John Lothian Newsletter: Banks Raise Fresh Challenges To Exchanges’ Legal Safeguards; Despite Gains, Many Flee Stock Market; Emkay Global’s Bad Orders Trigger Brief Halt On Nifty

Oct 5, 2012

Banks are calling out exchanges on legal protections that they say should be rewritten to more closely match the rules for other participants. The stock market may be rallying, but investors are pulling out large chunks of money and looking for other financial playgrounds. India’s NSE had its own “flash crash” today, as incorrect orders from a trader caused a brief two-digit drop in the value of the Nifty index. In today’s First Read, be sure to catch the final installment of the John Lothian Profiles series featuring Tom Cashman.

First Read

Apologies: Link error
Yesterday’s lead story was a thumbs-up to Veronica Augustsson, who has been tapped to lead tech company Cinnober. Unfortunately, the link to the press release didn’t properly convert into its short form when we built the newsletter, and those following the link got an error instead of the story. I’ve found the cause and corrected the problem for future newsletters; meantime, here’s that press release again, this time with a working link. Congrats, Veronica!

~ Jon Matte

Veronica Augustsson new CEO of Cinnober
As a successful young woman in the finance industry, Veronica Augustsson has made an impressive journey and was recently mentioned in Financial News’ “40 Under 40 Rising Stars of Trading and Technology” list. She has now been appointed CEO of leading financial technology company Cinnober.


Profiles: Tom Cashman (Part 5: Pit Trading, Droughts & Reflections)
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. John Lothian Profiles last and final segment in our interview with veteran trader Tom Cashman features questions about the advantage of pit trading, the 1988 drought and what he would do if he could start all over.

*** 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.


Eurex wins Best Derivatives Trading Platform at the annual Financial News Awards for Excellence in Trading & Technology
1. Deutsche Börse Eurex 3.96
2. The Order Machine 3.33
3. NYSE Liffe 3.25
4. Ice Futures Europe 3.19
5. Tradeweb 2.84


Fidessa Named Best Sell-Side Trading System At Financial News Awards – Firm Takes Top Spot For Fifth Year Running
Fidessa group plc, provider of high-performance trading, investment management and information solutions for the world’s financial community, was named best trading system for the sell-side at the 10th annual Financial News Awards for Excellence in Trading & Technology Europe. This is the fifth consecutive year that Fidessa has been awarded this prestigious title, demonstrating its market-leading position in the provision of trading technology.


Global Investor/ISF Names SunGard Data Provider of the Year for its Astec Analytics Solution
SunGard has won Global Investor/ISF’s Data Provider of the Year award, with readers ranking its Astec Analytics solution first in nine out of 10 categories. Astec Analytics provides market data, analytics and benchmarking tools for the global securities financing industry.


MGEX Announces Results Of 2012 Board Of Directors Election
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), announced the results of its annual Board of Directors (Board) election, held October 4, 2012. Re-elected to the Board were Scott A. Cordes and Martin F. Farrell. Newly elected to the Board were Christopher T. Matzdorf and Michael O. Miller.

**** MOM is on the board.


Balarkas: Emotion and politics are ‘distorting’ regulatory debate
Michelle Price – Financial News
Richard Balarkas has hit out against the increasingly “dangerous” political mood surrounding electronic equities trading and has called for the industry to “raise the quality of debate” regarding the purpose of the global equities markets.


Call to review for-profit exchanges rules
Arash Massoudi and Michael Mackenzie in New York –
Legal provisions that protect for-profit US stock exchanges and allow them to write their own rules are outdated and need to be reviewed, a leading regulator told an industry conference in New York.


Eugene Scalia: Why Dodd-Frank Rules Keep Losing in Court
Since the mid-2000s, regulations of the Securities and Exchange Commission have been challenged six times in the federal court of appeals in Washington, D.C. The SEC lost every time. I brought four of those lawsuits, and sometimes am asked why the agency has such difficulty defending its rules.


A who’s who of the Ricci reshuffle
Giles Turner and Farah Khalique – Financial News
Rich Ricci, the chief executive of Barclays’ corporate and investment bank, has carried out his first change to the management of the unit since taking over in June, with the creation of a single markets business. The unit will combine investment bank trading and distribution teams across fixed income, commodities and currencies and equities. Eric Bommensath, formerly head of FICC, will lead the business.


G20 calls off emergency food meeting
Javier Blas in London –
The G20 has called off an emergency ministerial meeting to discuss rising agricultural commodities prices, only weeks after France and the most senior food official at the UN formally convened the gathering.


Got a Complaint? Tweet @askCiti
Frustrated by the 40 minutes she spent on hold with Citibank customer service, Stacy Small tweeted her displeasure. To her surprise, a Citibank agent tweeted right back. “Send us your phone number and we’ll call you right now,” read the message.


Entrepreneurs Starting Up With Fewer Employees
Today, in his third start-up, he has one employee: himself, aided by seven contractors working more or less part time. His budget, like his head count, is smaller, and by his account the new model is much more sustainable.

Frank Pusateri of CTA Expo Discusses the Potential for Managed Futures ETFs
Frank Pusateri is the president and founder of CTA EXPO, the conference group which hosts events for emerging managers in Chicago, New York, London and for the first time, in Miami on December 13. He spoke with JLN editor-in-chief Jim Kharouf about the trends he is seeing in the managed futures space, the challenges they face and the prospects for managed futures ETFs as well as mutual funds.

JLN Interest Rates

Draghi Says ECB Primed To Buy Bonds When Ready
(Reuters) – European Central Bank President Mario Draghi said on Thursday the ECB was primed to buy troubled euro zone bonds when conditions were right and that this had already calmed financial market tension.

ECB keeps interest rates unchanged
The European Central Bank kept its main refinancing rate on hold at 0.75 per cent on Thursday, judging that for now there was no need to cut rates below what are already historic lows despite ongoing worries about the poor outlook for growth in the eurozone. Mario Draghi, president, was due to give more details about the ECB governing council’s discussion surrounding the rate decision at a press conference at 1:30pm BST, when he was also likely to face further questions about the bank’s proposed bond-buying programme to help countries with high borrowing costs.

Eurozone crisis live: UK and eurozone interest rates on hold
The Guardian
Bank of England and the European Central Bank leave interest rates and asset purchases unchanged.

*CN: A good deal of talk on Twitter and traditional media outlets about a Dow Jones journalist’s attire at this event. Evidently the reporter wore a hoodie to indicate some fashion of protest.


MarketsWiki Page of the Day
Veronica Augustsson


MarketsWiki Recent Updates


Michael Mayhew; Rick Gallwas; Isaac R. Souede; Michael T. Burke; Charles Taylor; Veronica Augustsson; Javier Tordable; Dave Oxner; Lee Hodgkinson

Companies, Organizations and Groups

HighGround Trading Group, Inc.; Permal; Cinnober Financial Technology; Scoach


29,196,024 pages viewed, 7,137 articles, 148,221 edits
MarketsWiki Statistics

Lead Stories

Banks Raise Fresh Challenges to Exchanges’ Legal Safeguards
By Jacob Bunge and Matt Jarzemsky – Dow Jones
Banks are mounting a fresh challenge to legal safeguards enjoyed by U.S. stock exchanges–as well as to the bourses’ ability to set key market rules–the latest in a long-simmering battle that intensified after the flubbed flotation of Facebook Inc.

Despite Gains, Many Flee Stock Market
The stock market is reaching toward new highs on the fourth anniversary of the financial crisis, but many people refuse to be lured back. Even as stock indexes have doubled in value since the market low in March 2009, investors have yanked a net $138 billion from mutual funds and exchange-traded funds that invest in U.S. stocks, according to the Investment Company Institute, a mutual-fund trade group.

Emkay Global’s bad orders trigger brief halt on Nifty
Reuters via Yahoo! Finance
The National Stock Exchange (NSE) was brought to a brief halt on Friday after Emkay Global Financial Services placed dozens of erroneous orders worth more than $125 million, triggering a sharp fall on the Nifty.

Regulators push ahead with audit trail plans
Shanny Basar in New York – Financial News
A senior US regulator said the technology requirements for the system to track US equity trades across the market should be set within nine months.

Germany Said to Support Enticing Non-Euro States Into Bank Plan
Germany is urging the European Union to improve proposals for a euro-area bank supervisor so that countries outside the currency bloc might be enticed to join, said two European officials familiar with the matter.

Regulators Said to Weigh Shorter List of Too-Big-to-Fail Banks
Global regulators may trim their list of 29 too-big-to-fail banks earmarked for capital surcharges, according to two people familiar with the talks.

Fed Seeks to Clarify Plans
Federal Reserve officials are considering another revamp of their communications policies. Since August 2011, the Fed has been saying it will keep short-term interest rates near zero until a particular date. Right now that date is mid-2015. The hope has been that these assurances would help hold down longer-term interest rates, as well as short-term ones, and thus boost spending and investment. But the Fed isn’t happy with this approach.


CFTC’s O’Malia Queries Time Constraints on Swaps Clearing
As banks push back against a new rule that requires faster processing of certain derivatives trades, they are finding some support from within the regulatory agency that set the time limit.

CFTC’s Division of Swap Dealer and Intermediary Oversight Provides Guidance on Segregated and Secured Funds Maintained in a Combined Omnibus Account
The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today released a letter providing guidance to registered futures commission merchants (FCMs).

NFA permanently bars New York commodity trading advisor, BKT Capital Management, and Basil R. Fayadh, an associated person and principal
National Futures Association (NFA) has permanently barred BKT Capital Management LLC (BKT Capital), a commodity trading advisor located in New York, N.Y., and Basil R. Fayadh, an associated person (AP) and listed principal of BKT Capital.

ESMA Publishes A List Of Exempted Shares According To The Short Selling Regulation

[Japan] Exchange of Letters (EOL) with Malaysia AOB on cooperation in the area of audit oversight

[France] The Autorité des marchés financiers announces the approval of Book II of its General Regulation on the regime governing the notification of major holdings and declarations of intent

SIFMA Executive Vice President Randy Snook Remarks – 2012 Market Structure Conference

“Time For A Fresh Look At Equity Market Structure And Self-Regulation” Remarks By SEC Commissioner Daniel M. Gallagher – SIFMA’s 15th Annual Market Structure Conference

Exchanges & Trading Facilities

Swiss bourse SIX determined to resist foreign merger
The Swiss bourse SIX said it had no interest in being taken over by Deutsche Boerse and told its northern neighbour it had the unanimous backing of shareholders to resist a move that made no business sense.

ASX chief defends business model as volume shrinks
Market Watch
The new chairman of ASX Ltd. used his first shareholder address to defend the company’s position as Australia’s dominant exchange operator, even as falling trading volume continued to weigh on its business.

KCBT Eliminates Early Opening Floor Times Effective Jan. 1, 2013
The Kansas City Board of Trade has filed a submission with the CFTC to eliminate the early start time of open outcry trading for the KCBT’s flagship hard red winter wheat futures and options contracts on USDA report release dates effective January 1, 2013. Open outcry trading will open at 9:30 a.m. CT on these days, as it does on all other trading days (Monday-Friday).

NASDAQ OMX: Report On Market Halts In Genium INET On Oct 1st 2012, Affecting Financial Derivatives, Fixed Income And Commodities Markets

Morgan Stanley Joins The Irish Stock Exchange As Primary Dealer In Irish Government Bonds

Program Trading Averaged 34.4 Percent of NYSE Volume during Sept. 24-28

ASX AGM – Presentation Slides

ASX AGM – Chairman and Managing Director and CEO’s Addressess

BM&FBOVESPA Announces September Market Performance
Record average daily financial volume and record average daily trading volume in the BOVESPA segment.

TOCOM September 2012 Volume Up 55.4% with 120,650 Contracts per Day
The Tokyo Commodity Exchange announced today that September 2012 trading volume averaged 120,650 contracts per day, up 55.4% from August 2012.

Bulgarian Stock Exchange Monthly Summary September 2012

September 2012 On The Warsaw Stock Exchange

Toronto Stock Exchange To Strengthen Corporate Governance Requirements For Listed Issuers

TSX Block List Leaders – September, 2012

NASDAQ OMX Commodities: EUA And CER Spot Market Reopening On 9 October
With reference to Exchange and Clearing Information no 34/12 “Suspended trading and clearing of EUA and CER spot from 30 May”, NASDAQ OMX Commodities announces the reopening of trading and clearing of EUA and CER spot contracts on 9 October, 2012 at 08.00 CET.

Hedge Funds & Managed Futures

CDS Volumes Spike On Credit Suisse U.S. Unit
Katy Burne –
Net volumes are soaring in derivatives used to guard against a deterioration in the financial health of Credit Suisse (USA) Inc., the U.S. arm of Swiss bank Credit Suisse AG. In the past week, the volume of credit-default swaps on the U.S. entity’s debt has ballooned 25%, according to Depository Trust & Clearing Corp. data released late Tuesday, making it the biggest mover among corporate CDS in the most recent weekly cycle.

France’s LBO Firms See ‘Death’ From Hollande’s 75% Carry Tax
Anne-Sylvaine Chassany – Bloomberg
French private-equity fund managers are predicting their own exile if lawmakers back President Francois Hollande’s proposed tax increases on the profit the industry makes from investments.

CEOs missing in action in US fiscal battle
Gillian Tett –
Last year I listened to Erskine Bowles, the wisecracking Democrat who has campaigned for bipartisan fiscal reform, throw down a gauntlet to American business. Speaking to an audience of corporate executives, at Harvard Business School, Mr Bowles begged them to support his efforts to forge a practical deal – and argued that this corporate voice was crucial to breaking Washington gridlock.

Paulson Funds Said to Further Cut 2012 Losses Last Month
John Paulson, the billionaire hedge- fund manager coming off record losses in 2011, further pared declines in his Gold and Advantage funds last month, according to two people familiar with the matter.

Layoffs hit Lasry’s Avenue Capital, firm to begin lending: memo
Reuters via Yahoo! News
Marc Lasry’s Avenue Capital Group hedge fund is downsizing and laying off roughly 6.5 percent of its staff, according to an employee memo reviewed by Reuters. The $12.7 billion fund that specializes in distressed-debt investing is eliminating 16 jobs after bringing in a consulting firm to review the New York-based fund’s overhead, efficiency and expenses.

Ex-Deutsche Bank Credit Trader Cornut Said to Plan Hedge Fund
Antoine Cornut, who led flow-credit trading in the Americas and Europe for Deutsche Bank AG, plans to start his own hedge fund, according to two people with knowledge of the matter.

Investors Back Away From ‘Junk’ Bonds
The massive “junk”-bond boom is raising alarm bells among some large money managers, who warn the market is showing signs of overheating.

European Private Equity Firms Seek Nontraditional Loans Amid Debt Crisis
As the sovereign debt crisis has slammed Europe, Cinven has had to get creative to finance buyouts.

Al Gore Walks Away From Green Energy
According to an SEC filing and a recent client update, the former vice president’s fund is making money, just not in alternative energy.

Minutes Of The Federal Open Market Committee, September 12-13, 2012

Banks & Brokers

JPMorgan Chase head of corporate affairs to leave: WSJ
Reuters via Yahoo! News
JPMorgan Chase & Co’s head of corporate and regulatory affairs, Barry Zubrow, is expected to give up his job, a Wall Street Journal report said. It is possible that Barry Zubrow, 59, will remain with the investment bank in an advisory role, the report said, quoting people close to the bank.

M Stanley chief warns on Wall St pay
Tracy Alloway and Tom Braithwaite in New York –
Morgan Stanley is preparing to wield its axe again with more job cuts and smaller bonuses planned for next year as the investment bank attempts to boost shareholder returns.

Analysis: Big funds seek to rein in pay at Wall Street banks
Reuters via Yahoo! News
The days when Wall Street banks could blithely hand out half their revenue in compensation to their staff without a murmur from shareholders have come to an end. In an era of leaner times and tighter regulation, big mutual funds and pensions are growing more vocal in pushing executives at investment banks to rein in pay and bonuses and consider more staff cuts.

Report: Deutsche Bank drops unethical traders
Associated Press via Yahoo! News
German media report that Deutsche Bank AG has put at least five of its traders on indefinite leave as part of an effort to restore the company’s ethical credibility.

International wealth drives UK management hires
Sophie Baker – Financial News
Private bank Coutts has hired a managing director within its international business in the UK to enhance links with its Asia operations, in the latest hire for the bank and for the wealth management sector.

Cantor Cut to Junk by Moody’s on Capital Markets Pressure
Zeke Faux and Lisa Abramowicz – Bloomberg
Cantor Fitzgerald LP, the investment bank planning to add 800 people, was cut to junk by Moody’s Investors Service as the ratings company said the expansion has failed to sufficiently boost profit.

Saxo Bank Launches CFDs on Government Bonds
Saxo Bank, the online multi-asset trading and investment specialist, today has added CFDs on Government Bonds to the existing range of asset classes available to trade.

RBS Said to Suspend Trader Over Interest Rate Rigging
Royal Bank of Scotland Group Plc suspended a trader for trying to rig the Singapore dollar swap offer rate, indicating employees may have sought to manipulate more than just Libor, two people briefed on the matter said.

Charles Schwab, TD Ameritrade closing some European businesses
Market Watch
Charles Schwab, TD Ameritrade are shutting down some of their business operations in Europe

Lehman Trustee Settles $6 Billion Dispute With Holdout Swiss Unit
Dow Jones
The trustee winding down Lehman Brothers brokerage has settled a $6 billion dispute with the failed investment bank’s former Swiss derivatives unit, one of the last holdouts among Lehman’s foreign affiliates in the fight over tens of billions of dollars in guarantees and intercompany loans.

Santander to Sell Loan Portfolio Worth EUR1 Billion to BofA Merrill -EFE
Dow Jones
Spain’s Banco Santander SA has reached an agreement with Bank of America Merrill Lynch to sell part of its credit portfolio worth about 1 billion euros, Spanish news agency EFE reported Thursday, citing market sources.

New York Times Profile of London Whale Boss, Ina Drew, Camouflages Dimon’s Risk Management Failures
Naked Capitalism
A New York Times profile of Ina Drew, the former head of the JP Morgan Chief Investment Office, almost certainly produced high fives in the bank’s corporate communications office. This piece is the best sort of PR you can get: it treats the trading losses as yesterday’s news, of interest only as point of entre into the downfall of a heretofore unknown but once hugely successful and personally appealing trading manager.

Jim Hays Named Head of Wells Fargo ‘Wealth Brokerage Services’ Division
Business Wire via Yahoo! Finance
Wells Fargo today announced that Jim Hays has been named executive vice president and head of Wealth Brokerage Services.

JPMorgan Dealmaker Jimmy Lee Gets All the Best Lines
The New York Observer
Two giant JPMorgan profiles landed this week, and it was a familiar character who delivered some of the more memorable lines in each of them. James Bainbridge Lee Jr.—better, Jimmy—is the legendary deal maker this paper once described as “the maestro of the syndicated loan market, Wall Street’s most famous corporate bailout artist,” now the vice chairman for investment banking at JPMorgan.

Clearing & Settlement

Boston Consulting Group Completes Study Of Potential Impacts Of Accelerating Settlement For U.S. Equity Trades – Cross-Industry Analysis Examines Costs And Benefits Of Shortening The Time Period Between Trade Execution And Settlement Date

SGX proposes to drop clearing member minimum share capital from S$1bn to S$50m
Justin Lee – Asia Risk
Singapore Exchange (SGX) is proposing lowering its requirements for firms to become clearing members to provide client clearing services of over-the-counter derivative transactions.

SGX Clearing Members Enjoy Fully Automated Fee Processing With eGAINS
Derivatives clearing members of Singapore Exchange (SGX) will enjoy greater efficiency and cost-savings at their back office from November 2012.

Indexes & Products

IndexIQ Launches QMN as Latest in Innovative Family of Absolute Return Hedge Fund ETFs

New SPDR ETF Launched On Xetra – First ETF On S&P 500 Companies With Lowest Volatility


RTS Announces Global Launch of Tango OnDemand
RTS Realtime Systems Group (RTS), a leading global trading solutions provider, announced today the global launch of Tango OnDemand, a new fixed-price package of customized algorithmic and automated trading solutions.


Federal Court in Florida Imposes $350,000 Penalty against GlobeFX Club, Inc. and Jeremy Munson Globe for Making False Statements to the National Futures Association
The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent order of permanent injunction requiring defendants GlobeFX Club, Inc. (GFC) and Jeremy Munson Globe, both of Homestead, Fla., jointly and severally to pay a $350,000 civil monetary penalty for concealing material facts and making false statements or misrepresentations to the National Futures Association (NFA) during an investigation and audit.

Former Oppenheimer Broker Likely Fabricated Investor
Paul Abrams, a purported investor whose sudden death helped scuttle the $12 million Broadway musical “Rebecca,” seems to have been invented by former Oppenheimer & Co. broker Mark Christopher Hotton, according to a lawyer for the show’s producer.

Environmental & Energy

Deutsche Bank suspends carbon traders – source
Deutsche Bank has suspended a handful of employees after it was criticised by a judge last year during a trial into tax evasion on carbon permits, a financial source familiar with the matter said on Thursday.

EU Carbon Pares Gains After Parliament Sets Carbon Vote
European Union carbon permits pared gains after the bloc’s parliament scheduled its first vote on a legal change that would enable the bloc to curb a glut of emission allowances later than regulators had planned.

**RKB – Vote set for Feb. 19 but uncertainty persists. Isabelle Curien, a Deutsche Bank analyst in Paris: “For now, timing on further steps is very uncertain.”

Spain Says EU Needs Clear Carbon Rules, Examines Backloading
European Union’s draft plan to curb a glut of carbon permits may endanger the predictability of the bloc’s trading rules and Spain hasn’t decided whether to back the proposal, Environment Minister Federico Ramos de Armas said.

**RKB – Country-by-country roll call here.


Laos Is Poised to Take Last Asean Place in WTO: Southeast Asia
The World Trade Organization is poised this month to accept Laos, the smallest economy in the 10-member Association of Southeast Asian Nations and the last one outside the global trading club.

Foreign Funds Boost Korean Bond, Stock Holdings in September
Foreign funds increased holdings of South Korean local-currency bonds by the most in six months in September, lured by credit-rating upgrades, according to data from the financial regulator.

Vietnam Downgrade Adds Momentum to Clean Up State Loans: Economy
As Vietnam wins a yearlong battle to tame inflation and stabilize its currency, the spotlight is moving to the drag on growth from undercapitalized banks that have channeled credit to the nation’s state-owned companies.

Tokyo Commodity Exchange Participates In FIA Expo 2012

Thai Bourse To Hold Roadshow In United Kingdom On Oct 10-11

Thai Bourse Joins Bangkok Bank For E-Dividend Service Application

Frontier Markets

S African unrest puts off foreign investors
Andrew England in Johannesburg –
Escalating industrial unrest in South Africa is forcing foreign companies to rethink plans to invest in the country, with concerns spreading beyond the beleaguered mining sector as a consequence of the crisis, according to South African executives.

Losses narrow at Citadel Capital
Kiel Porter – Financial News
Losses at Egypt-listed buyout firm Citadel Capital narrowed during the second quarter of 2012, as the company continued to recover from the fallout of last year’s Arab Spring.

Dubai’s Shuaa Capital plans to expand credit and boost profits
Dow Jones Newswires
Dubai-based Shuaa Capital on Wednesday said it’s expanding its credit business as part of a turnaround effort that the loss-making bank hopes will make it profitable again in 2013.

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