John Lothian Newsletter: Tom hits 1m options contracts in 10 months; US and European asset managers split on new money-fund rules; Chamber, Oil Groups Sue SEC on Foreign Payment Rule

Oct 11, 2012

Amsterdam’s TOM trading platform hits the million-contract milestone in less than a year.  Lobbyists in Europe and US have different viewpoints when it comes to additional regulation in the asset management sector.  The US Chamber of Commerce and a couple of oil trade groups are suing the SEC over rules governing the reporting of payments to foreign governments.

First Read

Conrad Leslie on Good Living
Conrad Leslie is a thirty-year CQG customer. Having just celebrated his 89th birthday, here are some observations for “good living” he is passing on to his three grandchildren.
During my fifty years as a member of the Chicago Board of Trade, I collected trading rules and comments about life. Perhaps some of these observations will be of interest to your children or your grandchildren.

**JK – Some great thoughts here including the very last one: To map out a course of action and follow it to the end requires great courage.


Only the beginning for exchange and clearing innovation
Daniel Parker – FOW
As global regulators move to implement new rules designed to control the swaps markets, the world’s futures exchanges are responding with bold and innovative structural changes intended to reduce or eliminate certain regulatory burdens faced by their customers, including increased trading costs and additional expenditures associated with alternative risk management processing methods.

**JK – Daniel Parker is vice president of SunGard’s capital markets business. He makes a great point about ICE’s “covered products” strategy, which could be a boost to the futures industry.


Fraser Sullivan Founder Tighe Sullivan Dies in Helicopter Crash
Zeke Faux – Bloomberg
Tighe Sullivan, co-founder of WCAS Fraser Sullivan Investment Management LLC, was killed in a helicopter crash in Pennsylvania while returning from a golf outing. He was 51.


Andrew Brimmer, Who Broke Color Barrier on Fed Board, Dies at 86
Andrew Brimmer, an economist who became the first black member of the U.S. Federal Reserve Board when President Lyndon B. Johnson appointed him in 1966, has died. He was 86.

**JK – A man worth remembering. Thanks LBJ.


Commodities Funds Not What They Used To Be
The use of commodities funds holding everything from oil to gold has become increasingly popular as a broad investment tool, even as more portfolio managers have started to question how effective this will be over time.

**JK – Interesting look at commodities as a correlated asset.


Analysis: Limited options for the CFTC
Galen Stops – FOW
On the September 28, US district judge Robert Wilkins rejected a proposal by the Commodity Futures Trading Commission (CFTC) to introduce position limits in the commodities markets. What does the mean for the implementation of the controversial trading curbs?


Technology: Vendors see the upside to CFTC Regulation 1.73
Dan Barnes – FOW
US regulator the Commodity and Futures Trading Commission (CFTC) took a new step in its strategy to reduce systemic risk on 1 October 2012 when Regulation 1.73 came into effect. This framework of rules set out where risk management must take place for buy-side firms’ order entry and the specific controls which clearing futures commission merchants (FCMs) and derivatives clearing organisations (DCOs) must use to control buy-side clients’ trading activities.


Who Is Thomas Peterffy, and Why Is He Warning Us About Socialism?
Tim Sprinkle -| The Exchange
Candidates, parties, super PACs … now even private citizens are promoting their own agendas in political advertisements.


AllianceBernstein whitepaper on HFT and effect on long-term investors
Dmitry Rakhlin, SVP and Global Head of Quantitative Trading at AllianceBernstein LP, provided this whitepaper entitled, ‘High Frequency Trading and Long-Term Investors: A View from the Buy-Side.’ The whitepaper looks at two different trading environments, the Tokyo and London equity markets. The authors go on to estimate HFT impact on market quality in these two environments, and suggest that “while HFT market making activity increases short-term intraday volatility… this impact is more than offset by significant compression of bid-ask spreads leading to a net reduction of trading costs for long term investors.”


John Coates, Former Wall Street Trader, Studies Neuroscience Behind Financial Risk Taking
Kate Kelland – Reuters
When John Coates was on a winning streak during his days as a trader at Deutsche Bank and Goldman Sachs, the narcotic-like “high” he experienced was so powerful he was determined to find out more. So after 13 years on trading floors on Wall Street he moved to the neuroscience labs of Rockefeller University in New York and of Britain’s Cambridge University.

**JK – Runner’s high, now Trader’s high.


Sallie Krawcheck: Banks Weren’t Fully Aware Of Risks They Were Taking Going Into The Downturn
Business Insider
The issue of creeping determinism.


Goldman’s ‘Muppet Hunt’ Draws a Blank
Tom Braithwaite and Tracy Alloway, Financial Times
Goldman Sachs has told its board of directors that an internal investigation found little substance to allegations made by Greg Smith, the disaffected employee who claimed the bank has a “toxic environment” where bankers refer to clients as “muppets”.

**JK – Goldman investigates Goldman and guess what, “We couldn’t find anything wrong.”


Buying Hard-To-Find Craft Brews Just Got Easier With The New ‘LetsPour Deals’ App For Smartphones
LetsPour, the leading social commerce site for craft beers, announced the release of the ‘LetsPour Deals’ App for Beer. “This is the first smartphone app that lets beer lovers find new beer deals on a daily basis, right from their smartphone,” said Raghav Kher, CEO and Founder of LetsPour. The new app will be demonstrated publicly for the first time at the Great American Beer Festival (GABF) in Denver, October 11-13, in LetsPour’s booth #151.

Metrixx Founder Jim Marzano on the Intersection of Bond Analytics and Social Media
Jim Marzano was the first person to trade the Chicago Board of Trade’s 30-year bond contract in 1977. Today, he’s looking to create another first as the founder and CEO of Metrixx — a bond, fx and commodities analytics company that also integrates social media for the trading community. Marzano spoke with JLN editor-in-chief Jim Kharouf about Metrixx, what it brings to the analytics space and how social media can help replace some of that market knowledge that used to be on the trading floor.

JLN Options

ISE, Nasdaq wary of planned Miami options exchange
Jacob Bunge, MarketWatch
The planned launch of a new U.S. stock-options platform has drawn criticism from two established operators, which asked regulators to scrutinize the transparency of the proposed market.
The Miami International Securities Exchange LLC plans to launch later this month into an already crowded market of 10 platforms competing for stock-options trading volume that has shrunk by 14% so far this year.

Markets are up. Earnings are down. Here’s what’s really going on.
Neil Irwin, The Washington Post
Earnings season is underway, and it’s looking to be a doozy. The Standard & Poor’s 500 stocks are forecast to have suffered a cumulative 2.7 percent drop in profits, according to Factset, the first decline in 11 quarters.
But there is a mystery hanging over the markets: During the quarter, the S&P 500 actually rose 5.8 percent.

Is Market Complacency Really That High?
Cullen Roche, Pragmatic Capitalism (via Business Insider)
One thing we keep seeing all over the place is how the VIX (volatility index) is so low and that this means the market is extremely complacent and therefore on the verge of a decline. This might be true, but I think it’s important to provide some perspective when using an indicator like the VIX.


MarketsWiki Page of the Day
Bank stress test


MarketsWiki Recent Updates


John Gage III; Justin Bouchard

Companies, Organizations and Groups

AlgoFast; Aquis Exchange Ltd


Bank stress test; US Treasury futures


29,422,331 pages viewed, 7,151 articles, 148,489 edits
MarketsWiki Statistics

Lead Stories

Tom hits 1m options contracts in 10 months
Philip Stafford in London –
The Order Machine (Tom), the start-up Dutch platform backed by banks and traders, has reached its first million traded options contracts as it steps up plans to carve out market share in the local derivatives market. The milestone, from individual stock options trading, was hit just 10 months after its launch in Amsterdam, Europe’s largest market for retail options trading.

US and European asset managers split on new money-fund rules
Jeremy Woolfe in Brussels – Financial News
Asset-management industry lobbies on either side of the Atlantic have split over the question of further reform of the $4.7 trillion money-market fund industry, which played a key role in 2008’s financial crisis.

Chamber, Oil Trade Groups Sue SEC on Foreign Payment Rule
The U.S. Chamber of Commerce and two oil industry trade groups sued the Securities and Exchange Commission challenging a rule requiring public companies to disclose payments of more than $100,000 made to foreign governments for commercial development projects.

Judge releases private-equity leaders’ exchanges, revealing chumminess
Tom Hamburger and Jia Lynn Yang – The Washington Post
Previously private communications between leading figures in the private-equity industry were released to the public Wednesday evening by a federal judge in Boston, revealing the clubby nature of their relationships and the extent to which rival firms cooperated in some of the biggest leveraged buyout deals in history.

Fed Governor Daniel Tarullo Calls for Cap on Bank Size
A top Federal Reserve official Wednesday called on Congress to consider capping the size of the nation’s financial firms, marking one of the most high-profile challenges to the way Wall Street does business.

JPMorgan’s Dimon says annual regulation costs to top $1 billion
Reuters via Yahoo! News
WASHINGTON – JPMorgan Chase & Co Chief Executive Jamie Dimon said annual overhead costs from new domestic and international regulations will likely reach more than $1 billion.

IMF Lagarde Seeks More Time for Greece Austerity
International Monetary Fund Managing Director Christine Lagarde said Greece should be given an extra two years to meet its budget targets, publicly wading into euro-zone officials’ politically sensitive bailout discussions.

Peregrine Funds in Question
The jailed founder of Peregrine Financial Group Inc. believes more funds may be available to the firm’s clients than is currently thought, a longtime family friend said.

IMF snub reveals China’s political priorities
Jamil Anderlini in Beijing –
China’s top financial officials have snubbed annual meetings of the International Monetary Fund and World Bank in Tokyo amid wrangling between China and Japan over a group of islands in the East China Sea.

Ex-Refco Lawyer Collins Begins Retrial After Winning Appeal
By Patricia Hurtado – Bloomberg
Joseph Collins, Refco Inc.’s former outside lawyer whose 2009 fraud conviction was reversed by an appeals court in January, is being retried for allegedly helping Chief Executive Officer Phillip Bennett and other executives defraud investors of $2.4 billion. Collins, who was found guilty in July 2009 by a federal jury in Manhattan, was granted a new trial by a U.S. appeals court, which ruled that the trial judge improperly instructed a deliberating juror outside the presence of Collins’s lawyers.


CFTC Staff Responds to Questions on Start of Swap Data Reporting
Today, Commodity Futures Trading Commission (CFTC) staff is responding to questions from market participants and other interested parties on the timing of when counterparties will be required to report swap pricing and transaction data as required under part 45 of the Commission’s regulations.

FSA Should Raise Important Matters At CEO And Not Compliance Officer Level, Says CISI Professional Interest Forum

NFA: Updated Self-Examination Questionnaire: For FCMs, FDMs, IBs, CPOs and CTAs

ESMA Publishes An Update Of The Q&A On Short Selling Regulation

The New Era Of Swaps Market Reform – Keynote Address Before The George Washington University Center For Law, Economics And Finance Conference By CFTC Chairman Gary Gensler

Speech By SEC Commissioner Elisse B. Walter: Remarks To American Bar Association International Section,

Speech By ESMA Chair, Steven Maijoor, At The BVI Asset Management Conference

European Parliament – Financial Transaction Tax: Anni Podimata Welcomes Plan To Press Ahead

[Japan] Speech by the Minister for Financial Services at the Sendai Dialogue

Meeting Of The Financial Stability Board In Tokyo On 10-11 October

Exchanges & Trading Facilities

TOM Trades One Millionth Option Contract
Press Release
TOM MTF is proud to announce the one millionth option contract was traded on its platform.

IntercontinentalExchange Receives 4d(a) Order from the CFTC; Cross Margin Benefits Continue Across Energy Contracts While Customers Benefit from Segregated Accounts
IntercontinentalExchange, a leading operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets, today announced that the CFTC has approved ICE Clear Europe’s request to allow the clearing house and its clearing members to hold both U.S. energy futures and foreign energy futures in the 4d(a) account for U.S. customers. The 4d(a) Order allows ICE to continue offering portfolio margining offsets for its energy customers, but with enhanced account segregation benefits.

EEX Transparency Platform to Provide First Data for Power Generation from Biomass
From now on, the “Transparency in Energy Markets” transparency platform of the European Energy Exchange (EEX) will publish generation of power from biomass as an additional category within the reporting of renewable energies.

NYSE Euronext to Host Fourth Annual Portugal Day at the New York Stock Exchange
Carlos Moedas, Secretary of State to the Prime Minister; Jorge Cardoso, CEO, Caixa-Banco de Investimento; Luis Laginha de Sousa, CEO, NYSE Euronext Lisbon, and CEOs of NYSE Euronext Listed Companies to Ring The Opening Bell

Burgundy: 48 % Of Trading In Swedish Equities On Alternative Marketplaces In September 2012
About 48 percent of the total Swedish equity trading was executed on alternative marketplaces in September 2012. Burgundy reached a market share in Swedish equities of about 3.23 (3.54) percent in September 2012.

Bolsa De Valores De Colombia (BVC) Extends Contract With NASDAQ OMX
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) and the Bolsa de Valores de Colombia (BVC), the fourth largest stock exchange in Latin America, today announced the extension of their current technology contract for an additional five years.

Bucking the trend, LME looks at expanding floor trading
By Josephine Mason and Susan Thomas, Reuters
The London Metal Exchange may add morning rounds of open-outcry trading for its unique futures contracts, senior trade sources say, as the new Hong Kong-based owners plot their first major move to hold off intense competition from their Shanghai rival.

BME’s Co-Location Service To Start On November 12th – Five Firms Have Applied For The Service

[CBOE] Equity and ETF LEAPS Listing Schedule for All Cycles

Direct Line Insurance Group plc raises £787m in London’s largest UK capital-raising of 2012

NYSE Group Inc. Issues Short Interest Report

NYSE MKT Issues Short Interest Report

Hedge Funds & Managed Futures

Du Toit and Majedie take top prizes at FN awards
Sophie Baker
Smaller firms more than held their own against their larger rivals at the eleventh annual Financial News Awards for Excellence in Institutional Asset Management, Europe, at London’s Royal Courts of Justice last night.

Pimco’s Bond ETF Reaches $3 Billion Mark
Kirsten Grind – WSJ
If Bill Gross drank champagne, now might be the time for him to uncork a bottle. The co-chief investment officer and founder of Pacific Investment Management Co. just reached $3 billion in assets under management in his new actively-managed exchange-traded fund – after launching just seven months ago.

Scotiabank to Expand Derivatives Services for Hedge Funds
Bank of Nova Scotia, Canada’s third- largest bank, will offer more products to hedge funds including derivatives trading as it expands prime services to compete inside and outside its home country.

Blackstone Real Estate Fund Raises $13.3 Billion
Business Wire via Yahoo! Finance
Blackstone today announced that it has closed its latest global real estate fund, Blackstone Real Estate Partners VII . The fund raised $13.3 billion over the past 13 months from more than 250 investors globally.

David Tepper’s 4 Stocks Trading at Discounts to His Purchase Prices
Appaloosa Management, a hedge fund David Tepper founded in 1993, has roughly $12 billion in assets under management. After years as primarily a distressed debt investor, Tepper became

Markit Integrates Dividend Content into Securities Finance Services
Markit, a leading, global financial information services company, today announced that its dividend forecasting content is now available to clients using Markit Securities Finance products and services.

Exchange traded funds: When are there too many?
There may be someone in the world who needs the iPath Long Enhanced MSCI EAFE Index ETN, an investment that offers rocket-powered gains and weapons-grade losses from a popular international stock index. If so, that person hasn’t shown up recently. The iPath exchange traded note last changed hands in January.

Banks & Brokers

Fed’s Tarullo: U.S. Should Consider Capping Banks’ Size
Dow Jones
The U.S. government should cap the size of big banks, putting limits on the growth of existing banks and blocking large mergers, a top Federal Reserve official said Wednesday.

Morgan Stanley, Mitsubishi UFJ CEOs Said to Meet on Tie-Ups
Takahiko Hyuga and Shigeru Sato – Bloomberg
Morgan Stanley and Mitsubishi UFJ Financial Group Inc. (8306)’s chief executive officers will meet this week in Tokyo to discuss deepening their partnership, said two people with knowledge of the matter.

Goldman Sachs Doesn’t Need More Deposit Funding, Cohn Says
Goldman Sachs Group Inc. , the fifth- biggest U.S. bank by assets, doesn’t need more deposits to fund its businesses, said President and Chief Operating Officer Gary D. Cohn.

JPMorgan CFO May Step Down
The fallout from the JPMorgan Chase trading mess continues as the bank’s CFO may step down. Douglas Braunstein is expected to step down as chief financial officer of the nation’s largest bank with the next two quarters, according to a WSJ report.

Dimon Unsure He Would Rescue Bear Stearns Again
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon says his bank did the U.S. a favor by buying Bear Stearns Cos. in 2008 and he might not go through with it again because of how much the deal ultimately cost.

DealBook: At JPMorgan, an Inquiry Built on Tapes
International Herald Tribune
Investigators examining a multibillion-dollar trading loss at JPMorgan Chase are focusing on calls in which employees openly discussed how to value troubled bets in a favorable way.

JPMorgan’s Dimon hits back at government over Bear Stearns suit
Reuters via Yahoo! News
WASHINGTON – JPMorgan Chase & Co Chief Executive Jamie Dimon on Wednesday lashed out at the government for a lawsuit alleging misdeeds at Bear Stearns, more than four years after JPMorgan was asked to rescue the teetering financial giant.

Societe Generale Expands U.S. Cash Equity Trading And Sales With Key Hires
Societe Generale Corporate & Investment Banking announces senior additions to its U.S. cash equity sales and trading teams to extend its leading trade execution capabilities as well as its highly rated European sectorial and global macro research to U.S institutional investors.

RBS Raises 787 Million Pounds in Direct Line’s Initial Offering
Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, raised 787 million pounds in an initial public offering of its insurance unit forced by European Union regulators.

JPMorgan must pay $18million in trust mismanagement case
Reuters via Yahoo! News
JPMorgan Chase & Co must pay more than $18 million to a trust in a suit stemming from its improper recommendation of a type of complex security that was unsuitable for the trust and benefited the bank, a U.S. state court judge has ruled.

Clearing & Settlement

Quant Congress Europe: Collateral choice will cause price fragmentation, says Piterbarg
Laurie Carver – Risk magazine
Obtaining a single, unique price for even simple derivatives products like forward foreign exchange rates may soon become a thing of the past, as dealers start taking the eligible collateral agreed as part of each credit support annex (CSA) agreement into account in their pricing, according to Vladimir Piterbarg, head of quantitative analysis at Barclays.

LCH.Clearnet Launches Global Consultancy Certification Program for OTC Clearing
LCH.Clearnet Limited’s interest rate swap (IRS) clearing service, SwapClear, today launched the industry’s first certification program for consultancy firms preparing market participants for the implementation of centralized OTC clearing. Five leading consultancies have already signed up to join the global initiative, which provides experience-based certification and CCP-authorized resources to better inform industry practitioners at this critical time.

EU Clearing Houses Results Reflect Tough Environment
Dow Jones
The financial results for two of Europe’s largest equities clearing houses have highlighted the difficulties faced by the operators, amid a slump in trading volumes and an increasingly competitive post-trade environment.

CME Group Clearing Advisory: CDS, IRS & FX Credit Controls

CME Clearing – New Product Advisory: Chinese Steel Rebar HRB400 (Mysteel) Swap Futures

CME Group Clearing Advisory: OTC New Release Advisory – Timing of Acceptance of OTC Swaps


SunGard Enhances Ambit Treasury Management to Help Banks Improve Balance Sheet Performance and Comply with Regulations
SunGard has enhanced the Ambit Treasury Management solution suite by integrating analytical tools for liquidity management, capital allocation and revenue protection, in order to help banks improve balance sheet management and comply with industry regulations such as Basel III and Dodd Frank. The enhanced solution will also help banks manage and minimize the risks that customer activity can pose to the bank’s balance sheet. In addition, the integrated analytical capabilities will help banks gain a complete and accurate view of their treasury and balance sheet activities to support increasing internal compliance requirements.

Exegy And StreamBase Partner To Enable Cross-Asset Class Algorithmic Trading

Redline Trading Solutions Adds Montreal Exchange Options and Futures to its InRush Platform
Redline Trading Solutions announced it has added support to its market-leading InRush Accelerated Ticker Plant for the Montreal Exchange (MX), Canada’s oldest, fully electronic derivatives exchange owned by Toronto-based TMX Group.


UBS Executive Probing Adoboli Trades Ignored Co-Workers
The UBS AG executive who conducted an internal review of Kweku Adoboli’s trades that allegedly caused a $2.3 billion loss didn’t look into the actions of any other traders on his desk or review their communications.

CFTC Orders Farr Financial Inc. to Pay $280,000 to Settle Charges of Improper Investment of Customer Segregated Funds and Supervision Failures
The U.S. Commodity Futures Trading Commission (CFTC) today announced the Farr Financial Inc. (Farr) of San Jose, Calif., agreed to pay a $280,000 civil monetary penalty to settle CFTC charges that it failed to properly invest customer segregated funds and failed to diligently supervise those investment activities.

NFA Enforcement and Registration Actions
TradingEdge Capital Management and Timothy J. Karlin

[ASIC] Insurance broker charged with theft

Environmental & Energy

Abbott tries to stop carbon link to Europe
Opposition Leader Tony Abbott has moved to halt the federal government’s plans to link Australia’s carbon price with a European scheme before they can proceed through parliament.

House to vote on carbon links on Thursday
THE lower house will vote on Thursday morning on legislation that ditches the carbon floor price and links Australia’s emissions trading scheme to Europe. Climate Change minister Greg Combet wrapped up after more than six hours of debate on the suite of seven bills on Wednesday.

‘Carbon markets on verge of collapse; require immediate rescue by nations’, suggests UN Panel
Thomson Reuters AlertNet
Carbon markets have proved instrumental for integrating the business community into the global effort to combat climate change through mitigation and in sensitizing the general public and nations alike about the issue. However, these markets are on the verge of collapse at present.


China’s Central Huijin: Bought Shares in Four Major Chinese Banks Wednesday
Dow Jones
Central Huijin Investment Ltd., an investment arm of China’s sovereign-wealth fund, said it bought shares in four major Chinese banks on the secondary market Wednesday and will continue such share purchases over the next 12 months.

HKMEx Signs MOU With Maike Metals – Leading Metals Trader Becomes Latest Industry Associate, To Support Upcoming HKMEx RMB Copper Contract
The Hong Kong Mercantile Exchange (HKMEx), China’s global marketplace, today signed a memorandum of understanding (MOU) with Maike Metals International Limited, one of the largest base metals traders in China, to promote China’s base metals trading sector to international market participants.

Bank of America Merrill Lynch Names Loh Boon Chye Head of Asia-Pacific Global Markets – Memo
Dow Jones
Bank of America Merrill Lynch has named former Deutsche Bank (DB) executive Loh Boon Chye as head of Asia- Pacific global markets and deputy president for the region, according to a memo to staff seen by Dow Jones Newswires on Wednesday.

Hong Kong’s Securities And Futures Commission Bans Former Bank Employee For Forgery

Frontier Markets

MoU Signed To Outline Areas Of Cooperation: Dubai Financial Market Provides Technical Support To Establish Erbil Stock Exchange
The Exchange Organized A Two Day Extensive Orientation Program For A High Level Delegation From Iraqi Region Of Kurdistan

JPMorgan Hires Ahmed Saeed From Nomura for Middle East Coverage
JPMorgan Chase & Co. hired Ahmed Saeed to head its public sector coverage in Middle East as the biggest U.S. bank boosts its presence in the oil-rich region.

Securities Commission Malaysia: One Year Jail, RM1.2 Million Fine For Ex-Director For Giving False Statement

Composition Of TASE Corporate Bond Indices As Of October 15th, 2012


Oil Find Offers Hope for Ireland
An oil field in the Celtic Sea may prove to be a game changer for Ireland, possibly producing enough to make the country self-sufficient in crude or even turning it into an exporter of the commodity, Irish oil company Providence Resources PLC said on Wednesday.

Apple Choice of IPhone Aluminum Said to Slow Down Output
Bloomberg News
Apple Inc. (AAPL)’s iPhone 5 supply shortfall is being exacerbated by a quality-control crackdown at Foxconn Technology Group that’s designed to cut the number of devices shipped with nicks and scratches, according to a person familiar with the matter.

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