, president of the European Central Bank, to do “whatever it takes” to save the euro quelled the market turbulence that threatened to tear apart Europe’s monetary union.

Bond traders flock to equity options – report
Futures & Options World
Corporate bond investors are turning to equity options to hedge their exposure because regulation has made their traditional credit derivative hedging tools too expensive, according to a new study. US research firm the Tabb Group issued a paper on Thursday that said equity options are being used by bond-holders as a substitute for credit default swaps, which are the normal instrument of choice for hedging corporate exposure.

Yellen Says U.S. Near Full Employment, Some Slack Remains
Jana Randow, Christopher Condon, Matthew Boesler – Bloomberg
Bernanke, Greenspan, Volcker, Yellen Speak on Same Panel; Fed’s 2% inflation target is a goal, `not a ceiling’
Federal Reserve Chair Janet Yellen said she continues to see some slack remaining in the U.S. labor market even as the economy shows “tremendous progress” following the financial crisis and the worst recession since the Great Depression.

Fed Leaders Past and Present Find Common Ground Onstage
Janet L. Yellen, the Federal Reserve chairwoman, said on Thursday that she did not regret the decision to start raising interest rates in December.

Transaction Tax Poses Bigger Threat Than `Brexit’ to Traders
David De Jong – Bloomberg
High-speed firm would leave Netherlands if tax is introduced; Brexit may benefit electronic traders by increasing volatility
There is a bigger threat to financial markets than Brexit.
Ten European countries are developing a tax on financial transactions, a prospect so terrifying to the continent’s traders that one firm in the Netherlands has already drawn up contingency plans to move to the U.K. or Switzerland.

Russian minister says important to start exchange trading of Russian export oil in 2016
Russian Energy Minister Alexander Novak said on Friday that it was important to start trading Russian export oil on a Russian exchange this year and that this would allow for a “fair” pricing mechanism.

Mac swaps, swap futures face new tax threat; Isda urges US tax officials to postpone rule treating certain payments as loans
Luke Clancy –
The International Swaps and Derivatives Association has requested a further year’s delay for proposed US tax rules that would make all non-periodic payments on a swap subject to income tax. A fresh postponement would push the new regime back to 2018. Non-periodic payments are cropping up more frequently in the over-the-counter and listed markets, as products take off that have standardised coupons – market-agreed coupon (Mac) swaps, deliverable swap futures, and some bilateral swaps transacted…

The Federal Reserve ‘Twisted’ the Corporate Bond Market Too
Tracy Alloway – Bloomberg
A new working paper sheds light on the impact of the U.S. central bank’s ‘Operation Twist.”
Reach for yield? Regulatory arbitrage? Obscure central bank stimulus programs?!

Dimon at the Bat for Big Banks
By Michael P Regan – Bloomberg Gadfly
If there’s one person with the credentials to defend the right of too-big-to-fail banks to exist, it’s probably Jamie Dimon.

Neurensic Appoints Dr. Cliff Click as Chief Technology Officer, Announces New Innovation Lab
Press Release
Neurensic, an artificial intelligence technology startup focused on software-as-a-service solutions for the financial services industry, today announced that Dr. Cliff Click has been named Chief Technology Officer. Dr. Click joins Neurensic from, where he was CTO and co-founder.

London’s $5 Trillion Gold Hub Getting Ready for a Major Overhaul
Eddie Van Der Walt – Bloomberg
London bullion dealers pitch new trade platform and reporting; Mining group pairs with LME on plan to create futures contract
There’s a competition brewing to figure out how the world’s largest gold-trading hub can get bigger and better.

London Stock Exchange Deal May Spark Industry Buyout Frenzy
John Detrixhe, Matthew Monks, Edith Fishta – Bloomberg
Deutsche Boerse’s $13.8 billion proposed buyout of London Stock Exchange Group Plc would be among the biggest in the industry’s history, sweeping into play information-service companies that might also tempt the exchanges. Those smaller deals have already racked up more than $10 billion.


CFTC’s 2016 SmartCheck Week to Emphasize Continual Background Checks of Financial Professionals
The CFTC encourages investors to check the background of their financial professionals before investing their money and to do continual checks for the time they are entrusting them with their money. It is easy with, which provides access to free tools that investors can use to check a financial professional’s background including his/her registration status, job history, and disciplinary actions.

US government to challenge MetLife ‘too big to fail’ decision
Barney Jopson in Washington and Alistair Gray in New York – FT
People enter the MetLife building, home to the headquarters of MetLife in New York
The Obama administration is to launch a legal fightback after a federal court found it had acted unlawfully by deeming the insurer MetLife “too big to fail”.

SEC Picks in Jeopardy as Some Democrats Revolt
Andrew Ackerman, WSJ
Senate Banking Committee vote on nominations is delayed as four lawmakers demand rules forcing companies to disclose political spending.
A revolt by Democratic lawmakers is jeopardizing the nominations of two White House picks for the Securities and Exchange Commission, threatening to further hamper the short-handed agency struggling to complete key rules.

FCA tells banks to disclose links to Panama Papers law firm by next week; Around 20 firms contacted
Jayna Rana – InvestmentWeek
The Financial Conduct Authority (FCA) has told banks and financial firms to hand over any information about their links with the Panama Papers law firm, Mossack Fonseca, by 15 April.

Investment Banks Win Research Rule Concessions From EU
Banks and brokers will be able to continue to offer market commentary without charging a separate fee, winning a concession from European regulators seeking to break apart the traditional model for distributing research. Under rules adopted Thursday, the European Commission will allow quick-turn analysis to be paid for indirectly through trading commissions or the spread on fixed-income trades, which are the traditional practices. For more detailed and proprietary research “capable of adding value,” banks may be required to charge separately.

The European Securities and Markets Authority (ESMA) has published today a new question and answer document (Q&A) on the application of the Markets in Financial Instruments Directive (MiFID) to the marketing and sale of financial contracts for difference (CFDs) and other speculative products to retail clients (such as binary options and rolling spot forex).

Securities Commission Malaysia Appoints Two Executive Directors
The Securities Commission Malaysia (SC) today announced the appointment of Kamarudin Hashim and Chin Wei Min as Executive Directors with effect from 4 April 2016.

Guidance on Small and Medium Sized Business (Credit Information) Regulations
In June 2015 we consulted on guidance explaining the scope of our functions in relation to the Regulations, which require us to monitor and enforce relevant requirements.

Canadian Securities Regulators Publish Amendments To Order Protection Rule
The Canadian Securities Administrators (CSA) today published final amendments to National Instrument 23-101 Trading Rules and its companion policy. The amendments adjust the order protection rule (OPR) framework to address inefficiencies and respond to market developments.

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans

    • CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule to Amend the Fees Schedule (Release No. 34-77554; File No. SR-CBOE-2016-023); see also Exhibit 5
    • FINRA: Order Approving a Proposed Rule Change to Require Registration as Securities Traders of Associated Persons Primarily Responsible for the Design, Development, Significant Modification of Algorithmic Trading Strategies or Responsible for the Day-to-Day Supervision of Such Activities (Release No. 34-77551; File No. SR-FINRA-2016-007)
    • FINRA: Order Approving Proposed Rule Change to Adopt FINRA Rule 3210 (Accounts at Other Broker-Dealers and Financial Institutions), as Modified by Partial Amendment No. 1 and Partial Amendment No. 2, in the Consolidated FINRA Rulebook (Release No. 34-77550; File No. SR-FINRA-2015-029);
    • ISEMercury: Notice of Filing of Proposed Rule Change to Limit Mandatory Participation in Scheduled Functional and Performance Testing Under Regulation SCI to Only Those Primary Market Makers That Meet Specified Criteria (Release No. 34-77556; File No. SR-ISEMercury-2016-08); see also Exhibit 5
    • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Rules 7015(g)(1) and 7034 (Release No. 34-77552; File No. SR-NASDAQ-2016-053); see also Exhibit 5
    • NYSE Arca: Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, to List and Trade of Shares of the WBI Tactical Rotation Shares under NYSE Arca Equities Rule 8.600 (Release No. 34-77549; File No. SR-NYSEArca-2016-14)
    • Phlx: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to PIXL (Release No. 34-77557; File No. SR-Phlx-2016-40)


Exchanges & Trading Facilities

NYSE Files to Scrap Controversial Trading Rule; Rule 48 worsened volatility in tumultuous trading session last August
The New York Stock Exchange has proposed scrapping a controversial rule that was designed to calm trading in times of volatility but that market observers say exacerbated problems during a tumultuous session last August.

BM&FBovespa raises $1.25 billion from CME stake sale to buy rival
In a securities filing, São Paulo-based BM&FBovespa said the decision to sell the 13.6 million Class A common shares it owned in CME implies the end of a cross-holding agreement with CME (CME.O) that lasted almost a decade. Terms of the transaction or the identity of the buyer were not disclosed.

BM&FBovespa expects accounting loss in Q2 from CME deal
BM&FBovespa SA expects an accounting loss of about 470 million reais ($127.81 million) on its sale of a four percent stake in larger peer CME Group Inc, Latin America’s largest financial exchange operator said.

LSE picks September 26 for CurveGlobal launch
Futures & Options World
The London Stock Exchange has set September 26 as the launch date for its new rates exchange CurveGlobal, after the group last month pushed the go-live to the third quarter. The new exchange was set to go live toward the end of May – as reported by FOW – but was delayed to the third quarter last month to ensure that market makers, technology providers and clients are ready for the launch.

FTSE Mondo Visione Exchanges Index Up A Stonking 6.7% In March As Battle For London Stock Exchange Group Heats Up
All constituents of the FTSE Mondo Visione Exchanges Index bar three were in positive territory this month. Top of the leader board was BM&F Bovespa which was the best performer by capital returns in US dollars with a 48.6 per cent increase in share price. As the possibility of Brazil’s embattled President Dilma Rousseff being ousted has risen, so has BM&F Bovespa’s share price. The next best performer was Bolsa Mexicana de Valores with a 25 per cent increase.

Eurex Exchange’s Fixed Income Futures & Options: highlights of Q1/2016
The first quarter of 2016 commenced with high market volatility and a sense of gloom. The fears of deflation and recession were the main source of this pessimism. Moreover, investors also worried about emerging markets and about China in particular. All eyes were fixed on the next move of the European Central Bank (ECB) which delivered another dosage of quantitative easing effective from 16 March in essence decreasing the rates:

Exchange Publishes Guidance Letter for Issuers Subject to Rumours or Market Commentaries
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a guidance letter (GL) for listed issuers subject to rumours or market commentaries with allegation of fraud, material accounting or corporate governance irregularities (together, allegations) that may require a halt of trading in their securities.


Five Questions With Mike Mayhew, CIO At Trading Technologies
Trading Technologies
Speed and accessibility are the key benefits most often talked about when promoting the TT® platform. But what is less frequently highlighted is the infrastructure and support structure that keep operations moving smoothly. That responsibility falls on Mike Mayhew, CIO at Trading Technologies. In this edition of “Five Questions with…,” we talk with Mike about his team and the behind-the-scenes work that goes into making the TT platform dependable and secure.

Four Banks, DTCC, Markit Complete Blockchain Test for CDS
Waters Technology
Four of the world’s biggest banks, along with the Depository Trust and Clearing Corp. (DTCC) and data vendor Markit, collaborated with Axoni, a blockchain infrastructure provider, to successfully complete a series of tests using blockchain technology and smart contracts for post-trade lifecycle events of standard North American single-name credit default swaps (CDS).

Techno-nirvana is going mainstream but at what cost?
Paul Murphy – FT
We had news this week that Circle Internet Financial, a US start-up, was hooking up with Barclays in the UK to allow users of its mobile app to transfer money to other users of its app. Circle Internet will take a sterling amount from your bank account, turn it into bitcoin, send it to your nominated recipient and then turn it back into sterling.


Cameron Accused of Hypocrisy for Stake in Father’s Offshore Fund
Thomas Penny, Alex Morales – Bloomberg
Prime minister to publish tax returns `as soon as possible’; Father `being unfairly written about,’ Cameron tells ITV
U.K. Prime Minister David Cameron was accused of “hypocrisy” after he said he held a stake in an offshore fund set up by his late father until six years ago, an admission broadcast on national television following four days of questions over the investment.

Rising U.S. Labor Force Belies Republican Criticism of Obama
Rich Miller – Bloomberg
It’s standard Republican criticism of President Barack Obama’s handling of the economy. Sure, unemployment has been halved from 10 percent in 2009 to 5 percent today. But that’s mainly because so many people have gotten so discouraged that they’ve just given up looking for work. Factor that in and real joblessness is a lot higher — 20 percent plus, according to an estimate by Republican presidential contender Donald Trump.

MP calls for Prime Minister’s resignation amid Panama scandal; PM profited from ownership in offshore fund
A Labour MP has called for Prime Minister David Cameron to resign after he admitted he had owned, sold and made a profit on shares held in a controversial fund linked to the Panama tax avoidance scandal.

Election stirs debate about Fed’s handling of political pressure
By Jonathan Spicer • Reuters
Donald Trump says the Federal Reserve has stoked asset bubbles and backs a congressional review of its decisions. Bernie Sanders also wants to “audit” the Fed to make it less beholden to Wall Street. Ted Cruz calls for a return to a gold standard abandoned in 1933.

Treasury Should Probe U.S. Banks on Panama Papers, Warren and Brown Say
Steven T. Dennis – Bloomberg
Warren, Brown ask Lew to investigate and brief by May 9; Lawmakers concerned about terrorist financing, tax avoidance
A pair of the U.S. banking industry’s biggest Senate critics demanded a Treasury Department investigation into offshore banking revelations contained in leaked documents from a Panama-based law firm.

Hedge Funds & Managed Futures

Inflation Set To Rise As Commodities Edge Up? (Video)
Blu Putnam, Chief Economist, CME Group
CME Group Chief Economist Blu Putnam appears on Futures Institute to discuss how commodities like oil and iron ore bouncing off multi-year lows could signal small, incremental gains in sustained low inflation.

How Do Survey- and Market-Based Expectations of the Policy Rate Differ?
Bonni Brodsky, Marco Del Negro, Joseph Fiorica, Eric LeSueur, Ari Morse, and Anthony Rodrigues – New York Federal Reserve
Over the past year, market pricing on interest rate derivatives linked to the federal funds rate has suggested a significantly lower expected path of the policy rate than responses to the New York Fed’s Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP). However, this gap narrowed considerably from December 2015 to January 2016, before widening slightly at longer horizons in March. This post argues that the narrowing between December and January was mostly the result of survey respondents placing greater weight on lower rate outcomes, while the subsequent widening between January and March likely reflects an increased demand for insurance against states of the world where the policy rate remains at very low levels.

Blanchard Favors QE Over Negative Rates as Pill for Dull Economy
Fergal O’Brien, Maria Tadeo – Bloomberg
Negative rates have side effects, says ex-IMF chief economist; Says global demand is weak, economic growth remains slow
Former International Monetary Fund Chief Economist Olivier Blanchard said central banks should focus on quantitative easing rather than rate cuts if more stimulus is needed to boost their economies.

Three ways to model liquidity risk; Deriving synthetic bid/ask spreads offers a new approach to a thorny problem
Damian Handzy –
Liquidity risk has got a fair amount of attention recently, with much discussion of how it is defined and thought about, but little revealed about how it can be effectively measured. Portfolio and risk managers describe officially sanctioned procedures for priority treatment of assets during liquidity events, such as rankings based on unrealised profit or on estimated time to liquidity. But most liquidity risk measurements discussed suffer from a serious flaw. Liquidity paradox Traditional liquidity…

Quarterly review: BlackRock tightens its grip on Europe
Chris Flood – FT
BlackRock topped the leaderboard for fund sales in Europe for a third successive year in 2015, with the world’s largest investment manager significantly outpacing its rivals in terms of asset growth.

Stock ETFs add sixth week to streak of inflows: Lipper
Exchange-traded fund investors showed continued confidence in U.S. markets, delivering stock ETFs based in the country $3.5 billion and their sixth straight week of net new cash during the latest week, Lipper data showed on Thursday.

Yale Made 93% a Year on Venture Capital in Past Two Decades
Janet Lorin – Bloomberg
Original $2.7 million LinkedIn investment reaped $84.4 million; Endowment is second-largest in U.S. at $25.6 billion
Yale University’s original $2.7 million investment in LinkedIn Corp. produced $84.4 million in gains for the school’s endowment after the company went public in 2011.

Blackstone to Shut Mutual Fund After Fidelity Pulls Out
Miles Weiss – Bloomberg
Blackstone fund to be liquidated by May 31, filing shows; Fund lost almost half its assets this year as Fidelity redeems
Blackstone Group LP, the asset manager run by Stephen Schwarzman, will shutter a mutual fund that allocates money to hedge fund managers following a large redemption by the vehicle’s main backer, Fidelity Investments.

Banks & Brokers

Ex-Barclays Trader Told SFO His Bosses Knew About Libor Fix
Jeremy Hodges, Stephen Morris – Bloomberg
Investment bank, fixed income executives named in London trial; Three managers, who deny the allegations, due to testify later
One of five former Barclays Plc traders accused of rigging benchmark interest rates told regulators that his bosses, including the investment bank’s chief operating officer Mike Bagguley, must have known about the manipulation, U.K. fraud prosecutors said at a London trial.

London Libor Bro Says Barclays Sent Him to New York To ‘Teach’ Traders
By Reuters via Fortune
A former trader at Barclays, one of five on trial on charges of conspiracy to manipulate financial benchmark interest rates, alleged that top bosses at the bank approved and condoned the practice, a London court heard on Thursday.

J.P. Morgan: We’re Too Big Not to Succeed; In its 2016 proxy, bank also sheds light on Chief Executive Dimon’s $27 million pay package for 2015
J.P. Morgan Chase & Co. says it is huge, but only in the best way, and just sprawling enough to serve its clients without being unmanageable.

Banking’s Rising Stars: What we wish we’d learnt sooner
By Tim Burke and Lucy Burton – Financial News
Ask Europe’s promising young investment bankers about the lessons they wish they had learnt sooner in their careers and one comes up again and again: the importance of networking.

JPMorgan Investors Seek Independent Chairman, Breakup Review
Hugh Son – Bloomberg
Board could wait until after Dimon leaves for implementation; Shareholders also urge bank to adopt tougher pay clawbacks
JPMorgan Chase & Co. shareholders are proposing the firm consider requiring an independent chairman, and they asked the bank to review whether divesting non-core businesses would improve returns.

Clearing & Settlement

Eurex entices brokers not to desert derivatives clearing
By Tim Cave – Financial News
It is fashionable to regard “disintermediation” in finance as a good thing – some online whizzkid cutting costs for market participants by connecting them directly with each other, eliminating the intermediary who was charging handsome fees to do the job. But what if intermediaries are, of their own accord, deserting a market that desperately needs them to stay? That is the plight of derivatives clearing.

Growing Influx of Fintechs: Banks Have Found a Way Out
Barclays PLC launched a bitcoin-supported payment application in collaboration with Circle Internet Financial. The London-based lender is expected to benefit from the first mover advantage in Britain. The bank would benefit from the collaboration in the form of increased cost efficiency, lower turnaround in clearing and the settlement of currency transfers.

Indexes & Products

Index IDEA: Getting smart about “smart beta”
FTSE Russell
Smart beta indexes from FTSE Russell present a way for investors to measure global equity market risks and return. Smart beta indexes have provided investors with an expanded toolkit, and the FTSE Global Diversified Factor Index Series, co-developed with J.P. Morgan Asset Management, represents further innovation in indexing by capturing the insights from a leading asset manager within transparent rules based indexes.

Are China A-Shares Ready For MSCI Inclusion?
MSCI is soliciting opinions from international institutional investors on whether to include mainland China’s A-shares into its global indices again. In 2014, the index provider unveiled a road map for including A-shares. It conducted two rounds of consultations in 2014 and 2015 but decided to delay an inclusion. China A-Shares are now on its review list.

Carbon Emissions From S&P 500 Companies Equivalent to Total Produced in France, Germany and UK
PR Newswire
S&P Dow Jones Indices (S&P DJI), one of the world’s leading providers of financial market indices, today announced the S&P Index Carbon Emitter Scorecard, an innovative report which provides carbon production and efficiency metrics for major indices and styles across global markets.

A Quality Small-Cap ETF That Focuses on Dividend Growers
ETF Trends
Each week ETF Trends publisher Tom Lydon sits down for “ETF of the Week” for MarketWatch on Chuck Jaffe’s MoneyLife Show where he highlights big movers and disappointments among exchange traded funds. This week, he looked at the ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV). SMDV may be a better way to access the small-cap category as the fund focuses on more stable dividend growing companies.

Everything You Need to Know About Strategic-Beta ETFs
Much of what investors need to know about strategic-beta funds has already been learned from decades of examining active strategies and how investors vet them and put them to use.

Expect more starting and stopping at the Fed on Interest rates.
David Blitzer – Indexology – S&P Dow Jones Indices
Given the FOMC minutes released yesterday we expect to see two rate increases in 2016. The next move is likely to be in June, not at the April 27th meeting. Some analysts blame disagreements within the Fed for what they see as inconsistent and changing policy. While it is difficult to anticipate short term market volatility, not paying attention to those market gyrations would be a mistake. This year began with sharp drops in the S&P 500 and Treasury notes and a spike in VIX (see chart). Had the Fed stuck to the plan it hinted at in December and pushed rates up in late January, it would have put stocks into a correction and spooked the economy. Instead it changed its mind when the data changed.

High flyer: STOXX® Europe 600 Index Derivatives
Our portfolio of Equity Index Derivatives covers global, European and national indexes including derivatives on the STOXX® Europe 600 Index, which had a very successful first quarter:


Las Vegas Sands Paying Penalty for FCPA Violations
An SEC investigation found that LVS kept inaccurate books and records and frequently lacked supporting documentation or proper approvals for more than $62 million in payments to a consultant in Asia. The consultant acted as an intermediary to obscure the company’s role in certain business transactions such as the purchases of a basketball team and a building in China, where casino gambling isn’t permitted. At one point, LVS could not account for more than $700,000 transferred to the consultant for team expenses, yet continued to transfer millions of dollars to him. A portion of the payments were improperly recorded in company books and records, such as money supposedly spent on artwork for the building when none was actually purchased.

Environmental & Energy

The death of US coal: industry on a steep decline as cheap natural gas rises; With Massey Energy boss Don Blankenship headed to prison and some of the industry’s biggest companies bankrupt, a historic transformation may be ahead
Suzanne Goldenberg in Washington – The Guardian
On a wintry night in 2010 a few months before 29 men were killed in the Upper Big Branch mine explosion, the coal boss, Don Blankenship – then one of the richest and most powerful men in West Virginia – squared up to Robert Kennedy Jr in a public debate about destructive mining practices and climate change.

Scientists find fracking contaminated Wyoming water after EPA halted study; Dangerous levels of chemicals found in underground water, while waste was dumped in unlined pits and barriers to protect groundwater were inadequate
Oliver Milman in San Francisco – The Guardian
Two scientists have highlighted dangerous water contamination from a fracking operation in Wyoming, three years after the US Environmental Protection Agency decided to abandon its investigation into the matter.

World Bank to spend 28% of investments on climate change projects; The world’s biggest provider of public finance to developing countries will refocus its financing efforts towards tackling climate change, group said
Fiona Harvey, Environment correspondent – The Guardian
The World Bank has made a “fundamental shift” in its role of alleviating global poverty, by refocusing its financing efforts towards tackling climate change, the group said on Thursday.

Draining the Shale Bankruptcy Swamp
Liam Denning – Bloomberg Gadfly
How’s your knowledge of covenant law?Well, you likely aren’t alone. In a bench decision last month in the U.S. bankruptcy court in New York, the Honorable Shelley C. Chapman wrote of covenant law as being an “unspeakable quagmire.” As if to emphasize this, she felt compelled to give a brief history lesson touching upon an English case from 1583.

India’s Thirst for Oil Is Overtaking China’s
Dan Murtaugh, Saket Sundria, Debjit Chakraborty – Bloomberg
IEA sees India as fastest-growing crude consumer through 2040
Modi `Make in India’ strategy seen stimulating oil consumption
In the energy world, India is becoming the new China. The world’s second-most populous nation is increasingly becoming the center for oil demand growth as its economy expands by luring the type of manufacturing that China is trying to shun. And just like China a decade ago, India is trying to hedge its future energy needs by investing in new production at home and abroad.


China Stanches Flow of Money Out of the Country, Data Suggests
HONG KONG — China rattled markets around the world last year when vast sums of money began flowing out of the country. Estimated at nearly $1 trillion, the money flows represented growing skepticism that China would be able to fix its deep problems and resume its place as a driver of global economic growth.

Euromoney Country Risk survey results Q1 2016: Heightened concern over Brazil, China and other EMs accentuates global shock prospects
By: Jeremy Weltman – Euromoney
Country risk scores for many of the large emerging markets (EMs) continued to fall in the first months of the year. Risk scores have now reached levels that do not preclude another global shock if China hits the skids.

Hong Kong stocks unlikely to return to glory days of a year ago
South China Morning Post
Last April 9 turnover on Hong Kong’s benchmark Hang Seng Index rose to a record HK$293.9 billion. The monthly average reached HK$200 billion. Almost a year later, that shrank to HK$72 billion, according to data from Hong Kong Exchanges and Clearing. Analysts said it’s unlikely the markets will return to their glory days anytime soon.

Singapore topples Hong Kong in global financial hub ranking
EJ Insight
Singapore has dislodged Hong Kong in a global ranking of financial centers. Hong Kong slid to fourth place, slightly behind Singapore, because of concerns over political and economic developments in mainland China, the Hong Kong Economic Journal reports, citing City of London Corp. think tank Z/Yen Group Ltd. The narrow gap between the two rivals shows tightening competition for financial hub status in the region, a Hong Kong government official said.

Frontier Markets

Nigeria could be kicked out of the MSCI Frontier Markets Index
CNBC Africa
MSCI has announced it is considering removing Nigeria from the MSCI Frontier Markets Index given restrictions on currency trading and the resulting deterioration of fx liquidity impacting investors’ ability to repatriate capital. This is a risk we’ve been highlighting for the last six months or so (see below) so shouldn’t come as a complete surprise, and JPMorgan and Barclays have already removed Nigeria from their respective local currency emerging market bond indices.

Myanmar investors flock to stock market after decades-long wait
Myanmar investors from students to seafarers have flocked for a frenetic first plunge into the stock market since the military grabbed power more than 50 years ago and launched its Burmese Way to Socialism.

Barclays to begin Africa sale with 10% stake offer
Barclays was preparing to sell an initial 10 percent stake in its African unit to several large investors, while keeping the option to divest its entire holding, three people with knowledge of the process said. The British lender, which owns 62 percent of Barclays Africa Group could retain a controlling position and choose a single buyer, said the people, who asked not to be identified because the plans are private.


It’s a Great Time to Buy a Diamond, But Fewer People Want One
Thomas Biesheuvel – Bloomberg
Younger consumers foil efforts by De Beers to raise gem prices; Marilyn Monroe’s `best friend’ is now cheaper than decade ago
In the diamond industry, even the crooks are old-fashioned.
The ringleaders jailed for a $20 million jewelry heist in London last year were in their sixties and seventies, so it’s no surprise they’d go after the gems. They’re old enough to remember when advertisers said diamonds were forever and Marilyn Monroe sang that they were a girl’s best friend.

Hungary’s central bank goes down the rabbit hole
In the six years since Fidesz came to power, its policymakers seem to have been reluctant to miss an opportunity to convince the world of their lack of commitment to transparency and good governance.

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