John Lothian Newsletter: NYSE Euronext to launch London clearing house; Top MF Global Witness Talks Deal With Justice; Singapore Exchange overhauls business structure

Mar 28, 2012

NYSE Euronext plans to spend $85 million over the next two years to create a London clearing house presence. Ex-MF Global employee Edith O’Brien probably won’t say much before Congress today, but she’s rumored to be looking for a testimony deal with the US Justice Department regarding what she knows about customer fund transfers. Singapore Exchange says co-president Gan is leaving, and announces changes to the management and structure of its business units. BATS’ Joe Ratterman gets a unanimous thumbs-up as CEO from the board, but not before losing his Chairman title.

Observations – Statistics – Commentary

CFTC Selects TABB Group CEO Larry Tabb To Join Its Subcommittee On Automated And High Frequency Trading
Press Release
TABB Group announced today that the U.S. Commodity Futures Trading Commission selected Larry Tabb, founder and CEO, to assist their CFTC Technical Advisory Committee as a member of its Subcommittee of Automated and High Frequency Trading (HFT) to create a definition for high frequency trading within the context of automating trading systems.


MF Global’s Shortfall No Surprise, Some Say
Some MF Global employees were aware of a shortfall in the firm’s customer accounts days before filing for bankruptcy on Oct. 31, according to people involved in the case, a revelation that raises questions about why the firm failed to safeguard client money and whether it withheld information from authorities.


MF Global won praise for risk handling
By Kara Scannell and Tom Braithwaite in New York – Financial Times
The consultancy Promontory Financial found that MF Global had a “robust enterprise-wide risk management” programme in early 2011, five months before the US broker-dealer’s high exposure to European debt led to its bankruptcy. In a report to MF Global’s board dated May 12 2011, Promontory noted MF Global’s “remarkable turn-around” of “leadership and culture” since it was retained in 2009 following an alleged trading scandal.


High Frequency Trading Not To Blame For Crash: BATS
D.M. Levine – Huffington Post
Don’t call it a flash crash. Last Friday, when BATS, one of the country’s leading venues for the controversial practice known as high frequency trading suddenly and mysteriously took a nosedive, some assumed that high-speed trading must have played a role.


FIA Japan Newsletter interview with Leo Melamed, March 2012


ISE Enhances its Trading Platform with Optimise 3.0 Release
The International Securities Exchange (ISE) completed Technology Release 3.0, the latest upgrade to its new trading system based on the Optimise trading architecture. With this release, ISE introduced the technology necessary to enable Legging Orders, a new order type scheduled to go live in early May. With Legging Orders, ISE will significantly enhance the execution of multi-legged strategy orders by enabling greater interaction of the complex order book with the regular order book. The result will be an increased fill rate for multi-legged strategy orders as well as tighter spreads and increased liquidity on the regular order book.


Fragmentation preparedness in the Brazilian marketplace
Alice Botis – FOW
After an intense period of transformation and realignment in the Brazilian market, which resulted in a new infrastructure, fee reductions and the introduction of co-location facilities, it looks as if the markets will be stirred up once again. While the BM&FBOVESPA has been actively pursuing electronic and high frequency trading, the Comissão de Valores Mobiliários has commissioned a report to evaluate the efficiency of the Brazilian capital markets and analyze the possibility of listing stocks simultaneously on a stock exchange and on an organized over the counter market.


The Vix distortion quantified
Izabella Kaminska – Financial Times
Are volatility-linked exchange-traded products (ETPs) getting too big for the Vix futures market? Are they comprising the price discovery role of Vix futures? Are they the reason why implied volatility curves have become steeply elevated? As it turns out, Barclays Capital’s equity strategy team apparently thinks yes, it is possible (H/T the FT’s Ajay Makan).


European finance: The leaning tower of perils
By Richard Milne and Mary Watkins – Financial Times
A drug. A pyramid scheme. Strikingly for an initiative that is credited with saving the eurozone and financial markets from disaster, those are just two of the undignified epithets that some in the financial markets now hurl at the European Central Bank’s provision of cheap three-year loans to eurozone commercial banking groups.


London and New York to Hold ‘Top City’ Positions for Another Ten Years, Says The Wealth Report 2012
PRWeb via Yahoo! News
Quality of life, knowledge and influence, and economic activity are the key factors for the ultra-wealthy investing in property, says Knight Frank and Citi Private Bank’s sixth Wealth Report.


Which Crowdfunding Bill Will It Be?
The most ballyhooed part of the House JOBS bill — and the only part changed by the Senate when it passed the legislation last week, is the so-called crowdfunding proposal to allow small companies to raise small amounts of money from large groups of small investors. It’s backed by the president, and by high-profile entrepreneurs, like Steve Case.


Mic Check of Chicago Mercantile Exchange CEO
Chicago Mercantile Exchange CEO Craig Donohue traveled to an energy trading industry conference in Houston today, expecting a warm welcome from his fellow 1% executives. What he got was a special greeting from an unexpected source—a welcoming delegation of working families, standing in for the taxpayers of Chicago and Illinois.


MarketsWiki Page of the Day
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MarketsWiki Recent Updates


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Lead Stories

NYSE Euronext to launch London clearing house
By Philip Stafford – Financial Times
NYSE Euronext said on Wednesday it would spend $85m in the next two years creating a “full service” derivatives clearing house in London as the US exchange operator seeks to compete in the emerging business of processing trades.

Top MF Global Witness Talks Deal With Justice
The star witness in a congressional hearing about MF Global Holdings Ltd.’s collapse has told Justice Department representatives through her lawyers details about transactions that ended up dipping into customer funds, people familiar with the matter said.

Singapore Exchange overhauls business structure
Singapore Exchange Ltd (SGX) said on Wednesday it is streamlining its business structure to try and improve its growth prospects.

BATS chairman stripped of title
By Telis Demos in New York – Financial Times
BATS Global Markets has stripped Joe Ratterman, the company’s president and chief executive, of his title as chairman in the wake of its botched initial public offering last week. But the board of the US and UK exchange operator announced that it voted to give “unanimous support” for Mr Ratterman to continue as the top executive.

Banks Can Hedge Most Rate Swap Risk in 30 Minutes, N.Y. Fed Says
By Matthew Leising
Most big trades between the world’s largest banks and customers in the $442 trillion interest-rate swap market are hedged within 30 minutes of the transaction, according to the Federal Reserve Bank of New York.

J.P. Morgan Was ‘Assured’ On MF Global Transfers
MF Global Holdings Ltd. Chairman and Chief Executive Jon S. Corzine was in direct contact with J.P. Morgan Chase & Co. officials about a large transfer of customer funds to the bank shortly before the securities firm collapsed, according to prepared testimony from a J.P. Morgan lawyer for a House subcommittee hearing Wednesday.

U.S. standards board to review accounting used by MF Global
The U.S. accounting standard-setting board could this year revamp the accounting treatment that MF Global used to mask risky European sovereign debt exposure, an official at the board will tell lawmakers on Wednesday.

ECB fails to stem reduction in lending
By Ralph Atkins in Frankfurt – Financial Times
Massive European Central Bank liquidity injections into the eurozone financial system failed to prevent a further contraction in bank lending to the private sector last month, highlighting the fragility of the region’s recovery prospects.

BBA to launch crackdown on Libor rates
By Brooke Masters in London – Financial Times
The sponsors of the London interbank lending rates used in $350tn in contracts worldwide are considering imposing tighter codes of conduct and new statistical controls at a time when regulators on three continents are probing allegations that the rates may have been manipulated.

Greece’s Fringe Parties Surge Amid Bailout Ire
ATHENS—Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections, raising the risk that it won’t be able to make the economic sacrifices still needed to keep it in the euro.

Environmental Trading News

EPA to impose first greenhouse gas limits on power plants
The Washington Post – Juliet Eilperin
The Environmental Protection Agency issued the first limits on greenhouse gas emissions from new power plants Tuesday, a move which could end the construction of conventional coal-fired facilities in the United States.

Government proposes first carbon limits on power plants
The Obama administration proposed on Tuesday the first rules to cut carbon dioxide emissions from new U.S. power plants, a move hotly contested by Republicans and industry in an election year.

EPA seeks strict limits on coal plants
Financial Times
New controls on carbon dioxide emitted by power stations proposed by the US Environmental Protection Agency would ban the construction of new coal-fired plants lacking costly special equipment.

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

Tocom seeks closer ties overseas
By Ben McLannahan in Tokyo – Financial Times
Tokyo Commodity Exchange is seeking deeper ties with rivals overseas, as the consolidation of Japan’s fragmented exchange landscape gathers pace. Speaking to the Financial Times, president and chief executive Tadashi Ezaki said he wanted to develop “more concrete relationships” with overseas partners such as CME Group of Chicago and other, unnamed, exchange groups.

NYSE Euronext and Uría Menéndez – Proença de Carvalho create a new dynamic for the listing of new companies on the Portuguese Stock Exchange
NYSE Euronext and Uría Menéndez – Proença de Carvalho are announcing a partnership whose aim is to promote the listing of new companies on the Portuguese stock exchange, namely on Euronext Lisbon[1] and NYSE Alternext[2] markets. The latter is dedicated to small and medium-sized enterprises (SMEs).

NYSE Euronext To Tie CEO Pay More Closely To Performance
NYSE Euronext (NYX) will tie its chief executive’s pay more closely to the Big Board parent’s performance as the company refocuses on an independent growth strategy.

BATS Global Markets Board States Unanimous Support For President, CEO Joe Ratterman

ULLINK’s Order Management System Complements DMA Connectivity Offering To Bolsa De Comercio De Santiago In Chile

CME Group Clearing Advisory
CME Group Delivery Dates for April 2012

CME Clearing – Performance Bonds / Margins
Performance Bond Requirements: Crude Oil Intra-Commodity Spread Charges – Effective Wednesday, March 28, 2012

OneChicago Holiday Trading Hours – Good Friday 2012

Banks, Brokers & Dark Pools

Goldman Bows to Pressure on Board
Goldman Sachs Group Inc. agreed to change its board structure in order to persuade a union pension fund to drop a shareholder proposal that could have cost Chief Executive Lloyd C. Blankfein his job as chairman.

Exclusive: Goldman’s European derivatives revenue soars
By Lauren Tara LaCapra
Goldman Sachs Group Inc’s first-quarter earnings are expected to benefit from the increased use of derivatives by European clients seeking ways to hedge risk, according to an internal report seen by Reuters.

BNP Paribas Head of Flow Credit Trading Epstein Has Left Bank
By Matthew Leising – Bloomberg
Jared Epstein left BNP Paribas SA after serving as head of flow credit trading for more than two years, a bank spokeswoman said.

Icahn forgiving toward MF Global
By Sam Forgione – Reuters
Billionaire investor Carl Icahn told CNBC on Tuesday that he is not concerned about his losses from the bankruptcy of futures firm MF Global. Regarding the role of Jon Corzine, who headed the firm, Icahn said that he likes Corzine and that the collapse was “probably an honest thing that happened.”

ICAP plc. Trading Statement
ICAP plc, the world’s leading interdealer broker, announces its trading update ahead of the close period for the year ending 31 March 2012.

Goldman Sachs Preserves Blankfein’s Dual Role With Lead Director
Goldman Sachs Group Inc. (GS) won’t face a union challenge to Lloyd C. Blankfein’s dual role as chairman and chief executive officer after agreeing to appoint an independent board member as “lead director.”

Swiss bank UBS rejects allegations in French book
Associated Press via Yahoo! News
Swiss bank UBS AG on Tuesday rejected allegations in a recently published book that it had systematically helped rich customers in France avoid paying taxes, saying the claims were based on testimony from disgruntled former employees.

JPMorgan nominates former KPMG chairman to board
Associated Press via Yahoo! News
JPMorgan Chase and Co. nominated the former Chairman of accounting firm KPMG International to its board, noting his experience with financial services and risk management.

Abu Dhabi royals involved in RBS talks: sources
Reuters via Yahoo! News
Talks to sell a stake in Britain’s state-owned Royal Bank of Scotland are being held at the level of the Abu Dhabi ruling family, sources told Reuters.

HSBC: To Exit Operations In Slovakia By End Of Third Quarter
FOX Business
HSBC Holdings PLC (HBC) will exit its operations in Slovakia by the end of the third quarter, the banking giant said Tuesday, as it continues to trim its global operations to maximise profitability.

Disasters push Lloyd’s of London into red
By Adam Jones – Financial Times
Lloyd’s of London posted its first annual loss in six years after a succession of natural catastrophes pushed it £516m into the red in 2011.

What Happens If My Broker Goes Bust?
Read full story for details.

Navigant/European Central Bank Debate: “The ECB and Its Balance Sheet”
OMFIF (Official Monetary and Financial Institutions Forum) will host a debate with Navigant and the European Central Bank (ECB) at the Reform Club in London on 28 March 2012 entitled: “The ECB and its Balance Sheet: Valuation and Risk Management.” The ECB will be represented by Francesco Papadia, Director General, Market Operations, who will talk frankly about the risks being taken on by the euro area central banks.

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.

CFTC’s Division of Market Oversight Issues Advisory Addressing Bona Fide Hedge Transactions and Positions
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) today issued an Advisory regarding the treatment of bona fide hedging transactions and positions under Commission Regulations 1.3(z), 1.47, and 1.48 as they existed prior to the adoption of the final rule addressing Position Limits for Futures and Swaps.

CFTC’s Division Of Market Oversight Issues Advisory Highlighting The Commission’s Special Call Authorities Relating To Claimed Exemptions From Speculative Position Limits
The Division issued the Advisory at this time because: (1) there will be new traders and new commodities subject to position limits (and the related exemption reporting requirements) under the Commission’s new speculative position limit rules in Part 151; and (2) the Division believes that it is important to highlight and clarify, as a general matter, the process and recordkeeping requirements associated with claiming a hedge exemption from the Commission’s position limit rules.

CFTC: Singapore Exchange Derivatives Trading Limited’s Euro Stoxx 50 Index Futures Contract Has Been Certified And May Be Offered To U.S. Persons Through Direct Access Effective March 23, 2012
On February 6, 2012, Singapore Exchange Derivatives Trading Limited (SGX) requested expedited Commodity Futures Trading Commission (CFTC) review of the SGX’s Euro Stoxx 50 Index futures contract so that it may be offered to U.S. persons. SGX also requested that the contract may be made available through direct access terminals in the United States.

ESMA: Publication Of The Responses Received To The Consultation On Key Concepts Of The Alternative Investment Fund Managers Directive And Types Of AIFM

Steven B. Kamin, Director, Division Of International Finance, U.S. Federal Reserve: The European Economic And Financial Situation – Before The Subcommittee On Domestic Monetary Policy And Technology, Committee On Financial Services, U.S. House Of Representatives

NFA Enforcement and Registration Actions
Tracy Morgan Spaeth

ESMA Announces Vacancies For Two Legal Officers
Press Release
The deadline for both posts is 24 April 2012.

Publication of a single document combining AMF recommendations and areas for consideration in relation to corporate governance and executive compensation in companies referring to the AFEP/MEDEF code

ASIC and Business gazettes

ASIC improves disclosure of unlisted property scheme risks

Investor Alert: BCSC Criminal Investigations Team arrests Hal McLeod

Gupta loses wiretap ruling, wins on SEC notes
Reuters via Yahoo! News
Former Goldman Sachs Group Inc director Rajat Gupta lost his bid to suppress wiretap evidence at his upcoming criminal trial on charges that he leaked boardroom secrets to hedge fund founder Raj Rajaratnam.

SEC Obtains Final Judgment on Consent Against Winifred Jiau
citybizlist Washington DC
The SEC announced that, on March 24, 2012, the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on consent as to Winifred Jiau in the SEC’s insider trading case, entitled SEC v. Mark Anthony Longoria, et al., 11-CV-0753 (SDNY) (JSR).

SEC Sues Former United Commercial Bank Executive Cinderey
The U.S. Securities and Exchange Commission sued former United Commercial Bank Vice President John Cinderey, accusing him of creating false records tied to the defunct San Francisco-based bank’s evaluation of loan risks.

Investments – Indexes – Managed Futures – Managed Funds

Expected Flood of Opportunities in Europe Is Still a Trickle
American private equity firms are betting that they can snap up cheap assets from troubled financial institutions on the Continent, but the great fire sale in Europe has yet to ignite.

J.P. Morgan Launches Alternative Investment Reporting Portal
Business Wire via Yahoo! News
J.P. Morgan Worldwide Securities Services today announced the launch of Alternative Investment Reporting, a new interactive portal enabling alternative asset managers across Hedge Fund, Private Equity and Real Estate strategies to view, analyze and extract their fund administration data from dashboards, workflow tools and reports.

PIMCO’S Gross sees lower returns in “repressive” environment
Reuters via Yahoo! News
PIMCO co-founder Bill Gross, the manager of the world’s biggest bond fund, is lowering expectations. In his April investment letter posted on the firm’s website on Tuesday, Gross says: “Total return as a supercharged bond strategy is fading.”

DTCC Successfully Completes Greek CDS Restructuring Credit Event Processing

No Time for Pity as Yong Rises to Top of Asia Hedge Funds
As a 10-year-old boy, Danny Yong got advice after his father’s death from cancer that drives him to this day.

A Bunch Of The Prop Traders That Left Goldman To Start Hedge Funds Are Getting Smoked
Lisa Du | Business Insider
Once upon a time, the Goldman Sachs star on your resume meant you were headed for riches and success. But in the face of economic turmoil, heavy financial regulation and cautious investors that may no longer be the case.

John Paulson Lowers the Bar to Pay Employees
Still suffering the repercussions of a huge downswing, hedge-fund manager John Paulson has told employees he’ll pay bonuses for this year out of his own pocket, according to someone familiar with the matter.

First U.S.-Listed Hedge Fund Replication Exchange-Traded Fund Celebrates Three-Year Anniversary
Business Wire via Yahoo! News
The IQ Hedge Multi-Strategy Tracker ETF, the first U.S.-listed hedge fund replication Exchange-Traded Fund, celebrated its three-year anniversary on March 25, 2012, the fund’s sponsor, IndexIQ, has announced.

Shin Corporation Public Company Limited Of Thailand Added To Dow Jones Emerging Markets Select Dividend Index

Borsa Italiana: Italian Government Bond ‘BTP Italia’ Raises E7.29 Billion On MOT

Technology News

Orc News – March 2012
In this quarter, we highlight several new and existing customers of Orc. Öhman Capital, Renell, Arqaam Capital, and Theoria Capital Management all announced either new or expansion of their business with us. We’re happy to have them all as Orc customers! We would also like to note that Orc Group is now owned by Nordic Capital, a Swedish private-equity firm. To learn more about Nordic Capital, visit

SunGard Earns Top Marks in Novarica’s ACE Silver Ranking Report
SunGard has received a score of 93 out of 100 in “overall customer satisfaction” for its iWorks EAS accounting and reporting solution, in the Q1 2012 Novarica Average Customer Experience (ACE) Silver Ranking Report.

Fixnetix Lands in Asia; Expands to HKEx for Equities and Futures
Fixnetix, managed services provider for ultra-low latency market data, trading and risk control, announced today access to Hong Kong Exchanges and Clearing Limited (HKEx) as a founding member of the HKEx Hosting Services Ecosystem.

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

SGX announces new organisation
Singapore Exchange (SGX) today announced a new organisation structure to reinforce its positioning as the Asian Gateway and better leverage growth opportunities in the region. From 1 May 2012, the organisation will have five Business Units. They are Derivatives, Listings, Market Data & Access, Post-Trade and Securities. The current Fixed Income business will become a part of the enlarged Securities unit while the Commodities business will be grouped within the enlarged Derivatives unit.

SGX co-president resigns, to stay on as advisor
After 11 years with SGX, Mr Gan Seow Ann, Co-President, has decided to leave the organisation. Having worked in the financial services industry for over 26 years, Mr Gan has decided to take time off to review his interests.

Singapore Explores Hosting Regional Rice Futures
By Sameer Mohindru – WSJ
Singapore is exploring the feasibility of hosting international futures trading in rice to stabilize prices across Southeast Asia for the politically sensitive commodity. If successful, it would be the first regional rice futures product to be traded in Asia.

Revolving credit: the beating heart of China’s metal trade
By Melanie Burton – Reuters
In a dilapidated high rise in a residential district of Shanghai sits the beating heart of China’s physical metal trade. The Wu Mao building, encircled by dusty bicycles and razor wire, houses around 500 companies trading copper, zinc, nickel, lead, aluminum and silver.

HKEx And Heilongjiang Financial Affairs Office Sign MOU

Citic Pacific Wins Appeal Police Shouldn’t Access Documents
Citic Pacific Ltd. (267) , which delayed reporting a potential HK$15.5 billion ($2 billion) loss from a failed derivatives bet, won its appeal that police shouldn’t have access to documents it argued were private.

Tokyo Stock Exchange Has Published The Index Value Of TSE Home Price Index For January

Frontier Markets

FMC stops futures trade in guar complex, spot prices decline
Latha Venkatraman – Hindu Business Line
The Forward Markets Commission has finally stopped futures trade in guar complex on commodity exchanges after a series of regulatory measures failed to check the price rise.

BRICS to eye joint bank, exchange ties at summit
Reuters via Yahoo! News
The BRICS group of emerging world powerhouses – Brazil, Russia, India, China and South Africa – is expected to launch plans this week for a joint development bank and measures to bring their stock exchanges closer together.

Egypt’s 2012 stock boom worries some fund managers
Reuters via Yahoo! News
Egypt’s stock market has jumped 37 percent so far in 2012, the largest gain of any country, but top U.S. fund managers focused on the region remain wary of further political turmoil and currency weakness in the most populous Arab nation.

Myanmar Announces Currency Reform
Associated Press
A state newspaper says Myanmar’s currency will be largely unshackled from government controls next week in a significant step toward reforming the impoverished country’s economy.

Miscellaneous News

Investors Beware: Securities Deregulation is Here Again, and It Will Hurt
Jake Zamansky – Forbes
Investors’ wounds from 2008 are still fresh, and many mom-and-pop investors remain terrified of jumping back into the stock market. As a result, investors have parked billions of dollars in money market funds, earning next to nothing in interest. That result leaves investors—especially retirees—desperate for some type of return.

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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