John Lothian Newsletter: LSE in talks with Singapore and Australia; MF Global trustee to return $685 million more to customers; CFTC Targets Rapid Trades

Mar 16, 2012

The LSE is talking to exchanges in Singapore and Australia about stock cross-trading alliances. MF Global’s trustee asks to return another chunk of cash to its ex-customers. The CFTC says that they want to figure out how to watch high-frequency order flow as part of their market monitoring efforts. In the top box, more futures industry analysis from Boca Raton; and JLN Interest Rates shows the way to a vastly improved blog and news site – take a look!

Observations – Statistics – Commentary

Boca Beat: Change essential to futures industry
By Jeremy Grant in Boca Raton – Financial Times
The cardboard cut-out photo figures of John Damgard, outgoing Futures Industry Association president, dotting the conference venue said it all. This was the end of an era that began in the 1970s when the US futures markets had only just been invented, years before “pit” trading succumbed to the electronic trading revolution that has swept the derivatives markets.


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Daily Trading in C2’s SPXpm Option Reaches New High on Wednesday
CBOE Holdings, Inc. today announced that trading in SPXpm options at the C2 Options Exchange (C2) reached a new high of 38,225 contracts on Wednesday, March 14. Yesterday’s volume more than doubled the previous high of 18,965 contracts on November 17, 2011.


High frequency trading in SGX equities almost zero-report
Reuters via Yahoo! Finance
High frequency trading (HFT) in Singapore equities is virtually non-existent, the Business Times reported on Friday, citing Singapore Exchange (SGX) president M Ramaswami.


What do they do at MF Global?
By Gary Silverman – Financial Times
I would like to repeat some gossip that I once heard about a competitor. This isn’t the kind of thing we normally do at the Financial Times. But in this case, I believe a wider dissemination of hearsay could contribute to the public good.


Hector Sants to quit FSA in June
By Patrick Jenkins, Banking Editor – Financial Times
Hector Sants has resigned as chief executive of the Financial Services Authority, after losing patience with the process of regulatory reform that would have made him one of three deputy governors of the Bank of England.


JLN Managed Futures: News from Boca
The JLN Managed Futures team is in Boca Raton, FL this week for the FIA International Futures Industry Conference. As expected, there were three key topics that consumed a majority of conversation, from panels to “table talk”:

* The retirement of John Damgard after 30 years as president of the FIA. He has been a tireless promoter of the futures industry whose presence will be sorely missed. John turns the reins over to former CFTC chairman Walt Lukken, who brings his decades of industry and regulatory experience at this critical time for the futures industry.

* The aftermath of the MF Global bankruptcy. There was a panel devoted to clearing member defaults and another on customer protections. It is clear that regulators, industry leaders and customer representatives all want the same things – for the customers be made whole and for protections be put in place so we do not see a repeat of this type of debacle.

* The Dodd-Frank rules are becoming finalized, and the implementation time is fast approaching. Not everyone is ready.

Keep up with the managed futures industry. You can find news summaries, interviews and more at JLN Managed Futures:


Backlash of the Titans
By Derek Klobucher, Sybase (via Forbes)
If you can’t run with the big dogs, stay on the porch. It’s one of those idioms that exalt the conspicuously massive, enticing us to celebrate the all-or-nothing spirit of those who dominate. But big isn’t as easy as it used to be. The U.S. Securities and Exchange Commission is looking into the possibility that some of the big exchanges may have unfairly benefitted their titan clients by spreading out massive orders over numerous smaller exchanges, circumventing discrimination rules.


SEC, Citigroup may win appeal in fraud case
Reuters via Yahoo! News
A federal appeals court stopped just short of throwing out a judge’s controversial rejection of the U.S. Securities and Exchange Commission’s $285 million fraud settlement with Citigroup Inc over mortgage investments. The 2nd U.S. Circuit Court of Appeals chastised U.S. District Judge Jed Rakoff in Manhattan, saying there was “no reason to doubt” the SEC’s determination that the October 19 settlement was in the public interest.

***JM: Good. This settlement would send a strong message that big institutions can’t just do whatever they want unless they pay the requisite fees.


Geithner, on Doing the Unpopular
One way to make politically unpopular acts popular is to recognize their unpopularity – and hope that the public comes to respect you for going ahead with them anyway. That may have been the reasoning behind some intriguing remarks Thursday evening from Treasury Secretary Timothy F. Geithner on the subject of financial rescues.


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Lead Stories

LSE in talks with Singapore and Australia
By Jeremy Grant in Boca Raton – Financial Times
The London Stock Exchange is in talks with exchanges in Singapore and Australia about trading each others’ blue-chip stocks in a sign that exchanges are stepping up alliances as an alternative to costly mergers. The development also signals the prospect of a deeper relationship between the London and Singapore exchanges as the LSE seeks to finalise its proposed acquisition LCH.Clearnet of , the Anglo-French clearing house.

MF Global trustee to return $685 million more to customers
By Tiffany Kary and Linda Sandler – Bloomberg
The MF Global Inc. (MFGLQ) brokerage trustee is seeking to distribute another $685 million to customers, giving some of them a return of about 80 percent. Commodity customers who traded futures on foreign exchanges will get their first payments of about $50 million, while about $600 million will go to customers who traded on U.S. exchanges, trustee James Giddens said today in a statement. Holders of physical assets such as precious metals are in line to get about $35 million.

CFTC Targets Rapid Trades
A top U.S. regulator said his agency plans to widen day-to-day monitoring of the commodities and futures markets, targeting the high-speed trading firms that are a growing force. Instead of just policing completed futures trades, the Commodity Futures Trading Commission will seek to watch the fleeting buy and sell orders that increasingly influence the market, CFTC Chairman Gary Gensler said in an interview.

MF Global Workers Expected to Be Called to Testify Before Congress
MF Global employees at the center of a federal investigation are expected to appear before a Congressional panel this month to shed light on the brokerage firm’s misuse of roughly $1 billion in customer money, according to people briefed on the matter.

Small business bill raises concerns at SEC
Two U.S. securities regulators are raising concerns about pending legislation in the U.S. Senate aimed at making it easier for small businesses to raise capital, warning that the measure could erode protections for investors.

Why quantitative easing is the only game in town
By Martin Wolf – Financial Times
The onus of UK macroeconomic policy falls on the Bank of England. George Osborne, chancellor of the exchequer, has nailed his colours to the mast of fiscal discipline instead. Whatever wheezes appear in next week’s Budget are likely to make little difference to immediate performance, as my colleague, Chris Giles, pointed out last week. This does not make the Budget unimportant. As Paul Johnson, director of the Institute for Fiscal Studies, has also noted, a tax system devoid of principles and rife with gimmicks is unpredictable and so a source of damaging uncertainty. But that is, alas, unlikely to change.

IMF Executive Board Approves 28 Billion Arrangement Under Extended Fund Facility For Greece

Iceland To Repay Early Some Outstanding Obligations To The IMF

Environmental Trading News

Emissions set to surge 50 percent by 2050 – OECD
Global greenhouse gas emissions could rise 50 percent by 2050 without more ambitious climate policies, as fossil fuels continue to dominate the energy mix, the Organisation for Economic Cooperation and Development (OECD) said on Thursday.

European Parliament vote adds to pressure for CO2 support
EU politicians once again voted in favour of intervention to shore up the carbon market on Thursday, adding to pressure on the European Commission to remove allowances ahead of the next phase of the Emissions Trading Scheme (ETS).

U.S., Britain set to agree emergency oil stocks release
Britain is poised to cooperate with the United States on a release of strategic oil stocks that is expected within months, two British sources said, in a bid to prevent fuel prices choking economic growth in a U.S. election year.

For more environmental trading news, subscribe to the Environmental Markets version of the John Lothian Newsletter edited by Jim Kharouf.
Visit http://www.jlnenvironmental.comto subscribe.

Exchange & ECN News

ICE to curb trades breaking pre-clearing
By Katy Burne – Dow Jones
IntercontinentalExchange Inc. ICE +0.80% has come up with a way to stop trades breaking–or failing to be completed–before they are processed and guaranteed by its central clearing arm, as will be required under new rules.

ICE Clearing Houses to Launch New Swaps Credit Risk Management Workflow with Enhanced Execution Certainty and Low Latency
IntercontinentalExchange, a leading operator of global over-the-counter (OTC) markets, clearing houses and regulated futures exchanges, today announced that it will introduce an innovative execution-to-clearing workflow for OTC swaps that supports credit risk management. Known as “Plus One,” this pre-clearing credit check workflow will be used for all ICE OTC clearing including its market-leading credit default swap and energy swap clearing business.

Maple Group and TMX Group Announce Progress at OSC and AMF
Maple Group Acquisition Corporation (“Maple”), a corporation whose investors comprise 13 of Canada’s leading financial institutions and pension funds, and TMX Group, today welcomed important new developments from both the Ontario Securities Commission (“OSC”) and the Autorité des marchés financiers (“AMF”).

Proposed Acquisition of TMX Group Inc. – AMF intends to approve Maple application
The Autorité des marchés financiers today announced that it intends to approve, based on information available to date, the transaction proposed by Maple Group Acquisition Corporation to acquire TMX Group Inc.

Toronto Stock Exchange volume to stay low, operator TMX says
Reuters via Yahoo! News
The Toronto Stock Exchange’s trading volume will likely remain sluggish compared to last year, partly because of the low volatility in the market, its operator TMX Group said on Thursday.

CME, Tokyo Commodity Exchange In Talks On Alliance
Officials with CME Group Inc. (CME) and the Tokyo Commodity Exchange Inc. met this week to discuss a potential tie-up that could see the Chicago-based derivatives giant take a stake in Japan’s main commodity market. A possible alliance between the two exchange operators could also include partnering on trading and clearing functions, according to Mitsuhiro Onosato, executive officer for the Tokyo Commodity Exchange, who confirmed the talks in an interview.

Linking Derivatives Clearinghouses Is Achievable, Says Singapore Exchange Exec
Singapore Exchange Ltd. (SGX) isn’t scared off by the idea of connecting to other companies around the world that process derivatives contracts, a company executive said Thursday. The failure of many high-profile exchange merger plans, including those pursued by SGX, has seen the industry refocus on a web of proposed alliances and pacts, many of them centered around the handling of transactions that regulators would like to see guaranteed through centralized platforms that minimize the risk of problems in one market spreading worldwide.

LCH.Clearnet CEO Marks Progress In Two-Year Strategic Revamp
By Jacob Bunge and Katy Burne Of DOW JONES NEWSWIRES
The chief executive of LCH.Clearnet Group Ltd. said he is on track with a two-year plan to streamline operations at the European trade-clearing firm and make it more competitive with smaller clearinghouse rivals. The Anglo-French clearinghouse operator has trimmed duplicative functions and staff and is running more like a risk management firm, according to Ian Axe, who took over as CEO of LCH.Clearnet a little over one year ago.

Order Price Reasonability Checks

Operational Systems Settings

NYSE Amex to Continue Trading Halt in Common Stock of China North East Petroleum Holdings Limited

Program Trading Averaged 29.4 Percent of NYSE Volume during Mar. 5-9

Direct Edge Trading Notice #12-12: New Routing Enhancements On EDGA and EDGX

Boerse Stuttgart : MITEC Automotive AG Issues Bond In Bondm Segment – Investors Can Subscribe To The New Bond Issue Starting 19 March

Banks, Brokers & Dark Pools

Italy Said to Pay Morgan Stanley $3.4 Billion to Exit Derivative
When Morgan Stanley (MS) said in January it had cut its “net exposure” to Italy by $3.4 billion, it didn’t tell investors that the nation paid that entire amount to the bank to exit a bet on interest rates.

SWIFT Instructed To Disconnect Sanctioned Iranian Banks Following EU Council Decision
Press Release

The Council Of The European Union Elaborates EU Sanctions Against Iran

Cameron meets Goldman Sachs, other CEOs in NY
Reuters via Yahoo! News
Prime Minister David Cameron on Thursday discussed financial regulation and the global economic situation with senior American financiers in New York, including Goldman Sachs boss Lloyd Blankfein.

Goldman Roiled by Op-Ed Loses $2.2 Billion for Shareholders
By Christine Harper – Bloomberg
Goldman Sachs Group Inc. saw $2.15 billion of its market value wiped out after an employee assailed Chief Executive Officer Lloyd C. Blankfein’s management and the firm’s treatment of clients, sparking debate across Wall Street.

Rivals fear Goldman backlash on Wall St
By Tom Braithwaite in New York – Financial Times
Wall Street’s concern over the latest public outcry at Goldman Sachs was underscored when the head of one of its biggest rivals warned his senior staff not to exploit the “alleged issues” surrounding the investment bank.

Russia to sell $6 billion stake in Sberbank
Reuters via Yahoo! News
Russia’s biggest lender Sberbank plans to start a roadshow for the sale of a $6 billion government stake on April 16, in a move that underscores its arrival as a major player in a European industry decimated by the global financial crisis.

BNP Paribas Appoints Andrew Dawkins Head of Delta One & International Derivative Sales, Americas
BNP Paribas Corporate and Investment Banking is pleased to announce the appointment of Andrew Dawkins as Managing Director, Head of Delta One & International Derivative Sales, Americas.

German Regulator Blocks Deutsche Bank’s Risk Officer Appointment – Report
Dow Jones Newswires
Germany’s regulators have blocked the appointment of a chief risk officer at Deutsche Bank AG (DB), German newsmagazine Der Spiegel reported on its website Thursday, citing unnamed sources in the banking sector.

Deutsche Bank To Name Stuart Lewis As Risk Manager – Source
Dow Jones
Deutsche Bank will appoint Stuart Lewis to its executive board as risk manager after German regulatory watchdog BaFin said it didn’t favor William Broeksmit, a different candidate put forward by the bank, a person familiar with the matter told Dow Jones Newswires Friday.

Ladenburg Thalmann Reports Fourth Quarter and Full Year 2011 Results

UBS highest-paid banker is U.S. brokerage head
Reuters via Yahoo! News
UBS paid U.S. brokerage chief Robert McCann nearly 9.2 million Swiss francs ($9.9 million) overall last year, with the executive usurping investment banking head Carsten Kengeter as the Swiss bank’s highest earner.

Regulatory News

The SEC News Digest
The SEC News Digest provides daily information on recent Commission actions, including enforcement proceedings, rule filings, policy statements, and upcoming Commission meetings.

SEC releases economic analysis for key swaps rule
Reuters via Yahoo! News
WASHINGTON (Reuters) – The Securities and Exchange Commission on Thursday released a new economic analysis that will be used to justify a critical final rule that will determine which companies will face new regulations of their derivatives trading.

Availability of Staff Analysis of Market Data Related to Credit Default Swap Transactions
The staff of the Securities and Exchange Commission today has made available publicly an analysis of market data related to credit default swap transactions.

Swaps Industry Debates Bankruptcy Code Fix to Protect Customers
By Matthew Leising – Bloomberg
Derivatives industry executives and a U.S. regulator differed over whether to change the bankruptcy code to protect customers from sharing in losses from a brokerage failure.

European banks allowed to use US ratings
By Brooke Masters in London – Financial Times
European banks and other financial services companies will be able to use credit ratings issued in the US, Canada, Hong Kong and Singapore for calculating risk-weights and other regulatory purposes, the European Securities and Markets Authority has decided, heading off fears of a market disruption.

CFTC’s Wetjen Worries For Future Of Some Swaps Execution Methods
One of the Commodity Futures Trading Commission’s five commissioners said Thursday he is mindful of the range of execution methods that have worked in the multi-trillion-dollar, off-exchange derivatives markets to date, and the need for lawmakers to not regulate some of them out of existence. Commissioner Mark Wetjen’s remarks come as the market for privately traded derivatives or “swaps” faces rules that will force trades onto open platforms–either exchanges or newly designated alternatives called “swap execution facilities” or SEFs–and as the CFTC has been criticized for focusing on only two modes of execution for swaps.

Monetary Authority Of Singapore Signs MOU With The European Securities And Markets Authority (ESMA)
Press Release

FESE Position On The Market Abuse Review

Speech By SEC Chairman Mary L. Schapiro: – Remarks At The Society Of American Business Editors And Writers (SABEW) Annual Convention

SEC Charges Senior Executives at California-Based Firm in Stock Lending Scheme
The Securities and Exchange Commission today charged two senior executives and their California-based firm with defrauding officers and directors at publicly-traded companies in an elaborate $8 million stock lending scheme.

SEC Charges Bay Area Investment Adviser for Defrauding Investors With Bogus Audit Report
The Securities and Exchange Commission today charged a San Francisco-area investment adviser with defrauding investors by giving them a bogus audit report that embellished the financial performance of the fund in which they were investing.

SEC Charges Chicago-Based Management Consultant With Insider Trading
The Securities and Exchange Commission today charged a Chicago-based management consultant with insider trading based on confidential information about his client’s impending takeover of a Long Island-based vitamin company.

NFA Enforcement and Registration Actions
Michael J. Levas

AAT affirms ASIC banning of former Commonwealth Financial Planning adviser

Investments – Indexes – Managed Futures – Managed Funds

[Video] Hedge Fund Demand From Asia Investors
Man Group Plc Chief Executive Officer Peter Clarke talks about the global hedge fund industry and Man’s business strategy. Clarke also discusses investment opportunities in China and Europe.

Ex-Lone Pine Krishnan gets SFC licence for HK hedge fund
Reuters via Yahoo! Finance
Eashwar Krishnan, former Asia head of Lone Pine Capital, has received a licence for his hedge fund from the Securities and Futures Commission on Thursday, records on the Hong Kong’s market regulator’s website showed on Friday.

Moody’s attacks rivals on debt risks
By Nicole Bullock in New York – Financial Times
Moody’s has taken a public shot at its rivals, warning that some of their credit ratings do not reflect rising risks in the securitisation markets.

California or Bust
by Clarke Camper – Inside the Beltway
California was once hailed as the supreme example of America’s economic vitality and entrepreneurial energy. Yet a pair of opinion pieces in Investor’s Business Daily and the Los Angeles Times label California “a bad bet for business.” So what’s going on in the Golden State?

Oil near $106 as US denies plan to release crude
Associated Press via Yahoo! News
Oil prices rose slightly to near $106 a barrel Friday in Asia after the U.S. denied reports it and Britain plan to release some their strategic crude reserves.

Bloomberg BNA Offers Comprehensive Look at Current State and Uses of Financial Products and Derivatives
PR Newswire via Yahoo! News
Recent scrutiny of the tax laws and the ways taxpayers have used financial products and derivatives to take advantage of those laws has put new pressure on companies to understand and properly implement financial products. Bloomberg BNA | CITE will host a live conference, Introduction to U.S. Taxation of Financial Products and Derivatives, April 2-3 in Chicago that will examine the basic economic and U.S. tax aspects of typical financial products and derivative instruments used in financial markets today.

EDHEC-Risk Institute To Unveil The Results Of Its Latest European ETF Survey At The EDHEC-Risk Europe Days Conference In London On March 27

Availability Of Staff Analysis Of Market Data Related To Credit Default Swap Transactions

Remarks By U.S. Treasury Secretary Tim Geithner Before The Economic Club Of New York

New Russell ETFs Offer High Dividend Yield Exposure (HDIV, DIVS)

Performance Of The STOXX Global Grand Prix Index vs. Australia And The World

ETF Securities Launches Daily Euro-Hedged Commodity Solutions And Expands Brent Crude Range – 12 New Exchange-Traded Commodities Listed On Xetra

Technology News

FINCAD Wins Best Operational Risk Management Initiative in FTF News Technology Innovation Awards
PR Newswire via Yahoo! Finance
FINCAD, the market leader for innovative OTC derivatives solutions, announced today that it has won the 2012 FTF News Technology Innovation Awards for Best Operational Risk Management Initiative.

For Apple, Pressure Builds Over App Store Fraud
Gilles Sabrie for The New York Times
Jian Huang, head of Hoolai Game in Beijing. Hoolai, a game developer, discovered that it was missing payments from Apple.
In a little over an hour, Ryan Matthew Pierson racked up $437.71 in iTunes charges for virtual currency that he could use to buy guns, nightclubs and cars in iMobsters, a popular iPhone game. One problem: Mr. Pierson, a technology writer in Texas, has never played iMobsters.

Media News

Google in New Privacy Probes
Regulators in the U.S. and European Union are investigating Google Inc. GOOG +0.83% for bypassing the privacy settings of millions of users of Apple Inc.’s AAPL -0.69% Safari Web browser, according to people familiar with the investigations. Google stopped the practice last month after being contacted by The Wall Street Journal.

Fictional Thriller Tackles Dangers of High-Frequency Trading
The Online NewsHour
And even as — speaking of markets, we turn to a very different, fictional take on Wall Street in the form of thriller with a plotline drawn from real life. That’s the subject of NewsHour economic Paul — economics correspondent Paul Solman’s conversation. It’s part of his ongoing reporting Making Sense of financial news.

Reports Economic Calendar

USDA Today

CBOE Events Calendar

Economic Release Calendar
The Economic Release Calendar (PDF) is a schedule of government, academic and industry economic releases, provided as a service to CME customers.

Asia-Pacific News

HKEx to launch commodity derivatives
By Jeremy Grant in Boca Raton – Financial Times
Hong Kong’s main exchange plans to capitalise on what it believes will be demand for commodity risk management coming from China with the launch of metals, agriculture and other commodity derivatives denominated in the renminbi.

MAS and SGX join Malaysia and Thailand to expedite review process for Secondary Listings within ASEAN
The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) today jointly signed a Memorandum of Understanding (MOU) on the Expedited Review Framework for Secondary Listings.

Carrying Forward Rational Investment And Boosting Right Protection Awareness – Shenzhen Stock Exchange Launches 3/15 Investor Right Protection Consulting Activity Online
Press Release

Barclays Capital Lays Off 13 in Asia
Wall Street Journal Blogs
Barclays Capital has trimmed headcount in its investment banking division across the Asia Pacific region, according to people familiar with the matter.

FSA publishes Newsletter No.103

Frontier Markets

Johannesburg Exchange Explores Links With African Markets
South Africa’s main exchange operator is discussing ways to provide technology and trading functions to other markets on the continent in an effort to help develop Africa’s capital markets, according to senior executives of the firm. JSE Ltd. could supply technology and market expertise to a roster of smaller, developing exchanges across Africa and aims to host an annual gathering of exchange heads to discuss financial-market structure and regulation, said Graham Smale, head of bonds and derivatives for the company.

MCX Weekly Market Report March 09, 2012 – March 15, 2012

Miscellaneous News

Regulators must get grip on traders’ hormones
By Gillian Tett – Financial Times
Why have the financial markets recently rallied so sharply in places such as America? If you ask a trader, they will cite “rational” explanations, such as US bank stress tests, an improved US economic outlook, and decline in eurozone concerns. But if you ask John Coates, formerly a senior trader at Deutsche Bank and Goldman Sachs, there may be another factor at work: hormones.

John Lothian Newsletter

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

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