John Lothian Newsletter: CME Group, BM&FBOVESPA Agree to x-list Index Futures; Libor Links Deleted as BBA Backs Away From Tarnished Rate; Athens, creditor group turn up heat on Greek bondholders

Mar 7, 2012

CME Group and BM&FBOVESPA agree to cross-list stock index futures, probably with a somewhat simpler symbol than CMEBMFBOVESPASP500. The British Bankers Association, as it helps to consider an improved way to calculate Libor that doesn’t involve collusion, quietly removes links on its web site to material explaining how they helped to design the old way of calculating it. Greece tells creditors balking at the bond swap deal that if they don’t accept the losses in the package, Athens may forcibly hand it to them anyway. TOCOM says no way, it’s not asking CME Group to take a stake in the exchange; at least, not yet. And in the top box, Doug Ashburn (from yesterday’s JLN FX Newsletter) grabs a eurozone crayon and draws a warning conclusion about the crisis there.

Observations – Statistics – Commentary

JLN FX Newsletter: Connecting the Dots
By Douglas Ashburn, Editor-at-Large, John Lothian News

I am occasionally blessed with a not-so-busy weekend; one which allows me to take a bit more time to actually digest the week’s news, rather than just skim, scan, and absorb the main points. When I do, I tend to come away with a more complete picture, as I give myself time to see the interconnectedness of seemingly unrelated story lines. Below are five headlines from the past weekend that, when taken as a whole, offer a fuller picture of what is happening (and what likely will happen) in Europe in the coming months. All headlines appeared in FT Weekend, March 3-4, 2012.

Eurozone Leaders Point to Recovery. It looks as though the panic has abated. The German DAX has risen 40 percent off this summer’s low. The yield on 10-year Italian bonds has dropped from the 7 percent “point of no return” to 4.92 percent as of Friday. European leaders, specifically French President Nicolas Sarkozy, are positively upbeat about the worst of the crisis being over. This was all on page one. If only I had stopped reading there.

Banks Park Record EUR 777 billion in cash with ECB overnight. The results of last week’s long-term refinancing operation (LTRO) were simply staggering. 800 banks borrowed EUR 530 billion in 3-year notes at one percent from the ECB, only to deposit more than half of it at the central bank, where it will earn the 0.25 percent overnight rate. If my thinking is correct, the banks are putting on one giant butterfly – borrow 3-year from the ECB, and buy ECB overnights and ten-year sovereign debt. I see the rationale – it has the look and feel of a hedged position, put on at quite a credit premium. What is clear is that banks have no intention of parking the stimulus with fellow banks, whose balance sheets they do not trust, nor into the “real economy,” which is still shrinking.

For the rest of the commentary and ongoing coverage of the currency sector, visit the JLN FX website at


Futures Firms Weigh New Client Practices After MF Global Revealed Snags
U.S. futures exchanges and brokerages are discussing ways to ease customers’ migration from one broker to another after the demise of MF Global Holdings Ltd. revealed snags in the process.

**JK – A snag? More like an unraveling.


Tokyo Commodity Exchange denies report that it’s set to seek capital from CME
The Tokyo Commodity Exchange on Wednesday denied a media report that it was set to ask CME Group Inc., the world’s largest futures exchange operator, to take a stake of up to 20 percent in it, although it said such a deal could be an option it explores in the future.

**JK – The new name would be Tok-to-ME.


Ex-CBOT chief’s trading firm to buy Chicago’s Endeavor
By: Lynne Marek – Crain’s
Sun Holdings LLC, a Chicago proprietary trading firm headed by former Chicago Board of Trade CEO Bernard Dan, is acquiring “substantially all” of Endeavor Trading LLC, another proprietary trading firm based in Chicago.


VIX Futures Open Interest Hits New Record: Over 280,000 Contracts
CBOE Futures Exchange, LLC (CFE) today announced that open interest in CBOE Volatility Index (VIX index) futures reached new all-time highs on Monday, March 5 and Thursday, March 1. On March 5, open interest hit 282,314 contracts, exceeding a 256,870-contract record on March 1.

**JK – We were hoping for more a round number in the office, of say 300,000.


Fidessa enhancing trading capabilities for Scottrade
Fidessa group plc, provider of high-performance trading, investment management and information solutions for the world’s financial community, announced today that it has provided enhanced dynamic order routing and order management capabilities to Scottrade, Inc., a leading online investing company. The deal marks one of Fidessa’s first high-profile U.S. trading system sales in the retail space.

**JK – They also replaced the goofy broker


Cinnober Newsletter Q1 2012
Brazil kicks off world’s largest clearing project
World’s fastest real-time index engine – by Cinnober
The LME upgrades for volume increase
OTF service ready to take on MiFID II
Veronica Augustsson – New Head of Sales at Cinnober


Investors will shoulder price of bank regulation
By Larry Tabb – Financial Times
Mea Culpa? Yes, the banks did wrong. They became overlevered; hopped-up on greed, they took on more credit than a loan shark would have extended. When the bets turned sour, they went cap in hand to the taxpayer. Once bailed out, the banks threw petrol on the fire by not being contrite, hoovering up cheap cash, paying bonuses as if there were no tomorrow and refusing to develop a set of even the least offensive business restrictions.


Alternative venues play waiting game in Japan
Steve Grob, Fidessa – FOW
Just back from an interesting week in Japan where I was presenting at the annual GMAC conference, Japan International Banking & Securities Systems Forum. The impact of Japan’s alternative venues (known as PTSs) was a particular area of discussion, especially now that Chi-X has set up in Australia and with Korea looking to introduce a multi-market structure too.

**JK – Steve Grob fragulating around the globe.


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Wednesday, March 7, 3:00 PM CT/4:00 PM ET

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* Jeff Lewandowski, experienced options trader and online options room moderator, then looks at the array of available weekly cotton options and explains how to use cotton weekly options strategies to manage risk and structure trading strategies around events like crop reports.
* A Q+A session is included in the program.

Ray McKenzie, VP, Market Development, ICE Futures U.S., moderates the program.

Registration and details:


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Lead Stories

CME Group, BM&FBOVESPA, and S&P Indices Announce Agreement for Cross-Listing of Global Benchmark Equity Index, Commodity and Energy Futures
PR Newswire via Yahoo! Finance
CME Group, the world’s leading and most diverse derivatives marketplace, and BM&FBOVESPA (BVMF), the largest equity and futures exchange in Latin America, today announced a cross-listing and cross-licensing agreement involving S&P 500 Index and Bovespa Index (IBOVESPA) futures.

Libor Links Deleted as Bank Group Backs Away From Tarnished Rate
Twenty-six years after helping to design the London interbank offered rate, Britain’s bank lobbyists are distancing themselves from their creation amid regulatory investigations and lawsuits.

Athens, creditor group turn up heat on Greek bondholders
Reuters via Yahoo! News
Athens turned up the heat on its creditors on Tuesday as it sought to secure a bond swap that will cut its mountainous debt, while the main bondholders group warned a disorderly default would cause more than a trillion euros of damage to the euro zone.

Former Iceland central bank chief warned of looming crisis
Reuters via Yahoo! News
Iceland’s former central bank chief had warned about the country’s over-sized banks before they went bust in 2008, he said Tuesday at the trial of a former prime minister for failing to prevent the crisis.

Bankers embark on Libor rate-setting rethink
By Brooke Masters and David Oakley in London and Izabella Kaminska in Geneva – Financial Times
Can Libor be saved? The British Bankers’ Association is certainly trying. The group kicked off talks on Monday over whether and how to revamp the way borrowing rates between banks are calculated. The London Interbank Offered Rates serve as benchmarks for more than $350tn in contracts worldwide and help set the price of financial products, including mortgages and credit cards.

The pain in Spain will test the euro
By Martin Wolf – Financial Times
One definition of insanity is to do the same thing over and over again and expect different results. Germany’s determination to impose a fiscal hair shirt on its eurozone partners did not work in the “stability and growth pact”. Is it going to work in the “treaty on stability, co-ordination and governance” agreed last week? I doubt it.

Environmental Trading News

Climex seeks 40,000 VERs for unnamed buyer
Point Carbon
Dutch emissions bourse Climex will host a tender for 40,000 voluntary carbon credits on April 5 on behalf of an unidentified international organisation.

EU-Australia carbon market link unlikely before 2020: lawyer
Point Carbon
Linking Australia’s emerging carbon market with the EU scheme is unlikely to happen before 2020, making the prospect of a global CO2 price a distant hope, Anthony Hobley, a lawyer at Norton Rose, said at an industry event Tuesday.

Emissions from Asia put US cities over the ozone limit
As plumes of pollution rise over the booming industrial towns of Asia, satellite data could help to alert people in other regions to the approach of drifting smog. A team of researchers from the United States has conducted the first high-resolution analysis of ozone — the main constituent of smog — travelling from Asia to the western United States.

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

Financial News: Deutsche Boerse Mulls Clearing Reform
By Michelle Price Of FINANCIAL NEWS
Germany’s Deutsche Boerse (DB1.XE) is exploring the possibility of introducing clearing reforms to its cash equities platform, in a sign of the growing pressure on incumbent exchanges to succumb to rising industry clamour for competition in Europe’s clearing market.

Thomson Reuters Global Equities Monthly Market Share Data Updated To Reflect February 2012 Activity

[LSE] Monthly Market Report – February 2012
London Stock Exchange Group sits at the heart of the world’s financial community, offering international business unrivalled access to Europe’s capital markets. In February a total of 30.8 million trades were carried out across the Group’s electronic equity order books with a combined value of £171.0 billion (E204.3 billion), down 11 per cent on February 2011 (£191.3 billion).

Burgundy Monthly Report February 2012

Madrid Stock Exchange Investor Ombudsman Report For 2011

Vienna Stock Exchange Derivatives Market Detailled Monthly Statistics – February 2012

KCBT Good Friday Holiday Hours

TMX Group Equity Financing Statistics – February 2012

ATHEX Monthly Statistical Bulletin February 2012

MICEX-RTS: Initial Margin Requirement Increased For The Holidays Season

Banks, Brokers & Dark Pools

Total ICAP Electronic Broking Volumes on BrokerTec and EBS Platforms for February increases 11% month-on-month; decreases 12% year-on-year
ICAP, the world’s leading interdealer broker, announces today that average daily volumes on the BrokerTec and EBS platforms for February were US$725.7bn, an increase of 11% month-on-month. For the month year-on-year, there was a decrease of 12% as macroeconomic uncertainty and low interest-rate volatility dampened activity.

MarketAxess Announces Monthly Volume Statistics for February 2012
MarketAxess Holdings Inc., the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today announced total monthly trading volume for February 2012 of $50.0 billion, consisting of $31.0 billion in U.S. high-grade volume, $4.1 billion in eurobond volume, and $14.9 billion in other volume.

Institutional Investor Names Deutsche Bank Europe’s Best Brokerage for 2012
Marketwire via Yahoo! Finance
Deutsche Bank captures first place in Institutional Investor’s inaugural ranking of Europe’s Best Brokerages. J.P. Morgan Cazenove comes in second, followed by the London-based operations of Bank of America Merrill Lynch in third.

Goldman Secret Greece Loan Shows Two Sinners as Client Unravels
By Nicholas Dunbar and Elisa Martinuzzi – Bloomberg
Greece’s secret loan from Goldman Sachs Group Inc. (GS) was a costly mistake from the start. On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.

Dealpolitik: Goldman, Self-Inflicted Wounds and a Bit of Naivete
Wall Street Journal Blogs
Goldman Sachs is getting hammered (including by me) as a result of how it handled its conflicts in advising El Paso on Kinder Morgans takeover but some of the moral outrage over this is a bit naive.

ECB’s favored creditor status dulls bond buys impact
Reuters via Yahoo! News
The European Central Bank’s immunity from losses on its Greek bond holdings risks undermining the effectiveness of its secondary market debt purchases in shoring up other weak euro zone issuers such as Portugal.

Barclays Joins JPMorgan in Catching Up to Goldman in Commodities Trading
The two banks tied Goldman Sachs and surpassed Morgan Stanley in the share of clients who use them for over-the- counter energy derivative trades, a Greenwich Associates survey of corporate treasury officials shows. In metals derivatives, JPMorgan dominated with a 60 percent market penetration.

S&P Blocked by Banks in CMBS Market After Derailed Goldman Deal: Mortgages
Standard & Poor’s is frozen out of the commercial-mortgage bond market by the biggest underwriters after derailing a $1.5 billion sale by Goldman Sachs Group Inc. (GS) and Citigroup Inc. last July.

Did The Fed Help Banks While Ignoring The Risks?
The Federal Reserve shrugged off warnings and let banks pay shareholders billions of dollars in dividends last year, despite warnings from the Federal Deposit Insurance Corp. ProPublica investigative reporter Jesse Eisinger says banks should have been forced to set aside the money as a rainy-day cushion.

HSBC sells general insurance business for $914 million
Reuters via Yahoo! News
HONG KONG (Reuters) – HSBC has agreed to sell its general insurance businesses to French insurer AXA Group and Australia’s QBE Insurance Group for $914 million in cash, as Europe’s biggest bank moves ahead with its plan to divest non-core assets.

Goldman Sachs Announces Successful Remarketing of Notes Held by Goldman Sachs Capital II

Schwab Endorses Industry-Changing Service for Alternative Investments
Business Wire via Yahoo! Finance
Following a recent No-Action letter obtained from the Securities and Exchange Commission , Charles Schwab today announced its support for The Depository Trust & Clearing Corporation’s Alternative Investment Products service as a means to facilitate the custody of alternative investments.

Lehman Brothers: The final chapter
Defunct investment bank Lehman Brothers moved into its final chapter Tuesday, but it will take years before the 161-year-old financial firm will close the book on its storied history.

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.

Stanford faces decades in jail for stealing $7bn
By Kara Scannell in New York – Financial Times
Allen Stanford, the billionaire Texas banker who was once knighted by the government of Antigua, was convicted of stealing $7bn in customer money to fund a high end lifestyle that involved sponsorship of an international cricket tournament, yachts, and island properties.

Stanford Convicted But Plenty of Shame and Blame to Go Around
Veteran regulatory lawyer Bill Singer sees very little to cheer about over Sir Allen Stanford’s conviction. Fumbled leads and inept regulation paved the way for this crime.

U.S. Urges Judge to Accept Morgan Stanley Antitrust Accord Over KeySpan
The U.S. Justice Department urged a judge to accept a $4.8 million antitrust lawsuit settlement with Morgan Stanley (MS) even without an admission that the New York bank violated federal law.

Madoff continues to haunt SEC in Hill hearing on budget request
Washington Post
Three years after he was sent to prison, con man Bernard Madoff continues to haunt the Securities and Exchange Commission . The agency says it needs a bigger a budget to police the financial world and protect investors. But some members of Congress cite the SEC’s failure to stop Madoff as one in a series of reasons to think twice before trusting the agency with more money.

Five Financial Reforms That Would Prevent Crises and Promote Prosperity
Excessive leverage and risk-taking are indeed endemic to the financial system, not because it’s too lightly regulated but because it isn’t capitalistic (free and unsubsidized) enough.

Testimony before the Subcommittee on Financial Services and General Government Committee on Appropriations United States House of Representatives
by Chairman Mary L. Schapiro, U.S. Securities and Exchange Commission

European Supervisory Authorities Publish Today A Joint Discussion Paper On Draft Regulatory Technical Standards Foreseen By The European Market Infrastructure Regulation (EMIR)

European Commission Acts To Increase The Safety And Efficiency Of Securities Settlement In Europe

European Commission Proposal On Improving Securities Settlement In The EU And On Central Securities Depositaries – Frequently Asked Questions

SEC Obtains Asset Freeze Against Long Island Investment Adviser Charged with Defrauding Investors
U.S. Securities and Exchange Commission
The Securities and Exchange Commission today announced it has charged a New York-based investment adviser with defrauding investors in five offshore funds and using some of their money to buy himself a multi-million dollar beach resort property on Long Island.

NFA Enforcement and Registration Actions
FIN FX LLC and Leon L. Wolmarans

[ASIC] Some charges not migrated to the Personal Property Securities Register

ASIC accepts enforceable undertaking from Commonwealth Bank

[ASIC] MoneySmart says be your best super-woman

[BCSC] Commission panel sanctions B.C. lawyer for trading on insider information

Online fraud awareness campaign confirms investors’ vulnerability [CSA]

Investments – Indexes – Managed Futures – Managed Funds

DTCC to Help Standardize and Automate AIP Broker/Dealers’ Compliance and Custody Requirements for Uncertificated Securities
The Depository Trust & Clearing Corporation announced today that its National Securities Clearing Corporation (NSCC) subsidiary will soon file a proposed rule change with the Securities and Exchange Commission (SEC) to amend its Alternative Investment Product (AIP) rules.

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 …

S&P eyes US local government rating change
By Nicole Bullock in New York – Financial Times
Standard & Poor’s may change the way it rates local governments in the US in a move that could lead to upgrades for about one-third of its ratings at a time when many areas continue to struggle with the effects of the recession.

Asia Hedge Fund Startups Falter as Biggest Backers Pull Cash
Asia-focused hedge funds that were started with the help of a major backer after the 2008 credit crisis are shutting down as a shrinking pool of key investors makes it harder for them to raise capital.

Agecroft Partners Wins Best Hedge Fund Third Party Marketing Firm for 5th Year in a Row
PRWeb via Yahoo! News
Agecroft Partners, the hedge fund consulting and third party marketing firm, was recognized by Hedgeweek as the winner of the “2012 Best Third Party Marketing Firm in North America” at their global Hedge Fund Awards ceremony held in London on March 2nd.

Russell to develop European mid-cap index
By Philip Stafford – Financial Times
Deutsche Bank, Goldman Sachs and UBS have teamed up with Russell Investments, the markets index compiler, to develop a pan-European index for small and mid-cap stocks amid signs investors are turning their attention to the lower reaches of the market.

IndexIQ Plans Physically Backed Diamond ETF via Yahoo! Finance

FTSE China Index Series Quarterly Review

Technology News

Orc names Siag Consulting as service partner
Orc Group AB, a leading provider of technology and services for the global financial industry, today announced a partnership with Siag Consulting International, a major consulting and systems implementation specialist based in Madrid.

BZ WBK Brokerage Selects SunGard’s Valdi OMS and Trading Tools
BZ WBK Brokerage has selected SunGard’s Valdi Order Management System and trading tools to help streamline its access to the Warsaw Stock Exchange (WSE).

360 AM Selects SunGard’s FastVal for Independent Valuation of Complex Derivatives
360 Asset Managers (360 AM), a French asset manager with E160M* in assets under management, has selected SunGard’s FastVal to help it independently value its derivative portfolios.

AIB Philippines Selects SunGard’s Ambit Treasury Management to Support Business Growth
Amalgamated Investment Bancorporation (AIB) has selected SunGard’s Ambit Treasury Management* to help streamline its treasury operations and support new growth opportunities.

FINCAD Launches F3 2.2 in Response to Rapid Market and Regulatory Changes
PR Newswire via Yahoo! Finance
FINCAD, the market leader for innovative OTC derivatives solutions, today announced the launch of F3 2.2. The new release addresses market needs around the effects of counterparty credit risk on valuation, whether via the impact of collateral on curve building in a multi-currency framework, or via CVA.

Media News

Thomson Reuters Launches Social Media Sentiment Analysis Offering
Thomson Reuters yesterday announced an extension of its machine-readable news offering to include a sentiment scoring service for social media. The new capability will mine the expansive wealth of social media and blog content to deliver digestible analytics on selected companies and market segments, to help trading and investment firms identify and capitalize on new opportunities.

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

Singapore SMX says Feb iron ore futures volume at record high
Reuters via Yahoo! Finance
The volume of iron ore futures contracts traded on the Singapore Mercantile Exchange rose to a record of 1.48 million tonnes in February, the bourse said on Wednesday, reflecting active interest from Chinese and Indian players.

Senior Asia Economist Jonathan Anderson Departs UBS
FOX Business
UBS chief emerging market economist Jonathan Anderson announced Wednesday he is departing the bank to be an independent consultant.

Tokyo Commodity Exchange February 2012 Average Daily Volume Up 4.7% From January 2012

HKEx Publishes Online Fact Book For 2011

Tokyo Commodity Exchange Statement On A Recent News Report On TOCOM And CME

TOPIX Index Futures Trading Hits A Record High On 6 March

Frontier Markets

Dubai Mercantile Exchange Announces Chief Executive Transition
Press Release
The Dubai Mercantile Exchange Limited (DME) today announced that Chief Executive Officer Thomas Leaver will depart the exchange to pursue other interests after six years of service. The Board of Directors has appointed a Transition Committee to oversee the search for his replacement. Mr. Leaver will support the Committee until a new chief executive has been hired.

Exclusive: Myanmar to float currency in 2012/13, unify FX rates
Reuters via Yahoo! News
Myanmar will begin a managed float of its currency in the fiscal year from April and develop an interbank money market, according to central bank documents obtained by Reuters, ending a fixed-rate currency system that has stifled investment and fueled a black market.

Palestine Exchange Closed On International Woman’s Day

Miscellaneous News

Is MF Global a Deadbeat Dad?
By Joseph Checkler – Reuters
Just what kind of parent is MF Global Holdings Ltd.? To one customer in the commodities firm’s bankruptcy case, the answer is essentially “deadbeat.”

John Lothian Newsletter

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CEO, Trading Technologies

Past JLN Newsletters

ETF trading surges on European stock exchanges

ETF trading surges on European stock exchanges

First Read $26,851/$300,000 (9.0%) Denise Knabjian ++++ Hits & Takes JLN Staff The U.S. has surpassed the 25 million Covid-19 infections level, according to data reported Sunday by Johns Hopkins University. JPX has signed a memorandum of understanding, or MOU,...

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