John Lothian Newsletter: Thomson Reuters to Suspend Early Peeks at Key Index; CFTC To Hold Open Meeting To Consider Cross-Border Final Guidance And Cross-Border Phase-In Exemptive Order; S&P to Argue Puffery Defense in First Courtroom Test

Jul 8, 2013

Thomson-Reuters to stop delivering economic survey two seconds early to those who pay for the privilege.  CFTC announce public meeting regarding cross-border-swaps on Friday, July 12.  S&P claims reasonable investors would not believe their claims about credit ratings.


First Read


Invest in our Industry’s Future
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I want you to make an investment in the future of our industry, our markets and our common good.  I want you to sign up your interns, your summer workers and even newer employees for our Chicago-based Intern Education Series.

We have put together an impressive list of industry leaders, innovators, entrepreneurs, attorneys, technologists, investors, traders and other industry participants for this series. Your interns and the like should be part of the audience for this program. 

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Back from London and Boy Scout Camp; Bugs Everywhere

Greetings.  Remember me?  I am back from a week in London at International Derivatives Week and the following week at Boy Scout Camp in Northern Wisconsin.  From Cricket in London to mosquitoes in the north woods, I have been educated, entertained and eaten alive.

Thank you to my guest editors David Setters and Pat Kenny.  Both of these gentlemen are incredible representatives of our industry and I am appreciative of both their efforts here in this newsletter.

I was absolutely moved to tears reading David’s final editorial where he “came out” and announced he had ALS. David’s words and his actions represent incredible courage, humility, charity and good will. For all bad that is written about our industry and markets, it is the bright lights like David’s that shine brightest for me.

The outpouring of support for Futures For Kids in London at the gala dinner, the charity cricket game put on by FFastfill and all the individual efforts was incredible.

At this year’s gala dinner, it was my friend Clive Furness who had accepted the kilt wearing challenge established by the FT’s Jeremy Grant and helped raise funds for Futures For Kids. While Clive did not beat the fundraising record set last year by Simon Rostron’s efforts, he did come close. And more importantly, he passed on the challenge to the CEO of the Futures Industry Association, Walt Lukken, setting the stage for a record setting kilt challenge fundraising effort.

While Pat Kenny wears the title of “Most Interesting Man in the World” proudly and with the proper amount of playfulness, our industry is full of interesting men and women who make me proud to be part of it.

Thank you to Pat, David, the JLN team and all the other interesting people in our industry.


~John J. Lothian


Boss’s Remark, Employee’s Deed and Moral Quandary
James B. Stewart – Dealbook
About 9 a.m. on Friday, Oct. 28, 2011, Jon Corzine, chief executive of MF Global and formerly a United States senator, governor of New Jersey and chief executive of Goldman Sachs, called Edith O’Brien, the assistant treasurer of MF Global in Chicago, according to a complaint filed last week by the Commodity Futures Trading Commission.

**** Hello, Edith? Jon here.


Are Things Too Cozy In London’s ‘City’ Within A City?
If you think that government and the financial industry are a bit too friendly in the U.S., try England. London’s version of Wall Street is called the City. And in the City, the line between government and corporate interests gets even blurrier. Critics say it’s time for change.
**JK – This story lacks depth.
Also see our JLN Special Report: London on a Pedestal.


20 Words That Will Make or Break Financial Reform
Time Magazine
Derivatives, those complex exploding financial securities that were at the heart of the 2008 Lehman Brothers collapse and global financial crisis, have been at the top of bank reformers’ agenda over the past five years. Figuring out a way to make them — and thus our financial system — safer has been one of the chief focuses of the Dodd-Frank financial-reform bill. But in the next week, a fight …

**** Gary Gensler goes to Time Magazine to get his message out.


FN100 Most Influential: Draghi scores a hat-trick
Financial News
Mario Draghi, the president of the European Central Bank, has made it a hat-trick, becoming the first person to top the FN100 list of most influential people in the European capital markets for three years in a row.


Why We Underestimate Risk by Omitting Time as a Factor
Suppose I offer you a simple gamble. Throw a dice: If you get a six, you win $10; if not, you lose $1. The loss is more likely; the win brings more money. Willing to play?

**** If you stand in the middle of a busy highway, you will understand time as a factor of risk.


Congress Is on Pace to Do Less Than Record-Breaking Low
Megan O’Neil – Bloomberg
The current U.S. Congress, facing a backlog of unfinished business and sliding approval ratings, is on pace to clear fewer bills than its predecessor — which had the least number of measures signed into the law since modern record keeping began in the 1940s.

***** Progress should never be confused with Congress.


Ellison Speeds Up America’s Cup With Flying Cats in Spectacle
Aaron Kuriloff – Bloomberg
The doors of Larry Ellison’s waterfront hangar on San Francisco Bay slide open and more than a dozen men in hard hats roll out the billionaire’s latest technological marvel. Built to defend the America’s Cup starting here on Sept. 7, Oracle Team USA 17 is a catamaran named after the company that made Ellison the eighth-richest person on the planet.

**** Which commodity hedge fund manager is putting together a team for the America’s Cup?



MarketsWiki Page of the Day
Thomas M. Joyce

MarketsWiki Recent Updates

Companies, Organizations and Groups

Options News Network; IMC Financial Markets; EnterNext; Turquoise


Asset class; European Market Infrastructure Regulation


41,455,623 pages viewed, 7,576 articles, 161,649 edits
MarketsWiki Statistics

Lead Stories

Thomson Reuters to Suspend Early Peeks at Key Index
Peter Lattman – Dealbook
Over the last several years, an exclusive group of investors has paid a steep premium to receive the results of a closely watched economic survey a full two seconds before its broader release. Those two seconds can mean millions of dollars in profits for the investors, who practice a computer-driven strategy called high-frequency trading

CFTC To Hold Open Meeting To Consider Cross-Border Final Guidance And Cross-Border Phase-In Exemptive Order
Press Release (via Mondovisione)
U.S. Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler today announced the Commission will hold a public meeting on Friday, July 12, 2013, at 9:30 a.m.

***** This is a big issue that may be the key to Mr. Gensler’s legacy.

S&P to Argue Puffery Defense in First Courtroom Test
Edvard Pettersson – Bloomberg
Standard & Poor’s, getting its first shot in open court at U.S. Justice Department claims it should pay as much as $5 billion in civil penalties, will defend itself by arguing reasonable investors wouldn’t have relied on its “puffery” about credit ratings.

High-frequency traders race to find new markets
Recent decisions by firms that use high-frequency trading strategies to move away from more established trading venues in favour or emerging markets continues a trend that has been developing since the financial crisis, finds Galen Stops.

Jobs Strength Keeps Fed ‘Taper’ on Track
Victori McGrane – The Wall Street Journal
After five years of unconventional measures and policies aimed at supporting the economy through severe financial crisis and sluggish recovery, Federal Reserve officials could see the strong June employment report as another sign that their efforts are finally paying off.

Earnings in Spotlight as Fed Jolt Fades
Matt Jarzemsky – The Wall Street Journal
After Friday’s stronger-than-expected U.S. jobs report, investors are more convinced than ever that the Federal Reserve’s bond-buying program will be scaled back as soon as September. If that happens, the stock market will lose fuel that helped power the Dow Jones Industrial Average to a new high in May.

Why Do Execs Commit Fraud?
Fox News
Hedge fund manager Raj Rajaratnam had it all. By some accounts, the co-founder of Galleon Group was a billionaire. Now he’s serving an 11-year prison term for running what may have been the biggest insider trading scheme in history.

In Ireland, Dire Echoes of a Bailout Gone Awry
Floyd Norris – Dealbook
The Irish bank bailout in the fall of 2008 was the first one to hit a euro zone country during the credit crisis, and it set some unfortunate precedents.

Investment group sues U.S. over Fannie, Freddie bailout terms
Margaret Chadbourn – Reuters
A group of investors led by hedge fund Perry Capital LLC sued the U.S. Treasury in federal court on Sunday to challenge the 2012 changes of the bailout terms set for government-owned mortgage firms Fannie Mae and Freddie Mac

Bond-Fund Losses Spur Withdrawals in the Second Quarter
Karen Damato – The Wall Street Journal
Financial markets went from smooth sailing to nausea-inducing as the second quarter went along.
In May, most types of bond funds posted negative returns amid worries that the Federal Reserve would soon start scaling back its aggressive efforts to keep interest rates low. (Rising rates produce price drops on existing bonds.)

Why Bonds Are Set To Bounce Back
Asset returns were all over the map in the first half of 2013. Stocks outperformed bonds. But within equities, developed markets pummelled emerging markets, with the U.S. and Japan leading the way. A similar trend happened in bonds, where investors who’d poured money into emerging markets promptly fled in May and June of this year. Of course, commodities were the biggest loser, and among these …

Gold’s One Certainty: Its Decline Has Been Swift
Conrad de Aenlle – The New York Times
GOLD and trouble go together, because the metal is often seen as a haven in times of economic distress.
But the relationship is complicated. Prices can rise or fall for seemingly contradictory reasons.

Losing $317 Billion Makes U.S. Debt Safer for Mizuho to HSBC
Anchalee Worrachate & Emma Charlton – Bloomberg
The biggest investors in Asia and Europe are keeping their money in Treasuries even after the steepest two-month loss for the securities erased $317 billion of market value.


Fedspeak: Complex Monetary Policy Spawns Flights of Metaphors
Victoria McGrane – The Wall Street Journal
At a news conference in mid-June, Federal Reserve Chairman Ben Bernanke struggled to explain what the Fed is trying to do, attempting this metaphor: “We’re going to be shifting the mix of our tools as we try to land the ship in a smooth way onto the aircraft carrier.”

Volcker Rule Stirs Fresh Confusion Among Big Banks
Julie Steinberg – Barron’s
Banks are reaching widely different interpretations of which employees are covered by curbs on participation in bank-run investments.

How Regulators Can Restore Trust in Bank Capital
George Hay – Dealbook
The Basel Committee just dealt another blow to the self-assessment of banking risk. This powerful group of global supervisors published new evidence on July 5 unmasking shortcomings in the models that tell lenders how much capital they need. For fans of the status quo, it makes gory reading.

Basel Report Finds Diverging Bank Views on Risk
Mark Scott – Dealbook
Regulators are still grappling with how best to rein in banks’ appetite for risk.
On Friday, the Basel Committee on Banking Supervision, a body of central bankers, said it had found significant differences in how some of the world’s large banks continue to assess risks on their balance sheets.

Statement By The European Commission, The ECB And The IMF On Greece
Press Release (via Mondovisione)
Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) have concluded their review mission to Greece. The mission has reached staff-level agreement, ad referendum, with the authorities on the economic and financial policies needed to ensure the program is on track to achieve its objectives.

ECB’s Noyer says financial market regulation needed
Reuters via Yahoo! Finance
Strengthening regulation of financial markets is necessary to reduce risks, ECB policymaker Christian Noyer said on Saturday, in a speech entitled “The end of the dictatorship of finance”. Noyer, …

U.S. swaps regulator calls vote on cross-border rule
Reuters via Yahoo! News
By Douwe Miedema WASHINGTON – The top U.S. derivatives regulator will meet next week to vote on how its rules apply to foreign companies that want to do business with U.S. firms, a sign it may be nearing a compromise on a thorny issue that has invoked the wrath of foreign regulators. The Commodity Futures Trading Commission announced a formal meeting for July 12 to decide how new rules …

Exchanges & Trading Facilities

Night Session Trading Volume Hit Record At Tokyo Commodity Exchange
Press Release (via Mondovisione)
The Tokyo Commodity Exchange, Inc announced today that the trading volume for the July 8 night session* which started at 17:00 JST of July 5 and closed at 4:00 JST of July 6 amounted to 161,245 contracts. It tops the previous all-time record of 146,847 contracts for the April 16, 2013 night session.

ISDX Launches New Admissions Criteria For ISDX Growth Market Companies
Press Release (via Mondovisione)
The ICAP Securities & Derivatives Exchange (ISDX), has today announced the launch of its new admissions criteria for companies wanting to apply for admission to the ISDX Growth Market. The ISDX Growth Market is a venue for small and medium sized companies seeking to raise growth capital, achieve an independent market valuation and enhance their corporate profile.

BM&FBOVESPA Publishes June Market Performance
Press Release (via Mondovisione)
BM&FBOVESPA published June market performance. The total financial volume in the BOVESPA segment reached BRL 178.84 billion in June, compared to BRL 162.35 billion in May, 2013. The daily average set a record of BRL 8.94 billion up from BRL 7.73 billion recorded in May. The total number of trades also reached the milestone of 21,381,341 in June, surpassing the 19,733,908 trades registered in May. The average daily trading volume set a new record at 1,069,067 compared to 939,710 the previous month.

BSE launches futures trading on Dubai bourse
Reuters via Yahoo! Finance
By Dinesh Nair DUBAI – The Dubai Gold and Commodities Exchange started trading an Indian stock index futures contract on Wednesday, aiming to tap demand from the large expatriate Indian …

Hedge Funds & Managed Futures

From the Fed, Mixed Signals for Main Street
Conrad de Aenlle – The New York Times
PRICES of stocks, bonds and other investments sank toward the end of the second quarter as the Federal Reserve signaled that it might begin what Wall Street has called “the taper” — the reduction and then the possible reversal of bond purchases that the Fed has used for years to support the economy and markets.

A Dimming Outlook for Bonds May Require Some Rethinking
Carla Fried – The New York Times
FOR three years, the warnings that bonds were primed for a downfall smacked of crying wolf. Bond funds generally did just fine, thank you. That is, until May.

Mutual Funds That Made Sense of a Confusing Market
Tim Gray – The New York Times
IN a hurly-burly quarter, with some stock-market sectors sagging and others surging, managers of three of the top-performing mutual funds managed to find rising returns in places as varied as restaurants, roadsters and robots.

Assets Of Top 100 Alternative Investment Managers Hit $3 Trillion – Towers Watson Survey Shows Total Global Alternative Assets Under Management Exceed $5 Trillion.
Press Release (via Mondovisione)
Total assets managed by the Top 100 alternative investment managers globally reached $3.1 trillion in 2012, according to research produced by Towers Watson and published in conjunction with the Financial Times.

Bill Miller’s Fund Is No. 1 Again
Suzanne McGee – The Wall Street Journal
For the third straight quarter, Legg Mason Capital Management Opportunity finished first in The Wall Street Journal’s ranking of diversified U.S.-stock mutual funds with more than $50 million in assets and at least a three-year record.

Banks & Brokers

Europe a hotchpotch of testing regimes for bankers
Reuters via Yahoo! News
By Laura Noonan LONDON – Five years after mismanagement brought the global financial system to the brink of collapse, a Reuters survey reveals yawning differences in the way European Union countries assess whether bankers are up to the job. In a continent where executives have made headlines for contributing to the failure of their banks – British CEOs Fred Goodwin of RBS and James …

At 88, Former AIG Boss Is Building a New Empire
Leslie Scism – The Walll Street Journal
Lately, Maurice “Hank” Greenberg, former chief executive of American International Group Inc., AIG has been traveling the world, with stops in Shanghai, Istanbul, Manila and other far-flung locales.

Is Bank of America Merrill Lynch poised for take-off in Europe?
Ben Wright – Financial News
Bank of America Merrill Lynch’s investment bank has had a great start to the year. It figures behind only JP Morgan, Goldman Sachs and Morgan Stanley in the league tables for global M&A and equity capital markets revenues over the first six months of 2013. Better still, it lags only JP Morgan for debt capital markets and overall investment banking revenues, according to figures from data provider Dealogic.

Clearing & Settlement

New offering enables firms to more accurately price credit risk and effectively optimize collateral
NEW YORK – July 8, 2013 – eClerx, a leading provider of knowledge and business processing to the global financial services industry, today announced the launch of its ISDA Credit Support Annex (CSA) Document Risk Review solution that allows financial institutions to strategically mine information comprehensively and accurately from CSAs for more informed management of credit and legal risk, optimization of cash and collateral, and operational risk mitigation. Firms can leverage the data pre-trade to ensure derivative trades are priced correctly, and post-trade to optimize collateral movements across counterparties.


Startup helps build trading tools
Peter S. Cohan –
Financial theory argues that over the long run, individuals can’t beat the market. But a Boston startup, Quantopian — which lets people build, test and execute trading algorithms — has developed software for those who want to try.


Many Paths Remain for a Case Against SAC Capital Advisors
Peter Lattman and Ben Protess – Dealbook
Of the multiple threads the government has pursued in its long-running insider trading investigation of Steven A. Cohen and his hedge fund, SAC Capital Advisors, the case against Mathew Martoma had been seen as the most promising.

Wall Street’s ‘Teflon Don’ Dodges Insider Trading Charges
Time Magazine
Hedge fund titan Steve Cohen and his firm SAC Capital will reportedly avoid federal prosecution

Prosecutors Lack Evidence to Charge Cohen: WSJ
Hedge-fund billionaire Steven A. Cohen isn’t likely to face criminal charges tied to the biggest alleged insider-trading case in history as U.S. prosecutors conclude there’s not enough evidence to meet a statute of limitations deadline to file a case, the Wall Street Journal reported, citing people familiar with the situation.

Environmental & Energy

Analyzing Renewable Energy in the United States
Press Release (via Yahoo Finance)
There is no doubt that the United States is a torch bearer in the renewable energy industry. In fact, 11.14 percent of the electricity produced in the US in the first six months of 2010, came from renewable energy resources itself. The US was the largest producer of electricity from wind power, solar power and geothermal sources in 2009, coming in second to China in the overall production of renewable energy.


China Cash Squeeze Seen Creating Vietnam-Size Credit Hole
China’s money-market cash squeeze is likely to reduce credit growth this year by 750 billion yuan ($122 billion), an amount equivalent to the size of Vietnam’s economy, according to a Bloomberg News survey.

China to Resume Trading of Treasury Futures After 18-Year Halt
China will resume trading of government bond futures for the first time in 18 years to provide investors with a hedging tool and help boost the fixed- income market.

Japan Mergers Fall to Nine-Year Low as Yen Volatility Surges
Yuriy Humber – Bloomberg
Japanese companies made the fewest acquisitions in a decade during the first half as the yen’s volatility climbed to a four-year high, cooling buying interest.

Frontier Markets

In Brazil, a Reminder of Emerging-Market Risks
Tim Gray – The New York Times
THE protests in Brazil last month were the latest vivid reminder of the perils of investing in emerging markets. Tens of thousands of demonstrators thronged the streets of São Paulo, Rio de Janeiro and other cities, incited partly by a rising cost of living and a slowing economy. Cars burned. Tear gas billowed. And the Brazilian stock market sank.

Investors Cheer Egypt Transition, See Brief Window of Hope
Reem Abdellatif – The Wall Street Journal
CAIRO—Judging by Egypt’s surging market and rebounding currency a day after the military ousted President Mohammed Morsi, investors believe that Cairo’s new leadership will shore up confidence in the country’s markets and open the way for new economic aid from Arab neighbors.

IMF Fears Risks From ‘Slippage’ in Italy
Christopher Emsden – The Wall Street Journal
Italy’s economy faces “risks tilted to the downside” due to potential backsliding on the policy front both at home and at the European level, the International Monetary Fund said Thursday.

Hedging Surge Prompts India Central Bank Inquiry on Rupee Moves
India’s central bank, concerned about the fastest growth in currency derivatives trading in more than three years, is asking overseas funds to prove they aren’t speculating on the rupee.


Alcoa Facing ‘Hard Decisions’ on Aluminum Plants
Sonja Elmquist – Bloomberg
Bob Wilt’s first job at Alcoa Inc. (AA) was in 1999 at a plant in the Tennessee town named after the company. In 2012, as head of the aluminum producer’s U.S. smelters, he oversaw the plant’s demolition.

Treasury Auctions Set for This Week
The New York Times
The Treasury’s schedule of financing this week includes Monday’s regular weekly auction of new three- and six-month bills and an auction of four-week bills on Tuesday.

What I Learned From The Greatest Stock Speculator In History
StreetAuthority Network via Yahoo! Finance
In this modern age of instant market access, high-frequency trading and real-time news, there really is nothing new under the sun.

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Past JLN Newsletters

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How Ken Griffin rebuilt Citadel’s ramparts

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