John Lothian Newsletter: CME Europe to debut with 30 forex products; Bucking the trend, LME looks at expanding floor trading; Nasdaq’s U.K. Derivatives Platform Seeks 10% Market Share

Oct 12, 2012

As the evaluation process begins for CME Group’s new European exchange, the company reveals that it intends to open its doors with 30 forex products on its shelf for trading. While many exchanges look to reduce or eliminate person-to-person floor trading in favor of electronic processing, the London Metal Exchange is actually considering expanding its traditional transaction form.  Nasdaq OMX Group, which is also looking to establish a new London-based trading platform, declares that they want to see at least a ten percent market share by the end of the first year of that platform’s operation.

First Read

Analysis: Commodity exchange battleground switches to “swaps”
Ann Saphir | Reuters
Chicago-based giant CME Group Inc. has lost ground in the estimated $1.2 billion-a-year business of guaranteeing over-the-counter swaps to arch-rival IntercontinentalExchange Inc. in recent years, company data show, as the Atlanta-based upstart offered cutting-edge trade technology.


Inaccurate media reports debunked: “The MF Global investigation is on”
Mark Melin, Opalesque Futures Intelligence
After a series of unattributed statements in the New York Times claimed an end to the investigation into criminal activity surrounding the illegal transfer of $1.6 billion in MF Global customer assets, the evidence in the criminal case may have found its tipping point. “The investigation into criminal wrongdoing among MF Global’s top executives is on,” said Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton, noting in the exclusive interview that investigators are now aware of potential criminal activity that occurred

**JK – On life support, on track or on something else?


Singapore Good Place for Water Derivatives Exchange, Times Says
Singapore would be a natural setting for a water derivatives exchange and it’s in country’s interest to set one up, the Straits Times reported, citing carbon-trading pioneer Richard Sandor.

** JK – Water, I need water!


Investor Group to Exchanges: Stop Dual-Class Listings
Citing recent bumpy tech IPOs from the likes of Zynga Inc. and Facebook Inc., a group of institutional investors is calling for stock exchanges to address a complaint it has had for decades—shares with unequal voting rights. The Council of Institutional Investors—whose pension funds, foundations and endowments manage about $3 trillion of assets—has asked Nasdaq OMX Group Inc. and Big Board owner NYSE Euronext to stop listing companies that offer dual share classes.

**JK – Voting equality NOW!


European Union Wins Nobel Peace Prize
The European Union has been awarded the Nobel Peace Prize for its efforts to promote peace and democracy in Europe, in the midst of the union’s biggest crisis since its creation in the 1950s.


The Mainframe Continues to Lure Wall Street
Melanie Rodier – Wall Street & Technology
With the rise of big data, mainframe computers are enjoying a resurgence of sorts. But many experts point out that ‘big iron’ never really went away in the first place.


Looser rules won’t get banks lending more
Gillian Tett –
Why won’t those wretched banks lend money? That is a question many European and American politicians have asked in recent months.


Lofty Gains Lift Gloom in IPO Market
The clouds lingering over the IPO market lifted Thursday, as the day’s four initial public offerings all surged more than 20% in their first day of trading. The strong debuts by Realogy Holdings Corp., Shutterstock Inc., Intercept Pharmaceuticals Inc. and Kythera Biopharmaceuticals Inc. marked the first time that four IPOs have booked gains of that magnitude simultaneously since December 2000, according to Dealogic. What’s more, all four IPOs fetched prices at or above the most optimistic expectations.


Guggenheim Trader Fined, Suspended
Math whiz Alexander Rekeda’s skill creating bonds from pools of risky subprime loans and other debts was prized by big banks before the financial crisis hit. Now the 38-year-old former trader stands out for a different reason: Regulators fined and suspended Mr. Rekeda on Thursday for allegedly hiding a trading loss on a collateralized loan obligation.


Panetta Warns of Cyberthreat
Defense Secretary Leon Panetta said Thursday a series of recent electronic attacks that have been tied to Iran, both in the U.S. and abroad, herald a “significant escalation in the cyberthreat,” and warned the U.S. would aggressively pursue the perpetrators, in what cybersecurity experts called a veiled warning to Tehran.


SEFCON III: Tuesday, November 13, 2012
On Tuesday, November 13, 2012, senior executives of firms participating in and serving the global swaps markets will gather in New York for SEFCON III to address trading swaps in global markets through Swap Execution Facilities under the Dodd Frank Act. SEFCON III will feature addresses by key policy makers from Capitol Hill and regulators from the CFTC and SEC. Panelists and presenters will include senior executives form leading swaps brokers, exchanges, clearinghouses, dealers, data repositories, traders and corporate end-users.

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 Interest Rates

Bond Buys May Have Diminishing Returns: Stein
WASHINGTON (MarketWatch) — Federal Reserve Gov. Jeremy Stein said Thursday that bond buys have diminishing returns, because even though it encourages refinancing, it doesn’t change the hurdle rate on capital-structure investment, which is determined by the expected future path of short rates.

**CN: Stein is an FOMC voter and said that effects from bond buys are “meaningful” because they lower interest rates and boost equity prices and other asset values.

Obama’s next Fed chief: Who gets the job if the president wins a second term?
Washington Post
Whoever is inaugurated as president Jan. 20 will, in the first year of his term, face a decision that will have a greater impact on the economy than any other single call he will make: Whom to select as chairman of the Federal Reserve.

Gensler: New Ear in the Swaps Marketplace
ABA Dodd-Frank Tracker
CFTC Chairman Gary Gensler spoke before the George Washington University Center for Law, Economics and Finance Conference about the importance of the upcoming weeks in the implementation of certain Dodd-Frank Act provisions. October 12 is the deadline for new rules regarding registration and reporting requirements for the biggest players in the derivatives market.


MarketsWiki Page of the Day
The Order Machine


MarketsWiki Recent Updates


John Gage III; Justin Bouchard

Companies, Organizations and Groups

AlgoFast; The Order Machine (TOM)


Bank stress test


29,448,347 pages viewed, 7,151 articles, 148,568 edits
MarketsWiki Statistics

Lead Stories

CME Europe to debut with 30 forex products
Philip Stafford –
CME Group, the US derivatives exchange, is planning to debut with 30 foreign exchange futures products when it launches its European bourse next year. The disclosure came as UK competition authorities launched a formal six-week public consultation to assess the Chicago-based group’s application for a local exchange licence.

Bucking the trend, LME looks at expanding floor trading
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.

Nasdaq’s U.K. Derivatives Platform Seeks 10% Market Share
Nandini Sukumar – Bloomberg
Nasdaq OMX Group Inc. (NDAQ), which is setting up a derivatives trading system in London to compete with Europe’s two biggest futures exchanges, will seek more than 10 percent market share in its first year of operation.

Swap Transparency Hailed by Gensler as Rules Begin Oct. 12
JPMorgan Chase & Co., Goldman Sachs Group Inc. and the $648 trillion swaps market will enter a new era of transparency when Dodd-Frank Act regulations for dealers begin taking effect tomorrow.

Liquidnet in talks to expand European partnerships
Market Watch
Liquidnet, which provides trading platforms for institutional investors, has said it is in talks to sign new partnerships with “most European exchanges” as bourses are “looking to create [high-frequency trading]-free pools of liquidity.”

trueEX to Use CME Clearing to Power Swaps Execution
Press Release
trueEX, LLC, an electronic execution platform for the global interest rate swaps (IRS) market, announced today that it has executed a clearing agreement with CME Clearing. trueEX provides execution and processing services as a CFTC-regulated Designated Contract Market (DCM) for the global IRS market.

China funds, brokerages embrace commodity futures as rules relax
Two Chinese fund houses have launched funds focused on the domestic commodities futures market as they look to tap into the burgeoning market that regulators have cautiously opened to local financial institutions this year.

S&P cuts Spain credit rating to near junk
Standard & Poor’s on Wednesday cut Spain’s sovereign credit rating to BBB-minus, just above junk territory, citing a deepening economic recession that is limiting the government’s policy options to arrest the slide.

Eurozone Watch: ‘Junked if you do, junked if you don’t’
Matthew Attwood and Farah Khalique – Financial News
A downgrade of Spanish debt to ‘junk’ status is looking inevitable after one of the major rating agencies yesterday said it could take the step if Spain refused to ask for a bailout, while another warned it could do so even if the country did ask.


CFTC Said to Be Close to Granting Delay on Energy Swaps Rule
Matthew Leising and Silla Brush – Bloomberg
The Commodity Futures Trading Commission is close to granting a delay on a rule set to take effect tomorrow affecting energy swaps clearing, potentially helping CME Group Inc. (CME) avoid customer defections, according to three people with knowledge of the matter.

Safeguards Against Speculative Banking
New York Times
Reform proposals in Europe, Britain and the United States could make banks safer. The banks will resist them, but policy makers should respond by making them tougher, not weaker.

Pamela Dyson Named SEC’s Deputy Chief Information Officer

CFTC’s Division of Swap Dealer and Intermediary Oversight Issues Interpretative Guidance to Equity REITs and Certain Securitization Funds
The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight today issued interpretative guidance letters to equity real estate investment trusts and asset-backed securities funds.

CFTC Staff Preserves Regulatory Status Quo for Petitioning RTOs & ISOs, and for Government and Cooperatively-Owned Electric Utilities
The Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight, Division of Swap Dealer and Intermediary Oversight, and Division of Clearing and Risk today issued no-action letters to Regional Transmission Organizations and Independent System Operators, and certain government and cooperatively-owned electric utilities.

CFTC Staff Responds to Frequently Asked Questions on the Reporting of Cleared Swaps
Today, Commodity Futures Trading Commission (CFTC) staff is responding to frequently asked questions from market participants and other interested parties on the reporting of cleared swaps as required under part 45 of the Commission’s regulations.

Speech By SEC Chairman Mary L. Schapiro: Remarks At 2012 New England Securities Conference

Speech By Adair Turner, Chairman, FSA City Banquet At The Mansion House, London

ESMA Publishes The Notification Thresholds For Sovereign Issuers

APRA guidelines for names relating to financial institutions

Subscribe to the ASIC Self-managed Superannuation Fund (SMSF) Auditor Update

[Japan] FSA publishes an English translation of Outline of 2012 Financial Instruments and Exchange (Amendment) Act

Exchanges & Trading Facilities

BM&FBOVESPA debates sustainability at the 52nd General Assembly and Annual Meeting of the World Federation of Exchanges (WFE)
BM&FBOVESPA will take part in the 52nd General Assembly and Annual Meeting of the World Federation of Exchanges (WFE), which will take place October 14-19 in Taipei, Taiwan. The Brazilian Exchange will be present at “Panel 2 – Special Session: ESG” on October 16, when for the first time environmental, social and corporate governance questions will be discussed in an exclusive session dedicated to these matters.

CEE Summit Of The Vienna Stock Exchange: Privatizations As A Driver Of The Economy And The Capital Market

EEX Runs First Primary Market Auction For The Czech Republic

Thomson Reuters Global Equities Monthly Market Share Data Updated To Reflect September 2012 Activity

National Association for Business Economics Visits the New York Stock Exchange

Realogy Holdings Corp. Celebrates Initial Public Offering and First Day of Trading on the New York Stock Exchange

Program Trading Averaged 29.0 Percent of NYSE Volume during Oct. 1-5

Novacyt lists on NYSE Alternext

Hedge Funds & Managed Futures

Exchange traded funds: When are there too many?
by John Waggoner – USA TODAY
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.

Banks want pensions to go dutch
The Wall Street Journal
Struggling with a property downturn and tighter capital regulations, Dutch banks are trying to persuade guardians of more than E900bn ($1.16 trillion) in pension money to become more patriotic and keep a higher percentage of their funds in the Netherlands.

Cargill quarterly profits surge 300%
Javier Blas, Commodities Editor –
Cargill, the world’s largest trader of agricultural commodities, reported a 300 per cent surge in profits in its first quarter as it benefited from customers seeking to offset a shortage in US grain supplies due to a severe drought.

PensionDanmark to Invest $1.03 Billion in Power, Water Fund
PensionDanmark A/S will invest 800 million euros in a new fund for infrastructure assets such as water supply and electricity transmission as it seeks to counter low bond yields.

CalPERS Board Member Priya Mathur Appointed To UN-Backed PRI Board

Richard G. Ketchum Chairman And Chief Executive Officer – Remarks To Bond Dealers Association Annual Conference

Banks & Brokers

JPMorgan, Wells Fargo Lead Off Bank Earnings Tomorrow In Defense Mode
Big lawsuits against JPMorgan Chase and Wells Fargo are a reminder that the industry has a long way to go before litigation reserves are an after-thought during quarterly earnings calls.

BofA’s Moynihan Sees More Job Cuts as Economy Sputters
Sara Eisen and Elisa Martinuzzi – Bloomberg
Bank of America Corp. Chief Executive Officer Brian Moynihan will press on with a plan to cut more than 30,000 jobs as revenue stays flat.

Morgan Stanley E-Mails Show Doubts in Doomed Vehicle
Morgan Stanley executives told a partner in its Rhinebridge structured investment vehicle that mortgages underlying the SIV may cause it to fail, according to e-mails cited by investors who were sold $100 million of the fund’s notes just days after the warning.

Gary Cohn: Europe ‘Needs a Moment’ for Change: Video
Gary Cohn, president and chief operating officer at Goldman Sachs, talks with Bloomberg’s Sara Eisen about the European debt crisis and the current state of Goldman Sachs. He speaks in an exclusive interview on Bloomberg Television’s “Bloomberg Surveillance.”

[Video] Blankfein Warns of ‘Fiscal Cliff’
The New York Times
The chief of Goldman Sachs told Steve Liesman of CNBC that the looming “fiscal cliff” could derail the U.S. economic recovery.

Goldman CEO: I’ll pay 5 percent more tax for budget deal
Reuters via Yahoo! News
WASHINGTON – Goldman Sachs Chief Executive Lloyd Blankfein on Thursday became the latest big-name business leader to pledge to pay a steeper tax rate – 5 percent more, he said – in exchange for a long-term bipartisan deal in Congress to keep the country from falling off the “fiscal cliff.”

Goldman Sachs heads of metals to retire
Jack Farchy –
Steve Branton-Speak, the veteran head of metals at Goldman Sachs, is to retire at the end of the year.

Citigroup CEO Says U.S. Banks The Right Size
FOX Business
Citigroup Inc.’s Chief Executive Vikram Pandit sought to brush aside calls for breaking up banks considered too big to fail, saying diversified financial institutions are “in line with what the clients need and how the market has evolved,” The Nikkei reported in its Friday morning edition.

TradeStation Announces the Opening of a Software Development Center in Costa Rica
GlobeNewswire via Yahoo! Finance
PLANTATION, Fla. — TradeStation Group, a Monex Group company and the parent company of an award-winning broker-dealer and futures commission merchant, today announced the opening of TradeStation Global Services, S.A., a software development center in Lagunilla, Heredia, Costa Rica.

Jamie Dimon’s odd idea of a “favor”
CNN Money
JP Morgan’s chief recently said the acquisition of Bear Stearns in the midst of the 2008 collapse was a gesture of generosity. Hardly.

BofA-Merrill Names New London Chairman of Financial Services
Wall Street Journal Blogs
In the latest investment banker-move news out of London, Henrietta Baldock, who runs Bank of America Merrill Lynch’s financial-institutions group here, is to become chairman of the operation, according to an internal memo circulating at the bank today that was seen by Deal Journal.

Cantor Fitzgerald Strengthens Municipal Sales and Trading Team
Cantor Fitzgerald & Co., a leading global financial services firm, announced that it is strengthening its Debt Capital Markets’ Municipal Bond Division with the addition of seasoned veterans Jim Dolan, John Donovan, Susan Marron and Dennis DiCicco, who are joining Cantor from Sterne Agee & Leach, Inc.

Clearing & Settlement

CME Group Clearing Advisory: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (A) Effective Friday, October 12, 2012

CME Clearing: Performance Bond Requirements – Coal, Crude Oil, Electricity, Freight, Metals, and Refined Products Outrights; Agriculture Intra-Commodity Spread Charges – Effective Tuesday, October 16, 2012

Global Financial Markets Association Letter To Risk Management Group At The Bank For International Settlements Regarding BCBS 227

Indexes & Products

Analysis: Fund firms cut back on new ETFs, closing more
Reuters via Yahoo! News
Fund companies are growing more wary of introducing new exchange-traded funds, and more willing to kill those that have not caught on, as they grapple with a price war in an overcrowded $1.2 trillion market dominated by the three largest providers.


Chartis Names SunGard a Category Leader in Enterprise Collateral Management
Chartis Research has positioned SunGard Financial Systems as a category leader in its RiskTech Quadrant for enterprise collateral management solutions. SunGard is the only vendor recognized as a category leader for both the trading and banking books.

Markit Named Best Enterprise Data Management Service Provider at Insurance Risk Awards 2012
Markit announced that Markit Enterprise Data Management (EDM), formerly Cadis Software, has been named Best Enterprise Data Management Service Provider at the Insurance Risk Awards 2012.


Reserve Management’s Bent Tells of Desperate Situation
By Bob Van Voris and Patricia Hurtado – Bloomberg
Bruce R. Bent, chairman and cofounder of the Reserve Funds, said he and others were willing to “try anything” the day after Lehman Brothers Holdings Inc.’s bankruptcy caused a run on the $62.5 billion money-market fund.

FINRA Fines Guggenheim Securities $800,000 for Failing to Supervise CDO Traders; Two Traders Sanctioned for Efforts to Hide Loss
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Guggenheim Securities, LLC of New York $800,000 for failing to supervise two collateralized debt obligation (CDO) traders who engaged in activities to hide a trading loss

Trial date set in SEC case against Goldman’s Tourre
Reuters via Yahoo! News
A federal judge on Thursday set a trial date for the only Goldman Sachs Group Inc employee charged in the government’s civil fraud case over the bank’s Abacus subprime mortgage deal. Fabrice Tourre’s case is scheduled to go to trial on July 15, 2013, District Judge Katherine Forrest in Manhattan ruled.

Ex-UBS Client Roessel Avoids Prison in Offshore Tax Case
Wolfgang Roessel, a former client of UBS AG and Wegelin & Co., avoided prison for failing to report more than $11 million in Swiss accounts to U.S. tax authorities.

SEC banishes convicted Danbury stock broker
Hartford Business Journal
A Danbury stock broker who last month pleaded guilty to defrauding clients, some of them fellow churchgoers, out of at least $600,000 has been barred from the securities industry, authorities say.

ASIC challenges Wellington Capital’s distribution of ARL shares

BCSC panel issues lifetime ban against B.C. man for attempted fraud

Environmental & Energy

China’s carbon trading debut defies doubters
Business Day
China’s first steps to build what is destined to be the world’s second-biggest emissions market are boosting the prospects for fledgling programs from Australia to California. Four cement makers in China, the world’s biggest emitter, bought 1.3 million pollution permits for 60 yuan ($9) a metric ton last month in Guangdong. The province plans the largest of seven pilot programs for a proposed national market within three years. Exchanges will trade permits to emit an estimated 1 billion metric tons of greenhouse gases a year by 2015, close to half the volume in the European Union system.


Japan M&A wave may hit record
The Wall Street Journal
With Japanese mobile carrier Softbank said to be eyeing an acquisition of US company Sprint Nextel chances are increasing for Japan to see the biggest boom year in cross-border deals in its history.

Tokyo Grain Exchange Rice Grading Table For Apr. ’13-Jun.
Rice Grading Table Applicable From The April 2013 Contract Month To The June 2013 Contract Month

Circular On The Implementation Of Amendment To Measures Of Dalian Commodity Exchange For Handling Violations

Frontier Markets

Ashmore’s managed assets up nearly 7%
David Oakley, Investment Correspondent –
The fortunes of Ashmore have turned round after the emerging-markets-focused fund manager said the summer rally in equities, sparked by central bank intervention, helped to boost inflows to its funds.

Belarus to start trading in futures in November
The first futures trading session will take place in Belarus in November 2012, Mr Anatoly Zaretsky, Deputy Chairman of the Board of the Belarusian Universal Commodity Exchange (BUCE), told media on 10 October.

Malawi Stock Exchange Weekly Trading Report

John Lothian Newsletter

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Past JLN Newsletters

ETF trading surges on European stock exchanges

ETF trading surges on European stock exchanges

First Read $26,851/$300,000 (9.0%) Denise Knabjian ++++ Hits & Takes JLN Staff The U.S. has surpassed the 25 million Covid-19 infections level, according to data reported Sunday by Johns Hopkins University. JPX has signed a memorandum of understanding, or MOU,...

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