John Lothian Newsletter: MF Global Still Set to Pay Bonuses; CBOE Executive Placed On Leave During SEC Investigation; LSE buys majority stake in LCH.Clearnet

Mar 9, 2012

MF Global’s bankruptcy plan includes significant bonuses for three senior execs of the firm. At the CBOE, a compliance executive has been placed on administrative leave as the SEC investigates company oversight. The London Stock Exchange steps up to buy a majority stake in LCH.Clearnet. In Europe, Greece successfully winds up its debt cycle with murmurs of impending doom rather than cheers.

Observations – Statistics – Commentary

MF Global Still Set to Pay Bonuses
Three top executives of MF Global Holdings Ltd. when it collapsed could get bonuses of as much as several hundred thousand dollars each under a plan by a trustee overseeing the securities firm’s bankruptcy case, people familiar with the matter said.

**JK – An easy target here. Are they the heroes in this sad story or the goats?


CBOE Executive Placed On Leave During SEC Investigation -Sources
The largest U.S. options exchange has taken a senior compliance executive off the job in the wake of an investigation by U.S. market regulators into the company’s oversight of traders, according to people familiar with the matter. Patrick Fay, senior vice president of member and regulatory services for CBOE and a 24-year veteran of the exchange, has been placed on administrative leave in a move linked to the SEC probe, according to two people familiar with the situation.


LSE buys majority stake in LCH.Clearnet
By Jeremy Grant and Adam Jones – Financial Times
The London Stock Exchange on Friday unveiled a deal worth up to E463m to take a majority stake in LCH.Clearnet in a move that boosts its presence in post-trade services.


FOWi reveals 52% of new contracts fail to trade
One in two new contracts launched on derivatives exchanges last year have failed to trade, a new report by FOW Intelligence has found. The “Derivative Contracts Performance Review 2011”, which was released this month, reveals that of the 584 new contracts launched in 2011, 52% failed to trade before the end of year.

***JM: Hedging against contract failure… that could be a contract!


Will MF Global haunt CME in 2012?
Elizabeth Dexheimer – MEDILL
It’s been four months since MF Global Holdings Ltd. filed for bankruptcy, but how long will the fallout continue to impact CME Group Inc.? It’s still too soon to tell, according to some industry experts.

**JK – The story points out volumes were off 13% in February from a year earlier, following a 5% drop in January.


The challenge of selling the LME
By Jack Farchy – Financial Times
The members of the London Metal Exchange know all about making markets. But they are struggling with the concept of selling the exchange itself.

**JK – If any exchange has good polish, it should be LME.


High-Frequency Trading: Menger vs. Walras
John Paul Koning – Ludwig von Mises Institute
While Carl Menger and Leon Walras simultaneously discovered the principle of marginal utility, their ideas about the nature of market prices are very different. Let us use as our example the modern-day phenomenon of high-frequency traders and the digital tracks they leave.


Lehman’s curse
Financial Times
For a country that hosts one of the world’s top financial centres, Britain is acquiring a worryingly poor reputation for protecting client money when investment firms fail.


It’s Time for Wall Street To Wash Its Dirty Dishes
It’s a concern that has crossed every restaurant-goer’s mind: “Is the kitchen clean?” Investors are no different. Seated in comfortable chairs, surrounded by the din of the markets and presented with a menu of potential purchases, they nevertheless fret about what goes on behind the scenes.

**JK – Gotta love Albert Collins’ “Dirty Dishes”.


MarketsReformWiki hits 1m page views
John Lothian’s MarketsReformWiki has recorded over one million page views in its first year of launch. The website, which provides readers with updates of regulatory change across the globe, was launched in February 2011 to meet to the growing demand for up to date information on the ever changing regulatory landscape.


Inflation hedge: China scrambles for egg futures
Leslie Hook – Financial Times
China, the world’s biggest consumer of many commodities, has its eye on one more: the humble egg. China’s egg market is worth some Rmb180bn ($28.5bn) annually, and China consumes about 23m tonnes of eggs a year, or 384bn eggs. But the egg market is missing one thing: futures trading.

**JK – Now about those hogs and pork bellies contracts.


JLN Interest Rates Newsletter

ECB sees slower growth, flags success of money flood
Reuters via Yahoo! News
FRANKFURT (Reuters) – The European Central Bank lowered its euro zone growth forecast after holding interest rates at record lows on Thursday, and said things would have been much worse without its dramatic action to pump a trillion euros into the banking system.

Greek Debt Restructuring Expected To Put CDS Market To Test
It isn’t yet known if Greece’s debt restructuring will trigger payouts on insurance-like contracts called credit-default swaps covering the government’s debt. But if it does, it will touch off the biggest-ever CDS auction for sovereign bonds and determine how much banks and others will have to pay to settle the swaps. Billions of dollars are at stake. The net amount of Greek CDS outstanding–after offsetting trades are cancelled out–is $3.2 billion. That is the maximum expected to change hands between CDS buyers and sellers, assuming every party that sold protection will have the cash to meet its obligations. If not, that sum could grow.

EU unveils plan to overhaul settling of trades
By Alex Barker in Brussels and Jeremy Grant in Paris – Financial Times
Tougher rules to prevent a breakdown of securities markets infrastructure have been unveiled by the European Commission, as regulators turn their sights on settlement risk.


MarketsWiki Page of the Day
Thomas Leaver


MarketsWiki Recent Updates


Richard Sandor; Walter L. Lukken; Greg Tanz; Thomas Leaverer

Companies, Organizations and Groups

Newedge; Futures Industry Association; International Organization of Securities Commissions; Bank for International Settlements; Dubai Mercantile Exchange



Job Postings; Committee on Payment and Settlement Systems


20,330,289 pages viewed, 6,739 articles, 137,807 edits
MarketsWiki Statistics

Lead Stories

Greece wraps up debt swap
Washington Post
Greece’s debt exchange offer to private investors ended on Thursday, with officials in Athens saying they were confident of the outcome and of further efforts in coming days to prop up the ailing country. Read full article

Offers for London Metal Exchange due by May 7
The London Metal Exchange (LME) has invited bidders to submit offers for the bourse by May 7 in the second phase of a process that could lead to the bourse’s sale, according to a letter sent to LME shareholders.

ISDA Panel to Meet Today to Decide if Greece Swap Constitutes Credit Event
By Chris Peterson and Shelley Smith – Bloomberg
The International Swaps and Derivatives Association said its determinations committee will meet today to consider a “potential credit event” relating to Greece.

Greece’s private creditors are the lucky ones
Nouriel Roubini – Financial Times
A myth is developing that private creditors have accepted significant losses in the restructuring of Greece’s debt; while the official sector gets off scot free. International Monetary Fund claims have traditional seniority, but bonds held by the European Central Bank and other eurozone central banks are also escaping a haircut, as are loans from the eurozone’s rescue funds with the same legal status as private claims. So, the argument runs, private claims have been “subordinated” to official ones in a breach of accepted legal practice.

European Parliament President Martin Schulz Welcomes Greek Debt Swap Deal
Press Release

Hellenic Republic Deputy Prime Minister and Minister Of Finance Evangelos Venizelos: Private Sector Involvement Tender Update
Press Release

Singapore regulator to help interbank rates probe
Reuters via Yahoo! Finance
The Monetary Authority of Singapore (MAS) said on Friday it has been approached by regulators in other countries to help in investigations over the possible manipulation of interbank interest rates.

Guiding light needed to cut through data fog
By Gillian Tett – Financial Times
If Greece were to descend into disorderly default, how big would the financial hit be? That question has been stirring up intense debate in the markets; and, of course, among regulators too. With negotiations about Greek debt having dominated the headlines, it has been important to understand the “what if” scenarios.

Libor’s survival hinges on its ubiquity
By Douwe Miedema and William James – Reuters
An arcane system at the heart of a global investigation into whether banks colluded in setting interest rates may endure simply because it is so deeply embedded in trillions of dollars’ worth of financial contracts.

Environmental Trading News

Kyoto 2 should last until 2020 – EU environment ministers
Argus Media
The majority of European Council environment ministers support an eight-year second commitment period under the Kyoto protocol rather than a five-year term, according to draft conclusions on the follow-up to the Durban climate summit seen by Argus.

EU Governments May Leave Out CO2-Permit Set-Aside in Energy Law
Governments in Europe intend to exclude from a planned energy law the option of withholding some carbon permits from the market, setting up a possible clash with European Parliament members seeking higher emission prices.

UK pushing for tougher emissions cuts at “crucial” EU meeting
Business Green
An increase in the EU’s carbon reduction ambitions will be Ed Davey’s main goal at today’s Environment Council meeting of ministers in Brussels.

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

Analysts back Rolet’s ‘novel’ LCH deal
Michelle Price – Financial News
Xavier Rolet, chief executive of the London Stock Exchange, said this morning that the UK group was pioneering a “novel” new model for clearing ownership through its acquisition of a majority stake in Anglo-French clearer LCH.Clearnet – a deal that has gained the support of industry analysts.

London Stock Exchange to Acquire Majority of LCH.Clearnet for $1 Billion
London Stock Exchange Group Plc (LSE) agreed to buy a majority stake in LCH.Clearnet Group Ltd. for 772 million euros ($1 billion) as the owner of Europe ‘s oldest independent bourse expands its provision of post-trade services.

Press Release
LCH.Clearnet Group Limited (“LCH.Clearnet”) and London Stock Exchange Group plc (“LSEG”) today announce that they have reached agreement on the terms of a recommended cash offer to be made by London Stock Exchange (C) Limited (“LSEC”), a wholly-owned subsidiary of LSEG, for LCH.Clearnet’s Issued Share Capital. On Completion, LSEG will become the majority owner of LCH.Clearnet, holding up to 60 per cent. of LCH.Clearnet’s Issued Share Capital.

Change in Executive Board of Clearstream Banking AG – Katja Rosenkranz to leave Deutsche Börse Group
Katja Rosenkranz, member of the Executive Board of Clearstream Banking AG, Frankfurt, has decided to step down from the board and leave Deutsche Börse Group, effective 31 March 2012, in order to pursue new activities. The Supervisory Board of Clearstream Banking AG confirmed with regret Rosenkranz’s request to terminate her contract. Ms. Rosenkranz is departing on amicable terms.

NYSE Euronext Announces Trading Volumes for February 2012
Business Wire via Yahoo! Finance
NYSE Euronext today announced trading volumes for its global derivatives and cash equities exchanges for February 20121. Trading volumes declined year-over- year and month-over-month across most venues.

NYSE: Hey stop picking on us!
CNN Money
The NYSE says uneven regulation is sending more and more trades into Wall Street’s so-called dark pool and hurting investors.

Program Trading Averaged 33.7 Percent of NYSE Volume during Feb. 27-Mar. 2

ASX Ltd Half-Year Results – Edited Analyst Briefing Transcript

ASX Ltd Half-Year Results – Edited Media Briefing Transcript

NASDAQ OMX: Bring The Money Home To Boost Our Economy

Banks, Brokers & Dark Pools

Cantor Fitzgerald & Co. Further Builds Prime Services Group
Cantor Fitzgerald & Co., a leading financial services firm, has further strengthened its Prime Services Group with the additions of John Fiore and Marc Young. Mr. Fiore, formerly of Bank of America, and Mr. Young, formerly of BNP Paribas, will serve as Managing Directors of Sales, responsible for business development and origination for hedge fund clients.

JPMorgan Hires Citco’s Miller to Run Product Strategy for Hedge-Fund Unit
JPMorgan Chase & Co. (JPM) , the largest and most profitable U.S. bank, hired Stephanie Miller from Citco Fund Services Inc. to oversee product strategy for its alternative-investment services unit.

Citigroup Nominates Franz Humer, Joan Spero To Board
Citigroup Inc. (C) announced that it has nominated Franz Humer and Joan Spero as new independent director candidates to stand for election at the company’s annual meeting of stockholders on April 17, 2012.

Goldman Sachs Sends Sher Down Under
Wall Street Journal Blogs
U.S.-based Goldman Sachs banker Steven Sher will relocate to Australia in April, a person familiar with the matter told Deal Journal Australia.

IMF To Co-Host High-Level Conference On China-India
Press Release

Goldman Sachs Raises Conflicts to a High Art: Jonathan Weil
Right after a Delaware state judge issued his ruling last week in a shareholder lawsuit contesting Kinder Morgan Inc.’s purchase of El Paso Corp. (EP) , the public finger-wagging aimed at Goldman Sachs Group Inc. (GS) began.

Barclays Awards $10.3 Million to C.E.O.
Barclays said Friday it paid its chief executive, Robert E. Diamond Jr., £6.3 million, or $10.3 million, for last year, with overall pay falling at the big British bank as profit slipped.

Citigroup CEO Pandit collects $14.9 million
Reuters via Yahoo! News
NEW YORK (Reuters) – Citigroup Chief Executive Vikram Pandit finally got his payday. The third biggest U.S. bank company paid Pandit $14.86 million in 2011, compared with $1 in 2010, according to a filing with the Securities and Exchange Committee.

Bank Of America Still Doesn’t Get It
The seemingly endless discussion of whether advisors at Merrill Lynch are benefiting from their marriage with Bank of America continues; the most recent war of words was sparked by Merrill Chief John Thiel, who defended the partnership after his predecessor made disparaging comments on the subject upon leaving the firm.

Allianz Global Investors Hires Jill Lohrfink as Head of U.S. Institutional
Business Wire via Yahoo! Finance
Allianz Global Investors announced today that it has hired Jill Lohrfink to lead the firm’s institutional client business in the United States.

HSBC to Vend Insurance Businesses
Zacks via Yahoo! Finance
HSBC will be divesting its general insurance units in Hong Kong, Singapore, Argentina and Mexico to Australia’s QBE Insurance Group Ltd. and France-based AXA Group in two separate deals.

Reports: Deutsche Bank Borrows From ECB Emergency Program
RTT News
German financial services giant Deutsche Bank AG (DB) took between 5 billion and 10 billion euros in loans, or between $6.63 billion to $13.27 billion, from the European Central Bank’s emergency lending program last week, according to media reports on Thursday.

WGMI Signs NASDAQ OMX Agreement for Distributing NASDAQ Prices and Marketing its Trading Platform on NASDAQ Websites
PR Newswire
Win Global Markets, Inc. (OTCBB:WGMI) a leading provider of online trading of binary options, announced that its wholly owned subsidiary, WGM Services Ltd has entered into an agreement with NASDAQ OMX for the distribution of NASDAQ OMX price quotes of US markets and Nordic exchanges in Stockholm, Copenhagen and Helsinki.

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.

J.P. Morgan Securities LLC Agrees to Pay $140,000 Penalty for Confirming the Execution of a Prearranged Trade on the CBOT
The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against futures commission merchant J.P. Morgan Securities LLC (JPMS) of New York, N.Y., for confirming the execution of a prearranged trade of ten year U.S. Treasury Note Futures spreads, which was a fictitious sale and noncompetitively executed on the Chicago Board of Trade (CBOT).

BlackRock Institutional Trust Co. NA Agrees to Pay $250,000 Penalty to Settle Charges of Prearranged Trading and Fictitious Sales on the CBOT
The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against BlackRock Institutional Trust Company NA (BlackRock) of San Francisco, Calif., for engaging in prearranged trades that were noncompetitively executed and fictitious sales in ten year U.S. Treasury Note Futures spreads (ten year spreads) on the Chicago Board of Trade (CBOT). BlackRock is an investment management firm and is a wholly owned subsidiary of BlackRock, Inc.

Jury: US can go after $330M in Stanford accounts
Associated Press via Yahoo! News
A Texas jury cleared the way Thursday for U.S. authorities to go after $330 million in stolen investor funds sitting in frozen foreign bank accounts controlled by convicted Ponzi schemer R. Allen Stanford.

SEC Charges Former Executive at Coca-Cola Bottling Company with Insider Trading
The Securities and Exchange Commission today charged a former executive at a Coca-Cola bottling company with insider trading based on confidential information he learned on the job about potential upcoming business with The Coca-Cola Company.

Please Listen Carefully, Some Menu Options Have Changed – Speech Of CFTC Commissioner Bart Chilton, Trade Tech 2012, New York, NY

Pritchard Stockbrokers Ltd enters Special Administration Regime
The Financial Services Authority (FSA) confirms that Pritchard Stockbrokers Ltd (Pritchard) has entered the Special Administration Regime (SAR) on 9 March 2012 and Timothy Ball, Roderick Weston and Alistair Wood at Mazars LLP have been appointed joint special administrators.

ASIC releases updated guidance for making a credit licence application

ASIC releases guidance and policy proposals for carbon financial products

Investments – Indexes – Managed Futures – Managed Funds

Banks’ Off-Balance-Sheet Commercial Paper May Have Prompted Financial Crisis
Stanford GSB
After analyzing repurchase agreements by money-market funds and security lenders, these researchers believe that banks off-balance-sheet collateralization of commercial paper is more likely to have prompted the run on short-term debt financing in the recent financial crisis.

Blackstone tops hedge fund investor list
Reuters via Yahoo! News
LONDON (Reuters) – Blackstone was the largest fund of hedge funds last year ahead of banking groups HSBC and UBS , according to a survey which showed that the total assets managed by these types of investors failed to grow amid criticisms of high fees.

Price war looms among big ETF providers
By Ajay Makan in New York – Financial Times
The three largest providers of US exchange-traded funds are aggressively slashing their management fees, fuelling a price war among asset managers for market share in the fast-growing investment business.

Clearstream’s February 2012 figures
In February 2012, the value of assets under custody held on behalf of customers registered a decrease of 3 percent to E 11.0 trillion (compared to E 11.3 trillion in February 2011).

Bond And CDS Arbitrage Opportunities?
By Vincent Cignarella – WSJ
To paraphrase the famous bard, “something is rotten in Portugal”. And the odor could be emanating from the credit default swaps market.

DealBook: Henry Silverman Joins Guggenheim Partners
New York Times
The financier, who built the conglomerate Cendant, had held a senior post at the private equity giant Apollo Global Management and recently settled his three-year-old divorce dispute.

Numerix Tops 2012 Structured Products Magazine’s Technology Rankings with No. 1 CVA and Cross-Asset Pricing Solution
Numerix (, the leading provider of cross-asset analytics for derivatives valuations and risk management, announced today that the firm was voted best overall in Structured Products Magazine’s Technology Rankings 2012 taking the No. 1 spot in Risk Management (market and credit) and Pricing and Analytics (credit, cross-asset and forex pricing).

WisdomTree Launches Emerging Markets Corporate Bond ETF
Seeking Alpha via Yahoo! Finance

[FMA] Exchange-rate-adjusted volume of foreign currency loans to households noticeably reduced
he outstanding volume of foreign currency loans to domestic private households stood at E 37.3 billion as at the end of Q4 2011 (compared with E38.7 billion in Q4 2010). Foreign currency loans thus represent a 28.4% share of the total amount owed by households (30.2% in Q4 2010).

Media News

Why are companies defecting from Google Maps?
Digital Trends via Yahoo! News
In recent years, Google Maps has transformed itself from an also-ran service struggling to catch up with the likes of MapQuest to a market-leading mapping and route planning service that seems to be everywhere. There’s scarcely a Web site or smartphone app with any location-related needs that doesn’t tie in with Google Maps.

Michael Arndt named new editor at Crain’s
Crain’s Chicago Business has named Michael Arndt, the paper’s current managing editor, to be its new editor.

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

BofA names Koder Asia-Pacific president, memo says
Reuters via Yahoo! News
HONG KONG (Reuters) – Matthew Koder will take over as president of Bank of America Merrill Lynch’s Asia-Pacific business, BofA announced in a memo obtained by Reuters on Friday, replacing the current regional president Brian Brille.

Shanghai Stock Exchange To Curb Speculation Through New Procedures And Surveillance System
Press Release

Tokyo Stock Exchange: One Year After The Great East Japan Earthquake
Press Release

Shanghai Stock Exchange To Strengthen Supervision Of Blue Chip Market
Press Release

Shenzhen Stock Exchange Reminds Small-Medium Investors To Rationally Participate In New Stock First-Day Trading
Press Release

Frontier Markets

[Video] Mark Mobius on Investing in Frontier Markets
Mark Mobius, chairman of Templeton Emerging Markets Group, talks about investment strategy in frontier markets and the outlook for the European sovereign debt crisis. Mobius speaks on Bloomberg Television’s “InBusiness With Margaret Brennan.”

Saudi-owned Africa fund hit by management discord
Reuters via Yahoo! News
Prominent African private equity firm Kingdom Zephyr is in talks with investors on the future of its $490 million fund after the departure of its rainmaker forced the closure of its South African office, according to sources familiar with the matter.

South Africa Exchange to Start Cape-Wheat Contracts After Decade
By Tshepiso Mokhema – Bloomberg
The South African Futures Exchange plans to reintroduce contracts for wheat grown in the Western Cape province, the area that produces 37 percent of the nation’s grain, which may boost prices that farmers receive.

MCX Weekly Market Report March 02, 2012 – March 08, 2012

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