John Lothian Newsletter: CFE To Launch S&P 500 Variance Futures On October 4; Chicago Fed warned SEC about high-frequency trading; Bond trading model shows signs of stress

Oct 2, 2012

The CBOE Futures Exchange announces a new S&P 500 variance futures contract, slated to begin trading on October 4 assuming that it receives a thumbs-up (or at least a “thumb-of-no-action”) from regulators.  In the latest episode of, “We Told Them Years Ago,” the SEC comes under fire for having been warned about high-frequency trading two years ago by the Chicago Fed, long before its recent interest in regulating the practice.  New regulations and trading environments are shaking up the once stable domain of the bond trader.  In today’s First Read, be sure to take a look at the second part of the John Lothian Profiles series featuring Tom Cashman of the CBOT; if you missed the first part yesterday, it’s still fresh and waiting for you on the website.  Also in First Read, you’ll find another link to the interview with Brian Fox of  The first big helping of monthly exchange volume stats are in, and you can get the complete picture in the Exchanges & Trading Facilities section (along with a couple of volume records highlighted in First Read).

First Read

Profiles: Tom Cashman (Part 2: Lessons Learned)
In our second segment with Tom Cashman, a veteran Chicago Board of Trade member and soybean pit broker, we ask him about his start in trading, the first lesson he learned and the most important lesson he learned.

*** John Lothian Profiles is a series of video interviews focused on the stories of an eclectic selection of traders and the lessons they learned about trading.


Don’t forget to buy your tickets for the Hedge Fund Rocktoberfest Oct 25th at the Chicago City Winery
The Ninth Annual Hedge Fund Rocktoberfest – New York City, the annual fundraiser for children’s charity A Leg To Stand On, is taking place on Thursday, October 11 at 583 Park Avenue in New York City. Hedge fund managers and hedge fund related industry professionals will perform rock and roll and acoustic music to raise money for ALTSO, which provides prosthetic limbs and corrective, life-altering surgeries to children with limb disabilities in developing market countries. On Thursday, October 25 ALTSO is holding a second fundraiser – its first annual Hedge Fund Rocktoberfest- Chicago taking place at the recently opened City Winery-Chicago. Tickets for both events cost $250 if bought at, or $300 at the door if space permits.


Trading Activity In VIX Futures Spurs CFE To Busiest Month In History
The CBOE Futures Exchange, LLC announced today that September 2012 was the most-active trading month ever for futures on the CBOE Volatility Index (VIX). The record trading activity in VIX futures drove total volume at CFE to a new all-time high. During the month, several new trading records — for both VIX futures and CFE — were set.

**DA: How many times have you read recently that trading volume is down “across the board?”  


OneChicago Volume Surges – Surpasses Total 2011 Volume within First Three Quarters
OneChicago, LLC, an equity finance exchange, today announced that September 2012 volume of 847,488 was up 365% percent year-over-year compared with September 2011.

**DA: Ditto that last comment.


MASS Exchange Launches the First Programmatic Futures Exchange for Addressable Advertising
Business Wire via Yahoo! Finance
MASS Exchange announced today that it has launched the first programmatic futures exchange supporting multiple addressable advertising markets.


SEC Leads From Behind as High-Frequency Trading Shows Data Gap
Nina Mehta – Bloomberg
The U.S. Securities and Exchange Commission, stung by criticism that it lacks the knowledge to analyze the computerized trading that has come to dominate American stock markets, is planning to catch up.

**DA: The same parties criticizing regulators are the same ones working behind the scenes to starve their budgets. The typical investment bank spends more on technology per month than the regulators get each year.


CNBC, First in Business Worldwide, today announced the launch of a new live online show, “Futures Now,” only available on and entirely devoted to the futures market.

**DA: When can you watch Futures Now? Later, actually. 1pm Eastern, beginning today.


Algo stress-testing rises up the agenda
Tom Osborn – Financial News
Last month, three of the world’s largest futures market operators – CME Group, IntercontinentalExchange and NYSE Liffe – signed a deal to help their members improve their live-testing of trading algorithms.


BATS: Pre-Testing Algos Makes Sense
Tom Steinert-Threlkeld
The operator of two national exchanges said that complex algorithms as well as new types of trading orders should be rolled out in stages, to avoid disrupting markets when launched.

***JM: Sure, in the sense that one should pre-test ANY piece of software before it goes into production. But if BATS is implying that such testing would eliminate the threat of (or mitigate the damage from) a runaway algorithm, then they haven’t paid much attention to the software industry of, oh, let’s say the last forty years. There’s value in continuing to ask the question, “Ok, but even with those protections, what if something still gets past,” every time somebody comes up with a new idea to reduce or eliminate a threat. To me, BATS’ recommendation (also in this article) of creating active monitoring systems to detect and isolate bad algo behavior (they use looping processes as an example) is far more important to implement than rigorous testing.


Rapid-Fire Traders’ Big Fear: Themselves
High-frequency trading firms, long resistant to tighter oversight of their businesses, are beginning to change their tune amid a spate of high-profile technology failures that have roiled financial markets.

**DA: In the words of Pete Townshend, “No one respects the flame quite like the fool that’s badly burned.”


Bacon Shortage ‘Baloney,’ but Prices to Rise
Bacon lovers can relax. They’ll find all they want on supermarket shelves in the coming months, though their pocketbooks may take a hit.

**DA: If bacon is baloney, what is a hot dog?


MacArthur Foundation reveals 2012 ‘genius grants’
Mandolin player and composer Chris Thile learned the hard way that when you get a call from the 312 area code this time of year, you should probably answer the phone. Thile is among 23 recipients of this year’s MacArthur Foundation “genius grants,” which are given in a secrecy-shrouded process. Winners have no idea they’ve been nominated for the $500,000 awards until they get the call, and nominators must remain anonymous.

Brian Fox of Talks About Exposing & Preventing Brokerage Fraud
Brian Fox, founder and chief marketing officer of, found his firm in the midst of one of the largest frauds in futures history several months ago. Hired by the National Futures Association to electronically confirm customer account balances that futures brokers report with the actual balances held at their banks, helped expose the PFGBest fraud. Brian Fox spoke with John Lothian News editor-in-chief Jim Kharouf about the case, how the confirmation system works and just how far electronic confirmations in the futures brokerage space can go to prevent fraud.


MarketsWiki Page of the Day
Peter O’Toole


MarketsWiki Recent Updates


Jeff Mezger; Frank Pusateri; Thomas J. Cashman; Brian Fox; Peter O’Toole; John J. Lothian

Companies, Organizations and Groups

CBOE Futures Exchange;


29,075,523 pages viewed, 7,123 articles, 147,994 edits
MarketsWiki Statistics

Lead Stories

CFE To Launch S&P 500 Variance Futures On October 4
New Contract Mirrors Quoting Conventions and Economic Performance of Over-the-Counter S&P 500 Variance Swaps
CBOE Futures Exchange, LLC (CFE) today announced that it will launch trading in S&P 500 Variance futures on Thursday, October 4, pending regulatory approval.

Chicago Fed warned SEC about high-frequency trading
More than two years ago, the Federal Reserve Bank of Chicago was pushing the U.S. Securities and Exchange Commission to get serious about the dangers of super-fast computer-driven trading. Only now is the SEC getting around to taking a closer look at some of those issues.

Bond trading model shows signs of stress
Tracy Alloway –
“Up until three or four years ago everybody knew what the business was,” laments one veteran corporate bond dealer. “Now we’re working our way through that process. We still don’t know.” Bond trading, once the darling of Wall Street, has become much more difficult for dealers in recent years.

CFTC urged to act on position limits
Jack Farchy and Javier Blas –
The US commodities regulator is mapping out a strategy to impose restrictions on large traders in spite of a judge’s move to block proposed “position limits”. Bart Chilton, one of the CFTC’s five commissioners, will on Tuesday call for the regulator to push ahead with position limits, notwithstanding the judge’s ruling.

New York attorney general sues JPMorgan over Bear Stearns securities
The New York attorney general’s office has hit JPMorgan Chase & Co. with a civil lawsuit, alleging that investment bank Bear Stearns — prior to its collapse and subsequent sale to JPMorgan in 2008 — perpetrated massive fraud in deals involving billions in residential mortgage-backed securities.

Dutch Justice dept examines Rabobank’s role in Libor: report
Reuters via Yahoo! News
The Dutch justice department requested information from Rabobank , on behalf of foreign investigators, concerning the role it may have played in the manipulation of interbank lending rates, a Dutch newspaper reported on Tuesday.

Volcker Says Fed Bond-Buying Has No Effect on Inflation
Zeke Faux – Bloomberg
Paul Volcker, former chairman of the Federal Reserve, said the U.S. central bank’s latest bond-buying program isn’t creating inflationary pressure. “It’s not going to have a profound effect on the economy and it’s not going to have any effect on inflation in the short run,” Volcker said today at a forum sponsored by Bloomberg Link at the New York Athletic Club. “The basic situation is not an inflationary situation.”

Putting the Brakes on High-Frequency Trading
The “liquidity” high-frequency trading provides is long past the point of being helpful.

Call for bank bonuses to be paid in debt
Alex Barker in Brussels and Patrick Jenkins in London –
Banks should pay bonuses in debt, which would be wiped out if a bank failed, an EU banking report will suggest as Europe attempts to step up the fight against bankers’ pay.


Panel May Propose EU Banks Split Investment From Retail
A panel of experts appointed by the European Commission is expected to recommend Tuesday that European banks introduce barriers between their investment and retail units to prevent consumer accounts from being put at risk by bank trading activities.

Comment: Europe risks OTC headache
Robert Pickel –
Europe’s overhaul of its financial markets moved a step closer last week as lawmakers agreed their revisions to the legislation that will govern trading in Europe. The stakes here are high.

Help offered on switching from Libor
Brooke Masters –
Global regulators want to issue guidance on how Libor users can safely move away from the scandal-hit interbank lending rate as part of a larger consultation on improving similar indices, the US regulator helping lead the effort has told the Financial Times.

Statement by Canadian authorities on clearing of standardized OTC derivatives contracts
In response to the economic and financial crisis, G-20 leaders initiated a reform of the over-the-counter (OTC) derivatives market in 2009 to improve transparency, mitigate systemic risk, and protect against market abuse.

FINRA Foundation Participates in Department of Justice-SEC Fraud Summits
The FINRA Investor Education Foundation will participate in a series of Investor Fraud Summits sponsored by the United States Department of Justice and the United States Securities and Exchange Commission (SEC) at several venues across the country.

Remarks Before The Financial Markets Law Committee Seminar At The Bank Of England, London, CFTC Chairman Gary Gensler

NFA Notice to Members
NFA Financial Requirements Section 16 Reporting Requirements Guidance

[Japan] FSA publishes Weekly Review No.14

Exchanges & Trading Facilities

CME Group Volume Averaged 11.9 Million Contracts per Day in September 2012, Up 16 Percent from August 2012
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that September 2012 volume averaged 11.9 million contracts per day, down 15 percent from September 2011, but up 16 percent compared with August 2012.  Total volume for September 2012 was more than 227 million contracts, of which a record 87 percent was traded electronically.

Average daily volume of 10.2 million contracts at Eurex Group in September
In September 2012, the international derivatives markets of Eurex Group recorded an average daily volume of 10.2 million contracts (September 2011: 12.4 million). Of those, 7.5 million were Eurex Exchange contracts (September 2011: 9.1 million), and 2.7 million contracts (September 2011: 3.3 million) were traded at the U.S.-based International Securities Exchange.

ISE Reports Business Activity for September 2012
The International Securities Exchange (ISE) today reported average daily volume of 2.7 million contracts in September 2012. This represents a decrease of 18.4% compared to September 2011. Total options volume for the month was 50.8 million contracts. ISE was the second largest U.S. equity options exchange in September with market share of 18.2%*.

CBOE Holdings Reports September 2012 Consolidated Trading Volume: 92.9 Million Total Contracts; 4.9 Million Contracts ADV
CBOE Holdings, Inc. reported today that September 2012 consolidated trading volume for options contracts on the Chicago Board Options Exchange and C2 Options Exchange and futures contracts on CBOE Futures Exchange, totaled 92.9 million contracts. September 2012 average daily volume for the three exchanges, combined, was 4.9 million contracts, a two-percent decrease from 5.0 million contracts ADV in September 2011, and a 23-percent increase from nearly 4.0 million contracts ADV in August 2012. Year to date through September, consolidated ADV for the three exchanges was 4.7 million contracts, down seven percent from 5.0 million contracts ADV for the same period a year ago.

The Options Industry Council Announces Average Daily Options Trading Volume Declined 7 Percent In September
The Options Industry Council (OIC) announced today that 17,348,823 contracts were traded on average each day in September, a 6.9 percent decline from the 18,630,087 contract average in September 2011, and the highest average recorded since February.

OCC Announces Average Daily Cleared Contract Volume Fell 6% In September
OCC announced average daily cleared contract volume in September was 17,570,113 contracts, a 6 percent decline from September 2011. Total cleared contract volume reached 333,832,141 contracts for the month, representing a 15 percent decline from the September 2011 volume of 394,148,808 contracts. OCC’s year-to-date total contract volume is down 14 percent with 3,058,201,355 contracts in 2012.

MGEX Reports Strong Open Interest Growth Month Over Month
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), today announced an eleven percent increase in total open interest at September month end from August 31, 2012. Additionally, total MGEX open interest has increased over forty percent in the last ninety days. Total Exchange volume for Hard Red Spring Wheat (HRSW) and Apple Juice Concentrate (AJC) came in at 87,759 contracts traded. Of that, futures contracts traded totaled 86,741 while options contracts traded totaled 1,018.

KCBT HRW Wheat Futures & Options Open Interest Increases in September
Kansas City Board of Trade HRW wheat futures and options open interest increased during the month of September when compared to last month. HRW wheat futures open interest climbed 9.2 percent during the month of September, with 163,213 contracts outstanding at the end of the month versus 149,480 contracts at the end of August. Open interest is 3.6 percent higher than at the end of September 2011.

BOX Price Improvement Activity for September
In the month of September, price improved contracts on BOX Options Exchange (“BOX”) averaged 268,423 per day.

BATS Reports 2nd Best US Equities Market Share In Company History – CXE Largest MTF Dark Book In Europe
September was a strong month for BATS, particularly for its U.S. equities segment, where market share was 12.4%, BATS third consecutive month exceeding 12%.

September’s Turnover At Boerse Stuttgart Around EUR 7.2 Billion – Increase In Equity And Investment Fund Trading – Large Increase In Turnover In German Government Bonds (‘Bunds’)
According to its order book statistics, Boerse Stuttgart generated turnover of about EUR 7.2 billion in September 2012. The trading volume was therefore around the same as in August 2012. At more than EUR 3.5 billion, securitised derivatives accounted for the largest share of the turnover in September.

Key figures SIX Swiss Exchange and Scoach Switzerland: September 2012
A total of 2,466,872 transactions were conducted on SIX Swiss Exchange and Scoach Switzerland in September 2012. This represents an increase of 1.7% over the previous month, which had two more trading days. Turnover was 3.2% higher than in August at CHF 71,3 billion.

Nasdaq OMX Nordic: Trading Statistics September 2012
NASDAQ OMX today publishes monthly trade statistics for the Nordic and Baltic markets. Below follows a summary of the statistics for September 2012: The share trading on NASDAQ OMX Nordic decreased by 15.1 % to a daily average of 2.0bn EUR, compared to 2.4bn EUR in September 2011. Compared to the previous month, August 2012, the daily average increased by 26.7%. Derivatives trading decreased by 10 % to a daily average of 519,069 contracts, compared with 577,456 contracts in September 2011. ETF trading1 (Exchange Traded Funds) decreased by 52.6 % to a daily average of 55m EUR compared to 115m EUR in September 2011.

LME Announces Record Volumes For September 2012
The London Metal Exchange (LME) experienced record volumes in September, with 14.09 million lots traded. Up to the end of September 2012, 119.1 million lots traded, the equivalent of $10.9 trillion in notional turnover, which is up 11% from the corresponding period last year (107.0 million lots).

BME – The Spanish Stock Exchange – Traded E48.74 Billion In September, Up 45% From The Previous Month

[SIX] Greater transparency: Improved insight into shareholder structures
On 1 October 2012, SIX Exchange Regulation introduced a new function regarding published notifications for significant shareholders of listed companies. It is now possible to query the currently disclosed shareholder structure for any company listed on SIX Swiss Exchange at the click of a mouse.

Trading On The WSE: September 2012
Total trading in shares on the Main Market reached PLN 15.7 billion in September 2012 as compared to PLN 22.6 billion in September 2011. The volume of trading in derivative instruments was 1.1 million as compared to 1.7 million in September 2011.

September Marks Record Month And Quarter For Pakistan Mercantile Exchange Trading Volumes
Pakistan Mercantile Exchange ended the first quarter of FY 2012-13 with a record trading volume of Rupees 385.58 Billion in terms of value. This represents an increase of 40.71 % on previous quarter. Over Rupees 150 Billion of traded volume was seen in September which is a monthly record, beating previous monthly high of 129 Billion Rupees set in August 2012.



John Menzies Celebrates 50 Years On London Stock Exchange

SIFMA Market Close Recommendations For The US Columbus Day And Japanese Sports Day Holidays In The US, The UK And The Japanese Markets

Direct Edge Regulatory Notice #12-05: Consolidated Audit Trail Industry Event

Burgundy: Modification Of Trading Fees

Hedge Funds & Managed Futures

More Money Than They Know What to Do With
It is a $1 trillion game: Use It or Lose It. The private equity world is sitting on that 13-figure sum. It’s what the industry calls dry powder. If they don’t spend their cash pile snapping up acquisitions soon, they may have to return it to their investors.

SAC Portfolio Manager Michael Steinberg Placed On Leave
A portfolio manager at a division of hedge fund SAC Capital Advisors LP was put on leave after his name surfaced in the government’s broad investigation into insider trading in corporate America, according to a person familiar with the matter.

BlackRock edges into banks’ territory
Tracy Alloway –
As a trader at Bank of America, Richard Prager helped develop a computer system that allowed retail customers to hedge their fuel needs in a similar way that big companies are able to do through complicated derivatives trades.

Hedge Fund Returns Worsen: Is ‘Enormous Unraveling’ Near?
The more stocks rise, the further behind hedge funds fall-with the industry now lagging market returns by double-digit percentage points.

JPMorgan Said to Raise $560.1 Million CLO for Och-Ziff Capital
JPMorgan Chase & Co. raised a $560.1 million collateralized loan obligation for Och-Ziff Capital Management Group, according to two people with knowledge of the deal.

Lazard banker launches chemicals boutique
Giles Turner – Financial News
Lazard’s former global co-head of chemicals has launched Natrium Capital, joining a small number of boutique advisers serving the $4 trillion chemicals sector.

Neuberger Berman Introduces Short Duration High Income Fund
Neuberger Berman Group LLC, one of the world’s leading employee-owned money managers, has introduced the Neuberger Berman Short Duration High Income Fund, a portfolio that seeks to provide investors with enhanced income by investing in a diversified portfolio primarily of short maturity non-investment grade debt and floating rate senior secured loans.

Taylor Alternative Mutual Funds Announce the Launch of Taylor Xplor Managed Futures Strategy Fund
Taylor Alternative Mutual Funds, which are committed to providing financial advisors and their clients direct and easy access to leading alternative investment strategies in a mutual fund format, today announced the launch of the Taylor Xplor Managed Futures Strategy Fund, the first mutual fund of the Taylor ALTS family of funds.

After scams and slumps, wealth advisers try to rebuild trust
Reuters via Yahoo! News
While big financial institutions lost the trust of investors with LIBOR scandals and mortgage meltdowns, financial advisers have seen the trust drain away for more personal reasons with faces attached: Bernie Madoff, Earl Jones, Allen Stanford.

Pension fund for New Orleans firefighters on shaky ground after missteps
New Orleans Times-Picayune
Of every $9 New Orleans spent on general operations last year, $1 went to pay firefighter pensions

SIFMA Executive Vice President Randy Snook Remarks At 2012 Municipal Bond Summit

Banks & Brokers

Merrill Plots Raid on A Vulnerable Rival
In a raid that stands out even in Wall Street’s aggressive recruiting culture, Merrill Lynch is arming some managers with lists of top Morgan Stanley Wealth Management brokers who are considered ripe for defection, according to people familiar with the firm’s recruiting.

Deutsche Bank Head of Systemic Risk Diplas Said to Leave Firm
Matthew Leising and Mary Childs – Bloomberg
Athanassios Diplas, the global head of systemic risk management at Deutsche Bank AG (DBK), is leaving the firm as of today, according to a person familiar with the decision.

Why’d It Take So Long for New York to Sue JPMorgan?
The Atlantic Wire via Yahoo! News
New York Attorney General Eric Schneiderman on JPMorgan early Monday evening: a multi-billion dollar lawsuit that accuses the bank’s subsidiary, Bear Stearns, of defrauding investors. You’re probably familiar with the allegation.

JPMorgan investment official Tse to leave: memo
Reuters via Yahoo! News
Another top executive at the JPMorgan Chase & Co unit that lost $5.8 billion on derivatives trades this year is leaving the company. Irene Tse, who headed the North America operations of the Chief Investment Office, told the firm she is resigning to focus on “entrepreneurial ventures,” according to a memo on Monday from Chief Operating Officer Matt Zames

Citi Introduces Alternative Trading Facility Citi Cross
Business Wire via Yahoo! Finance
Citi today announced the launch of Citi Cross, a real-time alternative trading platform that offers diverse sources of liquidity to a wide set of market participants.

Volcker to appear before UK investigators into banks: FT
Reuters via Yahoo! News
LONDON – Paul Volcker, the former U.S. Federal Reserve chairman, will appear before Britain’s Commission of Banking Standards this month, Andrew Tyrie, chairman of the commission, said in the Financial Times on Tuesday.

Merrill Lynch Rejected by High Court on Broker Bias Suit
Bank of America Corp.’s Merrill Lynch unit must defend against a race-discrimination lawsuit on behalf of 700 black financial advisers, as the U.S. Supreme Court turned away a company appeal.

The J. Aron Takeover of Goldman Sachs
New York Times
When Goldman Sachs bought the commodities broker J. Aron & Company in 1981, the cultures clashed, but now J. Aron alumni control the elevator to the executive suite.

Chase No. 1 in Chicago deposits; Bank of America slips
Steve Daniels – Crain’s
P. Morgan Chase & Co. boosted its leading share of Chicago’s bank deposit market in 2012 while national arch-rival and No. 3 local player Bank of America Corp. continued to lose market share, as it has steadily since muscling its way into the Chicago market five years ago through the purchase of LaSalle Bank Corp.

Crédit Agricole Starts Talks to Sell Its Greek Unit
Crédit Agricole, the big French bank, said Monday it had begun exclusive talks to sell its Greek unit, Emporiki, to Alpha Bank for a symbolic one euro.

Bank Failures: 43 So Far in 2012 – Analyst Blog
After a week’s respite from bank failures, the Illinois Department of Financial and Professional Regulation – Division of Banking – shuttered Crete, Illinois-based First United Bank last

Amex paying $112.5M in late-fee settlements
Associated Press via Yahoo! News
American Express Co. is paying $112.5 million in refunds and fines to settle regulators’ accusations that it charged unlawful late fees and deceived customers to pressure them to pay off old debts or buy extra credit card services.

RBS CEO says banks need culture change to regain trust
Reuters via Yahoo! News
LONDON – Banks must undergo a wholesale change in their culture and refocus their behavior on meeting the needs of customers to restore trust in the industry, Stephen Hester, chief executive of part-nationalised Royal Bank of Scotland , said on Monday

American Banker Celebrates 10 Years of “The Most Powerful Women in Banking and Finance”
American Banker has announced its 2012 lists of the Most Powerful Women in Banking and Finance. The tenth annual ranking will be published online at and will be featured in the October issue of American Banker Magazine.

Neonet Selected As Execution Service Provider By United Banker
Neonet, the independent execution services provider, today announced that UB Securities Ltd has entered an Execution Service Provider agreement to increase execution quality throughout its business.

Cantor Fitzgerald Continues its Expansion in Asset Management
Cantor Fitzgerald, a leading global financial services firm, announced today the appointment of Marc A. Bender as Senior Managing Director and Global Head of Acceleration and Seeding.

Cantor Fitzgerald And BGC Partners’ Michael Lehrman To Be Honored As This Year’s Urban Hero
Cantor Fitzgerald and BGC Partners, Inc., parent company of real estate powerhouse Newmark Grubb Knight Frank, today announced that Michael Lehrman, Global Head of Real Estate, will be presented with the Urban Heroes Award on November 5, 2012, at the Catalog for Giving of New York City’s 17th Annual Urban Heroes Awards Benefit.

Clearing & Settlement

LCH Receives Exemption From U.S. Rule for Swap-Clearing Time
By Matthew Leising – Bloomberg
LCH.Clearnet Group Ltd. received an exemption from a rule taking effect today requiring the largest clearer of interest-rate swaps between banks and their customers to confirm trades in less than 60 seconds.

Think tank urges clearing house failure plan
Phillip Stafford –
European authorities should establish plans to unwind failed clearing houses to ensure they cannot pose a systemic threat to global markets “as a matter of urgency”, an influential markets think-tank argued on Monday.

Citigroup Global Markets New ECC General Clearing Member
European Commodity Clearing AG (ECC) welcomes Citigroup Global Markets Limited, London, as a new General Clearing Member (GCM). In this capacity, Citigroup can settle its own transactions as well as customer transactions and, in addition, it is also available for Non-Clearing Members as a service provider.

Bank of Canada to allow global OTC derivatives clearing
Reuters via Yahoo! News
Canada will allow market players to use either global or local central counterparties to clear standardized over-the-counter derivatives, the country’s central bank said on Monday. Central counterparties guarantee against default should one party in a contract, trade or investment be unable to pay.

OpenLink Financial and DTCC’s Swap Data Repository to Support Solution for Regulatory Reporting Compliance
OpenLink Financial LLC, a leading provider of cross-asset trading, risk management and operations processing software solutions, announced plans to expand its suite of Dodd-Frank Regulatory Compliance solutions with The Depository Trust & Clearing Corporation’s (DTCC) service for Swap Data Repository (SDR) reporting.

CME Group Clearing Advisory: Equity Index Later Close for CME Globex Trading Day, Daily Price Limits

CME Group Clearing Advisory: IMPORTANT: Value-Date Conventions for Non-USD Variation Margin for Interest-Rate Swaps

Indexes & Products

iPath to Reverse Split VXX
ETF Database via Yahoo! Finance
iPath announced recently that it will be implementing a 1-for-4 reverse split on its volatility focused ETN VXX, which currently has over $1 billion in assets.

Component Changes Made To Euro STOXX Select Dividend 30 Index

FlexShares Introduces Developed and Emerging Market TILT ETFs

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Deletion From The S&P/TSX Venture Composite Index

S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Deletion From The S&P/TSX SmallCap Index


UBS Co-Worker Says He Used Adoboli’s Umbrella Account
John Hughes , a former UBS AG trader, testified he made the same type of unauthorized trades as his co-worker Kweku Adoboli, who is being prosecuted for fraud.

Federal Court Orders Oscar Hernandez and His Companies to Pay $1.4 Million in Penalties and Bars Him from the Commodities Industry for Operating a Commodity Pool Ponzi Scheme
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order requiring defendants Oscar Hernandez of Miami, Fla., and Midway Trading Company, LLC (Midway) and Conquest Investment Group, Inc. (Conquest), both Florida companies owned and controlled by Hernandez, to pay a $1.4 million civil monetary penalty to settle CFTC charges that they operated a multi-million dollar commodity pool Ponzi scheme and misappropriated customer funds for personal use

Four Charged in U.K. Insider-Trading Probe
British authorities have charged four people, including a former executive at Deutsche Bank AG, in relation to an alleged insider-trading ring in the most high-profile U.K. case of its kind.

[ASIC] Decision in High Court appeal by Fortescue Metals Group and Andrew Forrest

Environmental & Energy

Australia, California in talks to link carbon trading
The Age
Australian and Californian government officials have pledged to work towards linking their nascent carbon markets, they said on Sunday.
**RKB – Talk so far limited to a planned “forum” but that pledge did come from Aussie Climate Change Secretary Mark Dreyfus. Of course, EU and Australia expressed their hopes for a future in August.

Australia in Talks With California to Link Emission Programs
Australia said it agreed to work with the state of California to promote global emission markets. Mark Dreyfus, Australia’s secretary for climate change and energy efficiency, has set up an “ongoing working relationship” with the California Environmental Protection Agency and the California Air Resources Board, according to a release from his office yesterday. Dreyfus is in the U.S. for clean energy and climate talks, according to the release.

Carbon Trading Grows as Preferred Policy Tool, IETA Says
The expansion of carbon-trading mechanisms demonstrates that emission markets are the “policy instrument of choice” for cutting greenhouse gases, according to the International Emissions Trading Association.


Singapore has golden ambitions
The Wall Street Journal
Singapore has emerged as one of the world’s hubs for private banking for the wealthy, and now it is making a play to become the Fort Knox of Asia. Starting on Monday, the Southeast Asian city-state is scrapping a 7% tax on gold and silver in an effort to turn the city into a precious-metals trading hub to rival London and Zurich, where value-added taxes don’t apply to the investment grade gold trade.

SBI Japannext Launches New Trading System From NASDAQ OMX
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced that SBI Japannext has successfully launched a new NASDAQ OMX powered X-stream INET trading system.

SGX proposes to improve IPO participation for retail investors as securities market transformation continues
Singapore Exchange (SGX) today proposed new share allocations for retail investors participating in Initial Public Offers (IPOs). This initiative is another step in SGX’s plan to transform the securities market, assuring its relevance and competitiveness globally.

SGX welcomes Atlantic Navigation to Catalist

Frontier Markets

Myanmar gets its first investment bank
Associated Press via Yahoo! News
Alisher Ali knew on the morning of his second day in Myanmar that the long-closed country was a risk worth taking. Less than two months later he moved his wife and four children to crumbling, tree-lined Yangon and opened Myanmar’s first-ever investment bank with $1 million of his own money.

Keynote Address By Ybhg Dato Dr Nik Ramlah Mahmood, Deputy Chief Executive Securities Commission Malaysia, At IFN 2012 Issuers & Investors Asia Forum, Tuesday 2nd October 2012, KL Convention Centre, Kuala Lumpur:

Second Meeting Of The Financial Stability Board Regional Consultative Group For The Middle East And North Africa

Malawi Stock Exchange Third Quarter Market Performance Report-2012


We’re having the wrong debate on CEO pay
CNN Money
It’s not a battle between free market capitalism and populist fairness. It’s about inherent conflicts of interest.

Canary Wharf to create hub for financial tech start-ups
Reuters via Yahoo! News
London’s Canary Wharf business district, home to global banks HSBC, Barclays and Citigroup, wants to attract entrepreneurs with a new centre for technology start-ups focused on financial services.

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Past JLN Newsletters

How Ken Griffin rebuilt Citadel’s ramparts

How Ken Griffin rebuilt Citadel’s ramparts

First Read $33,626/$300,000 (11.2%) Charlie Carey ++++ Trading Technologies Announces Matching Program to Benefit GoFundMe Campaign for MarketsWiki Education Video Series and John Lothian News As a pioneer of electronic trading, we at Trading Technologies value our...

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