Industry execs see the possible sale of Euronext as shaking up the exchange balance in Europe. Asset managers get a welcome exception to Dodd-Frank credit-default swap collateral rules from the SEC. In the UK, a lawsuit over short selling rules could be a larger test over the power that cross-border regulators may wield in the future.
London is Next
John J. Lothian
Thanks to Jessica Titlebaum for editing the newsletter last week.
Jim Kharouf and I are both headed to London at the end of the month for FIA/FOA International Derivatives Week. Let us know if you would like to set up a meeting there.
We will be looking for a guest editor for that week. Suggestions are welcome. We have one for the following week lined up already, the first week of July, while I am away at Boy Scout summer camp.
Do you have Interns in Chicago this summer?
We are contemplating creating a summer intern education program as part of our World of Opportunity theme. Right now, this would just be a Chicago program, but could expand in the future if it works. Does your firm have interns in Chicago this summer? If so, how many do you have? We want to see if there are enough to make this program work, so please let us know.
Turkey on Hold
We are putting our Turkey Special Report on Hold (hold the Turkey!), while we evaluate the rather fluid political unrest there and its impact on the theme of our Special Report.
Meanwhile, we continue to work on our Special Report on London, hopefully publishing it the week of IDX.
I returned last week from a Boy Scout trip to Mammoth Cave in Kentucky. The boys had a great time of caving, zip lining, horseback riding, swimming and fishing. And, during a stop at the birthplace of Abraham Lincoln, they had the opportunity to retire the colors of the U.S. from the flagpole there. It was a moving experience and a great trip.
During one of the cave tours, I had to go up and down over 500 steps, which is pretty good considering I am less than 3 months from having double knee replacement surgery.
While I was on my trip, MarketsWiki passed the 40 million page view mark and MarketsReformWiki passed the 5 million page view mark. Those are getting to be some Mammoth traffic numbers.
IntercontinentalExchange Sets Daily Volume Record in ICE U.S. Dollar Index
IntercontinentalExchange, a leading operator of global markets and clearing houses, today reported record daily volume in the ICE U.S. Dollar Index (USDX) futures contract of 116,372 contracts on June 6, 2013. The notional value of USDX contracts traded was approximately $9.5 billion. The previous daily volume record of 88,394 contracts was established on March 13, 2013. Year to date, ADV for the USDX is 34,707, up 27% over the same period last year.
***** Do you know who was behind the creation of the tradable dollar index?
S.E.C. Plan for Money Market Funds Takes Some Baby Steps
New York Times
Mary Jo White, the S.E.C.’s new chairwoman, is taking a more incremental approach than her predecessor in trying to regulate money market funds.
***** Yes, bold regulatory action via baby steps.
Beyond the sound and fury of CFTC deadline
Lee Olesky – FT.com
For many US-based traders, Monday marks the beginning of a radical change in derivatives trading. The next major deadline in over-the-counter swaps market reform will take effect, requiring “Category II” companies such as commodity pools, hedge funds and non-swap dealer banks, to clear derivatives trades through a centralised clearing party.
HKEx’s LME warehousing conundrum
Jack Farchy in London – FT.com
Soon after Charles Li secured the acquisition of the London Metal Exchange, he caused a stir by promising to take a “bazooka” to its thorniest problem – warehousing. A metaphorical rocket-launcher would be necessary, the chief executive of Hong Kong Exchanges & Clearing explained, should it turn out that the long queues to take delivery from the LME’s network of warehouses were causing shortages of metal in the real world, forcing factories to shut down and harming economic growth.
***** Maybe selling the exchange was not such a great idea?
The Future of Global Financial Regulation
Clarke Camper – Inside the Beltway
The Institute of International Finance (IIF) recently published a report outlining sixteen recommendations to global financial policymakers on ways to best “promote greater consistency” during “all stages of the regulatory cycle.”
***** Here is your summer reading recommendation.
Jock Percy of Perseus Telecom on Microwave Technology in the Trading World
Jock Percy spoke with John Lothian News Editor-at-Large Doug Ashburn about the use of microwave for data transmission – what is driving the demand, the benefits and limitations of wireless, and a bit about the economics of technology upgrades. He closes with a look to the future of wireless and its global implications.
Dr. Jock Percy is CEO of Perseus Telecom, a global carrier of financial telecommunications specializing in ultra low-latency market-to-market connectivity. Before taking the helm at Perseus, Percy spent a number of years in the telecommunications sector, with firms such as Double Helix (sold to ACE*COMM in 2006), BT, Telekom Austria, Finnet, and Saudi Telecom. In 2009 he founded FXecosystem, a provider of low-latency infrastructure to the foreign exchange market.
Tradition Launches New Volatility Futures Platform – Streamlined Negotiation Of CME Group Futures With Variance Pay-Off
Tradition, one of the world’s largest interdealer brokers in over-the-counter commodity and financial products, has today announced the launch of Volatis, a new hybrid platform designed to facilitate the negotiation, and subsequent trading of, realised volatility futures with a variance pay-off listed and cleared on CME Group exchanges.
All is Fair in Exchanges’ War
JACOB BUNGE AND TELIS DEMOS – WSJ.com
When the two biggest U.S. stock exchanges battle for stock listings, they go at each other glitch for glitch. David Callisch witnessed the barbs when his company was deciding on its initial public offering last year.
An Old-School Stock Picker Struggles With Index Craze
KIRSTEN GRIND – WSJ.com
Wally Weitz may be only the second-best-known investor in Omaha. But like Warren Buffett, he has long churned out gains by sticking to a basic formula: Buy strong companies whose shares are down and wait patiently for a rebound. Over three years, his Weitz Value mutual fund has outperformed the Standard & Poor’s 500-stock index by an average of about one percentage point a year and beat about 90% of similar stock funds. Investors aren’t impressed.
Up, up and away: balloons
could enable high-speed trading
Michelle Price – Financial News
Network providers have drilled through the Appalachian Mountains and laid fibre optic cables beneath the Arctic ice, now they are exploring using a new technique in the pursuit of super-fast trading: the humble balloon.
Don’t worry about money
Chuck Jaffe, MarketWatch
The problem with growing up in the household of a columnist is that everything you do becomes work fodder. And so it was that my children’s money foibles as toddlers and teens made my work easier. Moreover, the one thing every columnist has in them at some point is a graduation speech; it’s one of those transitional points where we feel our lessons will be valuable. Yet the one thing my children asked me not to write was a “graduation speech about money” for when they got out of high school.
David Weidner’s Writing on the Wall: SAC and the cost of a lost reputation
In Shakespeare’s “Othello,” the slandered Cassio exclaims: “I have lost my reputation! I have lost the immortal part of myself, and what remains is bestial.” So it goes on Wall Street.
MarketsWiki Page of the Day
Stephen P. O’Connor
MarketsWiki Recent Updates
Companies, Organizations and Groups
40,452,027 pages viewed, 7,516 articles, 160,378 edits
Exchange CEOs See Euronext Sale Reshaping EU Equity Market
JACOB BUNGE – WSJ.com
NEW YORK—A planned spin-off of four European stock exchanges could trigger a shake-up of equity trading in the region that includes partnerships or further consolidation, senior industry executives said.
Hedge Funds Win Collateral Reprieve in SEC Dodd-Frank Shift
Silla Brush & Matthew Leising – Bloomberg
Hedge funds and asset managers won relief from Dodd-Frank Act collateral requirements for credit-default swaps under a policy shift disclosed today in letters posted on the U.S. Securities and Exchange Commission’s website.
UK short-selling suit to test Esma powers
Anish Puaar – Financial News
The outcome of a UK lawsuit over shortselling rules could prove pivotal in determining the future power of European super-regulators created in the wake of the financial crisis, according to legal experts.
Police Charge Man in HKMEx Probe Over Proof of Funds
Hong Kong police investigating the failure of the Hong Kong Mercantile Exchange charged a Malaysian man with possessing a fake statement of funds for $516 million.
SEC Pays $580,000 Over Ex-Investigator’s Firing Claims
The U.S. Securities and Exchange Commission has paid $580,000 to settle claims by a former internal watchdog that he was fired in an effort to quash his investigations.
Tech Beat: Market gets creative to beat the margin squeeze
Philip Stafford – FT.com
One of the trickiest issues banks and brokers will face in coming years is finding the collateral, or insurance, they need to back their trades. All recognise they will need more for trading when the wave of competing financial services regulation kicks in; few know how much will be required, nor what will be acceptable to both regulators and clearing houses.
Norway Banks to Hand Nibor Oversight to Bourse After Probe
Norway’s banks are working on handing oversight and setting of the nation’s benchmark interbank rate to the stock exchange after a probe into claims of manipulation was inconclusive.
Germany lays out high-frequency trading hurdles
Tim Cave – Financial News
German lawmakers stole a march on their European counterparts last month with the introduction of one of Europe’s first pieces of legislation designed specifically to curb high-frequency trading.
Recusals Likely for SEC’s New Top Cop
JEAN EAGLESHAM – WSJ.com
Andrew Ceresney was picked as the Securities and Exchange Commission’s new co-chief of enforcement partly because of his experience defending Wall Street in government investigations. Now, the agency has to work through the conflicts created by his private-sector past.
U.S. Rules on Swaps Face Opposition Abroad
JAMILA TRINDLE AND LAURENCE NORMAN – WSJ.com
Gary Gensler’s plan to impose U.S. derivatives rules on foreign-based banks will face a critical test when the Commodity Futures Trading Commission chairman meets with European regulators in Montreal on June 20.
Bloomberg Suit Over CFTC Swap Collateral Rules Is Dismissed
Joel Rosenblatt – Bloomberg
Bloomberg LP’s lawsuit challenging the top U.S. derivatives regulator over rules setting higher collateral standards for swaps than comparable futures was dismissed by a federal judge.
SEC counsel faces whistleblower’s claims
Tom Braithwaite and Kara Scannell in New York – FT.com
The new chief counsel to the Securities and Exchange Commission chairman is the subject of a discrimination complaint from a former colleague at Deutsche Bank, who claims he was fired for blowing the whistle on fraud.
CFTC’s Division of Clearing and Risk Issues Time-Limited No-Action Relief from Required Clearing for Swaps Entered into by Certain Cooperatives
The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission (Commission) today announced the issuance of a time-limited, no-action letter granting relief from required clearing under section 2(h)(1)(A) of the Commodity Exchange Act and part 50 of the Commission’s regulations for certain swaps entered into by qualifying cooperatives.
CFTC’s Division of Clearing and Risk Issues an Advisory Pertaining to the Effective Date of the Clearing Exemption for Swaps Between Certain Affiliated Entities
The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission (CFTC) today issued an Advisory notifying market participants that the effective date of the final rule adopting the “Clearing Exemption for Swaps Between Certain Affiliated Entities” has been automatically extended by operation of law, to June 18, 2013.
European Central Bank Consults On Draft Regulation On Oversight Requirements For Systemically Important Payment Systems
Exchanges & Trading Facilities
CME Group Sees Record Trading In Its Global FX Complex – Transacted $239 Billion In Notional Volume Across FX Futures And Options
CME Group, the world’s leading and most diverse derivatives exchange, yesterday saw record trading in electronic FX options, Japanese yen, Canadian dollar and open interest in Australian dollar. Total
Pierre Bornard Appointed Powernext’s Chairman Of The Board For A Fifth Consecutive Term
Powernext’s Management Board has appointed Pierre Bornard as its Chairman for a fifth consecutive term on 28th May 2013. Jean-François Conil-Lacoste is Powernext’s Chief Executive Officer since the creation of the company in 2001, while Mr. Bornard, also Vice-President of RTE’s Board of Directors (Réseau de Transport d’Électricité, the French TSO), is its non-executive President.
Q&A With Steffen Koehler, Chief Operating Office, EEX – From June’s Trading Places
BOX Options Exchange June 2013 InBOX
TMX Atrium Support Migration Of TOM (The Order Machine)
[CBOE] Restrictions on Transactions in Tata Communications Ltd. (TCL)
[CBOE] Trader E-News
TOM MTF Statistics Week 23, 2013
Hellenic Exchanges S.A. : Notification About A Significant Change In The Number Of Voting Rights (Law 3556/2007)
Athens Exchange Derivatives Market Monthly Statistical Bulletin May 2013
Irish Stock Exchange Admits Cantor Fitzgerald Ireland As A Primary Dealer In Irish Government Bonds
Irish Stock Exchange Statistics May 2013
Athens Exchange Monthly Statistical Bulletin May 2013
Hedge Funds & Managed Futures
Paulson’s main funds gain on deals, distressed debt
Reuters via Yahoo! Finance
Hedge fund manager John Paulson reported strong returns in his largest funds last month as bets on deals and distressed debt are paying off and boosting several of his portfolios to double digit gains so far this year.
Hutchin Hill Credit Trader Ahmad Said to Leave, Unwind Positions
Mary Childs – Bloomberg
Shahraab Ahmad, a credit trader at Hutchin Hill Capital LP who joined the firm at its 2008 inception, is leaving and has mostly completed liquidating his $150 million book.
Charity lunch with Warren Buffett sells for just over $1 million
Salvador Rodriguez – Chicago Tribune
A private lunch with Warren Buffett that benefits a charity was sold Friday on Ebay for $1,000,010. The anonymous bidder will be able to take seven of his or her friends with them to a steakhouse lunch in New York City for a private meal with Buffett, the billionaire investor known as the “Oracle of Omaha.”
CFTC Commitments Of Traders Reports Update
BlackRock Announces Changes to Investment Policies for The Massachusetts Health & Education Tax-Exempt Trust
Banks & Brokers
ICAP plc board changes
ICAP plc (IAP.L), a leading markets operator and provider of post trade risk mitigation and information services, today announces that, following his appointment as Chairman of United Overseas Bank Ltd, Hsieh Fu Hua will not be standing for re-election to the board at ICAP plc’s annual general meeting on 10 July 2013.
Schwab Topping Goldman Sachs Presages American Return to Stocks
Whitney Kisling & Alexis Xydias – Bloomberg
Shares of discount brokers are gaining the most since 2003 compared with the Standard & Poor’s 500 Index, a sign that small investors are joining the four-year bull market even after U.S. stocks suffered their biggest losses in six months.
JPMorgan Chase to Close Albion Mortgage Facility; 400 Workers Affected
ALBION, N.Y. — JPMorgan Chase will close its mortgage facility in Albion in Orleans County in September, putting 400 people out of work. But there are efforts to find new work for those employees.
DealBook: France Expands Inquiry Into Tax Evasion at UBS
New York Times
UBS, the target of a widening tax-evasion case in France, was placed under formal investigation on suspicion that it illegally helped French citizens to set up secret accounts abroad.
Deutsche Bank Opens Singapore Gold Vault That Can Hold 200 Tons
Deutsche Bank AG said it started gold storage facilities that can keep as much as 200 metric tons at the Singapore FreePort.
Clearing & Settlement
ISDA Publishes 2013 Standard Credit Support Annex (SCSA)
The International Swaps and Derivatives Association, Inc. (ISDA), today announced the publication of the 2013 Standard Credit Support Annex (SCSA).
CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (OS) Effective Monday, June 10, 2013
CME Clearing – Performance Bond Requirements – Agriculture, Energy, Freight, and Interest Rate Outrights; Natural Gas Intra-Commodity Spread Charges; Refined Product Inter-Commodity Spread Credits – Effective Tuesday, June 11, 2013
Indexes & Products
SEC Wants to Speed ETF Approval for Faster Launches
ETF Trends via Yahoo! Finance
The SEC will consider a proposal this year that would make it easier for asset managers to introduce simple index-based ETFs, according to a report Friday.
Component Change Made In STOXX Global Select Dividend 100 Index – Changes Are Due To Fast Exit Rule
Quarterly review AEX-Index family
NYSE Euronext: The Expert Indices Committee
Mamadoo Participates In Custom Connect – Big Opportunities For International, Carrier-Neutral Connectivity Services
SEC Charges Whittier Trust and Fund Manager in Insider Trading Investigation Into Expert Networks
The Securities and Exchange Commission today charged a South Pasadena, Calif.-based wealth management company and a former fund manager with insider trading on non-public information about technology companies. The charges are the agency’s latest in its ongoing investigation into expert networks and hedge fund trading.
Rengan Rajaratnam Cuts Own Path in Plea Talks
ANITA RAGHAVAN – NYTimes.com
Raj and Rengan Rajaratnam were both born in Sri Lanka. They both studied at the University of Pennsylvania and they both started hedge funds. But as Rengan, 42, faces insider trading charges, he appears to be taking a very different approach from his older brother, Raj.
Environmental & Energy
U.S. Northeast Carbon-Offset Sale Raises a Record $124.5 Million
Regional Greenhouse Gas Initiative Inc., the nonprofit that administers the U.S. Northeast’s greenhouse-gas emissions program, raised a record $124.5 million in its quarterly auction of carbon allowances after slashing next year’s supply by almost half.
**RKB — RGGI release and auction results, here.
Global carbon trading system needs urgent support warns UN chair
Responding to Climate Change blog
The world’s main system of carbon trading needs urgent support from governments if it is to continue functioning effectively and give developing countries access to green technologies.
Where’s the world going on carbon trading?
The transition toward a new generation of carbon markets includes a range of domestic or regional initiatives that will become the cornerstone of the global growth of the carbon market in the coming years. Over 40 national and 20 sub-national jurisdictions have either implemented or are considering market mechanisms that place a price on carbon.
**RKB — Over 2000 visitors from more than 100 countries attended the Carbon Expo in Barcelona last week. Carbon Market Institute CEO Peter Castellas reports on some of the key takeaways for Australia.
ShFE to launch night trades in gold/silver from July 5 – sources
The Shanghai Futures Exchange (ShFE) will start after-hours trading for its gold and silver contracts from July 5, two sources with direct knowledge of the matter said, as part of its efforts to become a more global marketplace.
California Summit Leaves Host of Unresolved U.S.-Chinese Issues
Though they bonded at their two-day California summit, sharing small talk about exercise and a shirt-sleeve stroll in the unforgiving desert sun, the presidents of the world’s two largest economies still confront a range of issues that threaten to pull them apart.
Osaka Securities Exchange: Open Interest For Nikkei 225 Options Exceeding 5 million Units
HKEx And Jiangxi Financial Affairs Office Sign MOU
HKFE Announces Margin Rates For Adjusted Sinopec Corp Futures
DGCX Monthly Volumes Rise 70% In May
The Dubai Gold and Commodities Exchange registered yet another monthly volume record of 1,448,242 contracts, valued at $ 48.47 billion, in May. Monthly trading volumes on the Exchange leapt 70% from the same month last year.
The hard yards begin in Myanmar’s quest for foreign investment
Reuters via Yahoo! News
By Jared Ferrie NAYPYITAW, Myanmar – In a cramped auditorium in Myanmar’s capital, pro-democracy champion Aung San Suu Kyi had a message for the world’s business elite: her country is teeming with foreign investors scouting for opportunities in one of Asia’s final frontier markets, but not many are actually investing.
Selective justice keeps foreign investment out of Ukraine
Reuters via Yahoo! News
By Olzhas Auyezov KIEV – Four years after British financier Neil Smith bought one of Ukraine’s largest local vodka producers, it was listed by Forbes as one of the country’s fastest-growing firms, with annual sales of $600 million. Then a local court ruling nearly shut it down. Such cases are one reason why Ukraine performs so poorly in attracting foreign investment
The Egyptian Exchange (EGX) Monthly Statistical Report May 2013
African Securities Exchanges Association Yearbook 2013
Nigerian Stock Exchange Weekly Report For The Week Ended June 7, 2013
Malawi Stock Exchange Weekly Report – Week Ending 07 June 2013