John Lothian Newsletter: Quote MTF targets Spain; New U.S. Rules Hinder Derivatives Trading in Asia; CBOT reportedly rethinking 21-hour grain trading cycle

Oct 19, 2012

Hungarian exchange company Quote MTF plans to pair up with a UK bank and open a trading facility in Spain, placing fresh pressure on the marketplace in that country. Banks in Asia appear to be stepping back from derivatives deals with US entities, fearing entanglement the US’s upcoming new regulatory regime. CME Group’s CBOT exchange, having gone through the effort to broaden the trading hours for grains, is now rethinking the wisdom of a near round-the-clock schedule for those commodities.

First Read

Smaller companies bear brunt of French FTT
Michelle Price
The French financial transaction tax has hit small cap stocks “particularly hard”, with average daily turnover in smaller companies falling 26% during August and September compared with the first seven months of the year, according to Credit Suisse.

**** We needed more causes for trading volumes to go down other than fear, loss of confidence and….stupidity.


Schapiro SEC Reign Nears End With Rescue Mission Not Done
What Mary Schapiro considered her most important task had just run aground, a symbol of the aspirations and missed opportunities of her tenure as head of the U.S. Securities and Exchange Commission. Schapiro worked for two years on a plan to head off what she calls the “terrifying” prospect of a run on money-market mutual funds like one that forced a U.S. rescue in 2008. After fellow commissioners refused to follow her lead, she teared up as she worked on a statement accusing opponents of having their heads “in the sand,” two people involved in the process said.

**** There is no crying in regulation.


A Computer Lesson From 1987, Still Unlearned by Wall Street
New York Times
The Oct. 19, 1987, stock market crash was the beginning of the destruction of markets, as computers came in and human judgment went out.

**** Yes, we never had a crash before when human emotions just ran the markets. ……Wait, I am wrong.


Black Monday Echoes With Computers Failing to Restore Confidence
A quarter century after the worst one-day stock crash in history, measures to prevent a repeat are failing to keep investors from losing confidence in the market.

***** Good story from Bloomberg.


Feature: Is China set to open up its futures markets?
William Mitting
Napoleon once famously referred to China as a sleeping dragon. “Let her sleep,” he is reported to have said. “For when she wakes, she will shake the world.” After almost 20 years of being closed to foreign participation in its futures markets, China is readying to open its doors to foreign investment once more.

**** I am more interested in its legal system than if they let me in the door. So you let me in. Can I get out?


Farms Awash in Peanuts
Peanut-butter hoarders can relax. U.S. peanut farmers are harvesting a record crop this year, putting to rest fears of repeating the shortage that drove up prices over the past year and prompted some shoppers to load up their pantries with the spread.

***** Let them eat peanuts.


Advanced Automation Will Bring Greater Efficiency To The Commission-Recapture Process, Says TABB Group
In new research published today, TABB Group says that recent advancements in automating low-touch trading are helping to ease institutional investors’ traditionally manual, often burdensome commission-recapture process.


Cooling the Pits: ICE Yelling Ends
Augustine Lauria knew his 37-year career as a floor trader was over when he got a memo from IntercontinentalExchange Inc. in late July announcing the closing of the exchange operator’s last trading pits. “What can I do? I can count fast and yell loud,” says Mr. Lauria, who boards the Staten Island Ferry before sunrise to get to work in time for the 8:10 a.m. bell.

**** In the old days, traders from Chicago would go to New York to trade potatoes, because that was where the trade and opportunity was, at least at that time of the year in the potato growing season. Hint, hint.


Newton native trades hedge funds for muffins
Newton Tab
Newton native Ben Gifford used to work for a hedge fund that manages billions of dollars for foreign governments, universities, pension funds and central banks. Now, he is managing muffin orders for his on-the-go bakery, Double or Muffin, and loving the change.

***** Move to Chicago, or open a muffin shop. There are your choices.


Gary DeWaal

Gary DeWaal of Newedge on 30 Years of Futures, Retirement and What’s Next

Gary DeWaal, group general counsel at Newedge, has been a stalwart of the futures industry for 30 years. He recently announced his “retirement” from Newedge, effective at yearend. DeWaal spoke with JLN Editor-in-Chief Jim Kharouf about how the futures industry has evolved and changed over the past three decades, where it goes from here, and why the word retirement should not really be used in the same sentence as Gary DeWaal.

Watch the video »

Evgeni Mitkov

SURFACExchange CEO Evgeni Mitkov Discusses the Potential for FX Options

Evgeni Mitkov, CEO of SURFACExchange, launched the FX options ECN in August 2011. Just over a year later, they’ve attracted almost 50 firms by offering the ECN to currency options traders through a no-install browser-based platform. Mitkov spoke with JLN Editor-in-Chief Jim Kharouf during the Profit & Loss Forex Network Chicago, about how the FX market is holding up, how the participation base is shifting away from banks, and where the FX options space is moving.

Watch the video »

JLN Interest Rates

CEOs Warn Obama, Congress To Avoid ‘Fiscal Cliff’
The Washington Post
Sixteen of the nation’s largest financial services firms warned President Obama and Congress in a letter Thursday that interest rates could spike significantly if they do not come to an agreement to stop the series of automatic tax hikes and spending cuts known as the “fiscal cliff.”

**CN: Goldman Sachs chief executive Lloyd Blankfein, JPMorgan Chase chief Jamie Dimon, Bank of America chief Brian Moynihan and 13 other top executives signed on to a letter demanding prompt action.

Could renewed U.S. economic strength turn the fiscal cliff into a fiscal ramp?
The term ‘fiscal cliff’ has now safely transitioned from economic jargon to popular cliché. But how worried should Americans be about the growth-stunting mélange of expiring tax cuts and spending reductions set to begin kicking in at the start of next year?

Swaps trades on brink of tough new regime
On any long journey, some steps are more important than others. The new Wall Street envisioned by the Dodd-Frank reforms in the US no longer has financial institutions swapping hundreds of billions of dollars of interest rate, commodity and credit exposure among themselves, in opaque trades that threaten to pull everyone down together in a crisis.


MarketsWiki Page of the Day
Andreas Preuss


Nicola Tavendale; Michael McFarlin; Joanne Morrison; Evgeni Mitkov; Jeffrey Wilson; James Bambino; Andreas Preuss; Janna Sampson; Galen Stops; Jeromee Johnson; Ronald Arculli; Gary Katz

Companies, Organizations and Groups

Orc Group; Kansas City Board of Trade


Profit & Loss Forex Network Chicago; CBOE S&P 500 Variance Futures; CBOE S&P 500 12-month Variance Futures


Physical delivery


29,688,156 pages viewed, 7,170 articles, 148,917 edits
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Lead Stories

Quote MTF targets Spain
Tim Cave
Quote MTF, the Hungarian-regulated market operator, is to launch a new Spanish trading venue in partnership with a UK boutique bank, as challenges to the strength of Spain’s national stock exchange intensify.

New U.S. Rules Hinder Derivatives Trading in Asia
Banks in Asia appear to be pulling back on trading derivatives with their U.S. counterparts over fears of being sucked into new rules proposed by U.S. regulators, industry officials say.

CBOT reportedly rethinking 21-hour grain trading cycle
The Chicago Board of Trade has explored reducing the nearly non-stop grain trading hours it implemented this year, according to a participant in initial conversations with the grain industry.

**** They are listening?

EU and Japan warn US on swaps
Stephen Foley in New York –
George Osborne, the UK’s chancellor of the exchequer, has joined forces with his French and Japanese counterparts and with Michel Barnier, EU internal market commissioner, to demand the US row back on new rules that would extend American oversight of the swaps industry far beyond its own borders.

EU leaders agree on bank oversight
Leaders of the European Union in Brussels have agreed Thursday to a deal for a eurozone-wide banking supervisor in 2013 that is designed to help prevent future catastrophic bank failures that could threaten the monetary union.

Italy and Spain Win Surprise Bond Relief
Big bond auctions in Italy and Spain gave a surprising boost to the biggest countries reeling under Europe’s debt crisis, with Italy selling a record E18 billion ($24 billion) worth—enough to satisfy its borrowing needs for the rest of the year in one unexpected stroke.

Brexit: Europe loses patience with London
Philip Stephens –
The story of British disengagement from the EU is often told as one of a proud island nation struggling to unshackle itself from its neighbours. The political dynamics, though, are changing. As David Cameron’s government shuns the closer integration born of the euro crisis, British pull is now being reinforced by continental push.

Additional interviews in MF Global inquiry
U.S. authorities investigating the collapse of MF Global have called in former executives of the failed commodities brokerage in recent weeks for additional interviews, people familiar with the inquiry said, as regulators work towards filing civil charges.


CFTC to Hold Open Meeting to Consider a Notice of Proposed Rulemaking on Enhancing Customer Protections
The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Thursday, October 25, 2012, at 1:00 p.m., to consider a Notice of Proposed Rulemaking on Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations.

**** A year after the MF Global implosion. This will give FIA’s EXPO in Chicago even more fodder on the issue.

Is The SEC’s Ponzi Crusade Enabling Companies To Cook The Books, Enron-Style?
The SEC is busy chasing Ponzi schemers and foreign bribers. But bogus accounting remains a bigger danger to the markets. Is another Enron brewing?

How Botched Derivatives Risk Taming Regulations are Again Going to Leave Taxpayers Holding the Bag
Naked Capitalism
An important piece in the Financial Times by Manmohan Singh, a senior economist at the International Monetary Fund, describes persuasively how one of the central vehicles for reducing derivatives risk, that of having a central counterparty (CCP) and requiring dealers to trade with it rather than have a web of bi-lateral exposures, or rely on banks to act as clearers (making them too big to fail) has gone pear shaped.

Taking A No-Nonsense Approach To Enforcing The Federal Securities Laws – Speech By SEC Commissioner Luis Aguilar At The Securities Enforcement Forum 2012

Head Of German Financial Supervisory Authority Visits Israel

Ministerial-Level Joint Letter Addressed To The CFTC Chairman

Exchanges & Trading Facilities

CME Waived From Reporting Swaps Until Oct. 26 -CFTC Letter
Katy Burne – Dow Jones
CME Group has secured a temporary waiver from new rules requiring it to report swaps to regulators. CME received relief in an Oct. 15 letter from the Commodity Futures Trading Commission. The CFTC letter said while CME Clearing was “not currently in compliance” with the reporting requirements, it wouldn’t take enforcement action until Oct. 26, as a sign of good faith.

FIA September US/August International 2012 Monthly Volume and Open Interest Reports

Moscow Exchange Group Announces Strong Growth Of Revenue And Net Profit In First Six Months Of 2012
Moscow Exchange Group today reported strong growth in revenue and net profit in the first half of 2012. According to consolidated accounting statements under IFRS, the Group posted net profit of RUB 4.22 billion, up 28% versus MICEX results for the same period in 2011 (RUB 3.29 billion).

Program Trading Averaged 29.9 Percent of NYSE Volume during Oct. 8-12

Exercise Of Ibovespa Options Generates BRL 4.04 Billion Financial Volume On BM&FBOVESPA

Hedge Funds & Managed Futures

Mesirow revenue down, profits up for year
Becky Yerak – Chicago Tribune
Employee-owned Mesirow Financial said Thursday that revenue dropped to $491 million in its fiscal year ended March 31, down 4 percent from the previous period, but profits were up to undisclosed levels.

ADM Buys Stake in GrainCorp, Seeks Talks on Potential Deal
Elisabeth Behrmann and Phoebe Sedgman – Bloomberg
Archer Daniel Midlands Co., the world’s biggest corn processor, is seeking talks with GrainCorp Ltd. (GNC) after buying a stake in the company.

Blackstone President Says Collusion Suit Is Fabrication
Tony James , president of Blackstone Group LP , said allegations that the biggest buyout firms colluded in bidding on takeovers are untrue and may have been politically motivated in an election year.

State Funds Focus on Alternative Assets, Ex-KIC Official Says
Sovereign wealth funds are spending more money on alternative investments after stock markets gained and bond yields declined, said Scott Kalb, chief executive officer of KLTI Advisors and former chief investment officer of Korea Investment Corp.

Greg Coffey: Stellar trader or faded star?
Harriet Agnew – Financial News
“One of the most impressive traders in the world” or a star whose reputation was built from being a “bull in a bull market”? Opinion is divided on Moore Capital’s Greg Coffey, known as “the Wizard of Oz” in a nod to his Australian heritage and trading prowess, who yesterday told investors that he was bowing out of the industry.

John Paulson Doubles Down
The hedge-fund manager, famous for correctly predicting the bursting of the housing bubble—and then missing a few calls—continues a real-estate spending spree; $49 million for a sprawling Aspen estate

165 Hedge Fund Suddenly Cried Out In Terror And Were Suddenly Silenced
Zero Hedge
Oops… The second most widely held company after AAPL just destroyed the quarter for 165 hedge funds. Source: Goldman Sachs

La Française AM And S&P Capital IQ Launch Global Credit Fund
La Francaise AM, the Paris-based asset manager, and S&P Capital IQ, a leading provider of multi-asset class research, data and analytics, have launched a global credit fund named LFP R2P Global Credit as part of a Luxembourg-domiciled SICAV (LFP S&P Capital IQ Fund), in the first phase of a partnership announced in June.

Swiss miss for Singer in Argentina squabble
New York Post
In its battle with hedge-fund honcho Paul Singer of Elliott Management, Argentina may have found at least one safe haven: Switzerland. Switzerland’s Federal Council on Wednesday rejected an effort by an Elliott unit, NML Capital, to embargo Argentine assets deposited in the Bank for International Settlements, which serves as the central bank for the world’s central banks. The Swiss government said it had no authority over the BIS.

DealBook: Customer Outflows Swell at Man Group
New York Times
Clients continue to pull money out of the Man Group, the world’s largest publicly traded hedge fund, as outflows rose almost 60 percent, to $2.2 billion, in the third quarter.

Thomson Reuters Adds Exclusive Oil Refinery Alerts to Eikon
Thomson Reuters today announced the addition of unique oil refinery data to its flagship desktop, Thomson Reuters Eikon, through an exclusive agreement with Genscape, the market-leader in real-time oil refinery monitoring

SAF-HOLLAND S.A. bond subscription ends early

Banks & Brokers

Morgan Stanley CEO: New Regulations Mean Looking for Appropriate Structures for Commodities Unit
Dow Jones
Morgan Stanley (MS) Chairman and Chief Executive James Gorman said that with a tougher regulatory environment, it’s ” incumbent” upon the securities firm to “look at appropriate structures” for its commodities trading unit.

JPMorgan apologizes to power regulator for misleading information
JPMorgan Chase & Co apologized to the U.S. energy regulator on Thursday for providing misleading information about California electricity markets, saying it was inadvertent.

Morgan Stanley beats estimates on big bond trade gains
Reuters via Yahoo! News
Morgan Stanley reported better-than-expected adjusted quarterly earnings on Thursday as it boosted revenue from trading bonds, long a sore spot for the investment bank.

Barclays takes another 700 million pounds hit on PPI
Reuters via Yahoo! News
LONDON – Barclays has set aside another 700 million pounds to cover the cost of compensation for the mis-selling of UK insurance policies, it said on Thursday.

Barclays Appoints Mike Rigby to Corporate Banking Unit
Dow Jones
Barclays PLC said Thursday it has appointed Mike Rigby Head of Manufacturing, Transport and Logistics for the Corporate Banking division, replacing Mark Lee following his move to Head of Key Clients.

Banks Pushed to Clear Fog of Cyberwar
Mary Gieser McCandless recently spent three hours trying to log on to Wells Fargo & Co.’s website before a customer service representative declared the problem was her computer. The diagnosis puzzled Ms. McCandless, who is no Luddite. She builds database software from her home in Winston-Salem, N.C. She only figured out the real problem later that day, after seeing news reports about how big banks were the target of a cyberattack.

Goldman Sachs: Greg Smith Was A Disgruntled Employee
Greg Smith, who publicly resigned from Goldman Sachs and is releasing a tell-all book, quit the financial firm only after he was denied a raise that would have doubled his compensation to over $1 million and a promotion, according to documents Goldman Sachs released today first to Bloomberg News.

E*TRADE Financial Corporation Announces Third Quarter 2012 Results

Clearing & Settlement

DTCC Appoints James Lee To Oversee Enterprise Computing Sector
The Depository Trust & Clearing Corporation (DTCC) today announced the appointment of James Lee as Managing Director and Head of Enterprise Computing, bringing more than two decades of leadership experience in information technology operations and software configuration to the company. In this new role, Lee will oversee and guide strategy for the development of new computational products.

Poland: Trade Repository In KDPW
As of November 2012 KDPW (The National Depository for Securities, Poland) will launch a new service: trade repository. The introduction of KDPW’s trade repository service addresses the Regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories (EMIR) which introduces among others the obligation to report derivatives trade to trade repositories and sets out the rules for trade repositories.

CME Clearing – New Product Advisory: USD-Denominated Ibovespa Futures

CME Group Clearing Advisory: *REVISED* NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (CH, RX, W) Effective Friday, October 19, 2012

CME Group Clearing Advisory: Delisting of Petroleum and Refined Products by New York Mercantile Exchange

CME Group Clearing Advisory: Midwest ISO Indiana Hub 5 MW Peak Calendar-Day Real-Time Swap Futures Contract-Trading Rule Amendment

Indexes & Products

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Deletion From The S&P/TSX Global Gold And Global Mining Indices

Semi-Annual Review Of The Athex Index Series

FTSE/ATHEX Index Series – Semi Annual Review

Rethinking Risk in Frontier Markets ETFs
ETF Trends via Yahoo! Finance
Frontier markets can be used to help lower risk in your portfolio. That might sound like a counterintuitive statement. After all, frontier markets like Sri Lanka or Kenya are often referred to as “pre-emerging markets” and they can exhibit significant country-specific risk.


ConvergEx Group’s Nancy McLaughlin Honored with Traders Magazine’s Lifetime Achievement Award
ConvergEx Group, a leading technology company, today announced that Nancy D. McLaughlin has been named a recipient of Traders Magazine’s Lifetime Achievement Award in their second annual “Wall Street Women: A Celebration of Excellence” awards.

Numerix Introduces Extensive Instrument Coverage for Municipal Derivatives in LiquidAsset Pricing Solution
Numerix (, the leading provider of cross-asset analytics for derivatives valuations and risk management, announced the most recent release of Numerix LiquidAsset, the easy-to-use, rapidly deployable solution to price the most common set of liquid OTC derivatives.

From Trading Pits to Megabits and Beyond…
RTS and Automated Trader invite you to a presentation that will chart the meteoric rise of algorithmic trading and look at some of the important trends we can expect to shape the future landscape.

Interactive Data Delivers Ultra-Low Latency Connectivity for New European Clients
Marketwire via Yahoo! Finance
Interactive Data Corporation, a leading global provider of managed ultra-low latency IT and market data services to facilitate electronic trading, today announced that new clients Saxo Bank and Konkyl are accessing its 7ticks network.

New Hedge Fund Software Expands into the South African Market
Canadian software vendor SGGG Portfolio Systems, SynOps Investment Operations and Deutsche Securities Johannesburg today announced the successful implementation of the SGGG Portfolio System across Deutsche’s hedge fund client base in South Africa.


UBS found 3 other unauthorized trading incidents, court told
Reuters via Yahoo! News
UBS managers have sacked two traders involved in unauthorized trading incidents unrelated to accused fraudster Kweku Adoboli, a London court heard on Thursday.

In Insider Trading Case, Drawing In David Ganek
Anthony Chiasson was unknown outside of Wall Street before his arrest in January on insider trading charges. A co-founder of Level Global and the head of research there, Mr. Chiasson typically resided in the shadow of his more prominent partner, David Ganek. Now, it appears, Mr. Chiasson is making an effort to pull in Mr. Ganek as part of his defense strategy.

CFTC Charges David M. Nunn with Engaging in an Illegal Trading Scheme and Making False Statements to ICE Futures US
The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil enforcement action against David M. Nunn, a Vermont resident and former floor broker of ICE Futures U.S., Inc. (ICE Futures US), which is a contract market designated by the CFTC.

FINRA Expels EKN Financial Services for Defying SEC Order and For Numerous Compliance Violations
The Financial Industry Regulatory Authority (FINRA) today announced that it has expelled EKN Financial Services, Inc. of Melville, NY, for numerous compliance violations and for allowing its CEO, Anthony Ottimo, to act as a supervisor after being barred from acting in that capacity by the Securities and Exchange Commission (SEC) in June 2008.

SEC Charges Trio in “.44 MAGNUM” Investment Scheme
The Securities and Exchange Commission today charged a purported money manager and two of his chief marketers with defrauding investors in a fake company he created that bore a similar name to what was formerly one of Germany’s largest banks.

Hong Kong Firm to Pay $14 Million to Settle Insider Trading Charges
The Securities and Exchange Commission today announced that a Hong Kong-based firm charged with insider trading in July has agreed to settle the case by paying more than $14 million, which is double the amount of its alleged illicit profits. The proposed settlement is subject to the approval of Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York.

ASIC cancels Australian Performance Financial Planning Pty Ltd licence

Environmental & Energy

NZ policy seen as barrier to joining Europe’s ETS
Radio New Zealand
New Zealand looks unlikely to follow Australia and join the world’s biggest emissions trading scheme.

Climex to Hold Reverse Auction for Voluntary CO2 Offset Buyer
Climex BV, the Amsterdam-based auction platform for emissions permits and offsets, will host a reverse auction of Verified Emission Reductions on Nov. 9.

China’s Power-Output Growth Slows in September
The Wall Street Journal
China’s power output grew at a slower pace in September on the back of a sluggish economy, reflecting third-quarter gross domestic product growth that was at its slowest since the first quarter of 2009.


Exclusive: China power brokers agree preferred leadership team – sources
China’s three most powerful men have come up with preferred candidates to head up the nation’s incoming new leadership team, sources said, in a ticket that includes financial reformers but leaves a question mark over its commitment to political reform.

Singapore Exchange Reports $74 Million Profit
SGX recorded revenue of $160 million ($178 million), net profit of $74 million ($88 million) and earnings per share (EPS) of 7.0 cents (8.2 cents). The Board of Directors has declared an interim dividend of 4.0 cents (4.0 cents) per share, payable on 5 November 2012.

ZULAUF: China Is Actually Growing At A 3% Rate
Business Insider
Swiss hedge fund manager Felix Zulauf believes everyone is overestimating China’s growth rates while underestimating its problems. Speaking at an investor conference sponsored by the CFA Institute in Prague, Zulauf said China is actually growing at a 3 percent rate.

SEC: Hong Kong Firm To Pay $14 Million To Settle Insider Trading Charges
The Securities and Exchange Commission today announced that a Hong Kong-based firm charged with insider trading in July has agreed to settle the case by paying more than $14 million, which is double the amount of its alleged illicit profits. The proposed settlement is subject to the approval of Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York.

Frontier Markets

BSE Ltd. Joins The Sustainable Stock Exchanges Initiative
BSE Ltd. has been the first amongst global peers to join five other leading exchanges that have publicly committed to promoting sustainable investment practices. The other exchanges such as the Brazilian stock exchange BM& FBOVESPA, Egyptian Exchange (EGX), Istanbul Stock Exchange (ISE), Johannesburg Stock Exchange (JSE) and NASDAQ OMX made a commitment towards improving sustainability at the SSE, Sustainable Stock Exchanges 2012 global dialogue in Rio de Janeiro earlier this year.

Bursa Malaysia Posts Patami Of RM115.8 Million For The Nine Months Ended 30 September 201
Growth On Track With Improved Performance In Stable Revenue, Derivatives Market And Islamic Market

Bursa Malaysia Implements The Final Phase Of Cds Straight Through Processing (CDS-STP)


Online ad business has reached maturity
John Shinal – MarketWatch
Long-term business trends are like large ships sailing the ocean: they take a long time to change direction. Once they do start to turn, a sudden reversal back to their original course is highly unlikely. So it is with the current course of Internet advertising, a market roughly 15 years old whose growth rate has slowed significantly during the past five years.

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