The CFTC votes 4-1 on a package of new rules that nobody likes very much, including the CFTC. Nasdaq posts the latest trading halt caused by a system fault. Regulators prepare to issue a big fine to an exchange, and are considering increasing their regulatory presence there in the future.

First Read

CFTC Moves the Ball Forward on Swap Execution
by Doug Ashburn, Editor-at-Large
Compromise, as they say, is an agreement whereby neither party gets what it wanted. Such was the outcome of yesterday’s CFTC meeting, in which final swap execution rules were, at long last, passed by the commission. The suite of rules, which go into effect 60 days after they are sent to the Federal Register, included final rules on block trades, SEF core principles and the so-called “made available to trade” provisions. Also approved was interpretive guidance on disruptive trade practices.

The meeting was also the swan song for Commissioner Jill Sommers, who had announced her departure several months ago, but said she would stay on until the execution rules were completed. (For more on the Sommers legacy, see her recent interview on

Of all the Dodd-Frank swap rules completed thus far, the SEF rules have been perhaps the most contentious. Among the sticking points were the size of block trades, the number of quotes required to be solicited prior to a trade, and whether swap trades negotiated by phone would still be allowed. In the end, no one seems happy with the final rules. Some market observers are calling the minimum quote requirement – beginning with two and phasing up to three – as “watered down” from the five-quote minimum as originally proposed. Others see the minimum quote and block thresholds as “overly prescriptive.” Even Commissioner Chilton referred to “holding his nose” while supporting yesterday’s measures.

But no one was more aggressive in challenging a rubber-stamp approval than Scott O’Malia. Before the SEF and block trade votes, O’Malia entered proposed amendments that would have required an additional data study and comment period prior to any automatic step-up in block thresholds and quote minimums. Both amendments were defeated. He also grilled staff and fellow commissioners on the language regarding voice execution, saying the final wording could have been more clear. Was he dotting the “i” and crossing the “t” yesterday, or laying the groundwork for the next legal challenge to Dodd-Frank?

Stay tuned.

For those wanting a full summary of the meeting and all final rules, we encourage you to visit MarketsReformWiki
Meeting Summary Page
Final Block Trade Rules
SEF Core Principles
Made Available to Trade Provision
Interpretive Guidance on Anti-disruptive Trade Practices


Debby Hallett

Debby Hallett of Arthur Bell CPAs on Performance Reporting for CTAs & Managed Accounts

Debby Hallett is director of performance analysis for Arthur Bell Certified Public Accountants, a firm specializing in audit, tax, accounting, and advisory services for the alternative investment sector. Hallett, a licensed CPA, focuses on CTA and fund manager reporting procedures. She spoke with John Lothian News Editor-at-Large Doug Ashburn about presenting performance when a managed account is a fund, the differences between fund performance and CTA program performance, performance record examinations, and why more CTAs are outsourcing performance reporting services to a third party provider.

Watch the video »


ICE Clear Europe Named 2013 Clearing House of the Year by Energy Risk Magazine
IntercontinentalExchange, a leading operator of global markets and clearing houses, announced today that ICE Clear Europe has been named Clearing House of the Year for 2013 by Energy Risk magazine.

***** I wonder if there is a bonus for winning awards like this?


Supervisory Board of Deutsche Börse AG extends mandate with Executive Board member Andreas Preuss
In yesterday’s meeting, the Supervisory Board of Deutsche Börse AG re-appointed Andreas Preuss, the company’s Deputy CEO and CEO of Eurex, as member of the Executive Board by further three years with effect from 1 April 2014.

****** I have had man-dates before, but never one for three years. It kind of reminds me of the time I ended up dancing with Rudy Ferscha at Boca one year.


Tony Falck new CFO at Orc Group (Cidron Delfi Intressenter AB)
Tony Falck B.Sc. Business Administration has been appointed CFO of Orc Group. He succeeds Tomas Ljunglöf who is leaving the company in July 2013. Tony comes from a position as CFO for Mercuri International Group and has a solid international career at companies such as Telia AB and Cambridge Silicon Radio.

***** I hoped to have a solid international career one day too, but everytime I go to London it seems to be more of a liquid experience.


Blackstone courts bold trades for new fund
Sam Jones, Hedge Fund Correspondent –
Blackstone is preparing to launch a “super” hedge fund to cherry-pick the best trades from the hundreds of third-party hedge funds it invests with in return for paying them a commission.

***** How does one “cherry pick” the best trades before they happen?


We’ll Probably Regulate Bloomberg: CFTC’s C

CFTC Commissioner Bart Chilton told CNBC he believes his agency will be able to regulate the relationship between Bloomberg’s trading business on its terminals and its news operation under a new rule up for consideration at the agency.

***** What happened to freedom of the press, I mean….digital media news organizations?


Who Waters Down Wall Street Regulation, Anyway?
Kevin Roose – NY Magazine
The familiar narrative about the Wall Street–Washington “revolving door” is that it is very, very, very bad. Having former bankers and white-collar defense lawyers go to D.C. to work as regulators, we are told, leads to lax policing of Wall Street and a permanently out-of-control financial sector. Today’s New York Times, however, contains a pretty important counterpoint to all of that groaning.

**** From the article: “There is not really much to know about the CFTC, except that it has five commissioners who vote on stuff, one of whom is a former Goldman Sachs executive, one of whom has flowing blond Fabio hair and talks about Tom Petty a lot, and one of whom is a former Harry Reid staffer from Iowa who once worked as a garbage collector and has no Wall Street experience at all.”


Has interoperability arrived in derivatives?
Galen Stops – FOW
The Memorandum of Understanding signed between the Depository Trust and Clearing Corporation (DTCC) in the US and Euroclear in Europe could be a step towards interoperability into the derivatives market but challenges lie ahead.

**** I have a new clearing model I am working on in my head to address too big to fail that includes interoperability and a ring clearing setup. It is just an idea, but I am concerned about the too big to fail issue for clearinghouses.


When it comes to Dodd-Frank Extraterritoriality, Trust but Verify
Mayra Rodríguez Valladares
Summer tends to be a quiet time for Europeans as many head out for nice holidays. This summer may be quite different, as European bankers, governments, and regulators are increasing their pressure on Commodity Futures Trading Commission Chairman Gary Gensler to curb what they deem is the CFTC’s extraterritorial reach with Dodd-Frank’s Title VII.

***** Europe should have finalized their rules first.


Technology Trends That Matter: Panel Discussion – based on the upcoming book “Architects of Electronic Trading”
W Chicago – City Center, 172 W. Adams St., Chicago
When: June 6, 2013 3:30 p.m. to 6:30 p.m.
Join Mike Persico of Anova Technologies, John Knuff of Equinix, Bernard Hosman of Eurex Exchange and Robert Walker of xCelor for a panel discussion on the latest trends in technology that are relevant for low-latency firms. You’ll hear how microwaves and FPGAs are changing the market landscape and how exchanges are integrating these technologies to enhance their offerings. Experts also will address how low-latency firms can embrace the emerging “Trading Smart” trend to gain a competitive edge. Special guest moderator, Suhit Gupta, former CTO of hedge fund Maverick Capital will frame the discussion around transformational technology and how technology gives savvy firms greater agility.

The content for the panel discussion is based on Stephanie Hammer’s book, Architects of Electronic Trading, which features interviews with a range of technology leaders that include this event’s panelists and others including Mark Gorton of Tower Research Capital, William Murphy of The Blackstone Group, W. Brennan Carley of Thomson Reuters and others.



MarketsWiki Page of the Day
Michael Markowitz

MarketsWiki Recent Updates


Michael Markowitz; Michel Finzi; Lee Shavel; Joseph Cusick; Jeffrey Singer; Barry Nobel; Meyer (Sandy) Frucher; Jeanine Hightower; Gary Katz; Greg Maynard

Companies, Organizations and Groups

Newedge; CQG; Continuum


39,391,459 pages viewed, 7,493 articles, 159,184 edits
MarketsWiki Statistics

Lead Stories

Regulators Tighten Rules On Trading of Derivatives
BEN PROTESS – New York Times
The Commodity Futures Trading Commission voted in favor of new rules to shine a light on risky Wall Street trading, but the commissioners softened a crucial aspect of the plan in the face of lobbying pressure from banks.

Nasdaq halts trading in some options contracts due system issues
Nasdaq OMX Group Inc. on Thursday halted trading in some options contracts on one of its options exchanges on Thursday due to system issues.

Regulators Target Exchanges As They Ready Record Fine
Financial regulators are taking a harder line on exchanges amid concerns over their ability to police the markets they operate, as the SEC prepares to hit one with a record penalty. The deeper scrutiny has prompted some exchange officials to push back against a new regulatory stance that they say leaves them more vulnerable to potential penalties and sanctions.

Energy Risk USA: Energy market participants struggle with reporting
Rules requiring over-the-counter derivatives to be reported under the US Dodd-Frank Act are presenting a major challenge to energy market participants in general and end-users in particular, said participants in a panel discussion at Energy Risk USA in Houston on May 15.

Markets Insight: Phoney QE peace masks rising risk of instability
Gillian Tett –
Are the markets going mad? That is a question many investors might have asked in recent weeks, as stocks in the UK, eurozone and US have soared – even as bond spreads decline.

Schwab Eliminates Class-Action Waiver Requirement for Clients
Brett Philbin – Dow Jones
Charles Schwab Corp. has reversed course on a requirement that customers must waive their right to participate in class-action lawsuits against the company.


White says SEC not now writing political spending rule
Reuters via Yahoo! News
By Sarah N. Lynch WASHINGTON – The head of the Securities and Exchange Commission told lawmakers on Thursday that her agency, despite pressure from liberal groups, is not currently drafting a rule that would call for public companies to disclose their political spending.

Statement Of CFTC Chairman Gary Gensler To Open Commission Meeting For Consideration Of Rules Implementing The Dodd-Frank Act

CFTC Chairman Gary Gensler Statements Of Support

Statement By CFTC Commissioner Scott D. O’Malia To Opening Meeting To Discuss Swap Execution Facility Rules, Swap Block Rules, Made Available To Trade Determination And Disruptive Trade Guidance

Opening Statement Of CFTC Commissioner Jill E. Sommers To Consider Final Trade Execution Rules And Anti-Disruptive Trading Practices Guidance Pursuant To The Dodd-Frank Act

Statement Of CFTC Commissioner Mark P. Wetjen Before Open Meeting To Consider Trade Execution – Anti-Disruptive Trading Practices Guidance

“Better Bend than Break” Opening Statement Of CFTC Commissioner Bart Chilton Before The CFTC Public Meeting On Dodd-Frank Rulemaking, Washington, DC
This set of three trading rules—SEF, MAT, and Block—have, to put it mildly, been a long time coming. What is in front of us today has parts I like, parts I don’t like—that’s what compromise means. As Churchill said, “The English never draw a line without blurring it.”

Covington & Burling is pleased to announce that Stephen M. Humenik will join the firm’s commodities practice. Mr. Humenik, former general counsel and chief regulatory officer at Eris Exchange, LLC, comes to the firm’s Washington office as of counsel. He will advise clients on transactional, regulatory and policy matters affecting the futures, derivatives and commodities markets, including the registration and compliance obligations of the Dodd-Frank Act.

SIFMA Strongly Disagrees With CFTC’s Final SEF Rules

[France] The Autorité des Marchés Financiers approves the “Provisions” of the AFG Code of Ethics and extends it to all asset management companies

[Austria] FMA presents 2012 Annual Report

Exchanges & Trading Facilities

London Metal Exchange to give date soon for clearing platform launch
The London Metal Exchange expects to announce a 2014 launch date for its self-clearing platform, LMEClear, within the next few weeks, LMEClear’s chief operating officer said.

NZX IPO Masterclass Presentation

Program Trading Averaged 23.7 Percent of NYSE Volume during May 6-10

Hedge Funds & Managed Futures

Ex-Goldman Partner Back From Bankruptcy
NY Times via CNBC
On Wall Street, the wheel of fortune can spin around and around, from enormous cash bonuses and luxurious perks one year to the unemployment line the next. Then there is Fred Eckert, a onetime Goldman Sachs partner who soared as a star in “vulture” investing in ailing companies.

Rothschild and HIG close debt funds
Ben Harrington – Financial News
Rothschild and HIG Capital have completed closings of their latest private debt funds as interest in the asset class continues to grow.

Deutsche Bank to Nomura Caution CMBS Investors After 25% Surge
Deutsche Bank AG and Nomura Holdings Inc. are urging caution as investors gorge on junk-rated commercial-mortgage bonds, wagering that economic growth in the U.S. will curb losses.

Goldman targets growing retail alternatives industry
Shanny Basar in New York – Financial News
Goldman Sachs Asset Management has launched an alternatives fund aimed at individual investors, a market that Citigroup has predicted will triple in size to almost $1 trillion by 2017.

BlackRock Has Alternative to Money Funds: Credit Markets
BlackRock Inc. and Western Asset Management Co. are offering a new twist on traditional money-market funds as regulators are set to impose sweeping changes on the $2.58 trillion industry.

Gold’s Allure Is Starting to Fade
The bears are mauling gold. The metal fell for a sixth consecutive trading session on Thursday, as investors continue to flee toward assets that promise higher returns.

The Facebook IPO, One Year Later
Two weeks ago, new posters began appearing at the headquarters of Facebook Inc. The posters proclaimed: “Advertisers are users too*.” At the bottom of the page, in smaller font, was the phrase “*no srsly,” Internet shorthand for “no seriously.”

Banks & Brokers

Royal Bank of Scotland to cut 1,400 jobs in UK
Reuters via Yahoo! News
DUBLIN – Royal Bank of Scotland will cut 1,400 jobs over the next two years in a restructuring of its retail head office in Britain, the part-nationalised bank said on Thursday. In a statement, the chief executive of RBS’s UK retail business, Ross McEwan, said the bank would try to avoid compulsory redundancies by redeploying staff where possible.

Goldman Offers Hedge Funds to the 99%
NEW YORK – Goldman Sachs said Thursday it is bringing the sophisticated trading strategies of Wall Street hedge funds to individual investors with investment portfolio’s and retirement accounts as small as $1000.

Judge Rules Against British Activists in Goldman Tax Case
New York Times
A deal between Goldman Sachs and Britain’s tax authorities about outstanding payments in 2010 was arranged clumsily but did not break any laws, a judge ruled on Thursday.

Citigroup moving some traders off Bloomberg chat
Associated Press via Yahoo! News
Citigroup’s foreign currency traders will soon stop using a messaging system on their Bloomberg terminals and use an internal chat tool instead. The change has been planned for months and affects only Citi’s foreign-exchange traders worldwide.

Ex-Citigroup Chief Pandit to Help Oversee, Expand JM Financial
Former Citigroup Inc. Chief Executive Officer Vikram Pandit is buying a stake in India’s JM Financial Ltd. and will take a leadership role as it sets up a bank, according to the Mumbai-based company.

Morgan Stanley Sued Over Retirement Plan Deal With ING
Morgan Stanley was sued by a Birmingham, Alabama, medical center over claims the bank received improper payments from ING Life Insurance and Annuity Co.

BNP Paribas to spend 80 million euros on new online bank
Reuters via Yahoo! Finance
PARIS – BNP Paribas, France’s No. 1 listed bank, will spend 80 million euros this year to launch a Europe-wide online bank as lenders cast their net wide for funding in a slowing economy.

Former Bear Stearns CEO Jimmy Cayne Says Jamie Dimon Critics Are Just ‘Jealous’
Business Insider
For the story, Bloomberg caught up with Jimmy Cayne, the former CEO of now-defunct Bear Stearns, for a rare interview since JPMorgan acquired his old bank.

Clearing & Settlement

Ice’s European clearing revenues come to the fore
Tim Cave – Financial News
Clearing revenues outstripped those derived from trading for the first time at IntercontinentalExchange’s European business last year, as the US-based operator continued to benefit from soaring demand for its benchmark oil contracts.

Indexes & Products

Fidelity clear for ETF takeoff
Jackie Noblett –
All that now stands between Fidelity and active exchange traded funds is the firm itself. Fidelity received an order last week from the Securities and Exchange Commission allowing it to launch actively managed ETFs.

Two SPDR equity index ETFs launched on Xetra

Tokyo Stock Exchange: Indicative NAV Published For New ETFs And ETNs Through The FLEX Standard Service

Japan Exchange Tops League Table For Third Consecutive Month – FTSE Mondo Visione Exchanges Index Up Two Per Cent In April
Japan Exchange, listed on the FTSE Mondo Visione Exchanges Index in February, has topped the Index for the third consecutive month, signalling strong performance in share price value and one to watch as the Japan economy shows signs of growth.

Changes In The Composition Of The ATHEX Indices

Changes In The Composition Of The ATHEX INDEX Hellenic Mid – Small Cap Index

Vanguard Selects FTSE For First Hong Kong Domiciled ETF

The Methodologies Of The Moscow Exchange Broad Market Indices, Second-Tier Indices And Sector Indices Calculation To Take Effect On May 20, 2013


Tick Data Bought Out by Management, VC
The management team of historical time-series data provider Tick Data — with some backing from Canadian venture capital firm Tactico and the Tactex F1 Private Equity Fund — has bought out the vendor from Disnat, the online brokerage arm of Desjardins Group, which acquired Tick Data parent Nexa Technologies, the technology business of now-bankrupt broker and clearing firm Penson Worldwide.

Tick Data Announces Management Buyback
Press Release
Tick Data’s management is buying the company and receiving funding from Tactex F1 Private Equity Fund. Neal Falkenberry, Tick Data’s president, and Thomas Myers, Senior VP, will have two-thirds, while Tactex will have one-third, a spokeswoman says. Tick Data, which is headquartered in Great Falls, Virginia, provides time data for the equities, options and futures markets.


Federal Court in Florida Orders Defendants Philip Milton and Trade, LLC, and Four Relief Defendants to Pay Millions in Restitution, Disgorgement, and Civil Monetary Penalties for Operating a $28.4 Million Ponzi Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Daniel Hurley of the U.S. District Court for the Southern District of Florida entered supplemental consent Orders against Defendants Philip Milton of Palm Beach Gardens, Florida, and Trade, LLC, based in Palm Spring Gardens, Florida, requiring Milton to pay restitution of more than $10.8 million and a $7.6 civil monetary penalty and Trade, LLC, to pay restitution of over $11.4 million and a $28.4 million civil monetary penalty for operating a multi-million dollar Ponzi commodity pool scheme

Federal Court Orders Spencer Montgomery, Brian Reynolds, Arjent Capital Markets LLC, and Chicago Trading Managers LLC to Pay More than $1.8 Million for Commodity Pool Fraud
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York entered a consent judgment and permanent injunction Order against Defendants Spencer Montgomery and Brian Reynolds, and a default judgment and permanent injunction Order against Defendants Arjent Capital Markets LLC (Arjent) and Chicago Trading Managers LLC (CT Managers), for defrauding pool participants by knowingly issuing or causing to be issued false account statements for commodity pools.

SEC Charges Chicago-Area Father and Son Conducted Cherry-Picking Scheme At Investment Firm
The Securities and Exchange Commission today charged a father and son and their Chicago-area investment advisory firm with defrauding clients through a cherry-picking scheme that garnered them nearly $2 million in illicit profits, which they spent on luxury homes, vehicles, and vacations.

Ex-BlackRock Manager’s Arrest May Give FCA Its First Big Fish
The arrest of a former BlackRock Inc. fund manager may move the regulator from small-fry insider- trading cases to its first big fish after years of criticism for pursuing dentists and print-room workers.

Wife of ‘Rain Man’ Trader Accused in Libor Case Pours Out Tweets
The bank trader known as “Rain Man” finally has someone to shelter him from the storm of the Libor scandal: his wife.

Former director of South Australian insurance broker sentenced

Environmental & Energy

US states look to cut greenhouse gases
Financial Times
A growing number of American states are looking at ways to reduce greenhouse gas emissions in the absence of federal climate change legislation, with a northeastern scheme for trading carbon becoming a model.

EU carbon permit surplus doubles in 2012
Financial Times
The surplus of permits in the EU’s carbon market more than doubled last year to 2bn, according to fresh data that Brussels hope will rally support for its controversial plan to boost carbon prices.

EU confirms two per cent reduction in ETS emissions
Business Green
New figures from the EU have today confirmed that greenhouse gas emissions from facilities covered by the bloc’s emissions trading scheme (ETS) fell two per cent last year, sparking fresh debate over the need to tackle the chronic over-supply of carbon allowances in the market.


US auditing watchdog moves closer to China deal
Kara Scannell in New York –
The US auditing watchdog is moving closer to a deal with China that would allow access to auditing work papers overseas, a small step between the nations towards alleviating investor concerns over accounting at many Chinese companies.

Japan’s Investment Banks Love Abenomics’s Stimulus
Investment banks are among the first and biggest beneficiaries of Japan’s new economic stimulus policies, known as Abenomics. Since Prime Minister Shinzo Abe came into office in December with a plan to end more than a decade of deflation, demand for banks that help companies sell equity and debt is white-hot.

Thai Bond President Favors Cut as Controls Hurt: Southeast Asia
An interest-rate cut in Thailand may be the best option to slow inflows that drove the baht to a 16- year high as capital controls would deter investors and push up funding costs, according to the Thai Bond Market Association.

Frontier Markets

MCX Weekly Market Report – May 10, 2013 To May 16, 2013


The City of London’s future as a global financial center is safe…for now
Quartz via Yahoo! Finance
It’s a refrain that seems to get recycled every few years: London’s storied financial center, “the City”, is under existential threat from onerous new regulations or competition from emerging financial capitals. But could the dire warnings prove true this time?

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