John Lothian Newsletter: After Hurricane Sandy, Stock Exchanges Prepare to Open; Russia works on financial hub ambitions; A Year Later, All Eyes Still on ‘Edie’

Oct 31, 2012

Wet and bruised but unbroken in the hurricane’s wake, the USA’s east coast and its financial centers prepare to clean up and return to normal operation. Moscow’s financial markets, the recipient of both fascinated appraisal and ridicule from the outside, is gradually making progress on becoming a legitimate center for trade. Last year’s house of horrors MF Global is still haunting investors, and little progress has been made on finding the people responsible for moving around the money, much less the stuffed zombies.

First Read

John J. Lothian & Company Announces Appointment of Advisory Committee
John J. Lothian & Company, Inc. today announces the creation of an advisory committee to provide strategic and corporate development advice to the company.

The advisory committee is made up of industry veterans from a broad spectrum of experiences and disciplines, all with a markets and trading focus.

Given the massive transformation taking place in the global derivatives and securities markets, from regulatory reforms to industry changes, the advisory group will help John J. Lothian & Company, Inc. identify and address the needs of the industry that will continue to help make the company a valuable information source and innovator in the financial space.

The chairman of the committee is Peter Wind, a veteran brokerage executive and longtime CME/CBOT member. Also from Chicago is Ed Boyle, who brings a brokerage and exchange background with a focus on options and trading technology.

From London, Bill Templer and Clive Furness are on the advisory committee. Templer is an industry consultant after serving many years in the bank and brokerage space, most recently with Morgan Stanley. Furness is an industry consultant focusing on commodities, derivatives, clearing and related technology with his firm, Contango Markets.

In New York, the committee includes Martin Mosbacher and Thomas F. Cashman. Mosbacher is a partner in Intermarket Communications, which provides public relations, digital media and marketing services for companies in the international financial community. Cashman is a recent arrival in New York after being a CBOT floor broker and trader. He is also a lawyer. Cashman is the son of Thomas J. Cashman, who was the initial subject of the John Lothian Profiles video series.

“I am extremely pleased to have such a talented and experienced collection of industry professionals to help John J. Lothian & Company, Inc. meet the needs of its varied customer constituencies,” said John J. Lothian. “Each has experience in key aspects of our markets and brings a customer oriented focus to the future direction and development of the company.”

“This committee brings new experiences, perspectives and disciplines to help guide the future development of the company and its continued innovative initiatives,” said Peter Wind, Chairman of the John J. Lothian & Company, Inc. Advisory Committee.

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US Defeats Europe!
In the first ever US versus Europe charity softball tournament for Futures For Kids, the US defeated the European team at the lovely Grant Park baseball fields with a score ending somewhere around 15-5. Thanks to CQG and Pat Kenny for organizing the event. The game follows the charity cricket match held in London during IDX this summer, which saw England conquer the rest of the world (for a few hours anyway). A cricket/softball tradition is taking root.

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Competition Coming to IR Swaps
One interesting competition that is taking shape is the battle for interest rate swaps clearing. Eurex confirmed last night at its media dinner that it will begin clearing interest rate swaps next month, and will offer a suite of segregated services for margin and collateral that addresses customer protection issues as well as collateral efficiency needs. IntercontinentalExchange has been the frontrunner in this space, but with CME and NASDAQ expanding their European clearing and interest rate offerings, it will be interesting to see if marketshare will move. NYSE Euronext is also in the thick of it with New York Portfolio Clearing.

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MF Global collapse, one year on, still haunts futures industry
Ann Saphir – Reuters
Billy Hunt is a veteran Chicago trader who specializes in the riskiest type of options deals. Yet it’s the supposedly safe money in his brokerage account that keeps him up at night. A year after the collapse of MF Global cost him $1.9 million, Hunt has made a full comeback and today trades on CME Group’s open-outcry floor exactly as he has for the last quarter of a century. He still has night-time worries about the $17.5 million in collateral that he keeps at his brokerage, though.
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**** Haunts? All I can think of is the creeps.

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A year after MF Global failure, customers safer than before collapse
Terrence A. Duffy
For more than 160 years, no customer had ever lost a penny as the result of default by a futures industry clearing member. MF Global’s failure last October, followed by fraud at PFGBest nine months later, shattered this uninterrupted legacy of trust in our industry. It was a sharp wake-up call for those of us – in both the private and public sectors – whose most important job is to keep our markets safe and secure.
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***** That opening claim is just a little too broad for my taste.

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Clouds Hang Over Futures Forum
JACOB BUNGE – WSJ.com
Russell Wasendorf Sr, the disgraced chief executive of Peregrine Financial Group Inc., may not be the only industry figure missing from the largest annual gathering of the global futures sector as attendees battle Hurricane Sandy to make the event that starts here Tuesday. However, it is Mr. Wasendorf’s shadow and that of bankrupt brokerage MF Global Holdings Ltd. that loom largest over a business that has seen the pillar of 40 years of growth—the segregation of customer and client funds—ripped apart.
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**** On the other side of the clouds is the sun, which is warm and bright.

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Visit TT at FIA Expo
TT is hosting several functions on Wednesday and Thursday of this week in conjunction with FIA Expo. These events are open to all registrants. Read on for more details.
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***** Ask to see the ADL.

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OptionsCity City News, October 2012
In this issue: OptionsCity Freeway wins the Chicago Innovation Award and Freeway 2.0 and Metro 4.0 upgrades are unveiled. CEO Hazem Dawani is a keynote speaker at OIC/IIT’s Road to Wall Street on 11/2; In our blog, Suzanne Cosgrove discusses gold and Michael Gorham outlines the advancements in futures over a half century. Participate in our algo building workshops and tee up your golf game at the OptionsCity booth #920 at FIA Futures & Options Expo on Wednesday, October 31 and Thursday, November 1.
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Hurricane’s shutdown of markets irks idled Chicago traders
BY DAVID ROEDER – Chicago Sun-Times
For Chicago trading firms, Monday was a quasi-holiday. As traders on the East Coast stayed away from offices because of Hurricane Sandy’s life-threatening barrage, financial markets here operated at a leisurely pace. And some Chicago traders didn’t care for it one bit.
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**** Oh, quit bellyaching.

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Commodity broker Country Hedging changes name to CHS Hedging Inc.
Today, CHS Hedging Inc. is the new name for Country Hedging, Inc., a full-service commodity brokerage providing expert consultation, innovative educational programs and a broad complement of price risk management programs for both commercial agribusinesses and individual producers.
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Daniel Godfrey to head IMA
Mike Foster – Financial News
The Investment Management Association has appointed Daniel Godfrey, former director general of the Association of Investment Companies, as its new chief executive, Financial News has learned.
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Parker: Is collateral scarcity an opportunity in disguise?
Daniel Parker – FOW
Collateral as a means of endorsing a promise is as old as human interaction itself. Collateral is even prescribed in the Bible as an ordinary business practice. In fact, a relevant verse of the Book of Exodus reads, “If you take your neighbor’s cloak as security for a loan, you must return it before sunset.”
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Opinion: The next IP battleground
John Ciannamea and Michael D’Andrea – FOW
Technology’s influence on the financial services industry has grown exponentially over the last twenty years. Between electronic trading platforms, high frequency trading algorithms and complex derivatives, success or failure as a financial institution has become extremely dependent on what technology it possesses. The convergence of technology, intellectual property, and patent infringement lawsuits is leading the way for the next big intellectual property war.
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Why Germany Wants to See its US Gold
Sven Böll and Anne Seith – Der Spiegel
For decades, almost half of Germany’s gold has been stored deep below the Federal Reserve Bank of New York. Now, with the euro crisis swirling, German politicians are asking their central bankers to take stock of the reserves. Some even say that the gold should be shipped home.
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MarketsWiki.tv

Justin Bouchard

Justin Bouchard of AlgoFast on the Potential for Event Driven Trading
MarketsWiki.tv

In today’s markets, new technology is getting more granular. Justin Bouchard, CEO of AlgoFast, has built his firm on event trading with new technology that allows traders to take positions on events such as Federal Reserve and central bank statements, employment reports, earnings and GDP numbers. He spoke with John Lothian News editor-in-chief Jim Kharouf about event trading, how AlgoFast works and why algorithms are not a bad thing.

Watch the video »

MarketsWiki

MarketsWiki Page of the Day
FIA Futures & Options Expo
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People

Justin Bouchard

Companies, Organizations and Groups

Bolsa y Mercados Espanoles

Products

FIA Futures & Options Expo; AlgoFast

Miscellaneous

Upcoming Events

Statistics

30,179,679 pages viewed, 7,189 articles, 149,289 edits
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Lead Stories

After Hurricane Sandy, Stock Exchanges Prepare to Open
SUSANNE CRAIG and BEN PROTESS – NYTimes.com
Stacks of sandbags were still protecting the entrance to the New York Stock Exchange and Goldman Sachs on Tuesday. Pockets of the financial district in Lower Manhattan remained underwater. Electric power was shut off for parts of the surrounding neighborhood.
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Russia works on financial hub ambitions
Mary Watkins and Courtney Weaver – FT.com
If President Vladimir Putin realises his ambitions, Moscow will become an international financial hub on a par with London or New York, and the rouble will become an international reserve currency. Sceptics scoff at such talk, arguing that it will take more than a few skyscrapers to make a world class financial centre. But Russia is making progress towards opening up its markets.
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A Year Later, All Eyes Still on ‘Edie’
AARON LUCCHETTI, JULIE STEINBERG AND MIKE SPECTOR – WSJ.com
Who broke the law by raiding customer accounts at MF Global Holdings Ltd.? Investigators seem no closer to the answer than they were when the New York brokerage firm filed for bankruptcy exactly a year ago Wednesday, owing thousands of farmers and ranchers, hedge funds and other investors an estimated $1.6 billion. Their money was supposed to be stashed safely at MF Global, but company officials used much of it for margin calls and other obligations.
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Wall Street bracing for volume surge
CNN Money
NEW YORK — Trading volume is expected to surge when U.S. financial markets reopen Wednesday, two days after Superstorm Sandy prompted an unexpected shutdown on Wall Street.
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ASX chief defends clearing monopoly
Neil Hume in Sydney – FT.com
The chief executive of the Australian Securities Exchange has urged the government to preserve its clearing monopoly because the risks of opening the market to global competitors are not matched by the rewards.
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Possible $500 Billion Fiscal Cliff Hit Looms
Clarke Camper – Inside the Beltway
The U.S. economy must brace itself for the possibility of “an immediate $500 billion dollar hit” beginning on January 1, 2013, should U.S. policymakers not take action to head off the fiscal cliff, says the National Association of Manufacturers (NAM) in a new report, Fiscal Shock: America’s Economic Crisis.
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World Economic Forum: Stagnating Financial Systems Hamper The Road To Recovery
Financial systems across the world are stagnating, leading to challenges for a global economic recovery, according to the fifth edition of the World Economic Forum’s Financial Development Report 2012 released today.
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Athens heralds bailout agreement
Kerin Hope in Athens – FT.com
Greece said on Tuesday it had wrapped up talks with international lenders on a new bailout deal despite objections by a small leftwing party, opening the way for parliament to approve the package and secure E31.5bn in fresh funding.
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Regulatory

U.S. Agencies Issue Statement On Supervisory Practices Regarding Financial Institutions And Borrowers Affected By Hurricane Sandy
The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (the agencies) recognize the serious impact of Hurricane Sandy on the customers and operations of many financial institutions and will provide regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions in the affected areas to meet the financial services needs of their communities.
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FINRA: Industry Communications Related To Hurricane Sandy
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ASIC taskforce to review Banksia and regulation of unlisted debentures
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ASIC annual report tabled
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Exchanges & Trading Facilities

CBOE Holdings Declares Fourth Quarter 2012 Dividend
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that its Board of Directors has declared a quarterly cash dividend of $0.15 per share of common stock payable on December 21, 2012, to stockholders of record at the close of business on November 30, 2012.
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BME Posts A Net Profit Of E105.1 Million Through September
BME posted a net profit of E105.1 million in the first nine months of 2012, down 11.3% from the same period a year earlier. Net profit for the third quarter was E31 million.
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NYSE Euronext receives the final report of the Strategic Planning Committee
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IPO by Telefónica Deutschland Holding AG in the Prime Standard
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CME Group to Reopen U.S. Equity Index Complex Tonight, Resume Normal Trading Hours
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NYSE Euronext Statement on Opening of U.S. Markets on Wednesday, Oct. 31, 2012
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IntercontinentalExchange Market Update; All Markets and Clearing Operations Open Wednesday, Oct. 31
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CBOE, C2 and CBSX Will Resume Trading on October 31, 2012
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[CBOE] Opening Quote Width Relief
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BOX Options Exchange Open Wednesday, October 31
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BATS BYX Exchange, BZX Exchange and BATS Options Will Open Normally on Wednesday, October 31, 2012

Hedge Funds & Managed Futures

How Not To Run A Hedge Fund: Geoff Grant Edition
Forbes
Most amusing little snippet in FT’s Alphaville: Grant Capital Partners is being shut down. This hedge-fund manager wind-down is brought to you by Geoff Grant, one of the same gentlemen behind Peloton Partners? enormous fall.
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Nest presence grows with big-name mandates
Mark Cobley – Financial News
McDonald’s, the BBC and BT are among 100 big UK employers who have signed up to use the National Savings Employment Trust, the government’s new low-cost pension scheme, which is shaping up to become a real challenger to existing private sector providers.
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State Street’s global investor confidence index posts an all-time low
Boston Globe
A global investor confidence index maintained by State Street Global Markets posted a drop to an 80.6 October reading, the lowest monthly reading in the index’s 14-year history. October’s reading is down 6.7 points from a revised September reading of 87.3.
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Franklin Templeton Introduces New Currency Hedged U.S. Rising Dividends Mandate for Canadians
Franklin Templeton Investments Corp. today introduced Franklin U.S. Rising Dividends Hedged Corporate Class for Canadian investors looking to minimize currency exposure while investing in American equities. This unique mandate invests in U.S. companies that have had consistently rising dividends in at least eight of the past 10 years.
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Banks & Brokers

Shocked UBS staff take to Twitter
Lina Saigol, Daniel Schäfer and Jennifer Thompson – FT.com
The old joke that UBS stands for “U’ve Been Sacked” was doing the rounds on trading floors on Tuesday as the Swiss bank confirmed plans to cut 10,000 jobs as part of a radical restructuring to slim down its investment banking division. UBS was one of the most popular trends on Twitter as the blogosphere flooded with comments in several languages, describing the shock and resentment of staff.
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UBS says under investigation in Singapore over possible rate manipulation
Reuters via Yahoo! News
SINGAPORE – UBS is under investigation in Singapore along with other banks for possible manipulation of Libor and other benchmark rates, the Swiss bank said on Tuesday.
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Rival banks face hard decisions after UBS retreat
Reuters via Yahoo! News
LONDON – UBS’s retreat from lucrative fixed income markets around the world is unlikely to be followed by its rivals, although rising costs and tougher regulations make more deep cuts at other banks inevitable. The Swiss bank is ditching most of its debt business – selling bonds to investors and trading them – in a revamp that will cost 10,000 jobs and free up much-needed capital.
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Barclays takes action on staff after Libor probe
Reuters via Yahoo! News
LONDON – Barclays has fired staff, clawed back pay and taken other disciplinary action after a “very rigorous” internal investigation into the bank’s manipulation of Libor interest rates, its new chief executive said.
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Barclays reports modest Q3 loss under new CEO
Associated Press via Yahoo! News
Barclays PLC has reported a third quarter net loss of 200 million pounds as earnings were hit in part by a previously announced 700 million pounds rise in provisions to compensate customers for payment protection insurance.
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Barclays hit by fresh U.S. investigations
Reuters via Yahoo! News
LONDON – Barclays, already rocked by an interest rate rigging scandal, unveiled two new U.S. regulatory investigations into the bank’s financial probity on Wednesday and said its profit was hit by charges for mis-selling insurance.
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European Central Bank And Bank Of Russia Sign A Memorandum Of Understanding
Mario Draghi, President of the European Central Bank (ECB), and Sergey M. Ignatiev, Chairman of the Bank of Russia, have signed a Memorandum of Understanding laying the groundwork for continued cooperation between the two institutions in the field of central banking.
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Goldman Petitions Supreme Court to Review Second Circuit MBS Ruling
Law.com
After suffering a stinging appellate court defeat, Goldman Sachs has called in some heavy hitters to help it do battle before the U.S. Supreme Court. The bank has filed a petition for certiorari asking the justices to review a Second Circuit ruling that expanded the class of investors that can bring securities class action claims against mortgage-backed securities offerers.
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BGC Partners Announces Resumption of Operation of its eSpeed Platform
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Clearing & Settlement

Renminbi set to join settlement system
Philip Stafford – FT.com
A basket of emerging market currencies, including China’s renminbi and the Russian rouble, are looking to join the world’s largest foreign exchange settlement system, run by CLS Bank International. The potential move would be part of a broader push by CLS into cutting systemic risk in currencies trading over the next decade. The group settles payment instructions related to FX deals in 17 currencies.
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Frankenstorm puts DTCC business continuity planning to the test
Michelle Price in Osaka – Financial News
The Depository Trust & Clearing Corporation, one of the US market’s most important pieces of infrastructure, invoked its business continuity plan late last week in anticipation of Hurricane Sandy which hit the east coast of North America on Monday night.
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Brazil: Foreign rivals join battle for post-trade prize
Samantha Pearson – FT.com
Clearing houses, the institutions that ensure trades are completed even if one party defaults, are not normally the source of much controversy. In Brazil, however, they have become the battleground for a bitter struggle for control over one of the world’s most prized markets.
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Indexes & Products

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

SunGard Enhances IntelliMatch Operational Control to Support Centrally Cleared OTC Derivatives
Osaka, Japan – SunGard has enhanced IntelliMatch Operational Control to help brokers address today’s market requirements in centrally cleared over-the-counter (OTC) derivatives. The solution’s customers include five of the top 10* Futures Commissions Merchants for reconciliation of exchange traded derivatives (ETD).
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Bank of America Merrill Lynch and SunGard’s AvantGard Launch Treasury Knowledge Alliance
Bank of America Merrill Lynch’s Global Transaction Services (GTS) and SunGard’s AvantGard today announced the launch of their Asia Pacific treasury knowledge alliance. The dedicated Asia Pacific program will leverage the respective business strengths and networks between Bank of America Merrill Lynch GTS and SunGard’s AvantGard, providing a client-focused platform to connect the market’s experiences and opinions, promote best-in-class practices and help drive enhanced technological innovation within the regional treasury industry.
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Patrick L Young Joins dce Board As Non-Executive Director – Innovative Data Centre Solutions Provider Continues Rapid Expansion
data city exchange (dce), the innovative data centre solutions provider, has announced the appointment of Patrick L Young to the board of directors in the capacity of non-executive director. Mr Young joins the board at dce during a period of significant growth and brings with him considerable experience in the technology and finance sectors.
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Enforcement

Adoboli admits lying to UBS
Richard Partington – Financial News
Kweku Adoboli has admitted to a London court that he lied about his trading activities to compliance staff at UBS.
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Ex-UBS trader Kweku Adoboli lost control of trades but denies fraud
Reuters
Former UBS trader Kweku Adoboli on Tuesday told a London court that he “lost control” in the summer of 2011 but insisted he never acted dishonestly in the frantic weeks that resulted in losses of $2.3 billion.
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[ASIC] Federal Court finds debt collection group misled and harassed debtors
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Environmental & Energy

EEX publishes Auction Calendar for the EU Auction Platform for 2012 – “Early Auctions” to start on 13 November
The European Energy Exchange (EEX), the European Commission and the 24 participating Member States have determined the auction calendar for the transitional common auction platform for 2012. The calendar details the timing and volumes for the “Early Auctions” of EU Allowances (EUA) of the third trading period and for the auctions of EU Aviation Allowances (EUAA) valid for 2012.
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Asia-Pacific

Why London became a centre of finance, but Shanghai won’t
Tom Holland | South China Morning Post
Here is a lesson for those who think that China’s big business capital will become a major centre servicing massive outward investments…
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China Exchanges Services Officially Launches
China Exchanges Services Company Limited (CESC), a joint venture of Hong Kong Exchanges and Clearing Limited, Shanghai Stock Exchange and Shenzhen Stock Exchange, officially commenced operations today (Tuesday).
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Bank of America Merrill Lynch Names Peter Jaeger As Asia Pacific Head of Futures & Options and OTC Clearing – Memo
Dow Jones
Bank of America Merrill Lynch has appointed Peter Jaeger as head of Asia Pacific futures & options and over-the-counter Clearing, according to a memo seen by Dow Jones Newswires Wednesday.
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Press Conference By Ikko Nakatsuka, Japan’s Minister For Financial Services
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Circular On The Announcement And Implementation Of The Amendments To The Management Methods For Dalian Commodity Exchange Standard Warehouse Receipt And Other Detailed Implementation Rules
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Shanghai Stock Exchange: Differentiated Levy Of Dividends Tax Boosts Long-term Value Investing
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John Lothian Newsletter

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