John Lothian Newsletter: NYSE to sell stakes to plug capital gap; Bats Europe Said to Seek U.K. Exchange License; ADM in talks with feds on bribery probe

Nov 7, 2012

NYSE Euronext, faced with new European regulations for clearing, plans to sell an assortment of stakes in other ventures in order to build a bigger capital buffer. Bats Chi-X Europe sets forth to become the first alternative trading system to register as an exchange. Archer Daniels Midland is said to be discussing bribery allegations with US regulators, and may face penalties for bribing foreign officials. In First Read today, take a look at the new interview with Harrell Smith, who talks to JLN’s Doug Ashburn about several critical topics affecting FX, including the regulatory landscape, algorithmic and high-frequency trading, and transaction cost analysis.

First Read

Multiple MarketsWiki Partner Sponsors Renew for 2013
John Lothian News is pleased to announce CBOE, Cinnober, Orc Software and Prime Analytics have renewed their Partner Level sponsorships of MarketsWiki for the next calendar year.

Here are statements from these sponsors about their renewals:

“More than five years ago, CBOE recognized the value of an industry ‘wiki’ and was among the first sponsors of MarketsWiki,” CBOE Vice President, Business Development, Andrew Lowenthal said. “Looking at how far the site has come – continually adding new topics of interest to our industry — we once again are pleased to renew CBOE’s sponsorship.”

“We support John Lothian Newsletter and MarketsWiki not only because these are in-depth industry resources,” said Marty Leamy, Orc President Americas. “But also because John is the tallest guy we know!”

“Prime Analytics, LLC is pleased to renew our sponsorship of MarketsWiki,” said John P. Kelley, Senior Managing Partner of Prime Analytics, LLC. “The site is a tremendous resource for our industry as we confront historic changes on a global basis. The addition of MarketsReformWiki demonstrated the willingness of the Lothian team to customize content for complex subject matter.”

“John and the MarketsWiki are key players in our industry” says Fredrik Backlund, Head of Marketing & Corporate Communication at Cinnober. “We’re proud to have been involved since the early days and continue our support of this rapidly growing, reliable and highly appreciated resource.”

We thank all of our sponsors for their support of MarketsWiki and of John Lothian News.


Announcing the 2013 Altegris CTA Challenge
JLN Managed Futures Blog
Altegris Clearing Solutions has announced the launch of its inaugural Altegris CTA Challenge, a competition for professional managed futures managers. Registration will be open until December 10, 2012. The Challenge is open to all qualified CTAs and is seeking entries from both undiscovered talent and established managers. The winner will be announced in early 2014 and will be selected based on both quantitative and qualitative scoring.

**DA: This is for serious professionals only. No fly-by-nighters or premium sellers. JLN Managed Futures is the lead media sponsor of Altegris CTA Challenge 2013.


Harrell Smith

Harrell Smith of Portware on FX Market Structure

Harrell Smith is the head of product strategy for Portware, a software company specializing in trade execution systems for equities, futures, options and foreign exchange markets. He spoke with John Lothian News Editor-at-Large Doug Ashburn about several critical topics affecting FX, including the regulatory landscape, algorithmic and high-frequency trading, and transaction cost analysis.

Watch the video »


Will Wall St firms that gambled on Romney now rebuild ties with Obama?
Faced with the prospect of even tougher regulations in President Barack Obama’s second term, Wall Street firms have to build better ties with the new financial regulators he will appoint.

****JK – Rebuild that bridge Wall Street, one gold beam at a time.


Million-Dollar Traders Replaced With Machines Amid Cuts
Mary Childs – Bloomberg
Wall Street’s credit-derivatives traders, who before the financial crisis commanded $2 million of annual pay, are being replaced by machines as banks cut costs and heed new regulations. UBS AG (UBSN), Switzerland’s biggest bank, fired its head of credit-default swaps index trading, David Gallers, last week, with no plan to fill the position, according to two people familiar with the matter. Instead, the bank replaced Gallers with computer algorithms that trade using mathematical models, said the people, who asked not to be identified because moves are private.

****JK – Real quotes from 2001 Space Odyssey:
Dave Bowman: Hello, HAL. Do you read me, HAL?
HAL: Affirmative, Dave. I read you.
Dave Bowman: Open the pod bay doors, HAL. …


Slide in trading volumes hits HKEx
Paul J Davies in Hong Kong –
Daily trading volumes on the Hong Kong stock exchange plunged to less than HK$50bn per day in the third quarter, levels last seen in the depths of the global financial crisis, as investors were scared off by economic and political uncertainties.


Restructurings and the Impact of Credit-Default Swaps
Last week we learned that one of the biggest critics of derivatives – Warren E. Buffett – actually made a lot of money from them. This is kind of indicative of the general reality: no matter how much has changed with regard to derivatives after the enactment of Dodd-Frank, much remains the same.


Rochdale in Rescue Talks After Errant Apple Trade
A small Connecticut brokerage firm is fighting for survival after one of its former traders made unauthorized trades in shares of Apple. Rochdale Securities, which is known for employing the banking analyst Dick Bove, is in negotiations to sell itself or receive a cash infusion from outside investors, according to a person with direct knowledge of the talks.


Pearson Said Exploring Financial Times Sale as CEO Leaves
Matthew Campbell, Edmund Lee and Amy Thomson – Bloomberg
Pearson Plc (PSON) is planning to explore a sale of the Financial Times newspaper as the company focuses on its faster-growing education business, people with knowledge of the situation said.

****JK – John J. Lothian & Co. is officially making a bid as well.


Financial Times owner denies plans to sell title
Dan Sabbagh –
The owner of the Financial Times has denied reports that it would sell off the title. Pearson took the unusual step on Tuesday night of denying a report that it was contemplating a sale of the newspaper, after Bloomberg said the company was exploring a private sale this year.

****JK – Forget it, unless no means yes.


Wall Street Offers a Second Career for Former Politicians
When you wake up on Wednesday morning and find out whether Mitt Romney or Barack Obama will be in the White House next year, don’t pity the loser. He can always have a future career in high finance. It’s quite a lucrative one, too.


Ukraine fails to call a spade a spade
Javier Blas in London –
The US government has shocked the commodities trade industry. It has just commended Ukraine for showing restraint and not imposing an export ban on grains. But Washington is well aware that Kiev is indeed restricting exports, even if Ukraine has decided to keep its decision under the radar.

****JL – This is just a lack of will, or what we call Chicken Kiev.


The Goldman 33: Where are they now?
Farah Khalique – Financial News
Goldman Sachs is 31 partners lighter, according to accounts filed with the US Securities and Exchange Commission this week. Financial News looks at what those who no longer hold the coveted title of partner are doing now.

****JL – Anyone see Corzine at the Goldman Partner Alumni Club meeting?


Tuesday, November 13, 2012, Grand Hyatt Hotel, 42nd Street and Lexington Ave, New York.
Sponsored by The Wholesale Market Brokers’ Association Americas.
See the new line-up of speakers from the U.S. Government, regulatory agencies, swaps and derivative dealers, traders, future exchanges and future swaps execution facilities organizations.

****JK – T minus 6 and counting.



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Lead Stories

NYSE to sell stakes to plug capital gap
Philip Stafford in London –
NYSE Euronext said it would sell its stakes in assets totalling about $100m to help plug a shortfall in regulatory capital stemming from tough new regulations around derivatives clearing in Europe. The exchanges operator told analysts on Tuesday it would need to double its regulatory capital from its current level of about $180m, with the majority related to the planned expansion of its European clearing house.

Bats Europe Said to Seek U.K. Exchange License
Nandini Sukumar – Bloomberg
Bats Chi-X Europe plans to become the region’s first alternative trading system to register as an exchange in a renewed challenge to traditional bourses such as London Stock Exchange Group Plc. (LSE)

ADM in talks with feds on bribery probe
Archer Daniels Midland Co , one of the world’s top grain traders, said it is negotiating with the U.S. government to resolve possible violations of U.S. foreign bribery laws and could face penalties.

Trustee Seeks to Delay Deadline for Peregrine Financial Claims
Jacob Bunge – Dow Jones
The trustee unwinding Peregrine Financial Group Inc. aims to postpone until mid-December the date by which customers and creditors must file bankruptcy claims against the brokerage, according to a court filing.

Madoff Recoveries Increase
More than half of investors’ funds have been recovered nearly four years after Bernard Madoff’s arrest for running the biggest Ponzi scheme ever.

Rehn Seeks to Lock Down Greek Debt Deal Next Week
The European Union’s top economic commissioner said euro leaders need to lock down an agreement on tackling Greece’s debt by next week as regional finance chiefs defended their response to the sovereign debt crisis.

Deutsche Bank Rejects FERC Penalty for Market Rigging
Deutsche Bank AG ’s energy trading unit denied manipulating power markets and told the U.S. Federal Energy Regulatory Commission it should drop a proposal that the bank pay a $1.5 million fine and give up $123,198 in profit.


Banks plea for right to sell derivatives
Jennifer Thompson –
Three of the UK’s biggest banks have told MPs they should be allowed to sell simple derivative products from within their retail banking operations, a key flashpoint in banking reform.

AFM And FINRA Sign MoU On Financial Market Surveillance And Supervision
In October 2012, Richard G. Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (FINRA) and Ronald Gerritse, Chairman of the Executive Board of the Netherlands Authority for the Financial Markets (AFM) signed a

Collateral Initiatives Coordination Forum (CICF) Calls For Urgent Focus On Collateral Fluidity
The Collateral Initiatives Coordination Forum (a grouping of European trade associations representing a broad range of financial market participants internationally) has called for regulatory authorities to focus on the efficient mobilisation of collateral in financial markets. The CICF makes the case that, as high quality collateral is in increasing demand to support transactions in financial markets, regulatory measures should ensure that it flows efficiently around the market, facilitating the matching of collateral sources and uses. The developments, and their sequencing, that are necessary to improve collateral fluidity are set out in a CICF White Paper published today.

Exchanges & Trading Facilities

EEX And Powernext Aim To Create A Pan-European Natural Gas Trading Market
European Energy Exchange AG (EEX) and Powernext SA have signed a Memorandum of Understanding to combine their natural gas market activities and pool their respective expertise to create a pan-European gas market. This project is subject to the customary regulatory and competition approvals.

BM&FBOVESPA Presents The Post-Trade Integration And CORE New Risk System Project To The Market
BM&FBOVESPA has just presented the Post-Trade Integration Project (IPN), which includes a new risk system that is unprecedented in global markets. The presentation involved all the market participants (banks, brokerage houses, distributors, regulators and investors), who were fully informed of the implementation timetable up until 2014 and of the new technology, concepts and solutions that will revolutionize important services provided by the Exchange.

NYSE 3rd-Quarter Profit Tumbles 42%; Costs Come Down
Dow Jones Newswires
NYSE Euronext (NYX) on Tuesday reported a 42% drop in third-quarter net income, though the exchange group marked progress in trimming its costs. Operating expenses have fallen by $82 million year to date as the Big Board parent exited some ventures and as some senior staff departed, according to the company.

BM&FBOVESPA Announces Results For The Third Quarter 2012
BM&FBOVESPA S.A. (BVMF3) today reported third quarter earnings ending September 30, 2012. The Bovespa segment recorded its second strongest performance to-date. This performance together with higher Rate per Contract (RPC) for derivatives and growth in non- trading and settlement segments delivered solid revenue increase. Also, expense control in the quarter contributed to improve operating performance.

EPEX SPOT & EEX Power Derivatives: Power Trading Results In October 2012
In October 2012, a total volume of 29.3 TWh was traded on EPEX SPOT’s Day-Ahead and Intraday markets (October 2011: 27.3 TWh).

HKEx 2012 Third Quarter Results

Bulgarian Stock Exchange October 2012 Statistics

Vienna Stock Exchange Monthly Statistics – October 2012

Vienna Stock Exchange Monthly Statistics Derivatives Market – October 2012

Athens Exchange Monthly Statistical Bulletin October 2012

November 2012 InBOX
This is the November issue of InBOX, your news source from inside the BOX Options Exchange. This monthly publication will provide convenient summaries of recent developments at BOX.

TMX Group Equity Financing Statistics – October 2012, Toronto Stock Exchange, TSX Venture Exchange

Kansas City Board of Trade Thanksgiving Holiday Hours

Hedge Funds & Managed Futures

Private Equity Lures Pensioners as Bond Yields Sink
Brazil’s top three pension funds are leading a shift by local investors from lower-yielding government debt to private-equity investments in infrastructure as the country prepares to host the 2014 World Cup and 2016 Olympics.

NML Capital Asks for Expedited Ruling on Argentine Bonds
Elliott Management Corp.’s NML Capital Fund asked a court for an expedited ruling in a bid by creditors to collect on defaulted Argentine bonds, claiming Argentina’s leaders “have stated their intention never to comply” with a recent court decision in the case.

Calamos Asset Management, Inc. Reports Third Quarter 2012 Results and Declares Dividend

IMF Managing Director Christine Lagarde Names Alejandro Werner As Director of the Fund’s Western Hemisphere Department

Bain Capital’s Hedge Fund Prices Second CLO As Credit Bubble Simmers
Zero Hedge
We will have much more to say on the grandiose return of CLOs in the next few days but for now we just wanted to bring to our readers’ attention that yet another $625 million CLO has just priced

Banks & Brokers

Citigroup Discloses Libor Inquiry By Singapore
Dow Jones
Citigroup Inc. disclosed in its quarterly financial filing Tuesday that the Monetary Authority of Singapore has launched an inquiry into its practices involving the setting of global interest rates.

Bloomberg Tradebook Expands Consultancy Services in Asia
Business Wire via Yahoo! Finance
Bloomberg Tradebook, Bloomberg LP’s global agency broker, announced today at TradeTech Asia that Thomas (Tom) Kingsley will drive Bloomberg Tradebook’s Asia-Pacific execution consulting practice from Singapore.

Ex-UBS, Credit Suisse banker pleads guilty in U.S. tax probe
Reuters via Yahoo! News
A former banker at giant Swiss financial institutions UBS AG and Credit Suisse Group AG pleaded guilty on Tuesday to helping wealthy Americans hide millions of dollars from U.S. tax authorities during his time at UBS.

Morgan Stanley selling its Indian private bank – sources
Reuters via Yahoo! News
Morgan Stanley has launched the sale of its India private wealth business, which manages about $1 billion including loans, after entering the highly fragmented and competitive market just four years ago, sources with knowledge of the matter said.

BNP Paribas Net Lifted By Investment Banking
Dow Jones
French bank BNP Paribas SA Wednesday said it has completed restructuring kicked off last year to meet Europe’s new banking rules and that third-quarter net profit more than doubled thanks to investment-banking revenue.

BTG investment bank defies Brazil’s shrinking fee pool
Giles Turner – Financial News
Brazilian bank BTG Pactual, which went public in April this year, posted an increase in investment banking revenues during the third quarter despite subdued M&A and equity capital markets activity in the region.

J.P. Morgan, SEC Near Pact on Mortgage Bonds –
J.P. Morgan Chase is close to a settlement with the Securities and Exchange Commission that would end one probe into how the company’s Bear Stearns Cos. unit packaged and sold home loans to investors, according to people familiar with the case.

HSBC Names New Australia CEO as Maia Moves to Canada
Dow Jones
HSBC Holdings PLC announced a management reshuffle that will see Tony Cripps replace Paulo Maia as chief executive of its Australian operations, as Mr. Maia moves to Canada to head up the bank’s operations there from Dec. 24.

StanChart hires Sun to head North Asia financials banking
Reuters via Yahoo! Finance
Standard Chartered Plc has hired Steven Sun to head its financial institutions investment banking in North Asia, the Asia-focused bank said, as it aims to benefit from an expected pick-up in bank and insurance M&A and capital raisings in the region.

Goldman Partners Pocket $22 Million
Business is tough at Goldman Sachs Group Inc., but the past is paying off: More than 30 executives, including Chief Executive Officer Lloyd C. Blankfein, recently cashed in stock options awarded in the afterglow of the company’s initial public offering in 1999.

Hannam sets up UK private office
Matt Turner – Financial News
Ian Hannam, the ex-JP Morgan banker who stepped down from the US bank in April following a fine from the Financial Services Authority, has set up a UK private office to house his consulting activities, according to filings.

RBS Traders Brace for Job Cuts as City of London Contracts
Traders at Royal Bank of Scotland will be the latest to be hit by one of the biggest rounds of job cuts since the credit crisis began.

Morgan Stanley Posts Loss on Eight Trading Days in Third Quarter
Morgan Stanley , the Wall Street bank with the biggest trading-revenue increase last quarter, lost money in that business on eight days in the period, down from 31 days a year earlier.

The Truth About How To Get Promoted At An Investment Bank
Business Insider
So, what happens if you’ve lost your mind and suddenly don’t want to move into PE, go to a hedge fund, or become a venture capitalist?

Morgan Stanley Pledges Up to $2.5 Million to Superstorm Sandy Relief Effort and Establishes Employee Giving Program

Bank of America CEO Brian Moynihan to Open Bank of America Merrill Lynch Banking and Financial Services Conference

Clearing & Settlement

Barclays clears $5.3tn in OTC derivatives
Michael Mackenzie in New York –
Barclays has cleared more than $5tn of over-the-counter derivatives for its customers, with the pace accelerating as the market prepares to embrace mandatory requirements for reducing counterparty credit risk next year.

Indexes & Products

Steel And Tube To Be Added To NZX 50 Index

The Dow Jones Credit Suisse Core Hedge Fund Index Closed Down 0.47% in October


ITG Expands Global Futures Capabilities
ITG, a leading independent execution and research broker, today announced the expansion of its global brokerage services to offer futures execution capabilities as well as broker-neutral routing on venues in the Americas, Europe and the Asia-Pacific region.

Eze Castle Integration Ranked Top Cloud Computing Service Provider by Hedge Funds Review
PRWeb via Yahoo! News
Eze Castle Integration ranked top cloud computing service provider in Hedge Funds Review Service Provider Rankings 2012Boston, MA November 06, 2012 Eze Castle Integration, a leading provider of strategic IT solutions and private cloud services to hedge funds, today announced that it is ranked as the top cloud computing service provider in Hedge Funds Review Service Provider Rankings 2012.


Fired Bankers’ U.K. Lawsuits Fail as Judges Tire of Bonus Claims
Fired bankers suing for unfair dismissal and unpaid bonuses have found little success at London’s specialty employment courts as continuing anger over the financial crisis has left judges unsympathetic.

Adoboli Says Initial Lie He Acted Alone Shouldn’t Hold Up
Kweku Adoboli, the former UBS AG trader, said after admitting he made unauthorized trades last year he quickly realized his initial story that he had acted alone would fall apart once it was scrutinized.

Federal Court Of Australia Issues landmark Judgment Against S&P And ABN Amro

Perth lender enters into enforceable undertaking and pays credit infringement notice penalties

Environmental & Energy

The 6 big energy issues this election
One curious thing about this year’s presidential race is the prominent position energy policy has taken. This issue, which in past elections largely got relegated to the “too wonky to bother with” category, is now front and center because energy has become inexorably linked with job creation. Says Andy Karsner, a former assistant secretary of energy under George W. Bush and now executive chairman of Manifest Energy: “Both candidates see the current oil and gas boom as an opportunity to create employment.”

**RKB — This is an older story but we dusted it off on election night.

Climate policy advances in the states, but slowly
The Washington Post
While Tuesday’s election may not break the national logjam over how to address climate change, a few states will take decisive action on energy policy in the coming week.

**RKB — Interesting drill-down on ballot issues in California, Michigan, Washington and a handful of other states. That’s where the polls will matter even as national campaign attention on climate change policy proved a political non-starter–at least pre-Sandy.

Nine energy policy principles for Obama, Romney
The Christian Science Monitor
Since tomorrow’s election is heavily focused on the appropriate scope of government, I have spent a little time lately reflecting upon the proper role of government in the energy sector.


Asia ETFs see $5.5bn flow surge
Sarah Krouse – Financial News
Exchange-traded products in the Asia Pacific region gained momentum in October, as regulatory changes paved the way for a $5.5bn inflow surge.

Facing Protests, China’s Business Investment May Be Cooling
Local leaders were all smiles this summer at a groundbreaking ceremony for a vast copper smelting project that seemed like the answer to the chronic unemployment that has plagued this city in northern Sichuan ever since a devastating earthquake in 2008. But within days, the tree-lined plaza at the heart of the city was packed with thousands of youths, protesting that the $1.6 billion factory would pose a pollution hazard.

Japan counts “zombie” cost of easy money
John Plender –
The debate about the effectiveness of unconventional monetary policy measures such as quantitative easing remains perennially inconclusive. Yet the experience of Japan suggests there is one clear negative outcome from ultra loose monetary policy: it does structural damage to the economy.

Malaysia And Hong Kong Jointly Launch Online Forum For Takeovers Regulators
The Securities Commission Malaysia (SC) and the Securities and Futures Commission (SFC) Hong Kong yesterday jointly launched the Asia Pacific Takeovers Regulators Forum, which will incorporate the first e-platform in the region for takeovers regulators.

Hong Kong’s Securities And Futures Commission Bans Leung Kau Fung For Nine Months

Press Conference By Ikko Nakatsuka, Japan’s Minister For Financial Services

Frontier Markets

Bet on Africa’s Retail, Not Its Resources: Fund Manager
Investors who view Africa solely as a natural resources play are “missing the picture,” according to Robert Scharar, fund manager at the Commonwealth Africa Fund.

DGCX Records Over 1 Million Contracts In October
October monthly volumes total 1,057,508 contracts, valued at $ 43.07 bln

Tehran Stock Exchange: 2nd FEAS On-Site Training Program In Tehran, 10 – 21 November 2012
Tehran Stock Exchange will hold the 2nd FEAS On-Site Training Program in Tehran, 10 – 21 November 2012. The two–week event will include different courses and visits at the Iranian capital market’s entities.

Palestine Exchange (PEX) Monthly Newsletter

Bursa Malaysia Derivatives: Branches And Kiosks Enabled For Trading Participants Following Easing Of Requirements

Closure Of Bursa Malaysia Berhad – Market Holidays

Dubai Financial Market Closed On Thursday 15 Novembmer 2012 – New Hijri Year

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