Special Report from Fidessa: You Only Live Twice: Creating the FCM of the Future
Steve Grob, Fidessa
Published in 1964, Ian Fleming’s eleventh Bond novel describes the change in 007 from a depressed man in mourning, to a man of action ready to rise up and take on the world again. In a similar way, the global derivatives industry is undergoing the same metamorphosis. For some time now the industry has been battling against multiple headwinds – low interest rates, falling commissions and an image tarnished by the spectacular failures of some individual firms. New regulations have also tilted its entire axis as exchange-traded and OTC workflows look set to run into each other.
New white paper looks at the realignment of FCM business models and the impact on technology.
Click here to download the paper: fidessa.com/papers
***** A thinking man’s piece from a thinking man’s writer. Even Daniel Craig has read this.
***Registration, which is free, is required to view the paper.
Extreme Makeover: Gary DeWaal Says FCM Landscape has to Change
The futures commission merchant (FCM) space is likely to change dramatically in the coming years. How is the question. John Lothian News sat down with Gary DeWaal, of Gary Dewaal Associates, for his views on the shape of the brokerage industry in the coming years. “For years FCMs have tried to be everything to everybody,” DeWaal says. “Frankly, except for two or three of the big FCMs, that is not a reasonable prospect going forward. I think that FCMs are going to really have to figure out what its niche is.”
Feeling Better, Thanks
We checked in on one of our favorite people in the industry, Pat Kenny, to see how he is coming along with his treatment for cancer. Pat just finished the last of his treatments last week and is on the road to recovery. Great news during our holiday season!
New hedge funds need $300 mln in assets just to break even
Traders launching a hedge fund need to raise at least $300 million in assets to pay for rising regulatory costs and to offset lower fees, a survey showed, a far cry from the pre-crisis days when managers could start with tens of millions.
***** Amazingly, Ponzi schemers can still start with much lower amounts.
ICE Futures Europe Announces Successful Transition Of Brent Crude Oil Futures And Options To New Expiry Calendar
ICE Futures Europe, a wholly owned subsidiary of IntercontinentalExchange Group, the leading global network of exchanges and clearing houses today announced the successful completion of the transition of ICE Brent futures, options and related derivatives instruments to a new, ‘month-ahead’ expiry calendar.
***** Also on the calendar, Groundhog Day has been moved up a month.
CME to launch Edmonton Sweet as producers seek to dodge price discounts
CME Group Inc. is preparing to launch a new futures contract for Alberta’s light oil, spurred by demand from small producers eager to avoid price discounts created by pipeline constraints.
***** The sweetest import from Edmonton since Gretzky.
Special Report: A Bitcoin for Your Thoughts
What is it? And if you can determine that, how should it be regulated, taxed, or even traded? Is this the next asset class? Some may find potential there, while others still find it a joke or worse. Our special report features a column from JLN publisher John Lothian about his thoughts on Bitcoin, a short primer on the aspects of Bitcoin, as well as some of the best articles we have found in recent weeks. This special report is designed to inform and perhaps, raise the debate and dialog further.
How to Ensure Transparency in Alternative Investments—White Paper Published by Gate 39 Media
Mark Shore – Gate 39 Media
“Providing Transparency in Alternative Investments: The Importance of the Advisor-Client Relationship”, is a new white paper that discusses investment transparency, the hot topic in the world of managed futures and hedge funds.
***** Transparency can build trust, but verification is even more important.
With the Volcker Rule, the More Regulators the Merrier
DAVID ZARING – NYTimes.com
The Volcker Rule is the latest version of a phenomenon unique to American financial regulation. Issued by five agencies, more or less at the same time, it is one rule with many masters. In other countries most financial regulation is done by one, or perhaps, two, agencies. Yet there are some positive outcomes with the American approach of having so many different regulators doing the same thing.
***** Perhaps the finest element aspect of the Regulator Employment Act of 2010.
While Regulators Drew Map, Street Changed
Francesco Guerrera – MoneyBeat – WSJ
The first eight minutes of the Volcker rule’s life were the easiest. That is how long it took President Barack Obama to announce the surprise new ban on Wall Street banks’ trading with their own capital and owning hedge funds. That was back in January 2010. The ensuing three-plus years of industry lobbying, intra-governmental infighting and regulatory uncertainty took the “devil-is-in-the-details” cliche’ to a new level.
***** The CFTC announced today that today’s meeting was canceled due to the devil bringing an ice storm north to Washington DC, shutting down much of the government’s activity.
Corporate social networking takes advantage of captive audience
Hannah Kuchler in San Francisco – FT.com
From taste tests on a new burger to making the sprawling arms of the European Commission work together, organisations are using internal social networks to boost productivity, flatten management structures and monitor who makes the real decisions.
High-Tech Commodity Testing Advances
Leslie Josephs – WSJ.com
Jesse Curlee is on a mission to stamp out textile trickery, one strand of DNA at a time. As president of Supima, the three-decade veteran of the textile industry is tasked with ensuring that the brand of premium U.S.-grown cotton touted on labels, such as those on Brooks Brothers and L.L. Bean shirts, is legit.
***JM: I am ready and willing to sign on as a bacon tester.
MarketsWiki Page of the Day
MarketsWiki Recent Updates
Companies, Organizations and Groups
45,794,027 pages viewed, 7,715 articles, 169,429 edits
US regulator acts to reform futures trading
Gregory Meyer in New York – FT.com
The US derivatives regulator has drawn up plans to bring more transparency to futures trading, a move that could tilt the competitive balance between commodity exchanges.
US regulator calls for stock trading rules review
Philip Stafford in London and Arash Massoudi in New York – FT.com
The main US securities regulator is facing fresh pressure to undertake a large-scale review of the rules governing the US equity markets following a call from another of the agency’s five main commissioners.
Hong Kong listings revival offers sovereign wealth path to China
Josh Noble in Hong Kong and Richard Milne in Oslo – FT.com
Sovereign wealth funds, led by Norway’s $810bn oil fund, are using Hong Kong’s new listings revival to achieve a long-held goal of ramping up exposure to China.
Odd-lot trading data starts being disseminated to public
Small trades of less than 100 shares began being reported to the “consolidated tape” on Monday, almost four years after regulators asked whether the increased use of “odd lots” was a sign of traders trying to circumvent certain regulations.
For Bitcoin, Square Peg Meets Round Hole Under the Law
PETER J. HENNING – NYTimes.com
The advent of a new medium to conduct business inevitably means avenues for criminals to swoop in to take advantage. The development of Bitcoin, the virtual currency that is not issued by any government, presents challenges for the authorities to use laws that were not designed for the digital world to combat illegal conduct.
Europe’s ‘Robin Hood tax’ plan is alive and deadly, warn Lords
George Parker, Political Editor – FT.com
The City of London still faces the risk of “significant damage” from a proposed European financial transactions tax, senior parliamentarians were warning on Tuesday, insisting that the proposal remains “alive and deadly”.
MPs urge Britain to shape EU transaction tax debate
Britain should cultivate allies and use its clout to stop a tax on financial transactions in 11 European Union countries from harming the City of London, a panel of UK lawmakers said.
Wall Street Braces For Volcker Pain, Final Rule Emerges Tomorrow
Wall Street (and its lawyers) brace for Tuesday when US regulators will vote on a final version of the much-awaited Volcker Rule. So, what’s the big deal? Banks and their lawyers have been waiting for the last three years for the details of the rule to emerge.
Only 40% of Dodd-Frank Rules Have Been Written
Maureen Farrell – MoneyBeat – WSJ
Regulators have a losing track record when it comes to writing and implementing the rules for Dodd-Frank, the legislation designed to prevent another financial crisis.
Everything You Want to Know About the Volcker Rule But Were Afraid to Ask
Scott Patterson – MoneyBeat – WSJ
U.S. regulators are expected Tuesday to approve the so-called Volcker rule, which bans banks from making bets with their own money and limits their ability to invest in certain trading vehicles. So what exactly is the Volcker rule? Why did it take so long for regulators to approve? MoneyBeat answers that and more below.
Bank critic plans to vote for strengthened Volcker rule
Gina Chon in Washington – FT.com
Bart Chilton, the regulator and fierce critic of Wall Street banks in the aftermath of the financial crisis, has dropped his opposition to the Volcker rule, as US regulators prepare to vote on the controversial proposal to ban proprietary trading by banks.
If We’re Lucky Volcker Rule Will Make Banks Less Transparent
Matt Levine – Bloomberg
I guess the Volcker rule comes out tomorrow and you can read about it then but why should its nonexistence stop you today? Here are DealBook and Bloomberg News articles that are best read as companion pieces: Bank lobbyists think that the Volcker rule is too strict and will sue to weaken it, while anti-bank lobbyists think that it’s too lenient and will lobby to strengthen it. No one knows what it says.
Keyser Sose – FOW
So it’s been an interesting month in Sef World. A plethora of confusion was then supplanted by a plethora of Guidance and No Action letters that left, well, more confusion.
SEC accountant wary of audit firms’ push into consulting
The Securities and Exchange Commission’s top accountant on Monday urged accounting firms to think carefully before acquiring non-audit related consulting businesses, warning such moves could damage their independence and credibility.
SEC Names Sebastian Gomez Abero to Head Office of Small Business Policy in the Division of Corporation Finance
The Securities and Exchange Commission today announced that it has named Sebastian Gomez Abero as chief of the Office of Small Business Policy. The appointment is effective immediately.
Commodity Futures Trading Commission Counsel Joins Murphy & McGonigle
Murphy & McGonigle, P.C. announced today that Brian Walsh has joined the firm’s Washington, D.C. office. Mr. Walsh’s arrival enhances the financial services law boutique’s ability to serve futures market participants and marks the firm’s continued attraction of top litigation and regulatory talent since first opening its doors in 2010.
Looking ahead to 2014 – Financial Conduct Authority
Speech by Martin Wheatley, Chief Executive of the FCA, at the ICI Global Trading and Market Structure Conference. This is the text of the speech as drafted, which may differ from the delivered version.
CFTC Seeks Public Comment on Certification from Bloomberg SEF LLC to Implement Available-to-Trade Determinations for Certain Interest Rate and Credit Default Swaps
CFTC Meeting Scheduled for December 10, 2013, Has Been Cancelled
ASIC statement on generic calculators
This afternoon the Fairfax media published a report about ASIC’s policy development for generic calculators undertaken nearly 10 years ago.
Statement Of CFTC Chairman Gary Gensler Before The Financial Stability Oversight Council
The Benefit Of Hindsight And The Promise Of Foresight: A Proposal For A Comprehensive Review Of Equity Market Structure – SEC Commissioner Michael S. Piwowar, U.S. Securities And Exchange Commission
FMA Q3 2013 Report on Austrian Prospectus Supervision
Third Meeting of the International Advisory Board of SEBI held at Bangalore
Exchanges & Trading Facilities
HKEx waives fees to help brokers
South China Morning Post
Hong Kong Exchanges and Clearing will waive some terminal fees for brokers next year after fierce competition forced 14 brokerage houses to close this year.
London Metal Exchange GC: Ringing the changes
Joanne Harris – The Lawyer
London Metal Exchange GC Tom Hine has guided the institution through a Hong Kong buyout and out onto the stormier seas of Eurocracy
The Changing Face of Nasdaq OMX
Gaston F. Ceron – Morningstar
In the evolving world of financial exchanges, Nasdaq OMX Group (NDAQ) is zigging and zagging to remain vibrant.
Borsa Italiana’s Corporate Governance Committee: New Entries And New Deputy Chairman
1st Report On Compliance With The Italian Corporate Governance Code – New Website Launched
Moscow Exchange Announces Measures To Improve Its FX Market Order Book
New Fees Of The Moscow Exchange’s Equity Market To Come Into Effect
Moscow Exchange: Grace Period For Trades In Foreign Securities
Hedge Funds & Managed Futures
Two and twenty is long dead and buried
Dan McCrum | FT Alphaville
Glance at a Citi Prime Finance report that fees are starting to crumble, and a casual reader might conclude that something is wrong in the house of hedge funds. Perhaps investors have begun to notice well documented problems with performance?
Hedge fund managers seek to set themselves apart through branding
Christine Williamson – Pensions & Investments
Hedge fund branding is increasing as institutional investors’ presence within hedge funds’ client bases is forcefully nudging even the most tight-lipped firms to open up and explain what they do.
Jupiter chief quits amid rising pressure on fund managers
David Oakley, Investment Correspondent – FT.com
The departure of Edward Bonham Carter as chief executive of Jupiter Fund Management, one of the biggest listed investment groups in Europe, comes at a critical time for the industry.
Larry Fink on the global pensions crisis
Mark Cobley – Financial News
Larry Fink, chief executive of BlackRock, the world’s largest asset manager, has been clear in his message that the US needs to save more for retirement. Now, to coincide with Financial News’ feature this week on the world’s pensions crisis, he tells FN policymakers — and individuals — worldwide need to do more.
SAC Reaches Deal to Sell Reinsurance Firm
MATTHEW GOLDSTEIN – NYTimes.com
The billionaire trader Steven A. Cohen is one step closer to converting his onetime $15 billion hedge fund into a family office after a tentative deal to sell a reinsurance firm he formed in 2012.
Guggenheim Is Beating PIMCO and Doubleline. Predictions From Its CIO
Maureen Farrell – MoneyBeat – WSJ
Scott Minerd, the global chief investment officer of Guggenheim Partner, is the smallest of the so-called bond market kings, but his fund is winning in 2013.
Q&A with Sberbank’s new fintech fund
Anna Irrera – Financial News
Russia’s largest lender Sberbank last month launched a venture capital fund, SBT Venture Capital, that will focus exclusively on investments in the financial technology sector. Financial News spoke to Matteo Rizzi, general partner at SBT Venture Capital, about the fund and the drivers of growth in the fintech sector.
Todd Ruppert joins UK boutique
Mike Foster – Financial News
Todd Ruppert, former international president of US asset manager T Rowe Price, has become a director at Trinity Street Asset Management, a UK-based boutique.
Risk-transfer accelerates out of pension funds
Alistair Gray, Insurance Correspondent – FT.com
Corporate pension schemes are set to transfer more liabilities to financial institutions through so-called bulk annuity deals than they have in any year since the financial crisis.
Ex-Deutsche Bank energy traders launch hedge fund
Alexander Osipovich – Risk.net
As Deutsche Bank retreats from commodities markets, three of its former top US power and gas traders have set up a new hedge fund specialising in financial transmission rights (FTRs), a type of instrument whose payout depends on price differentials between locations in nodal power markets.
Lions share industry wisdom
Margie Lindsay – Risk.net
Episode two of Hedge Fund Lions’ Den has the three industry heavyweights sharing their collective knowledge, expertise and experience about starting hedge funds and what can go wrong
Banks & Brokers
Worth Remembering Where HSBC Came From
Ben Wright – MoneyBeat – WSJ
In assessing the future strategic direction of HSBC, it is worth remembering where the bank has come from.
A Swiss Bank Decides Less Than 0.1% is Enough
John Letzing – MoneyBeat – WSJ
Valiant Bank, a Swiss retail lender with a balance sheet of roughly $29 billion, publicly declared Monday that it’s opting for the most perilous of categories under the U.S. Department of Justice program for self-confessed abettors of American tax evasion.
Irish bank tests send few signals to anxious EU rivals
Banks in Europe, keen for any hints about next year’s industry health check by European regulators, will find few pointers from Ireland’s just-completed review of its three major lenders.
J.P. Morgan Shareholder Calls for Independent Chairman after Dimon
A J.P. Morgan Chase & Co. shareholder is again calling for the bank to split the chairman and chief executive posts held since 2006 by James Dimon, citing a “deeply troubled period” at the bank and concerns about potential conflicts of interest when one person holds both titles.
Everything must have a reason, even banks
Izabella Kaminska | FT Alphaville
Another good snippet from the BIS quarterly review that’s worth highlighting comes in the observation that banks are losing their raison d’etre due to the erosion of their funding advantages versus non-banks. Which means they’re increasingly resembling listless entities devoid of purpose in a capital shadowland that’s not willing to let them move onto another more deathly plane.
Clearing & Settlement
Post-Trade Finally Gets Its Close-Up
Richard Hulit Jr. – Wall Street & Technology
Once a back-office function, the post-trade space is now paramount to the success of market participants, infrastructure players and regulators alike.
ISDA: Standard Initial Margin Model (SIMM) For Non-Cleared Derivatives
In order to facilitate the introduction of final BCBS-IOSCO guidelines for “Margin requirements for non-centrally cleared derivatives”, published September 2, 2013 (BCBS 261, “the Guidelines”), ISDA is proposing a standard initial margin model (SIMM) which could be used by market participants.
Human Rights Campaign Names DTCC A “Best Place To Work” For A Second Straight Year
The Human Rights Campaign (HRC) has named The Depository Trust & Clearing Corporation (DTCC) to its “Best Places to Work” list for 2014 for lesbian, gay, bisexual and transgender (LGBT) employees, making it the second straight year DTCC has been named to the list.
Clearstream’s November 2013 Figures
New Record Peak In Assets Under Custody With EUR 11.9 Trillion – 10 Percent Increase Compared To This Time Last Year In Combined Securities Lending, Triparty Repo And Collateral Management Offering – Continuous Steep Growth Of Transactions And Volumes In Investment Funds Business
Indexes & Products
STOXX Introduces Emerging Markets Exposed Index For Europe
Austrian Regulator E-Control Chooses Surveillance System From Cinnober
The Austrian regulatory authority for the electricity and gas-markets, E-Control, has selected independent supplier Cinnober for the implementation of its new surveillance system. The multi-asset solution Scila Surveillance will strengthen E-Control’s regulatory capacity to monitor the energy market for abuse and manipulation.
Waters Announces American Financial Technology Awards 2013 Winners
Anthony Malakian – WatersTechnology
Tonight, Waters hosted the ninth annual American Financial Technology Awards (AFTAs) banquet, following the Waters USA conference, at the New York Marriott Marquis in Times Square.
Caplin Launches direct FX e-distribution service
Caplin Systems today announced the launch of Caplin Direct, a breakthrough in FX e-distribution. Delivered as a hosted, managed service, Caplin Direct is designed for banks that want a modern FX single-dealer platform (SDP), but have previously been held back by the cost and technical challenges involved.
Scila And E-Control In Continued Co-Operation
Two years ago, Scila delivered an award winning pilot project to the Austrian regulatory authority for the electricity and gas markets, E-Control. Since then, the two entities have been discussing energy market surveillance in general. Those discussions have now resulted in E-Control choosing Scila Surveillance as its surveillance system for monitoring the Austrian energy market under the Regulation on Energy Market Integrity and Transparency (REMIT).
Five Taiwanese Banks Have Selected Calastone For Offshore Fund Execution As Landbank Of Taiwan, Mega International Commercial Bank And Bank Of Taipei Sign Up For Order Routing
Far Eastern International Bank And Union Bank Of Taiwan Already Went Live With Calastone Earlier This Year
Federal Court in Austin, Texas Orders Australian Defendants to Pay over $192 Million in Restitution and Fines for Forex Fraud
The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court default judgment Order awarding restitution for defrauded customers and civil monetary penalties of more than $192 million against Defendants Senen Pousa and Investment Intelligence Corporation (IIC) (d/b/a ProphetMax Managed FX) in connection with an off-exchange foreign currency (forex) fraud scheme in which Pousa and IIC defrauded over 960 clients in the United States and abroad of over $32 million.
FINRA Fines Oppenheimer $675,000 and Orders Restitution of More Than $246,000 for Charging Unfair Prices in Municipal Securities Transactions and for Supervisory Violations
Snooping in SEC examiner’s briefcase, Madoff hid fraud -ex-aide
When a pair of U.S. Securities and Exchange Commission examiners visited Bernard Madoff’s offices in 2005, the now-imprisoned financier was not too worried – until he sneaked a look into one of their briefcases.
Some claims against Madoff feeder funds, sons’ wives are curbed
The trustee seeking money for Bernard Madoff’s victims may be unable to pursue some claims against investment firms that fed client funds into the swindler’s Ponzi scheme, a Manhattan federal judge said.
Republican SEC member blasts $13 billion JPMorgan settlement
A Republican member of the U.S. Securities and Exchange Commission blasted other government regulators on Monday for requiring JPMorgan Chase & Co to pay $13 billion to resolve allegations of mortgage misdeeds tied to the financial crisis.
Alan Grayson Lost $18 Million In Investment Fraud Scheme
U.S. Rep. Alan Grayson of Florida lost $18 million in a scheme that cheated him and about 120 other investors out of more than $35 million, according to court papers.
Environmental & Energy
Carbon Market Framework Needed to Preserve Investment, CEPS Says
United Nations climate envoys must start coordinating data on how carbon markets cut greenhouse gases, or risk undermining investment in clean technologies, according to the Centre for European Policy Studies.
ETS backloading: carbon market schemes at a turning point
European Parliament Release
Plans to freeze the auctioning of some CO2 permits, so as to raise their price and thus encourage firms to invest in low-carbon innovation, will be put to a final vote on Tuesday, after EU ministers endorsed Parliament’s July 2013 proposal setting stricter conditions for the freeze. The aim is to restore the incentive effect of the Emissions Trading System, which is designed to cut greenhouse gas emissions and tackle climate change.
Prague energy bourse launches gas futures trading
Prague’s Power Exchange Central Europe (PXE) launched gas futures trading on Monday as part of its push to be at the centre of a regional energy trading hub and take advantage of growing interest in energy trading there.
SGX and Thomson Reuters launch Bond Indices for Benchmarking Investment Performance
Singapore Exchange (SGX) and Thomson Reuters today announced the launch of a suite of Singapore dollar (SGD) bond indices designed to meet the needs of fund managers, asset owners and custodians in benchmarking investment performances. The new index series is the only complete government, statutory board and corporate bond index series to provide five years of historical data.
Schwab founder met with China officials about Shanghai office
Charles Schwab traveled to China in September to discuss opening an office of his eponymous securities firm in Shanghai. “There’s a massive opportunity there, they are very underserved,” the 76-year-old founder of Charles Schwab Corp said in a meeting Monday with Reuters reporters and editors.
STJ Advisors targets Asia expansion
Richard Partington – Financial News
Capital markets boutique STJ Advisors has appointed a former Asia head of equity capital markets at Morgan Stanley to lead an expansion push in the far east.
Nomura to Hire 20 U.S. Bankers in Bid to Regain M&A Rank
Nomura Holdings Inc. (8604), Japan’s biggest brokerage, plans to hire about 20 bankers in the U.S., part of efforts to regain lost share of the world’s largest mergers and acquisitions advisory market.
JCCH: Japan Commodity Clearing House SPAN Parameter Update effective Dec. 16
HKEx: Main Board and GEM Annual/Interim/Quarterly Reports 2012 on DVD
Shenzhen Stock Exchange Market Bulletin 9 December, 2013 – Issue 27
DGCX Year-to-Date Volumes Up 51% In November
Year-to-date volumes on the Dubai Gold & Commodities Exchange (DGCX) increased by 51% in November, with over 12.9 million contracts.
O’Neill, Man Who Coined ‘BRICs,’ Still Likes BRICs, But Likes MINTs, Too
Luciana Magalhaes and Matthew Cowley – MoneyBeat – WSJ
The creator of the BRIC acronym says he hasn’t always been an optimist, but right now his enthusiasm for the global economy is running sky-high.
African Securities Exchanges Association Launches New Website