John Lothian Newsletter: 'Volcker Rule' Faces New Hurdles; UK watchdog to consider forex rules after probes completed; ICE Remains Committed to Euronext IPO After Liffe Separation

Nov 20, 2013

First Read

The mailbox has produced a question: who was this Singaporean who mistook a tiger for a lion? Sang Nila Utama was his name, the legendary founder of the Kingdom of Singapura in the 12th century. He was a prince of Srivijaya the powerful ancient thalassocratic empire (ie. one based on naval supremacy) first mentioned in Chinese records in the 7th century.

Which clumsily segues to the proprietor of Sriwijaya Air who last week whisked me off to Indonesia to the Bangka-Belitung islands (better known as “Babel”) to visit his tin mines and refineries. (Also his restaurant, boats, and private island artificially constructed especially for his pet monkey. I didn’t get to see his monkey. It escaped.)

Tin mining was a source of abundant wealth in South-East Asia and frequent visitors to Singapore will know of Bukit Timah, literally “tin mountain”. Tin ingots were once a form of currency in the region, perhaps a little less portable than Bitcoins.

Indonesia today produces over a third of the world’s tin, with China the biggest user. Likewise the playbook for this region of South-East Asia … is really that of Asia buying Asia. The realists see an almost perfect demographic pyramid with a narrow aging class of capital owners at the top, tapering to a huge base of young productive consumers of capital. The optimists see decades before Asia inverts to the European form, with a huge aging class of capital owners at the top …

… and the triumphalists recount that Arab writers of the 9th and 10th century hardly mention Europe for anything other than its backwardness but they considered the king of Al-Hind (India and South-East Asia) as one of the four great kings in the world.

But in the cold light of day what we do know of 500 years of modern financial history – from Kindleberger, Eichengreen or Rogoff & Reinhart – is that periodic hubris and crisis are a certainty. And that in our rush to pile up the sandbags against the watermark of the previous financial crisis, now half a decade old, we do not forget to expect the expected.

Karl Marx might have a quick chuckle at the nationalisation of banking systems, seeing the apparent triumph of labour over capital. He would quickly sober up and remind us of internal contradictions. Three cheers for the Third Plenum!

Mike Syn

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Jim Bennett

Connecting the Data Dots: Sapient’s Jim Bennett Talks Compliance Reporting
JohnLothianNews.com
New financial regulation has ushered in a host of reporting rules for over the counter and listed markets. Jim Bennett of Sapient Global Markets knows full well how critical it is to properly integrate compliance systems. “Standardized, automated messaging is the key” to reporting says Bennett, but platforms must also be flexible enough to interface with internal systems. Bennett sat down with John Lothian News editor-at-large Doug Ashburn to explain Sapient’s approach to Dodd-Frank and EMIR reporting, and how its Compliance Management and Reporting System (CMRS) is helping firms meet the regulatory challenge.

Watch the video »

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ICE turns up heat on Singapore commodity markets
Kenneth Lim – Business Times
Singapore’s growing status as a commodities trading hub has drawn global heavyweight IntercontinentalExchange Group Inc (ICE), which will fork out US$150 million to acquire commodities market operator Singapore Mercantile Exchange (SMX).
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CME Group digs in on fee increases as brokers protest
Reuters
CME Group Inc, the world’s largest futures exchange operator, on Tuesday said it will plow ahead with plans to hike fees for traders despite an outcry from customers fuming over higher costs.
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*** MS: “plough”? There’s gold in them there fields.

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ISE Gemini Trades 20 Millionth Options Contract
The International Securities Exchange (ISE) today announced that ISE Gemini traded its 20 millionth contract, continuing the exchange’s consistent growth in volume and industry market share since launching on August 5, 2013. ISE Gemini has averaged 2.8 percent equity options market share during the month of November, with average daily volume nearing half a million contracts.
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***JM: Did you guys do something special for the 20-mil trader? You know, balloons falling from the ceiling, Gary K running out from behind a door to shake the trader’s hand and give away a fruit basket… that kind of thing? I want to see pics of the trader flapping his hands near his face and running in place.

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CBOE says it is open to growing within comfort zone
Reuters
CBOE Holdings Inc is open to licensing new products and acquiring technology but only within its options-focused comfort zone, top executives said on Tuesday.
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Swiss exchange chief Christian Katz takes helm at Fese
Anish Puaar – Financial News
The chief executive of the Six Swiss Exchange has been named as the new president of exchange lobby the Federation of European Securities Exchanges.
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Pat Fay

Small Cap Splash: Russell’s Pat Fay talks about CBOE’s latest volatility contract
JohnLothianNews.com
The CBOE Volatility Index futures, or VIX, has been THE most successful futures contract in recent years. With the VIX posting record volumes this year, the exchange and Russell Indexes say now is the time to launch the Russell 2000 Volatility Index futures or RVX. John Lothian News sat down with Russell Investment’s Pat Fay to talk about RVX and its potential, especially versus other indexes like VIX and the European volatility index VSTOXX. Fay says the appetite for a small cap stock volatility futures is strong, especially among money managers looking to incorporate volatility hedges into their portfolios. “Clients are asking for volatility products,” Fay says. “Folks have taken the opportunity to educate themselves on it, develop strategies, it’s become very popular.”

Watch the video »

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Rich make same investment errors as rest
John Authers – FT.com
The latest exhaustive research shows [the wealthy] are pron
e to almost exactly the same mistakes as everyone else. Indeed, they even handled the crisis of 2008 somewhat worse than the average investor.
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*** MS: “Conservation of misery” – the First Law of Capital?

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The Rise of Analytics: On the Right Side of the 8-Ball
Paul Rowady – TabbFORUM
Machines now handle most of the processing of raw data. But in order for humans to teach the machines what to do next, we first need to understand what to do next. And the only way for this to happen is for humans to be able to improve our understanding of what lies within the data.
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Barchart Launches Stocks, Futures and Forex Mobile App for iOS and Android with Extensive Market Data and News Coverage
Barchart.com, Inc., a leading provider of market data and information, today announced the release of the free companion app for their financial website, www.barchart.com, now available for iOS and Android.
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***JM: I can’t wait to see if v2.0 will display data on rate and benchmark manipulation. More value, better trades!

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FIA Futures Cares Corporate Challenge: Deadline Extended through Wednesday, November 27
As we prepare to celebrate Thanksgiving later this month we are reminded that throughout Cook County, record numbers of families are turning to food pantries at this time. Nearly 284,000 men, women and children will turn to the Food Depository’s network in the next 2 weeks and with your support, we can continue to provide nutritious food to those who need it most. We would be honored if you would support this effort; help provide our hungry neighbors with nutritious food this Thanksgiving and beyond by supporting the FIA Futures Cares Corporate Challenge.

We believe no one in our community should go hungry, and are committed to ensuring that our neighbors have nutritious food to eat. Every dollar you give to the Food Depository provides enough food for 3 meals for hungry Chicagoans. Please give what you can today.

Together, we can fill empty plates!
jlne.ws/1fTcRuN

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MarketsWiki

MarketsWiki Page of the Day
Singapore Mercantile Exchange (SMX)
jlne.ws/I1CJZQ

MarketsWiki Recent Updates

People

Thomas J. McMahon

Companies, Organizations and Groups

Dubai Gold and Commodities Exchange; IntercontinentalExchange Inc.; BATS Chi-X Europe; Singapore Mercantile Exchange

Products

CBOE Russell 2000 Volatility Index Futures

Miscellaneous

Brent crude; West Texas Intermediate crude

Statistics

45,353,062 pages viewed, 7,706 articles, 168,647 edits
MarketsWiki Statistics

Lead Stories

‘Volcker Rule’ Faces New Hurdles
Scott Patterson and Andrew Ackerman – WSJ.com
Two top regulators are raising new—and late—objections to the “Volcker rule,” arguing it is too soft on banks and threatening to further delay its implementation beyond the year-end deadline set by the Obama administration.
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*** MS: Full intent of DFA? … the “Wall Street Reform and Consumer Protection Act”.

UK watchdog to consider forex rules after probes completed
Reuters
The first set of rules for the unregulated multi-trillion dollar foreign currency market will be considered after the completion of probes into possible manipulation, a British regulator said on Tuesday.
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*** MS: So what happens when central banks intervene in the currency markets … or the bond markets …

ICE Remains Committed to Euronext IPO After Liffe Separation
Matthew Leising & Sam Mamudi – Bloomberg
IntercontinentalExchange Group Inc. (ICE) remains committed to spinning off its European equity market division, Euronext, through an initial public offering, according to Chief Executive Officer Jeff Sprecher.
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ICE Moves Hutcheson from Liffe to LIBOR
Max Bowie – WatersTechnology
IntercontinentalExchange, the new owner of NYSE Euronext and its NYSE Liffe derivatives market, has appointed Liffe chief executive Finbarr Hutcheson president of ICE Benchmark Administration, the renamed NYSE Euronext Rate Administration business, which recently won the contract to run and administrate the LIBOR benchmark rate calculation process.
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Direct Edge CEO: Investors aren’t getting ripped off
MarketWatch
Maybe you’ve never heard of a little outfit called Direct Edge, but it plays a big role in the U.S. stock markets and is getting bigger.
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FX Dealers Said to Use Day Traders to Make Personal Bets
Ambereen Choudhury, Liam Vaughan & Gavin Finch – Bloomberg
Currency dealers in London gave information about client orders to day traders who then made bets on their behalf, sidestepping restrictions on personal trading, three people with knowledge of the practice said.
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*** MS: “Why did the market go up today?” “More buyers than sellers.” “Surely there are as many buyers as there are sellers.” “Shut up and make me some tea.”

New Libor administrator signals caution over compilation changes
Reuters
Replacing the quote-based Libor with an index drawing on actual market trades won’t happen anytime soon, the benchmark’s new administrator said on Tuesday.
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Live Blog: J.P. Morgan’s $13 Billion Settlement Announced
MoneyBeat – WSJ
J.P. Morgan and the Department of Justice announced Tuesday the bank’s $13 billion settlement over mortgage-related issues, a month after striking a preliminary agreement.
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Regulatory

S.E.C. Official Charged With Making False Statements
WILLIAM ALDEN – NYTimes.com
A Securities and Exchange Commission official was criminally charged on Tuesday with making false statements about stock holdings that he wasn’t allowed to own under the agency’s ethics rules.
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CFTC Shakes Up the SEFs’ View of Impartial Access
Ivy Schmerken – Wall Street & Technology
Yesterday, CFTC Chairman Gary Gensler told SEFs that their trading platforms could no longer be just dealer-to-dealer or dealer-to-customer, and must be open to all market participants.
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Asian dealers ‘disappointed’ by CFTC clarification of footnote 513
Viren Vaghela – Risk.net
Asian dealers are “disappointed” that last week’s clarification from the Commodity Futures Trading Commission (CFTC) closes the door to foreign branches in the US escaping the transaction-level requirements of Dodd-Frank even where swaps are only originated in the US but booked and executed overseas.
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*** MS: Footnote 662 on the CFTC’s cross-border guidance begins with “See” …

Swedish insurers to suffer capital hit as regulator approves rule changes
Louie Woodall – Risk.net
Swedish insurers may struggle with new capital rules being introduced to ease the transition to Solvency II, experts are warning. On November 12, the Swedish financial regulator, Finansinspektionen (FI), passed new rules changing the way the discount rate for valuing insurance liabilities is calculated. It also made changes to the so-called ‘traffic light methodology’, a tool for supervising insurers’ capital requirements when under stress.
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Remarks Of CFTC Chairman Gary Gensler At The CME Global Financial Leadership Conference
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Modelling integrity through culture
Speech by Martin Wheatley, Chief Executive of the FCA, at the FCA Markets Conference 2013.
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Evolving the FCA’s approach to markets regulation
Keynote speech by David Lawton, Director of Markets, at the FCA Markets Conference 2013.
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[AMF Canada] Improvements to AMF E-Services
You can now take advantage of several improvements made to AMF E-Services. We have changed or added functionalities based on users’ comments to make your transactions with the AMF even more effective.
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Exchanges & Trading Facilities

CFTC Releases Rule Enforcement Review of North American Derivatives Exchange Inc.
The Division found that Nadex maintains an adequate trade practice surveillance program, including adequate staff, systems, investigatory work and sanctions. The Division also found specific areas where Nadex should improve its trade practice program. Among other items, the Division recommended that Nadex improve the recordkeeping of its investigation logs and investigation memoranda.
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Moscow Exchange Will Migrate To A New Format Of The Stock Market Data Dissemination On February 17, 2014
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Jiménez Latorre, Secr. Of State For Economy, To Open The 15th. Latibex Forum
The 15th Latibex Forum, organised by BME, begins tomorrow with an opening event that will be presided over by Fernando Jiménez Latorre, Secretary of State for the Economy, and Antonio Zoido, Chairman of BME.
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CBOE, C2, CBSX and CFE Trading Schedule For The Thanksgiving Holiday
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Direct Edge Trading Notice #13-47: Market Holiday Reminder – Thanksgiving
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MIAX Options Holiday Schedule – Thanksgiving
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BM&FBOVESPA Black Consciousness Day
Wednesday (November 20) is a semi-national public holiday in Brazil and there will be no trading on BM&FBOVESPA.
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Hedge Funds & Managed Futures

Pimco in Global Hiring Mode Amid Fresh Push Beyond Bonds
Joe McGrath – MoneyBeat – WSJ
Giant bond fund manager Pimco is planning a recruitment drive in the latest stage of its strategy to diversify beyond fixed-income. It will be overseen by its new global
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A Lonely Short-Seller Still Plies His Trade, Waiting for the Next Big One
Paul Vigna – MoneyBeat – WSJ
With the Dow ripping through 1,000-point moves and besting even the forecasts of the Street’s most bullish prognosticators, one short-seller continues to go against the market, waiting for yet another big score.
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*** MS: Then comes the bit where John Lothian coached Eddie Murphy to get the gorilla to double down ahead of the orange crop reports?

Man Group employees feel the squeeze at Riverbank House in London
Chris Newlands – FT.com
Man Group employees are feeling the squeeze at the struggling hedge fund, with staff at its London headquarters being shunted into just one-and-a-half floors of the nine-story building it opened to great fanfare in 2011.
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US funds place big bets on euro bank recovery
Michael Stothard in Paris and Stephen Foley in New York – FT.com
US fund managers have been making multibillion-dollar bets on the recovery of banks in the eurozone over the past four months in the belief that the region’s stuttering economic recovery will soon start to gather steam.
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CalPERS To Recover $261 Million In JPMorgan Federal Investigation Settlement
The California Public Employees’ Retirement System (CalPERS) is set to get back approximately $261 million in damages from JPMorgan in a federal investigation settlement announced today by California’s Attorney General Kamala Harris.
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EDHEC-Risk Institute Welcomes Five Distinguished New Members To Its International Advisory Board
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Banks & Brokers

Dimon Says He’s Surprised by Probe Costs Tied to Bear Stearns
Zachary Tracer – Bloomberg
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who reached a $13 billion settlement to resolve mortgage-bond disputes, said he was surprised by costs tied to the purchase of Bear Stearns Cos.
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JPMorgan Settlement Offers Look Into Mortgage Machine
JESSICA SILVER-GREENBERG and BEN PROTESS – NYTimes.com
JPMorgan Chase and the Justice Department reached a record $13 billion settlement on Tuesday, wrapping up a series of state and federal investigations that offer a rare glimpse into Wall Street’s mortgage machine before the financial crisis, when it churned out billions of dollars in securities that later imploded.
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Barclays names new head of Americas sponsors group -memo
Reuters
Barclays Plc has named Chris Sullivan as head of its financial sponsors group for the Americas, according to an internal memo.
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E*Trade gets another nod from regulators on its recovery
Reuters
E*Trade Financial Corp said on Tuesday that it has received approval from regulators to divert capital from its bank subsidiary to use for broader corporate purposes.
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BMO Capital Names Dan McNamara U.S. Financial Institutions Head
Matthew Monks & Doug Alexander – Bloomberg
Bank of Montreal, Canada’s fourth biggest bank by assets, has hired former Calamos Asset Management Inc. executive Dan McNamara to oversee financial institutions investment banking in the U.S.
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UBS appoints European private equity secondaries head
Dan Dunkley and Ayesha Javed – Financial News
UBS has appointed a new head of private equity secondaries in Europe, according to a source familiar with the matter.
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Investors attack Bank of America’s ‘Frankenstein’ MBS settlement
Camilla Hall in New York – FT.com
Bank of America’s plan to pay $8.5bn to compensate 22 institutional investors for soured mortgage-backed securities is a “Frankenstein settlement”, and should be rejected, a lawyer for a dissenting group of investors told a New York judge Tuesday.
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Clearing & Settlement

Traiana Harmony’s CFD And Equity Swap Network Expands In Asia
Traiana, the leading provider of post-trade solutions, announces today that the Harmony network, its global product for equities swaps/CFD markets, is now live in the Asia Pacific region.
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*** MS: Looking forward to seeing more of Andy Coyne and crew in Singapore

Lombard Risk announces COLLINE collateral optimisation module
Lombard Risk Management plc a leading provider of integrated collateral management, regulatory compliance and reporting solutions for the financial services industry, announces its collateral optimisation module for COLLINE.
jlne.ws/1ehRIKi

Indexes & Products

Exclusive: Barclays weighs index unit sale after MSCI approach – sources
Reuters
Barclays Plc is exploring options for its index business after equity index provider MSCI Inc approached the British bank recently about buying the unit, according to several people familiar with the situation.
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*** MS: I still haven’t gotten used to the Lehman’s Agg being the Barclays Agg

Technology

SunGard’s Apex Securities Finance Wins Global Custodian Award for Excellence in Securities Financing
SunGard’s Apex Securities Finance was chosen as the best securities financing solution in the inaugural Global Custodian Technology, Consultancy, and Law Awards for Excellence. The Global Custodian Awards for Excellence celebrate the securities services industry and recognize firms that have exceled in their annual client perception survey.
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Algomi Hires Stefano Vaccino To Join Expanding European Sales Team
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Enforcement

As Trader’s Trial Begins, Name of One Insider Stands Out
PETER LATTMAN and BEN PROTESS – NYTimes.com
From his cubicle at Dell’s headquarters in Round Rock, Tex., Rob Ray shared insights about the computer maker that ricocheted across the country, reaching a trust company in California, a mutual fund in Manhattan and hedge funds in New York and Connecticut.
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Federal Court Sanctions David Prescott for Forex Pool Fraud
The U.S. Commodity Futures Trading Commission (CFTC) obtained $455,098 in restitution for defrauded off-exchange foreign currency (forex) customers and a $1,365,294 civil monetary penalty in a federal court default judgment Order against Defendant David Prescott, individually and doing business as Cambridge Currency Partners (Cambridge).
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New York AG Steals J.P. Morgan Show
Devlin Barrett, Dan Fitzpatrick and Andrew Johnson – MoneyBeat – WSJ
Even after months of tense negotiations, the unveiling of J.P. Morgan Chase & Co.’s $13 billion settlement with the Justice Department was not without a few hiccups.
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FCA acts quickly to stop suspected boiler room from taking more money
A suspected boiler room has had an unlimited worldwide asset freezing order placed upon it by the Financial Conduct Authority (FCA) after a High Court judge agreed that First Capital Wealth Limited (FCW) posed a serious risk to consumers. The hearing took place at the High Court on Friday 15 November 2013.
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[AMF Canada] Penalties against C. Audren inc. (Courtier d’assurances, Insurance Broker) and responsible officer
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[AMF Canada] Groupe financier Lemieux inc. and its responsible officer fined
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Environmental & Energy

EU, California Show China How to Avoid Carbon-Permit Oversupply
Bloomberg
European Union and Californian emissions markets have shown China how to avoid the pitfall of oversupply in its own carbon-trading programs, said the vice mayor of the city of Shenzhen.
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Carbon Trading Scheme In Europe Dying? Why Banks In London Are Exiting The Carbon Trade
International Business Times
The global carbon market, once hailed as a promising solution to greenhouse gas emissions, may be dying a slow death, as turmoil in the European trading arena has at least 10 London banks scaling back or closing their carbon desks.
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TransCanada Pushes Keystone XL Pipeline Start to 2016
Bloomberg
TransCanada Corp. (TRP) pushed the start date for its $5.4 billion Keystone XL oil pipeline into 2016, the second delay this year as the company awaits U.S. approval for the project.
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Asia-Pacific

Singapore regulator may have nudged Jignesh Shah-owned Financial Technologies to exit from SMX
Financial Express
Jignesh Shah-owned Financial Technologies-India (FTIL) on Tuesday announced that it has sold its 100% stake in Singapore Mercantile Exchange (SMX) for $150 million to Intercontinental Exchange Group, which owns leading bourses like NYSE Euronext and New York Board of Trade. This is the first instance of FTIL selling stake in any of its overseas exchange holdings after the settlement crisis at the National Spot Exchange (NSEL) came to light in August.
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Companies On Thai Alternative Bourse Post Growing Sales In July-Sept
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Frontier Markets

The EM flow turnaround
Cardiff Garcia | FT Alphaville
The charts, from the latest global economic monitor by the Institute of International Finance, show the stabilisation of developing-country capital markets following the Fed’s surprise September decision not to taper. Assets have recovered somewhat, and if the money didn’t immediately return en masse, at least it clearly stopped fleeing.
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The Saudi Stock Exchange (Tadawul) And The Abu Dhabi Securities Exchange (ADX) Sign Cooperation Agreement
The Saudi Stock Exchange (Tadawul) and the Abu Dhabi Securities Exchange (ADX) have today entered into a Memorandum of Understanding (MoU), which will serve to augment the already robust bilateral relationship between the two exchanges.
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*** MS: Did you know Tadawul is open for trading on Sundays?

ADX Achieves 99% In Disclosure Compliance
Abu Dhabi Securities Exchange (ADX) announced that it has succeeded in achieving a compliance rate of 99% regarding the disclosure of the 3rd quarter financial statements of its listed public joint stock companies within the deadline of 45 days from the end of the financial period.
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Amid Strong Indications Of A New Era For The Sector: DFM and NASDAQ Dubai IPO Forum Discusses The Role Of IPOs In Diversifying Investment Opportunities And Achieving Sustainable Growth
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