First Read

Bits & Pieces
By John J. Lothian

Congratulations to former FIA President John Damgard and his longtime companion Mary Brittain “Britty” Bardes on their marriage on Saturday in Palm Beach, FL. The JLN team is very happy for both of them.

We are nearing the end of our MarketsWiki Education video release schedule. From our 2014 Chicago and London events, we have published more than 30, 12- to 15-minute videos featuring the perspectives of participants representing all facets of the market. We would like to once again thank this year’s sponsors, starting with London premier sponsor CME Group and contributing sponsor Turquoise. The Chicago event was brought to you by six firms, Bats, CBOE, CME Group, Institute for Financial Markets, Spot Trading and Illinois Institute of Technology Stuart School of Business

On our wish list for 2015 is adding a New York event to the education stable.

As a reminder, our office will be closed between December 24 and January 5, 2015. We will be publishing the John Lothian Newsletter remotely through the holiday season (except for December 25 and January 1). Our other daily newsletters – JLN Environmental/Energy, JLN Options and JLN Financials – will be on hiatus.

SEFCON Snapshot 2014, Part I: Technology and Innovation

The WMBA Americas hosted SEFCON V on November 12, 2014, and John Lothian News was there. We interviewed 14 SEF operators, regulators and participants and put together this three part series on the state of SEFs one year into the mandate.

Part I looks at the state of innovation in SEF technology and market structure. The creation of the swap execution facility really forced a collision of the bilateral and listed worlds, and necessitated an entirely new workflow. Some of the technology is still being invented. Furthermore, the need for capital efficiency and product standardization have led to new product design.

Watch the video »


AlphaMetrix settles with Commodities Futures Trading Commission
By Lynne Marek, Crain’s Chicago Business
The Commodity Futures Trading Commission has reached a settlement with former futures fund manager AlphaMetrix that requires the defunct company to pay $5.6 million, though it’s unlikely that payment will ever be made in full. The agreement was filed yesterday in the U.S. District Court for the Northern District of Illinois in Chicago and a hearing on it is scheduled for Dec. 16. It calls for AlphaMetrix to pay restitution of $2.8 million, plus interest, and a civil monetary penalty of $2.8 million. While there would be a priority on paying the $2.8 million to investors still owed money, the penalty isn’t likely to be collected.

***** One too many glitzy conferences, I guess.


HKEx Launches Incentive Programmes For RMB Currency Futures Amid Record Trading Volumes
RMB currency futures contracts have proven themselves as an effective risk management tool for market users amid increased USD/CNH volatility, and Hong Kong Exchanges and Clearing Limited (HKEx) is introducing additional measures to solidify the development of the RMB currency futures market.

***** Let’s put the pedal to the metal.


Denmark lays formal claim to North Pole
Richard Milne, Nordic Correspondent, FT
Denmark has become the first country to lay formal claim over part of the North Pole as the jostling over sovereignty in the Arctic heats up.

***** Nice timing right before Christmas.


Veronica Augustsson, CEO, Cinnober – The Why & How of Technology

“If you don’t know the technology, you don’t really know what you can achieve. It’s when you combine the business knowledge and the technology that you achieve something special.”

Veronica Augustsson, CEO of Cinnober, discusses the importance of tying together technical and business knowledge. Augustsson says that as a developer, one must not be easily discouraged when others tell them their ideas seem impossible. Knowing the capabilities of your technology will help generate new solutions to existing problems. Augustsson also touches on the importance of curiosity and why we should be driven by our curiosity to innovate and improve existing technologies. She says that finding an environment that helps inspire and drive your curiosity is essential.
Watch the video »


Netherlands Asks Bankers to Swear to God
By Liz Alderman
The sinners of the banking industry seem so uncowed by regulators and prosecutors that one country is trying a higher deterrent: the fear of God. In the financial industry equivalent of the Ice Bucket Challenge, executives in the Netherlands have been taking the bankers’ oath.
“I swear that I will endeavor to maintain and promote confidence in the financial sector,” the oath reads in part. “So help me God.”

***** A new bill in the U.S. Senate put forth by Sen. Al Franken would have bankers swear “I am good enough, I am smart enough, and doggone it, people like me.”


What Does Vladimir Putin Have to Do With the Price of Fish?
By Yuriy Humber and Ichiro Suzuki, Bloomberg
In the tit-for-tat sanctions between Russia and nations opposing its annexation of Crimea, one retaliation by President Vladimir Putin in August was to include fish in a banned list of products from the European Union, Norway, Canada, the U.S. and Australia.

***** This is hard to explain, but it has to do with fish being afraid of bare-chested men on horseback.


SurveyMonkey Valued at $2 Billion as Some Investors Sell Shares; Online Questionnaire Service Looks to New Round of Funding to Expand Corporate Software
By Douglas MacMillan And Gillian Tan – WSJ
A group of large money-management firms are valuing SurveyMonkey at close to $2 billion in a new round of funding that will help fuel the online questionnaire service’s expansion into corporate software, said a person familiar with the matter.

****** The top survey today is “Would you pay $2billion for a company with the word “monkey” in its name.


Pipelines: Nick Solinger talks market infrastructure for SEFs

It’s been a historic year for swap execution facilities as more were launched in the wake of Dodd-Frank rulemaking by the Commodity Futures Trading Commission.

Nick Solinger, head of product strategy and chief marketing officer of Traiana, said that its been a good year for firms getting connected to SEFs and for SEFs getting off the ground. The firm connected 16 FCMs to 16 SEFs with six more on the way.

“The typical FCM has been able to clear, three, four, five, six different venues with that one connection to our hub,” Solinger said. “Buy-side firms can similarly trade across multiple SEFs with one-credit line. So we really have realized that initial vision we had as an industry.”

Watch the video »


Lead Stories

Wall St. Wins a Round in a Dodd-Frank Fight
By Peter Eavis – New York Times
When Wall Street traders sense opportunity in the markets they pursue it with a sharklike intensity. After scoring a victory in Washington that repeals a rule that the industry has long assailed, the large banks are most likely weighing where to strike next.

Meet the SEC’s Brainy New Crime Fighters; ‘Quants’ Are Agency’s Latest Weapon Against Financial Misdeeds
By Scott Patterson, WSJ
Long outgunned by Wall Street’s legions of Ph.D.s, the Securities and Exchange Commission is arming itself with mathematicians and computer programmers of its own to catch bad market actors.
The question is whether this is an arms race government regulators can hope to win.

Commodities Go From Hoard to Floored; Oil and Iron Woes May Be Far From Over
By Justin Lahart – WSJ
In understanding the latest commodities selloff centered on oil, consider a raw material lurking in your kitchen: rice.

Interdealer broker BGC Partners to buy RP Martin UK assets
U.S. interdealer broker BGC Partners has struck a deal to buy the UK assets of rival RP Martin, BGC Partners said in a statement on Monday.

Too big to resist: Wall Street’s comeback
Edward Luce, FT
There will be another crisis. No law can stop it, no regulator can foresee it
When Washington is on the brink, who has the clout to persuade legislators to keep government open? The obvious answer is the US president. A better one is Jamie Dimon, chief executive of JPMorgan Chase. With last week’s vote in doubt, Mr Dimon helped to arm-twist Congress to pass a bill to keep the Federal government running for most of next year. What a splendid public service, I hear you say. In fact, his motive was more specific. The bill included an unrelated item allowing banks to resume derivatives trading from their taxpayer-insured arms. That ban is now history. Who other than a Wall Street titan could demand — and receive — such a service?

SocGen Defies Industry Retreat in Pompidou-Sized Venue
By Fabio Benedetti-Valentini, Bloomberg
In a new building on the edge of Paris, Societe Generale SA (GLE) moved 3,000 employees this year onto five trading floors each longer than a football field. The glass-faced edifice, roughly the size of the city’s Centre Pompidou, signals an increasing reliance on corporate and investment banking, even as many of the firm’s biggest European competitors scale back their securities businesses.

WA’s Ravensthorpe nickel mine shut after chemical spill
Stephen Bell, The Australian Business Review
ONE of Australia’s biggest nickel mines has been temporarily shut as its owner, First Quantum Minerals Ltd, investigates the cause of a processing-plant rupture that resulted in a chemical spill.


Wealth managers hit out over ‘crippling’ suitability requirements
Laura Dew, Investment Week
Wealth management firms say they are being “crippled” by suitability requirements as the Financial Conduct Authority (FCA) increases its scrutiny of the sector.

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
BATS: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. (Release No. 34-73813; File No. SR-BATS-2014-063; December 11, 2014); see also Exhibit 5
BYX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc. (Release No. 34-73812; File No. SR-BYX-2014-037; December 11, 2014); see also Exhibit 5
CHX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Applicability of Certain Fees and Credits Provided under the Fee Schedule (Release No. 34-73814; File No. SR-CHX-2014-19; December 11, 2014); see also Exhibit 5
NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify Certain NASDAQ Options Market Professional User and Enterprise License Fees (Release No. 34-73823; File No. SR-NASDAQ-2014-119; December 11, 2014)
NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify a Level 2 Professional Subscriber Fee (Release No. 34-73820; File No. SR-NASDAQ-2014-111; December 11, 2014)
NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Modify NASDAQ Rule 7021 Fees (Release No. 34-73815; File No. SR-NASDAQ-2014-121; December 11, 2014); see also Exhibit 5
NYSE: Notice of Filing of Proposed Rule Change Amending Its Continued Listing Requirements In Relation to the Late Filing of a Company’s Annual Report with the Securities and Exchange Commission As Set Forth in Section 802.01E of the Exchange’s Listed Company Manual (Release No. 34-73821; File No. SR-NYSE-2014-65; December 11, 2014); see also Exhibit 5
NYSE: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Proposes to Establish an Access Fee for the NYSE Best Quote & Trades Data Feed, Operative on December 1, 2014 (Release No. 34-73816; File No. SR-NYSE-2014-64; December 11, 2014)
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 Thereto, Amending Rule 6.2A to Authorize the Exchange to Share Any User-Designated Risk Settings in Exchange Systems with the Clearing Member that Clears Transactions on Behalf of the User (Release No. 34-73818; File No. SR-NYSEArca-2014-110; December 11, 2014)
NYSEMKT: Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending Rule 902.1NY to Authorize the Exchange to Share Any User-Designated Risk Settings in Exchange Systems with the Clearing Member that Clears Transactions on Behalf of the User (Release No. 34-73817; File No. SR-NYSEMKT-2014-81; December 11, 2014)

SEC Charges Manhattan-Based Attorney With Conducting Ponzi Scheme
The Securities and Exchange Commission today charged a Manhattan-based attorney with conducting a Ponzi scheme that defrauded some of his legal clients as well as close family members and friends.
The SEC alleges that Charles A. Bennett raised approximately $5 million by selling purported investments in what he described as a pool of funds that invested in joint ventures with a Wyoming-based investment fund to which he claimed to have a close connection.

ASIC cancels registrations of SMSF auditors
ASIC has cancelled the registration of 440 Self-managed superannuation fund (SMSF) auditors who did not undertake or pass a competency exam necessary to retain their registration.

Exchanges & Trading Facilities

Vix Futures Extended Trading Hours Volume Hits New Single-Day High
CHICAGO, IL – December 12, 2014 — The CBOE Futures Exchange, LLC (CFE®) today announced that trading volume in CBOE Volatility Index® (VIX® Index) futures during extended trading hours (ETH) – from 3:30 p.m. CT yesterday to 8:30 a.m. CT today – established a new single-day volume record.

CME Group Notices
Approved Applications for Increase in Wheat Regularity 12 Dec 2014
Product Modification Summary – Adding 3rd Serial Month to All Treasury Options – December 14, 2014

Hedge Funds & Managed Futures

VIX Note Volume Proving Prescient as Volatility Surges
By Inyoung Hwang and Callie Bost, Bloomberg
Turbulence is reappearing in the stock market. For traders in exchange-traded notes that rise and fall with market volatility, it’s like it never went away.

Norway ‘burnt’ foreign investors
Steve Johnson, FT
A large investor has accused the Norwegian government of intentionally “burning” foreign investors while protecting Statoil, the largely state-owned national oil company.

Wealth Adviser: A Personal Bias in Crafting Clients’ Portfolios
by Kevin Noblet, WSJ MoneyBeat
Financial advisers may have a very personal bias when they’re designing clients’ investment portfolios. According to a recently published academic study, the asset allocation in an adviser’s own portfolio might be one of the biggest factors in determining how he or she allocates clients’ assets. While most advisers say they customize portfolios to meet each client’s circumstances, they “don’t really seem to pay that much attention to what their clients look like,” one of the study’s authors tells Wealth Adviser at The study looked at data from nearly 600,000 clients of commission-based advisers in Canada. The authors say it wouldn’t be unreasonable to find similar behavior among U.S. advisers.

Banks & Brokers

Julius Baer answers critics of Merrill Lynch deal
James Shotter in Zurich, FT
Two years after Julius Baer snapped up the international wealth management business of Merrill Lynch, its chief executive is feeling vindicated. Investors had been concerned that the Swiss group would not be able to integrate such a large and sprawling business into its own.

Dimon dials DC to divert derivatives action
Tom Braithwaite in New York, FT
As the US Senate argued late into Friday evening and throughout Saturday, struggling to agree on a government spending bill, Elizabeth Warren, the Democratic senator from Massachusetts, took aim at the country’s largest banks.

Green Mountain moves coffee buying to Switzerland, following rivals
By Luc Cohen, Reuters
Vermont-based coffee roaster and brewing technology maker Keurig Green Mountain will move most of its U.S. coffee buying operation to Switzerland, following rivals who have already moved to the global hub for commodities trading.

Bigger is better for retaining junior analysts
By Daniel Huang, The Wall Street Journal
Big Wall Street firms have suffered through their fair share of headaches recently, from outsize regulatory penalties to upstart boutiques that are taking more market share.

Dealers face FX front-running battle
Banks face a tough task proving to regulators that foreign-exchange traders are not front-running clients, as they respond to the government’s consultation on reinforcing confidence in the fairness and effectiveness of fixed-income, currency and commodities markets (FICC).

Clearing & Settlement

Malaysian Ringgit And Philippines Peso Trading Added To Thomson Reuters Matching – Currencies Of Dynamic Asian Economies Added To The Leading Electronic Trade Matching System To Offer Greater Liquidity And New Trading Opportunities
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the launch of real-time electronic trading of spot and forward Malaysian Ringgit and Philippines Peso on Thomson Reuters Matching platform.

Indexes & Products

Annual changes to Nasdaq-100 index announced
By Chuck Mikolajczak, Reuter
Nasdaq OMX Group announced late Friday the results of its annual re-ranking of the Nasdaq 100 index, which will cause a reshuffling of several constituents.

China Exchanges Services Company Limited (CESC) Launches New Index Series On Shanghai-Hong Kong Stock Connect
China Exchanges Services Company Limited (CESC) today (Monday) launched a new index series on the Shanghai-Hong Kong Stock Connect (Stock Connect) programme. The series is composed of the CES Shanghai-Hong Kong Stock Connect 300 Index (CES SHSC300) and CES Stock Connect Hong Kong Select 100 Index (CES SCHK100). The CES SHSC300 and the CES SCHK100 today closed at 3,511.26 and 4,355.36 respectively.


Trying to Swim in a Sea of Social Media Invective
By Jenna Wortham, New York Times
Over the last few months, I’ve watched friends and colleagues endure endless harassment on Twitter. Strangers have hurled offensive, racist names and gendered insults, relentlessly and with little fear of consequence. I’ve come across blog posts that capture similarly awful experiences.


FCA bans former BlackRock director for dodging train fares
Anna Fedorova, InvestmentWeek
The Financial Conduct Authority (FCA) has banned former BlackRock managing director Jonathan Burrows for dodging rail fares worth £43,000.

Environmental & Energy

U.N. talks agree building blocks for new-style climate deal in 2015
By Alister Doyle and Valerie Volcovici, Reuters
About 190 nations agreed on Sunday the building blocks of a new-style global deal due in 2015 to combat climate change amid warnings that far tougher action will be needed to limit increases in global temperatures.

Climate talks struggle into overtime
By Pilita Clark in Lima, FT
UN climate talks stuck to a time-honoured tradition and ran into overtime as negotiators struggled to agree a work plan for an international global warming deal next year.


China financial firms seek control deals in outbound M&A
By Denny Thomas and Lisa Jucca, Reuters
Chinese financial firms are targeting purchases of distressed banking assets coming on the market in Europe, having been urged by Beijing to expand their reach beyond emerging markets.

Thai alternative bourse to classify stocks into 8 industry groups from Jan 5
The Stock Exchange of Thailand
BANGKOK, December 15, 2014 – Market for Alternative Investment (mai), under The Stock Exchange of Thailand (SET), will classify mai-listed stocks into eight industry groups starting from January 5, 2015, enabling investors to analyze information more efficiently and effectively.

China sprouts green shoots in securitization
by Rob Hartley, Euromoney
A flurry of new deals points to an exciting new business possibility for Apac banks in 2015.

Frontier Markets

The New Bucharest Stock Exchange Website Has Been Launched Today
Bucharest Stock Exchange (BVB) has launched today, December 15, 2014, the new website. It brings rich trading and statistics content, new user friendly interface for the stock exchange products and services, and numerous website…

NBHC partners with NCDEX for warehouse service; NBHC can now offer solutions to NCDEX members their clients across all commodities and geographies
Dilip Kumar Jha, Business Standard
IVF Trustee Company owned National Bulk Handling Corporation (NBHC) has joined hands with National Commodity & Derivatives Exchange (NCDEX) for providing warehousing services to the exchange’s members and clients. Until April 2014, NBHC was a subsidiary of Financial Technologies (India) (FTIL).

Securities and Exchange Board of India Notices
Interim Order in the matter of Adorable Agrotech Limited
Interim Order in the matter Blessing Agro Farm India Limited
PR – Order in the matter of acquisition of shares of S.A.L. Steel Limited by SAL Care Private Limited
Order in respect of Skylark Land Developers and Infrastructure India Ltd. and its Directors

DFSA Congratulates UAE National Graduates
The Dubai Financial Services Authority (DFSA) held its annual Tomorrow’s Regulatory Leaders (TRL) awards ceremony last week. The awards mark the successful completion of a two-year development programme for UAE Nationals. The programme prepares newly graduated UAE Nationals to become financial services regulators.

Egyptian Exchange Hosts The Employment Forum For The (Certified Financial Analyst – CFA) International Certificate Holders And Students
As per the Egyptian Exchange (EGX) interest to build and strengthen the capital market employees’ abilities, EGX hosted at its headquarters in Smart Village the employment Forum for the (Certified Financial Analyst – CFA) internationally approved certificate’ holders and students in presence of a large number of companies and CFA holders in Egypt.

Kuwait says working to improve stock exchange conditions
Kuwaiti authorities are working to improve conditions in the stock market, Finance Minister Anas al-Saleh said on Sunday as the market’s main index fell steeply, bringing its year-to-date losses to 17 percent.

Moscow Exchange Trading Schedule For New Year Public Holidays
Moscow Exchange’s trading schedule for the New Year 2015 public holidays is as follows:


The Future of a Commodity: Bitcoin Regulation and the CFTC
Jared Paul Marx, Coindesk
Mark Wetjen, a commissioner at the US Commodities Futures Trading Commission (CFTC), has made it known loud and clear recently that bitcoin fits the legal definition of a commodity and that the CFTC has authority to regulate the digital currency.
So what would the CFTC’s regulation of bitcoin actually look like? For the average bitcoin user and business, probably not anything dramatic. For people who buy and sell bitcoins daily, though, there might be a new sheriff in town.

Cargill says corn sweetener supplies ‘limited’ -letter
Cargill Inc said supplies of corn sweetener are “limited” for 2015 and all outstanding and unaccepted offers are withdrawn, according to a letter from company’s milling division obtained by Reuters from a sugar industry source on Friday.

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