John Lothian Newsletter: NASDAQ OMX and World Steel Exchange Marketing Announce Strategic Partnership; CME eyes new U.S. Gulf Coast crude futures launch by year-end; Deutsche Börse Creates New Business Segment For IT And Market Data

May 7, 2013

Nasdaq OMX plans to introduce contracts of steel on its futures exchange, with help from the World Steel Exchange. CME Group makes its own plans for new contracts, eyeing two new crude oil products by year’s end. Exchange operator Deutsche Börse is the combo breaker today, announcing not new contracts, but a new technology and service division.

First Read

Looking Back in Time
Patrick Thornton-SmithTraiana
They say history repeats itself, so I decided to look back 10 years to see what was happening in our industry, what the headlines were and how they compare to May 2013. My memory is not that good so many thanks to Will Mitting of FOW to allow me to look at some back issues of FOW Week…

Amongst the many news stories and trends, two caught my eye. In the May 8th edition an article by Mike Topping (remember him?) on a recent Tower Group report. The thrust of this report was to present listed derivatives as a huge new opportunity in the financial services industry (new in 2003? I would have said they were pretty established by the, but no matter…). Growing volumes, rapid adoption of electronic trading, new markets and growth of hedge funds were all cited as examples to support the research claims. The report talks of a ‘wholesale restructuring of the industry to support a new revenue and cost model’ and ‘the good news is that firms which are able to recognize and take on this new structure will be able to leverage a range of compelling opportunities’.

Sadly, the article does not go on to explain what exactly this new structure was or indeed what constitutes the new revenue and cost models or what the opportunities were. However, it doesn’t really matter as a) it’s a decade ago and b) interest rates were somewhat higher than they are today so clearing was a profitable business anyway and c) there were still a good five years to go before it all went so wrong. The report makes mention of the importance of technology and specifically the ‘implementation of innovative and efficient technology solutions’ which brings me to my second observation.

Browsing through the past editions one of the things that struck me was the amount of independent software firms there used to be (between Bill Herder and myself I think we have worked for most of them). We are all aware of consolidation in this area over the last decade and here are some names that appeared as independent firms then: Clearvison, EMOS and GL Trade – all now under the SunGard umbrella – and Rolfe & Nolan, Future Dynamics, Pats, Exchange Traded Systems and FFastFill – now all Ion firms through a series of acquisitions and takeovers. So now in 2013 we have two dominant vendors but also a new set of entrants bringing new ideas into the market from either other asset classes or disciplines especially as the ETD and OTC market’s start to co-exist more closely. I wonder what the technology ‘landscape’ will look like over the next 10 years? If it were me I’d look to invest in firms who specialize in data storage given the new trade reporting demands.

Facts of the day: The Washington Post won the Pulitzer Prize for work in exposing Watergate on May 7th 1973 and (this is a little weird) in 1991 a team of geneticists were given permission to clone genes from the remains of Abraham Lincoln, so perhaps Daniel Day-Lewis’s performance was more than just great acting? And finally….one of the technology firms I omitted to mention, above, was actually launched in May 2003. FOW Week of May 8th reported a certain Patrick Thornton-Smith had set up MarginClick. Where did all the years go…

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CME eyes new U.S. Gulf Coast crude futures launch by year-end
Reuters
The CME Group intends to launch at least two new U.S. crude oil futures contracts before the end of this year, as the rapid growth in U.S. oil production and infrastructure boosts liquidity in Gulf Coast spot markets.
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***PTS: How long before a fracking futures contract?

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Deutsche Börse Creates New Business Segment For IT And Market Data – “Market Data + Services” To Drive Further Innovation And Growth
Deutsche Börse today announced the formation of a new “Market Data +Services” segment that combines its Market Data & Analytics unit with its external technology and connectivity services. The Market Data + Services segment will be part of the division IT & MD+S headed by Executive Board Member Hauke Stars. The new segment is headed by Managing Director Holger Wohlenberg.
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***PTS: See earlier comment re technology trends.

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BOX to Offer Jumbo SPY
The BOX Options Exchange announced today it received SEC approval to offer Jumbo SPY to its customers. Jumbo SPY Options are a new options contract overlying 1,000 SPY ETF shares per contract, as compared to 100 shares per contract for standard options.
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***PTS: A headline that’s indecipherable to anyone outside our industry.

**JK – But no doubt, Tony McCormick is onto something big here.

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Keyboard Trader Now Available as a CQG Integrated Client Add-On
Bionic Trader Systems, developer of the Keyboard Trader software platform, has joined the CQG Certified API Partner Program. Keyboard Trader is a keyboard-based execution system designed to speed up manual trading.
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*** PTS: Yet more technology stories today…

**JK – If you haven’t seen this technology, as a point-and-click trader, you should.

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A Disappointing Debut at the S.E.C.
NYTimes.com
Mary Jo White, the new chairwoman of the Securities and Exchange Commission, has gotten off on the wrong foot. Last week, in her first commission vote, Ms. White led the commissioners in approving a proposal that, if finalized, could leave investors and taxpayers exposed to the ravages of reckless bank trading.
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**JK – Don’t make a mess Mary Jo.

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Nearly half of directors aware of financial irregularities
Caroline Binham, Legal Correspondent – FT.com
Nearly half of board members and senior managers of large companies across Europe, the Middle East, Africa and India are aware of irregularities in their own financial reports, as companies struggle to maintain healthy balance sheets, according to research that will make for worrying reading for shareholders, anti-fraud campaigners and prosecutors.
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**JK – That’s more than I thought. (See Enron, Worldcom, MF Global…)

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IT Hiccups of the Week: Online Testing Problems Spread
IEEE Spectrum
Last week saw the ongoing effects of several IT-related problems initially spotted over the past month.
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***JM: It’s not just exchanges. Wonder why school testing regulators don’t simply mandate error-free software?

*** PTS: And the technology news was all so good up to this one.

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A Simple Algorithm That May Prevent Financial Disaster
Mashable
Monday marks t
he three-year anniversary of the 2010 Flash Crash , when the U.S. stock market lost 1,000 points in a matter of minutes before recovering most of these loses a few minutes later. The crash occurred when high-frequency trading algorithms got into a vicious, high-speed selling spiral, wiping out billions of dollars of value before anyone knew what was happening. Some observers argue …
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*** PTS: I will shut up now on technology news.

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US regulators eye Bitcoin supervision
Tracy Alloway, Gregory Meyer and Stephen Foley in New York – FT.com via CNBC
Senior officials at a top US financial regulator are discussing whether Bitcoin, the controversial cyber-currency, might fall under their regulatory remit. Bitcoin “is for sure something we need to explore”, Bart Chilton, one of the five commissioners at the Commodity Futures Trading Commission (CFTC) told the Financial Times.
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*** PTS: Esperanto never caught on but this might.

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MarketsWiki

MarketsWiki Page of the Day
John M. Ruth
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MarketsWiki Recent Updates

People

Adam Sheldon; Jacqueline Mesa; Brian Haag; Elise Fleischaker; James Angel; Daniel P. Collins; John J. Ruth

Companies, Organizations and Groups

Bionic Trader Systems; ABN AMRO Clearing Chicago LLC; Century Group

Products

Keyboard Trader

Miscellaneous

Five Minutes With Adam Sheldon, Founder Of Bionic Trader Systems; Associated Person; Qualified Eligible Person

Statistics

38,898,887 pages viewed, 7,472 articles, 158,555 edits
MarketsWiki Statistics

Lead Stories

NASDAQ OMX and World Steel Exchange Marketing Announce Strategic Partnership
The NASDAQ OMX Group, Inc, and World Steel Exchange Marketing, LLC, founded by World Steel Dynamics in 2009, today announced a strategic partnership to develop financially settled steel and steel scrap futures products to be traded on the NASDAQ OMX Futures Exchange, Inc.
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**JK – Well timed with the debut of Iron Man 3.

Swap Regulators Face Congressional Pressure to Curb Dodd-Frank
Bloomberg
U.S. regulators face renewed pressure from congressional lawmakers to ease Dodd-Frank Act derivatives requirements amid mounting criticism from Wall Street and overseas officials that the rules overreach.
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NASDAQ OMX Launches WorkSpace
The NASDAQ OMX Group, Inc. today announced the launch of WorkSpace, a new cloud computing platform that will expand the company’s Corporate Solutions client base and enter the burgeoning virtual data room market.
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Make no mistake, size matters with systemic risk
Roy C Smith – Financial News
In 2007, according to the McKinsey Global Institute, global financial assets had a combined market value of $202 trillion, a surprisingly large amount and equal to three and a half times’ global gross domestic product. The following year, precipitated by a sharp and steady drop in liquidity supporting the $6 trillion securitised mortgage market, and accelerated by unpredictable government actions, a staggering $28 trillion plunge in the value of global equities occurred.
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Dijsselbloem: We’ll Test Banks’ Assets
Matina Stevis – MoneyBeat – WSJ
The push to probe euro-zone banks’ asset quality –outlined first in April by our Brussels reporter Gabriele Steinhauser — is quickly turning into concrete policy: the euro-zone finance ministers’ group chairman said Tuesday the test will go ahead.
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High returns attract rivals in search of sanctuary
Daniel Schäfer – FT.com
The business of storing and investing rich clients’ money remains a bright star in the banking industry firmament, especially at a time when other once-profitable parts of its universe – such as mortgage lending and trading – are looking decidedly bleak.
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Pension fund sues banks over CDS ‘dominance’
Tracy Alloway in New York – FT.com
A pension fund for Ohio-based sheet metal workers is challenging big banks’ “collective dominance” of the $27tn market for so-called credit default swaps. The class action antitrust suit filed by the pension fund accuses banks including Citigroup, Deutsche Bank and JPMorgan of engaging in “anti-competitive conduct” when it comes to CDS contracts.
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Regulatory

ASIC helps teens become mobile phone savvy
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[Japan] FSA publishes Weekly Review No.44
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Exchanges & Trading Facilities

NYSE Euronext Announces Trading Volumes For April 2013
Global Derivatives ADV Up 3% Year-Over-Year, Excluding Bclear – European Derivatives ADV Declined 6% Year-Over-Year, Excluding Bclear – U.S. Equity Options ADV Up 10% Year-Over-Year And Up 15% Sequentially – European And U.S. Cash Equities ADV Declined Year-Over-Year But Rebounded Sequentially
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Eurex hosts delegation from CFA and Chinese financial firms in Frankfurt
Eurex Group announced that a high-ranking China Futures Association (CFA) delegation was welcomed in Frankfurt today. Led by CFA Vice Chairman Li Qiang, 45 financial analysts, traders and staff from Chinese derivatives trading and brokerage firms will attend a three week training programme on fixed-income derivatives trading in Frankfurt.
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Deutsche Börse opens spring conference
Deutsche Börse today opened its Spring Conference 2013 in Frankfurt am Main. The event takes place from 6 to 8 May and is aimed at listed companies from the transparency standards of Deutsche Börse and at investors and analysts.
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Luxembourg Stock Exchanges Celebrates 50 Years Of Eurobonds At Its Annual Stock Exchange Day
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Trading On The Warsaw Stock Exchange: April 2013
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[CBOE] Requirement to Provide Notification to the Exchange of Disciplinary Action
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[CBOE] Restrictions on Transactions in New Energy Systems Group (NEWN)
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TMX Group Equity Financing Statistics – April 2013
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Hedge Funds & Managed Futures

CMIA Targets $150 Million for New China Private-Equity Fund
Bloomberg
CMIA Capital Partners Pte, run by former bankers at Cargill Inc. and HSBC Holdings Plc, plans to raise $150 million for a private-equity fund by the end of the year to invest in Chinese agricultural businesses.
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Pension fund files suit against bank CDS “conspiracy”
Reuters via Yahoo! Finance
A pension fund has initiated a class action lawsuit against a group of the world’s largest banks, accusing them of “conspiring” to scuttle competition in the $27 trillion credit default swap (CDS) market, in turn raising fund managers’ costs.
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SEI Named ‘Most Innovative Fund Administrator’ at HFMWeek Hedge Fund Services Awards
Marketwired via Yahoo! Finance
SEI today announced that it was named “Most Innovative Fund Administrator” in the 2013 HFMWeek European Service Provider Awards among service providers with over $30 billion in assets under administration.
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Subscription starts for PNE WIND AG corporate bond
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Newly Merged Nuveen Closed-End Funds Declare Post-Merger Distributions
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Banks & Brokers

BofA Settles ‘Big Kahuna’ Mortgage Lawsuit as Another Case Looms
Dakin Campbell & Donal Griffin – Bloomberg
Bank of America Corp. Chief Executive Officer Brian T. Moynihan, who once vowed to wage “hand-to-hand combat” in lawsuits over faulty mortgages, settled one big fight with MBIA Inc. yesterday as another remains unfinished.
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UBS to Pay Assured Guaranty $358 Million in Settlement
Bloomberg
UBS AG agreed to pay an initial $358 million to Assured Guaranty Ltd. to settle litigation over money-losing residential mortgage-backed securities transactions, Assured officials said.
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Net Jumps at Crédit Agricole, Dives at Société Générale
WSJ.com
French bank Crédit Agricole SA said first-quarter net profit jumped 51% as it draws a line under its disastrous foray into Greece, while rival Société Générale said its first-quarter net was halved, hurt by renewed euro-zone tension and an accounting charge relating to its debt.
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HSBC says Q1 profits jump to $8.4 billion as bad debts drop
Reuters via Yahoo! Finance
HSBC reported a near doubling in first quarter earnings on Tuesday, demonstrating the benefits of a three-year restructuring, cost cuts and a big drop in bad debt charges.
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London Banker Job Vacancies Rose 19%, Recruiter Says
Bloomberg
Job vacancies at London’s financial- services companies climbed 19 percent last month as tougher regulation of banks spurred hiring in compliance and anti-money laundering, recruitment firm Astbury Marsden said.
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Susquehanna Financial Group Hires Brian Nowak, CFA As Senior U.S. Internet Analyst
Susquehanna Financial Group, LLLP (SFG), the institutional broker-dealer member of the Susquehanna International Group of Companies (SIG), announced today that Brian Nowak, CFA has joined the firm as the Senior Analyst covering the U.S. Internet sector.
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Paschi Prosecutors File Appeal to Seize Nomura Assets in Probe
Bloomberg
Siena prosecutors are seeking to overturn a judge’s ruling that rejected their request to seize assets held by Nomura Holdings Inc. as part of an inquiry into Banca Monte dei Paschi di Siena SpA’s use of derivatives to hide losses.
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Citigroup’s new CEO is a banker. Imagine that.
CNN Money
In December, Citigroup’s new CEO, Michael Corbat, appeared at a meeting of company alumni in Manhattan. It was their first interaction with Corbat as chief, and between the unceremonious ouster of his predecessor, Vikram Pandit, and the bank’s disastrous half-decade, the mood was glum.
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US judge blocks auction rate arbitration against Citigroup
Nate Raymond | Reuters
For the second time in a week, a federal judge has blocked a securities arbitration against Citigroup Inc, allowing the bank to avoid fighting a multi-million dollar case before Financial Industry Regulatory Authority arbitrators.
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$25 Billion Later Bank Of America, Wells Fargo Still Face Mortgage Trouble From NY AG
Forbes
Here we go again. Big banks Wells Fargo and Bank of America may be facing additional legal trouble on the mortgage and foreclosure front.
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Deutsche Bank Names Jeanie Genirs as Global Risk-Syndicate Head
Bloomberg
Deutsche Bank AG promoted Jeanie Genirs to head of global risk syndicate in the Americas, a role that oversees new debt sales underwritten by the bank.
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Clearing & Settlement

REGIS-TR sign KAS BANK as first participant reporting on behalf of market participants
REGIS-TR, the European Trade Repository owned by Clearstream (Deutsche Börse Group) and Iberclear (BME) recently signed KAS BANK as their first participant acting as third party reporting on behalf of other market participants.
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CME Clearing – Performance Bond Requirements: CME Equity Futures Outright Margin Change- Effective Tuesday, May 7, 2013
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Indexes & Products

Knight’s Browne: A Flash Crash Meditation
IndexUniverse.com via Yahoo! Finance
Reggie Browne, perhaps the most influential ETF trading expert in the world, says investors are clearly starting to grasp the power of the ETF, but they are still assimilating all the nuances of ETF trade.
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Direxion Appoints Patrick Rudnick As Chief Financial Officer
Direxion, a leader in alternative investment solutions, announces that Patrick Rudnick has been appointed Chief Financial Officer of Direxion. http://finance.yahoo.com/news/direxion-appoints-patrick-rudnick-chief-123000109.html

ISE ETF Ventures And YieldShares Announce Partnership To Develop And Promote New ISE High Income Index
jlne.ws/YClpSf

S&P 500 Buyback Index Launched By S&P Dow Jones Indices
jlne.ws/YClo0J

BM&FBOVESPA Announces The Ibovespa And Other Indices, Valid For May-August 2013
jlne.ws/YClo0K

Moscow Exchange: The Government Bond Index Reviewed
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Technology

Broadway Named Best Places to Work for Second Year by Austin Business Journal
Marketwired via Yahoo! Finance
Broadway Technology, LLC, a leader in high-performance trading solutions for top-tier global banks and hedge funds, announced today that it has been named one of the “Best Places to Work” in Central Texas according to the Austin Business Journal for a second consecutive year.
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Ian Doull Joins Integral in Global Product Role
Integral Development Corp. (www.integral.com), a leading provider of FX trading solutions and services, announced today that Ian Doull has joined the firm as managing director, product marketing. In this newly created role, Doull will apply his significant product expertise to further accelerate the go-to-market strategy and road map of existing and yet-to-be-announced products and services.
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Enforcement

CFTC Charges Bostonian David Prescott with Forex Pool Fraud
The U.S. Commodity Futures Trading Commission (CFTC) today announced that on May 3, 2013, the Honorable C.N. Clevert, Jr. of the U.S. District Court for the Eastern District of Wisconsin issued an Order freezing the assets of Defendant David Prescott, individually and doing business as Cambridge Currency Partners (Prescott).
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SEC Charges City of Harrisburg for Fraudulent Public Statements
The Securities and Exchange Commission today charged the City of Harrisburg, Pa., with securities fraud for its misleading public statements when its financial condition was deteriorating and financial information available to municipal bond investors was either incomplete or outdated.
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New York Attorney General Schneiderman To Sue Wells Fargo & Bank Of America For Violating National Mortgage Settlement
Attorney General Has Documented Hundreds Of Cases Of Homeowners Put At Risk By Banks’ Violations Of Settlement Terms – Schneiderman: The Terms Of The Settlement Are Clear And They Will Be Enforced In New York State
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Jeweler agrees to plead guilty in KPMG insider-trading case
chicagotribune.com
A San Fernando Valley jeweler has agreed to plead guilty to conspiracy for allegedly making illegal stock trades based on inside information given to him by a KPMG partner.
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Credit Suisse says ex-VP stole trade secrets in move to Goldman
Reuters
Credit Suisse Group AG sued the former vice president of its emerging markets group on Friday, claiming she stole confidential documents and trade secrets to transfer business to her new employer, Goldman Sachs Group Inc.
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ASIC concerns lead to insurance comparison website changes
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Environmental & Energy

European carbon market in trouble
Anthony Faiola – Washington Post
The collapsing price of carbon in Europe is darkening the outlook for a greener future in a part of the world that was long the bright spot in the struggle against climate change.
jlne.ws/YA8tfJ

EU Pollution Push in Disarray on Debt Crisis Distraction
Ewa Krukowska & Alex Morale
The situation “reflects a sea-change against climate policy,” said European Green Party Co-Chair Reinhard Buetikofer, who supported the plan. The effort to limit carbon gases “is not being perceived as an opportunity by industry but rather a burden,” he said, adding that the decision “destroyed the foundation of common European climate policy.”
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EEX Trading Results in April
In April 2013, the total volume traded in power derivatives on the European Energy Exchange (EEX) amounted to 90.3 TWh which is a year-on-year increase of 85 percent compared to April 2012 (48.7 TWh). The Power Derivatives Market volume contained 38.4 TWh from OTC clearing.
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Asia-Pacific

HKMEx Joins BT Radianz Cloud Community – BT Radianz Cloud Community Now Provides Access To Over 100 Trading Venues
BT today announced that the Hong Kong Mercantile Exchange (HKMEx) has joined the BT Radianz Cloud community. HKMEx is now offering access to trade its range of commodity futures products as well as its market data feeds to BT’s financial cloud community, further attracting liquidity from international investors and strengthening Hong Kong’s position as a major financial centre.
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Overview Of Annual Reports Of 2012 Of Shanghai Stock Exchange-Listed Companies
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Frontier Markets

Veteran financier sets up private bank in Iran
Najmeh Bozorgmehr in Tehran – FT.com
The international banking sanctions that have crippled Iran’s economy did not discourage Parviz Aghili from opening what is in effect the country’s only privately owned bank, the Middle East bank, earlier this year.
jlne.ws/YCloh9

HSBC Sees 2013 Sukuk Sales Doubling to $3 Billion: Turkey Credit
Bloomberg
Islamic bond sales in Turkey may double to $3 billion this year as companies join the government in accessing Shariah-compliant investors, according to HSBC Holdings Plc , the world’s biggest underwriter of sukuk.
jlne.ws/YClohb

Listing of Private Companies event to take place in Doha this Wednesday
Under the patronage and presence of H. E. Sheikh Hamad Bin Jassim bin Jabr Al Thani, Prime Minister and Minister of Foreign Affairs, the Qatar Exchange will be organizing the inaugural “Listing of Private Companies: Supporting Qatar’s National Vision” event on Wednesday, May 8th 2013 at the Four Seasons Hotel Doha.
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Seven Months Of Growth On Dubai Mercantile Exchange
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Dubai Financial Market Board Of Directors’ Meeting
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Palestine Exchange Monthly Newsletter
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