John Lothian Newsletter: Mexican Exchange to buy stake in Lima Exchange; US watchdog set to weaken derivatives rules; Cleartrade puts majority stake up for sale

Mar 1, 2013

The Mexican Stock Exchange forms a strategic agreement with the exchange in Peru, and takes a stake in the shares of that exchange. The CFTC prepares to “pull a Maker’s Mark” and water down its upcoming rules for swap execution facilities; but unlike the whisky manufacturer, the CFTC’s customers may not all fly into a rage. Cleartrade Exchange in Singapore puts just over half of itself up for sale via a share offering. In First Read today, check out the very thorough article, “Interest Rate Swap Futures: Finally the Right Time” penned by Sean Owens of Woodbine Associates, and featured in MarketsReformWiki.

First Read

Interest Rate Swap Futures: Finally the Right Time
By Sean Owens, Director of Fixed Income, Woodbine Associates
Sean Owens is director of fixed income at Woodbine Associates, a Stamford, Connecticut-based consulting and research firm serving the capital markets. In addition to his research, he has served on industry panels and roundtables and is a frequent speaker at industry events. His latest work, the “OTC Derivatives Readiness Guide: Business and Regulatory Requirements for Asset Managers and Other End Users Under Title VII,” is a comprehensive examination of the business and regulatory requirements for asset managers, hedge funds, and other end users in the newly regulated OTC derivative markets. For more information, or to obtain a copy of the guide, click HERE:

After three decades of increasing use of OTC derivatives for sophisticated, customized and even generic forms of risk transfer (call it “swap-ification” of risk), the frameworks being implemented via Title VII and Basel III are compelling participants to migrate to more generic products for trading and hedging.

Market participants have begun turning to futures as capital-efficient, low-cost alternatives for generic risk transfer. Hence the new era of “futurization.”

In the interest rate markets, competing swap futures recently began trading. While past initiatives for interest rate swap (IRS) futures have been unsuccessful, we think it will be a different story this time.

A History Lesson

Many solid capital market offerings have not been successful due to poor timing or the lack of sufficient impetus for participants to adopt them. For example, Blackbird, a technology start-up, launched an electronic swap trading platform in 1999. The innovative trading platform leveraged technology in the IRS markets and could be considered similar to a present-day alternative trading system (ATS) or swap execution facility (SEF). Unfortunately, the timing was off: there was no compelling need or regulatory impetus driving dealers or participants to trade on the platform.

For the rest of this in-depth and comprehensive article, visit MarketsReformWiki at


Knight Futures Becomes Friend level MarketsWiki Sponsor
John J. Lothian & Company, Inc. is pleased to announce that Knight Futures, the futures commission merchant arm of Knight Capital Group, has become a Friend level sponsor of MarketsWiki.

“MarketsWiki is a great tool and a handy way to quickly find futures industry related information and we are happy to support it,” said Carl Gilmore, Managing Director of Knight Futures.

“We are very pleased to have Knight Futures among the numerous industry players who support MarketsWiki,” said John J. Lothian, President & CEO of John J. Lothian & Company, Inc. and founder of the online knowledge base. “Knight Futures and its predecessor firms have long been a friend of John Lothian & Company, Inc. and MarketsWiki. We appreciate their support for the site and our efforts.”

Learn more about Knight Futures at


Dodd-Frank Swap Oversight Goal Stymied as Firms Fight Over Data
More than two years after Congress voted to bring swap transactions out of the shadows so they could be tallied and monitored, U.S. regulators are still struggling to build a system that works.

***JM: JLN’s Doug Ashburn says (in another bid for attention…): For more on the CME-DTCC data dispute, check out my recent commentary on MarketsReformWiki:


CBOE Says Cost of Settling SEC Probe Could Reach $10 Million – Filing
Jacob Bunge – Dow Jones
The parent of the Chicago Board Options Exchange said Thursday that the cost of resolving a yearlong regulatory investigation could rise to $10 million, double what the company has set aside to settle the matter, according to a regulatory filing.

**** Thank goodness for the VIX records.


Blackstone Profits From Regulation With Citigroup Deal
Michelle Wiese Bockmann, Liam Vaughan & Ben Moshinsky – Bloomberg
Blackstone Group LP (BX), the world’s largest private-equity firm, has devised a way to profit from regulation: It’s helping banks meet tougher capital rules without the pain of selling assets or raising equity.

**** Where there is a will, there is a way.


ASX to use cross-margining efficiencies in battle for Australia clearing market
The decision by the Australian Securities Exchange (ASX) to introduce cross-margining between listed and over-the-counter derivatives when it launches its OTC clearing operation later this year will help it secure a majority of the cleared Australian OTC derivatives market, says a senior figure for the exchange.

***** What is the over under on the down under being over easy.


Finance: An inequitable divide
Anne-Sylvaine Chassany in London and Henny Sender in New York –
In October 2006 Guy Hands, his advisers at Citigroup and two other banks met in London to discuss a life-transforming plan for the British financier. The idea was to list Terra Firma, his private equity firm, to help diversify into new businesses: property, infrastructure and debt. Terra Firma would triple assets under management within three years to about E30bn, and Mr Hands would cash in a tidy $500m, according to people with knowledge of the matter.

***** I quake at the thought of Terra Firma.


Comment: Some HFT myths debunked
Remco Lenterman –
An influential MEP told me some months ago that of the 250 meetings he’d attended in the preceding six months, 80 per cent were about high-frequency trading. This is an astonishing number. Who would have guessed that this one issue would have captured so much attention, given all the other urgent financial and economic issues facing European policy makers?

***** Remco Lenterman is my hero.


Breuer Reflects on Prosecutions That Were, and Weren’t
After spending four years under the microscope as he led investigations of some of the world’s biggest banks, Lanny A. Breuer hasn’t lost his swagger. The 54-year-old prosecutor, with a Rolodex as thick as his Queens dialect, will leave the Justice Department
on Friday, emboldened after mounting recent cases against banking giants. But Mr. Breuer, the department’s criminal division chief, also leaves somewhat bruised, having taken criticism for not throwing Wall Street executives behind bars after the financial crisis. In short, it has been grueling.

***** It has been grueling for all of us.


Everybody’s Everything
Trade Talk – Trading Technologies
There are very few “renaissance” men (or women) around these days, so I don’t think Leonardo has any worries. Still, the need for individuals with vision, skills and ambition is not a luxury but rather a necessity for businesses today. Every once in awhile, I come across students who understand this.

***** Attention WILD, future speaker.


Boris’s Roman wisdom
David Thomas – Financial News
Never afraid to bamboozle the public with obscure classics references, London mayor Boris Johnson has described an EU limit on banker’s bonuses as “possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire.” Boris’s enmity for interventionist policy clearly spans the centuries, but who was Diocletian, and how much did he really have in common with today’s Eurocrats?

***** He who controls prices, controls nothing.


Nils-Robert Persson

Nils-Robert Persson Talks About Cinnober and the Growth of Real-time Risk Management

There are some firms who are ahead of the curve and profit from it. Cinnober Financial Technology, the Swedish-based provider of electronic trading platforms was certainly one of them when it began pushing real-time risk management technology for trading and clearing platforms long before the 2008 financial crisis. Now its an integral part of the marketplace.

Nils-Robert Persson, executive chairman for Cinnober spoke with JLN editor-in-chief Jim Kharouf about the speed of execution and clearing systems, as well as what’s next for the firm.

Watch the video »


MarketsWiki Page of the Day
Haruhiko Kuroda

MarketsWiki Recent Updates


Andrew Lamb; Haruhiko Kuroda; Sean Owens; Jacob “Jack” Lew

Companies, Organizations and Groups

Woodbine Associates


Job Postings; Interest rate swaps


35,671,697 pages viewed, 7,419 articles, 155,452 edits
MarketsWiki Statistics

Lead Stories

Mexican Exchange to buy stake in Lima Exchange
Market Watch
MEXICO CITY–The Mexican Stock Exchange said Thursday it has agreed to take a stake in the Lima Stock Exchange via the purchase of 5.9% of the Peruvian bourse’s Series A shares. The two exchanges have also agreed to form a “strategic association,” the Bolsa Mexicana De Valores BOLSA.MX said in a statement, that will aim to further develop the securities markets in Mexico and Peru.

US watchdog set to weaken derivatives rules
Shahien Nasiripour in Washington and Michael Mackenzie and Tom Braithwaite in New York –
A leading US regulator is poised to water down rules for derivatives trading that critics argue will allow global banks to preserve their dominance of the market. Mark Wetjen, seen as the swing vote on the five-person Commodity Futures Trading Commission, recommended this week in a confidential agency memorandum that the CFTC alter its proposed rule regarding derivatives marketplaces, or “swap execution facilities”, according to people who have seen the document.

Cleartrade puts majority stake up for sale
Suzi Ring – Financial News
Cleartrade Exchange, the Singapore-based trading platform, has launched its first share offering to investors, with 51% of the business up for sale as it looks to build capital for further growth.

LME Revenue Advanced 28% Last Year After Higher Fee
Agnieszka Troszkiewicz – Bloomberg
The London Metal Exchange, the world’s largest metals marketplace, reported a 28 percent jump in revenue last year after raising fees.

Edith Ramirez to be Named F.T.C. Chief
Edith Ramirez, a former appellate and antitrust lawyer who served on the staff of the Harvard Law Review with Barack Obama and later coordinated his campaign’s outreach to Latino voters in California, will be appointed by the president to be chairwoman of the Federal Trade Commission, the agency said on Thursday. She begins work on Monday.

Peregrine Founder Transferred to Indiana Prison
Peregrine Financial Group Inc. founder Russell Wasendorf Sr. was transferred this week to a high-security prison in Indiana, where he will begin serving his 50-year sentence for fraud.

Can investment banks keep their heads above water?
William Wright – Financial News
Something strange is happening in the world of investment banks: for the first time in nearly two years, they might just have stopped destroying value for their shareholders.


Remarks Of CFTC Chairman Gary Gensler On Libor Before The Global Financial Markets Association’s Future Of Global Benchmarks Conference

FINRA Investor Education Foundation and United Way Worldwide Announce More Than $1 Million in Grants to Support Grassroots Financial Education Projects

Canadian Securities Regulators Adopt Amendments to Prospectus Rules

ASIC releases guidance on code approval under FOFA

[Japan] Press Conference by the Minister for Financial Services (February 26, 2012)

SIX Exchange Regulation: Conclusion Of The Consultation Regarding The Application Of Swiss GAAP FER

IOSCO Identifies Non-Signatories To The MMoU On The Exchange Of Information

Exchanges & Trading Facilities

Cleartrade Exchange (CLTX) Launches Share Issue – Market Users And Industry Participants Get The Opportunity To Join In Exchange’s Success
Press Release
Cleartrade Exchange (CLTX), the Singapore Regulated Futures Exchange, today announced its first share offer to professional investors. An investment memorandum has been distributed to a number of strategic investors and market participants. Northland Capital Partners Limited is representing CLTX.

TSE Trading Overview in February 2013
Monthly trading volume for 10yr JGB futures was 779,481 contracts (daily average: 41,025 contracts), up 17% year-on-year; Monthly trading volume for TOPIX futures was 1,273,161 contracts (daily average: 67,008 contracts), up 53% year-on-year

TFX Trading Volume in February 2013
The trading volume of Three-month Euroyen futures in February was 456,496 ( + 16.6% MoM / + 8.7% YoY) and its average daily volume was 24,026 .

Burgundy: Aggregated Market Shares – Finnish Equities, February 2013

Burgundy: Aggregated Market Shares In Swedish Equities – February 2013

SIX Financial Information UK listed in The Sunday Times Best Companies to Work For 2013
SIX Financial Information UK Ltd is pleased to announce that it has been listed in The Sunday Times 100 Best Companies to Work For 2013. The company also came second place in a special award for ‘innovation in employee engagement’ and achieved a two star ‘outstanding’ recognition through the Best Companies accreditation process.

CBOE Holdings To Present at Raymond James Institutional Investors Conference On March 5

IntercontinentalExchange CFO to Present at Raymond James Conference on March 4

MIAX Options Exchange: Penny Pilot Classes For Option Classes To Start Trading On March 4, 2013

[CBOE] March 2013 Fee Changes

Direct Edge Trading Notice #13-10: Fee Schedule Changes For EDGA And EDGX Effective March 1, 2013

Program Trading Averaged 26.3 Percent of NYSE Volume during Feb. 19-22

NYSE Liffe welcomes Concord Futures Corp as a new member

NYSE Euronext Announces Date for First Quarter 2013 Earnings Release and Conference Call

NYSE, NYSE MKT and NYSE ARCA Participation in Industry LULD/MWCB Testing

Athens Exchange Market Operations Committee Decision

Hedge Funds & Managed Futures

Hedge fund in “Whale” trade tried to poach JPM employees: sources
Reuters via Yahoo! News
NEW YORK – BlueMountain Capital, a hedge fund involved in JPMorgan Chase & Co.’s $6.2 billion trading loss last year, tried to recruit several employees in the bank’s chief investment office in the months before the losses, according to two people familiar with the matter.

Tudor Said to Plan First Equity Funds Since Pallotta Left
Tudor Investment Corp., the $11.6 billion hedge fund that seeks to profit from macroeconomic events, is planning its first equity funds since stock manager James Pallotta left the firm in 2009, according to four people with knowledge of the matter.

Investor Outflows Continue at Man Group
New York Times
Clients continued to withdraw money from the Man Group, the world’s largest publicly traded hedge fund, in the final quarter of last year, raising the stakes for the new chief executive to win back investors.

Building your own hedge fund
CBS News
Some companies are offering funds that replicate hedge funds, and that includes their poor performance

Baillie Gifford closes diversified fund to new investors
Mark Cobley – Financial News
Baillie Gifford, the Scottish fund manager, has closed its popular Diversified Growth fund to new investors as the appeal of such multi-asset strategies continues to grow.

KKR’s dynamic dealmaking duo
CNN Money
After 36 years at the helm of KKR, Henry Kravis and George Roberts have both earned a place among private equity’s éminence grises . But their partnership began when they were 2-year-old first cousins vacationing in Marblehead, Mass.

Buffett to Update His Acquisition Hunt
Two years ago, Warren Buffett told Berkshire Hathaway Inc. shareholders he was on the lookout for major acquisitions, as part of his unending effort to profitably employ the buckets of cash his company collects every month.

Preliminary Report On Foreign Holdings Of U.S. Securities

Banks & Brokers

Blackstone Profits From Regulation With Citigroup Deal
Michelle Wiese Bockmann, Liam Vaughan & Ben Moshinsky – Bloomberg
Blackstone Group LP (BX), the world’s largest private-equity firm, has devised a way to profit from regulation: It’s helping banks meet tougher capital rules without the pain of selling assets or raising equity.

JPMorgan No. 1 Investment Bank as Flurry of Deals Spurs Optimism
Dawn Kopecki and Michael J. Moore – Bloomberg
Investment banking, after five long, hard years of negative or anemic growth, job cuts, pay cuts and public lashings, is on the verge of a comeback. Really, it is — if the data can be believed.

JPMorgan Grabs No. 1 Underwriter Spot Spurred by Debt Refinance
Matthew Leising – Bloomberg
Jim Casey, co-head of global debt capital markets at JPMorgan Chase & Co., says 2012 was so spectacular that it deserves a moniker: the Year of Refinancing.

Goldman Sachs Tops M&A List as Berkshire-Heinz Signals Rebound
David Welch & Matthew Monks – Bloomberg
When Hormel Foods Corp. announced in January that it had signed a $700 million deal to acquire the Skippy brand from Unilever NV, analysts joked about putting peanut butter on Spam. Investors liked the combination of foodmakers: Hormel’s stock rose 7 percent by the end of the next day.

Libyan Fund Helping SEC in Goldman Probe
Libya’s sovereign-wealth fund said it is cooperating with the U.S. Securities and Exchange Commission in its ongoing investigation into Goldman Sachs Group Inc. over the securities firm’s dealings with the fund when Col. Moammar Gadhafi was in power.

Euro Zone Plan to Limit Bonuses Rattles Bankers
International Herald Tribune
Bankers voiced complaints about a euro zone proposal to limit bonuses, but it appears that banks will have ways to get around it.

Monte Paschi Begins Legal Action Against Nomura, Deutsche Bank
Italy’s third-biggest lender also sued former Monte Paschi managers Antonio Vigni and Giuseppe Mussari , according to a stock-exchange statement today. The bank didn’t specify how much it’s seeking in damages.

Lloyds Banking Reports a $2.2 Billion Annual Loss
The Lloyds Banking Group reported a net loss on Friday of £1.4 billion, or $2.2 billion, partly because it was forced to set aside billions of dollars to compensate customers that were inappropriately sold financial products.

As Losses Mount, R.B.S. Unveils Plan to Sell Assets
New York Times
Royal Bank of Scotland, which reported a $9 billion loss for 2012, says it plans to sell assets like a stake in the American lender Citizens, as part of an effort to appease regulators and its biggest shareholder, the British government.

RBS to float Citizens within two years
Hartford Business Journal
The Royal Bank of Scotland has confirmed plans for anl initial public offering of Citizens Financial — which has extensive holdings in Connecticut — within two years as it prepares for the U.K. government to start selling its stake.

Morgan Stanley Becomes Primary Dealer in Spanish Government Bonds

Morgan Stanley Announces Sale of Its Remaining Legacy Ownership Interest in DigitalGlobe

Clearing & Settlement

London Stock Exchange Group Plc – LCH.Clearnet Group Limited: Offer Update
On 31 January 2013 London Stock Exchange Group Plc (“LSEG”) and LCH.Clearnet Group Limited (“LCH.Clearnet”) announced the extension of the longstop date of LSEG’s recommended cash offer for a majority stake in LCH.Clearnet until 28 February 2013.

CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (C1, 6K, CPF, RPF) Effective Friday, March 1, 2013

Indexes & Products

STOXX Limited Named “Most Innovative Index Provider”


Fixnetix Arrives In Canada – Global Managed Services Company Offers Market Data For TMX Group And Chi-X Canada


CFTC Settles Charges against Ronnie Gene Wilson of South Carolina and His Company, Atlantic Bullion and Coin, for Operating a Multi-Million Dollar Silver Bullion Ponzi Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge J. Michelle Childs of the U.S. District Court for the District of South Carolina issued an Order requiring Defendant Ronnie Gene Wilson to pay a $23 million civil monetary penalty and $11,530,000 of restitution to defrauded investors in connection with a multi-million dollar silver bullion Ponzi scheme.

Federal District Court in New York Enters Order of Permanent Injunction against Defendants Agape World, Inc. and Agape Merchant Advance LLC, Charged with Defrauding Customers in Commodity Futures Trading Scheme
The U.S. Commodity Futures Trading Commission announced today that it obtained a federal court Order against Defendants Agape World, Inc. and Agape Merchant Advance LLC (the Agape Entities), charged by the CFTC with defrauding customers of tens of millions of dollars in a commodity futures trading scheme (see CFTC Press Release 5606-09, January 27, 2009).

China-Based Company and Former CFO to Pay Penalties for Disclosure and Accounting Violations
The Securities and Exchange Commission today charged a China-based petrochemical company and its former chief financial officer with accounting and disclosure violations, and they agreed to pay more than $1 million combined to settle the charges.

Convicted UBS Trader Adoboli Appeals Rogue-Trade Sentence
Convicted UBS AG trader Kweku Adoboli asked a British appeals court to overturn his seven-year prison sentence for causing a $2.3 billion loss through unauthorized trades.

A ‘Whale’ of a scrap
New York Post
JPMorgan Chase opposed Lehman Brothers’ bid to pull Bruno Iksil, JPMorgan’s former “London Whale” trader, into their $8.6 billion fight. Lehman had asked a bankruptcy judge to let it try to force Iksil to testify about trades in 2008 that Lehman said hastened its bankruptcy…

[ASIC] Former managing director of stockbroking firm pleads guilty to insider trading

Environmental & Energy

Why traders are rushing into the EU carbon market
Climate Spectator
The risk of carbon prices tumbling to zero is not scaring off investors in the European Union’s trading scheme, where fraught efforts to draw up a rescue plan have seen daily trade volumes soar.

**RKB — Thesis here is that regulation and slow grind toward a fix, not fundamentals, holding back market. Enter: speculators. Key figures: Emissions trading platforms in the EU handled record volume of 9.25 billion carbon units last year, or 22 per cent more than 2011. At the same time, the value of the EU Emissions Trading Scheme (EU ETS) shrank by more than a third to around 50 billion euros ($A65 billion) due to the falling carbon price.

EU Carbon Surges the Most in 2 Weeks as Merkel Said to Back Fix
European Union carbon permits surged the most in two weeks after a German lawmaker said Chancellor Angela Merkel shares her environment minister’s stance on reducing a surplus of the allowances.

U.S. energy policy shifting as abundance replaces scarcity-Obama adviser
As U.S. oil and natural gas production booms, the Obama administration’s energy policy has been “fluid” by necessity to adapt to the huge economic opportunities and climate challenges posed by growth, the top White House energy and climate adviser said on Wednesday.


‘Abenomics’ is not enough to rescue Japan
Henny Sender –
Most Japanese investors have embraced prime minister Shinzo Abe’s determination to drive down the currency and embark on a new round of fiscal stimulus. Since Mr Abe’s election, the Topix Japanese stock index has risen 22 per cent and the yen has weakened dramatically. Now Haruhiko Kuroda, a career bureaucrat at the Ministry of Finance newly appointed to the Bank of Japan, will preside over a more aggressive round of quantitative easing.

Dalian Commodity Exchange Makes Thorough Investigations Into Bucketing And Other Illegal Behaviors And Warns Investors To Pay Attention To The Safety Of The Funds On Their Accounts

SGX Regulatory Monograph – Understanding Regulatory Approach And Guiding Principles

HKEx Report On Initial Public Offering Applications, Delisting And Suspensions

Changes To The Monetary Authority Of Singapore Board Of Directors

Frontier Markets

Egypt trying to dissuade Orascom from delisting from local bourse
Reuters via Yahoo! News
CAIRO – The Egyptian government is holding talks with the country’s biggest listed company, Orascom Construction Industries, to dissuade it from delisting from the local stock exchange, Investment Minister Osama Saleh told the state news MENA agency on Thursday.

Morgan Stanley Middle East Equity Chief Joins Dubai Boutique HK
Morgan Stanley ’s head of Middle East equity sales and trading, Fahmi Alghussein, left to join Dubai- based HK Advisory Services Ltd. after the Wall Street firm shifted equity jobs from the U.A.E. to Saudi Arabia.

Bursa Malaysia Securities Issues A Revamped Business Rules For Securities Brokers

MCX Weekly Market Report February 22, 2013 – February 28, 2013


Prof. Mike Aitken New CEO Of Capital Markets Co-operative Research Centre – Prof. David Skellern Takes Over Chairman Role
Capital Markets Cooperative Research Centre (CMCRC), the Australian independent academic centre for capital market research, today announced that Professor Michael Aitken had taken up the role of CEO, as Professor Alex Frino stepped down. Professor David Skellern joined as Chairman of the Board.

‘Sandwich generation’ vents about struggle to care for aging parents, still-needy kids
Washington Post
They were asked to introduce themselves, going around the circle: name, age, etc. But by the time they got to the fifth person around the table, deep, dark family secrets — sibling rivalries, financial ruin, deadbeat kids — were spilling out. The stories were accompanied by tears.

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