John Lothian Newsletter: The year dark trading surged; Abenomics Drives Japan Hedge Funds to Worlds Top Performers; Optiver appoints new CEO

Dec 27, 2013

First Read

Ideas adjust to new ‘facts’ of finance – FT.com
Gillian Tett
Eight decades ago, economist John Maynard Keynes reputedly remarked: “When the facts change, I change my mind; what do you do sir?” Investors might do well to consider that question as, looking back at the past five years, it is clear some of the “facts” of global finance have been overturned. Unsurprisingly, that has produced some visible shifts in most investors’ views.
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***JM: It’s an interesting paradox that our perspective can shift over time, yet we can also stubbornly engage in an infinite loop of destructive behavior in other ways. See Also, “financial regulatory reform.”

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Further Automating the Trading Desk
Damian Bierman – Wall Street & Technology
In today’s high-speed electronic markets, the trader’s role is only becoming more challenging. From analyzing market conditions, selecting the best strategy for a particular order, monitoring the speed and quality of executions as they come in, and making appropriate adjustments as conditions change throughout the day, traders are ultimately responsible for the overall trade lifecycle. Unfortunately, strategy selection and optimization still remain largely a manual process with traditional execution management systems, placing yet another burden on the trader.
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***JM: As soon as somebody can automate the process of making SUCCESSFUL picks, I’ll sign.

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2014 — a turning point for system quality?
Veronica Augustsson | Cinnober
The year has flown by and it’s time once more to pass along the season’s greetings, take a peek in the rear-view mirror, and a look at next year’s challenges. For Cinnober, 2013 has been an exciting year, capturing market share in an industry where investment has been on the slow burner for a while. I’m very concerned, though, over the growing evidence that there is a great deal to be done in this industry when it comes to system quality.
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***JM: We can hope, at least.

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MCX Asks Financial Tech to Cut Stake After Regulator’s Rebuke
Bloomberg
Financial Technologies (India) Ltd., the founder of the Multi Commodity Exchange of India Ltd., was asked to cut its holding in the bourse after the regulator said it was unfit to own a controlling stake.
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***JM: Cleaning up the mess you found in the barn isn’t any more palatable than discovering it in the first place.

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Fund managers make monkeys out of molehills
Mark Cobley – Financial News
One of the biggest debates in fund management in 2013 concerned whether a new breed of “smart” index-tracking investment strategies are as good at picking stocks as upside-down monkeys.
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***JM: I was going to write a big comment about this, but then I got to the end of Mark’s article and found this: “You pay your money, you take your choice, and may the smartest beta win. Good luck, monkeys!” There’s not much else to add to that.

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Restoring Ranch Land for a Profit, and a ‘Trout Dividend’
SARAH MAX – NYTimes.com
From the road skirting its property line, Freestone River Ranch looks like a flat, cattle-trodden pasture flanked by rolling hills. But Jay Ellis, founder of the private equity firm Sporting Ranch Capital Management, sees something sparkling in the distance. He slams on the brakes and jumps out of his rented sport utility vehicle to get a closer look at one of the dozens of natural springs spilling out from small aqueducts.
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***JM: The “moose dividend”, where you get to run for safety while being chased by one, is pretty popular up here but not worth nearly as much.

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Y-T-D GVZ is Up 38%, BXY is Up 20.5%, and VIX is Down 31.6%
Matt Moran – VIX Views, CBOE
Over the next week many investors will read year-end wrap-ups noting that some U.S. stock indexes recently hit all-time highs and have risen more than 30% in 2013. This blog provides a year-to-date update on a number of other indexes and commodities that also are used in diversification and portfolio management strategies.
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MarketsWiki

MarketsWiki Page of the Day
Santa Claus Rally
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MarketsWiki Recent Updates

People

Raj Fernando; Chadwick Campbell

Companies, Organizations and Groups

Chopper Trading

Miscellaneous

Santa Claus Rally

Statistics

46,118,263 pages viewed, 7,726 articles, 170,127 edits
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Lead Stories

The year dark trading surged (and regulators hit back)
Tim Cave – Financial News
It was the year that dark trading became the victim of its own success. While activity in off-exchange venues reached record levels in both the US and Europe, regulators across the globe have rounded on the phenomenon. American and EU regulators are working on tighter rules, while their counterparts in Canada and Australia have already clamped down.
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Abenomics Drives Japan Hedge Funds to World’s Top Performers
Tomoko Yamazaki and Komaki Ito – Bloomberg
Japanese hedge funds are heading for record returns this year as investors bet that Prime Minister Shinzo Abe’s policies will succeed in reviving the world’s third-largest economy.
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Optiver appoints new CEO
Michelle Price and Tim Cave – Financial News
Optiver, one of the world’s largest high-frequency trading firms, has promoted the head of its Asia-Pacific operation to become its new global chief executive, Financial News has learned.
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Doing M&A With – And In – Bitcoin: Blockchain Buys ZeroBlock App
Paul Vigna – MoneyBeat – WSJ
You can travel around the world on bitcoin. You can buy a Tesla with bitcoin. You can pay for college classes with bitcoin. There’s a guy out on Long Island who will sell you his house in bitcoin. You can buy companies, too.
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Overstock to Embrace Bitcoin, Giving the Currency a Lift
NICK WINGFIELD – NYTimes.com
One of the biggest questions looming over Bitcoin, the digital currency generating attention in the tech business, is when big mainstream merchants will begin accepting it. Overstock.com, the online discount retailer, has an answer: within the next six months, if all goes as planned.
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***JM: I can’t see anything looming under the shadow of, “What will happen if enough major governments begin to regulate it, and how might that be done?”

It’s Very Good That Gold Was A Bad Investment This Year
Louis Woodhill – Forbes
Because I write a column on economics for Forbes, people are always asking me, “Is gold a good investment?” My answer is always the same: “It had better not be.”
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Sign of Division at Japan’s Central Bank
Reuters
Policy makers at Japan’s central bank broadly agreed that the economic recovery would remain on track as an improving job market fueled consumer spending, but some expressed worry about the pace of growth, according to the minutes of a meeting in November.
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Lines Blur When Lobbyists Invest in Industries They Represent
WSJ.com
Carol Andress, a lobbyist at the Environmental Defense Fund, has met with top government officials advocating a clean-air approach likely to help natural-gas companies. Ms. Andress also is an investor in stocks that could gain from such policies, which the Obama administration has largely adopted.
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Regulatory

American Bankers Association To File Lawsuit On Volcker Rule TruPS Provisions
The American Bankers Association has announced its intent to shortly file a lawsuit challenging the Volcker Rule’s trust preferred securities (TruPS) provisions, seeking emergency relief.
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Notice to Members I-13-45: Reporting Requirements for New Year’s Day and Reminder for 2014 Holidays
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Exchanges & Trading Facilities

MIAX Options Exchange: Amendments To MIAX Rule 404 And 404A – Short Term And Quarterly Option Series
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Moscow Exchange Fixing To Be Used To Calculate NFEA FX Swap Rate
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Hedge Funds & Managed Futures

U.S.’s Fortress to raise $1.9 bln fund for Japan infrastructure -sources
Reuters
U.S. asset manager Fortress Investment Group LLC aims to raise 200 billion yen ($1.9 billion) to set up Japan’s first infrastructure fund, three people with knowledge of the matter told Reuters on Friday.
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Millions of Tons of Metals Stashed in Shadow Warehouses
WSJ.com
The world’s metal is slipping into the shadows. Banks, hedge funds, commodity merchants and others are stashing tens of millions of tons of aluminum, copper, nickel and zinc in a hidden system of warehouses that span the globe.
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The 2014 Contrarian Investment Tour, From Rupees to Copper
Lewis Braham – Bloomberg
Don’t try to catch a falling knife. It’s one of the oldest saws on Wall Street. But to make a lot of money, sometimes you have to get a little bloody.
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***JM: Try to pick the winners. Try to pick the losers. Pretty much whatever comes after “try to pick” is just the color of the shirt you’re wearing…

Five trends in global hedge fund flows
Harriet Agnew – Financial News
As 2013 draws to its close, research from data provider eVestment points to the key trends emerging in the global hedge fund industry.
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Bonus for Harbinger’s Falcone Could Hit $20 Million
WSJ.com
Harbinger Group Inc. Chairman and Chief Executive Philip Falcone’s bonus for the current fiscal year could reach $20 million, according to a filing with the Securities and Exchange Commission.
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Banks & Brokers

Goldman Closes on European M&A Hat-trick
Matt Turner – MoneyBeat – WSJ
Goldman Sachs is on course to finish 2013 at the top of the mergers and acquisitions rankings in Europe for the third year running, laying claim to the number one spot in four of the region’s six busiest markets.
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Enforcement

SEC Charges New York-Based Brokerage Firm for Ignoring Red Flags in Soft Dollar Scheme
The Securities and Exchange Commission today announced sanctions against a New York-based brokerage firm for ignoring red flags and paying more than $400,000 in soft dollars for expenses that an investment adviser had not properly disclosed to clients.
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FINRA Fines Barclays $3.75 Million for Systemic Record and Email Retention Failures
The Financial Industry Regulatory Authority (FINRA) announced today that it fined Barclays Capital Inc. $3.75 million for systemic failures to preserve electronic records and certain emails and instant messages in the manner required for a period of at least 10 years.
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Asia-Pacific

China Banks Keep the Fees Flowing
WSJ.com
Wall Street made millions of dollars taking Chinese banks public during the boom years when the economy was riding high and the country’s lenders were reaping big profits.
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Deutsche Bank Sees Asian Comeback as Pimco Positive
Jeanette Rodrigues – Bloomberg
Taiwan’s dollar and the Indonesian rupiah are forecast to lead a recovery in Asian currencies next year as attention shifts to the region’s growth potential and away from the reduction in U.S. monetary stimulus.
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HKEx: China Securities Depository and Clearing Corporation becomes CCASS Clearing Agency Participant
Hong Kong Exchanges and Clearing Limited announced today that its wholly-owned subsidiary, Hong Kong Securities Clearing Company Limited, has admitted China Securities Depository and Clearing Corporation Limited as a Clearing Agency Participant to the Central Clearing and Settlement System of HKSCC.
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JCCH: Japan Commodity Clearing House SPAN Parameter Update effective 1/6/14
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[TSE] Acucela Inc. to be Listed on February 13, 2014
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HKFE Announces Revised Margins For Futures Contracts
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Japan’s Financial Services Agency: Reforms Of On-Site Monitoring Following The Mizuho Bank Case
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Dalian Commodity Exchange: Notice On Strengthening Risk Management During Market Closure On The New Year’s Day Of 2014
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Q&As On The Implementation Rules For Offline Placement Of IPO Shares On Shenzhen Market And The Implementation Measures For Online Subscription for IPO Shares According To Market Value On Shenzhen Market
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Frontier Markets

Erdogan Crisis Slams Lira, Stocks as Foreigners Dump Turkey Debt
Taylan Bilgic – Bloomberg
Turkey’s lira and stocks slumped the most in emerging markets and foreigners dumped the nation’s debt on concern the showdown between the government of Prime Minister Recep Tayyip Erdogan and the judiciary will worsen.
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Indian Probes Risk Revival of $160 Billion Projects: Commodities
Bloomberg
The decision by India’s top investigating agency to probe a third billionaire-led mining deal in six months puts at risk government efforts to revive $160 billion of stalled projects.
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MCX Weekly Market Report – December 20, 2013 – December 26, 2013
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Malawi Stock Exchange Weekly Trading Report- 27th December, 2013
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Dubai Financial Market Closed On New Years Day
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John Lothian Newsletter

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