The SEC, looking for ways to better monitor and regulate high-frequency trading firms, turns to a high-frequency trading firm for help. Active fund managers, struggling with dishwater returns and an unpalatable fee structure, are having trouble re-engaging with investors who have become enamored with more passive investment choices. The NSE and others in India are calling for new and better trading limits in the wake of last week’s Indian Flash Crash. In First Read today, take a look at the MarketsWiki.tv interview with John Savercool of UBS, who talks politics and finance with JLN’s Jim Kharouf. Also, if you didn’t see the JLN Metals interview with Jeffrey Christian of CPM Group, follow the link in the JLN Metals box inside. It’s a high energy talk!
How the Presidential Election Impacts Dodd-Frank: UBS Lobbyist John Savercool Interview
John Savercool, senior lobbyist and managing director of UBS Americas knows his politics. A 23-year veteran of Capitol Hill, Savercool recently spoke at the CTA EXPO in Chicago about the presidential election and prospects for Mitt Romney and President Obama next month. Savercool sat down with JLN editor-in-chief Jim Kharouf and spoke about the impact the presidential election will have on financial markets and Dodd-Frank, his expectations for coming Dodd-Frank rules, and what legislation is on his radar for next year.
**JK – This interview was conducted before the presidential debate, but at the time, Savercool forecast that Obama held a decent lead, in terms of likely electoral college votes.
Fidessa Expands Asian Footprint With Mumbai Base – Global Multi-Asset Expansion Fuels Opening Of Indian Office And Datacentres
Fidessa group plc, provider of high-performance trading, investment management and information solutions for the world’s financial community, has today announced the opening of a Mumbai office, building on the strength of its other regional bases in Hong Kong, Singapore, Tokyo and Sydney. Growing demand from Fidessa’s global clients to trade Indian equities and derivatives has driven the establishment of a local team, office and datacentre facilities. Sayant Chatterjee, previously Fidessa’s Senior Vice President of Business Development in New York, will head up the operations as Managing Director of India.
Wall Street Regulator Ramps Up Enforcement
BEN PROTESS – NYTimes.com
Wall Street’s smallest watchdog is starting to show its fangs. The Commodity Futures Trading Commission, once considered a toothless regulator, brought a record number of enforcement cases over the past year, as fines soared.
The clock is stopped on the LSE/LCH deal
William Mitting – FOW
Just how much of a done deal is the London Stock Exchange’s takeover of LCH.Clearnet? This week the Office of Fair Trading announced it was “stopping the clock” on the 40 day investigation into the merger. In itself, this is not unusual, but it coincides with a growing chorus of concern and agitation from some corners of the market over the deal.
Vision Financial to take control of former Peregrine accounts
Futures brokerage Vision Financial Markets will take control of all accounts held by former clients of its defunct rival Peregrine Financial Group, Vision’s President Howard Rothman said on Friday.
Fribourgs return to trading front line
Javier Blas in London – FT.com
The Fribourgs, the family who founded the iconic commodities trading house Continental Grain two centuries ago and expanded it to challenge Cargill, are returning to the front line of physical trading after a 15-year hiatus.
How to Run Your Hedge Fund From a Prison Cell
As if America’s hedge-fund elite didn’t have enough crises to worry about — riots in Spain, the fiscal cliff, Lindsay Lohan’s hotel brawl — the parade of underlings copping pleas to insider-trading crimes just keeps growing. Every week it seems another one flips, promising to turn state’s evidence.
Insight: The Lex Factor roils Dow Jones
Jennifer Saba – Reuters
He’s tearing down walls. He’s tossing out old business models. And he’s dressing down people, publicly and profanely, in the once-buttoned-down halls of Dow Jones & Co., publisher of the august Wall Street Journal. Lex Fenwick (pronounced FEN-nick), a long-time Bloomberg LP executive, is making his mark on Dow Jones, the News Corp subsidiary where he became chief executive officer earlier this year.
**JK – They have names for people like this, many, many names.
California Facing $5 Gasoline Stirs Brown to Relax Rules
Michael B. Marois and Lynn Doan – Bloomberg
Gasoline closing in on a record $5 a gallon prompted Governor Jerry Brown to direct California regulators to relax smog controls so oil refineries could increase supplies of cheaper fuel.
FIA Expo 2012 Complimentary Exhibits-Only Passes from John Lothian News Sponsors:
Five Minutes with Jeffrey Christian
Jeffrey M. Christian is the managing director and founder of CPM Group, which offers commodities research, consulting, asset management and investment banking services. He is well known for his research and analysis of copper, gold, and other commodities and writes and speaks extensively about precious metals as well as world economic conditions. He sat down with JLN Metals editor Sarah Rudolph in his New York offices recently to talk about the outlook for gold demand, the effects of recent central bank actions, the jewelry markets in China and India, and why GATA is so angry at him.
Q: What do you think will be the effect of QE3 on the demand for gold and metals prices?
A: Our analysis regarding monetary accommodation, whether it’s quantitative easing or what the Fed calls “large scale asset purchases,” or maturity extension programs like that of the ECB or the Bank of Japan, the first thing you have to note is that since 2008 or 2009, each time the Fed or other monetary authorities have done a large scale asset purchase program, the economic results have diminished from the previous round, and the effects on asset markets – including gold and silver and copper and oil – have been diminished. So what you’re seeing, which the Fed has talked about during the past year, is diminishing returns, both in the real economic benefits the Fed seeks to promote, and in the asset prices, including commodities.
Our view is that the most recent asset purchase program will have very little positive effect on the economy and on metals prices, and that most of the effect on metals prices is already priced into the market. In addition, part of the effect on asset prices has been the inflationary expectations. But over the last three and a half years there has been no inflationary implication to these asset purchase programs. What you’ve actually seen is inflation deteriorating, and the threat of deflation becoming greater today in the U.S. and globally. These things could be inflationary at some point in the future, but monetary authorities know how to sterilize that inflationary implication should it start to appear.
One of the things you’re seeing in the markets right now is institutional investors saying, “In the past I bought into the inflationary thesis promoted by people selling assets (brokers and banks), so when I’ve seen these Fed programs I’ve gotten excited thinking that it’s going to be inflationary, and it hasn’t been. So when they come screaming at me, ‘You’ve gotta buy gold, you’ve gotta buy silver, you’ve gotta buy oil and copper’ because of the inflationary indications of the latest round of Fed monetary accommodation, I’m just drinking decaf coffee and saying, wake me when we see the inflationary implications.”
For the rest of the interview, visit the JLN Metals blog at jlne.ws/SHVNtp
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S.E.C. Regulators Turn to High-Speed Trading Firm
NATHANIEL POPPER and BEN PROTESS – New York Times
As billions of shares course through the stock market each day, investors rely on the government to keep up with Wall Street’s rapid-fire traders. But in an acknowledgment that the Securities and Exchange Commission has fallen behind the firms it regulates, the agency is turning to one of those high-frequency traders for help.
Fund Managers Struggle as Investors Turn Passive
CNBC via Yahoo! Finance
Fund managers used to be able to charge high fees even if their mutual funds underperformed markets, but now they need to find new ways to win back investors who have piled out of traditional actively-managed funds in a big way over the past decade, research from HSBC shows.
Record Crash Prompts Indian Exchanges to Seek New Limits
Indian exchanges asked the market regulator to narrow the range it allows some stocks to trade after erroneous orders caused a record plunge in the S&P CNX Nifty Index, according to officials familiar with the proposal.
Former SEC Watchdog Violated Ethics Rules, Review Finds
Robert Schmidt and Joshua Gallu – Bloomberg
The former internal watchdog for the U.S. Securities and Exchange Commission violated ethics rules by overseeing investigations that touched on people with whom he had “personal relationships,” an outside review found.
The Muni Bond Market, Mired in Its Past
By GRETCHEN MORGENSON – NYTimes.com
THE $4 trillion market in municipal bonds, which finances American life where it gets lived, is stuck in the Dark Ages. It has been for decades.
India Brokerage Seeks Annulment of Erroneous Trades
ASHUTOSH JOSHI – WSJ.com
The brokerage behind the erroneous $126 million of orders that led to a trading halt on India’s largest stock exchange Friday said it expects the exchange to annul the related trades, which it attributed to an error by a dealer.
Money Funds Face New Battle On Rules
KIRSTEN GRIND – WSJ.com
Barely a month ago, the money-market mutual-fund industry was celebrating its biggest political victory in years. Now it is gearing up for another fight.
UK’s Financial Services Authority Bans Payments From Discretionary Investment Managers To Advisers
Statement On Dodd-Frank Implementation And Compliance, CFTC Commissioner Chilton
Board Decisions Further Global Regulatory Reform And Strengthen IOSCO
ASIC launches online survey to hear from small businesses
Exchanges & Trading Facilities
Premium segment launched for trading corporate bonds
Deutsche Börse’s new premium corporate bond segment launches today. The first tradable bond is from Deutsche Börse AG (ISIN DE000A1RE1W1).
NGX Announces its Cleared Energy Products are Futures
Natural Gas Exchange Inc. (NGX), a wholly-owned subsidiary of TMX Group, today announces that its derivatives clearing organization (DCO) is clearing all NGX energy products as futures contracts under U.S. regulations.
[CBOE] Trader E-News
[CBOE] Portfolio Margin and Regulation SHO E-Mail Addresses
New “J” Origin Code For Joint Back Office Orders
Standard Monthly Option Expiration Date Move from Saturday to Friday
ISE Weekly Listings October 5, 2012
Hellenic Exchanges Monthly Statistics Bulletin For September 2012
TOM MTF Statistics Week 40
Borsa Italiana Monthly Update – September 2012
Hedge Funds & Managed Futures
Clueless Capital: An Interview With the World’s Youngest, Most Charmingly Oblivious Hedge Fund
New York Magazine
Last week, I wrote about a hedge fund, Lumina Investments LLC, that was run by three college students from North Carolina. The post was a send-up of how self-serious the students had made themselves appear on their website (“macro event-driven investing”) and in their résumés (“Mahoney, the firm’s specialist in global securities and derivative structures … ”). After posting it, I felt a little bad, having just ruined the dreams of a couple of kids who, I imagined, just wanted to do something productive with their bar mitzvah money.
Hedge Funds Trail Stock Rally With 0.6% September Return
Hedge funds rose 0.6 percent last month, trailing a global stock rally after the European Central Bank announced specifics of its bond-buying plan and the U.S. Federal Reserve said it would buy mortgage-backed securities.
Third Point’s subprime portfolio returns over 24% in 2012, firm sees increasing opportunities
Precy Dumlao, Opalesque Asia
The surge in subprime market gains helped propel Daniel Loeb’s Third Point to post 24.3% positive returns for its subprime portfolio so far this year. Indeed, the fund’s subprime portfolio posted the highest returns amongst its asset backed securities portfolios. Third Point’s Reremic gained 11.6%, CMBS posted 10.7%, and Other Collateral returned 9.1% as at end September this year.
Hedge Funds End Rout as Prices Reach Two-Month Low: Commodities
Hedge funds increased bullish bets on commodities for the first time in three weeks as prices dropped to a two-month low on signs of slowing Chinese growth and rising supplies of everything from crude oil to coffee.
Trouble Not as Close as It Appears
SPENCER JAKAB – WSJ.com
In the stock market, trouble comes when you least expect it. With the S&P 500 up 16% year to date ahead of Tuesday’s unofficial start of earnings season, and an unusual amount of short-term political and economic uncertainty, some fear investors have become complacent. But the fact the question is being asked so frequently is, in itself, evidence they aren’t.
Chuck Jaffe: In Vanguard, Schwab fee war, investors win
The fight between the Vanguard Group and Charles Schwab Corp. over which firm has the lowest-cost exchange-traded funds is a lesson in pennies saved being pennies earned.
CFTC.Gov Commitments Of Traders Reports Update
FTSE Launches Website For Vanguard Customers
To support Vanguard’s customers, FTSE has set up a website featuring the FTSE indices that will be benchmarks for Vanguard’s funds, at www.ftse.com/vanguard.
Banks & Brokers
JPMorgan Chase former risk chief retires
Crain’s New York Business
Barry Zubrow, who was head of risk management at JPMorgan Chase & Co. when the bank was building a dangerously large position in credit derivatives, is retiring. Zubrow, 59, will leave the company at the end of the year, according to an internal memo from CEO Jamie Dimon, which the bank released on Friday.
Morgan Stanley’s Chief Sticks by Debt Trading
New York Times
Despite prolonged troubles with fixed-income trading, Morgan Stanley has no plans to withdraw from the business, the firm’s chief executive told The Financial Times.
JPMorgan Loss Proves System Too Complex, China’s Gao Says
JPMorgan Chase & Co.’s $5.8 billion trading loss this year showed that the financial system is getting too complicated for even respected institutions, the president of China ’s sovereign-wealth fund said.
Lehman Brokerage Payout Nearer After $38 Billion Pact
Linda Sandler – Bloomberg
Defunct brokerage Lehman Brothers Inc., which hasn’t paid hedge funds after four years in liquidation, is nearer to making them whole after reaching a “critical milestone” in settling a $38 billion dispute with an affiliate, the trustee said.
Ben Tobin joins EBS as Director of Liquidity Management
EBS, ICAP’s market-leading electronic FX platform, today announces that it has appointed Ben Tobin to Director of Liquidity Management, reporting to Gil Mandelzis, EBS’s Chief Executive Officer.
E*TRADE Financial Corporation Announces Third Quarter 2012 Earnings Conference Call
E*TRADE Financial Corporation today announced that it will report its third quarter 2012 financial results after the close of the U.S. financial markets on Thursday, October 18, 2012.
Indexes & Products
Tokyo Stock Exchange: Constituent Change In TOPIX New Index Series
Java leads as high-performance language for mission-critical financial applications
Cinnober has today released a white paper addressing the benefits of using Java in mission-critical financial applications. The authors succinctly lay out its memory and processing advantages resulting in fast execution while at the same time avoiding unnecessary code complexity.
MarketPrizm Provides Low Latency Trading Infrastructure To LME
MarketPrizm, a leading provider of market data and trading infrastructure services, today announced that it has established its low latency trading infrastructure for clients at the London Metal Exchange (LME).
Volante Partners With Rapid Addition To Provide End-To-End Messaging Capability
Rapid Addition, the leading provider of trading technology to buy- and sell-side financial institutions, is collaborating with Volante Technologies (‘Volante’), a provider of integration technology which enables business information flexibility and agility, to create an end-to-end messaging capability that supports the full trade life cycle.
CFTC Releases Enforcement Division’s Annual Results – Agency Filed 102 Enforcement Actions, The Highest Number Of Cases Ever For The CFTC In One Year, Bringing The Two-Year Total To More Than 200 Actions
The Commodity Futures Trading Commission (CFTC) today announced that it filed 102 enforcement cases in fiscal year 2012 (FY 12). During the past two fiscal years, the Commission filed a total of 201 enforcement actions, representing a significant increase from past years. The Division of Enforcement (Division) also opened more than 350 new investigations in FY 12, among the highest annual count of new investigations in program history.
SEC Charges Four Brokers With Defrauding Customers in $18.7 Million Scheme
The Securities and Exchange Commission today charged four brokers who formerly worked on the cash desk at a New York-based broker-dealer with illegally overcharging customers $18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades.
Ex-LinkBrokers Employees Charged With Conspiracy, Fraud
U.S. prosecutors charged three brokers with making millions of dollars by lying about the prices of securities they bought and sold for clients.
[ASIC] Australian credit licence cancelled
Environmental & Energy
Should There Be a Price on Carbon?
The Wall Street Journal
What price carbon? That question is splitting even those who agree that government should be pursuing policies to promote clean energy.
**RKB — Good, quick access to some big thinkers here. Excerpts from WSJ Q&A with David Weisbach, a professor of law at the University of Chicago; Eileen Claussen, president of the Center for Climate and Energy Solutions; and Ted Nordhaus, chairman of the think tank Breakthrough Institute.
Commission seeks to speed up EU carbon market remedy
Talks are underway to hasten a deal to prop up the European Union’s ailing carbon trading scheme, a senior European Commission official said on Friday.
**RKB – Delbeke insists ETS is here to stay.
Japan May Meet Kyoto Emissions Cut Target, Ministry Estimates
Japan is on target to cut greenhouse gas emissions by an estimated average of 8 percent for the five years ending in March, meaning it will meet commitments under the Kyoto Protocol, the environment ministry estimated.
Japan’s Financial Services Agency: Exchange Of Letters (EOL) With Malaysia AOB On Cooperation In The Area Of Audit Oversight
Financial Services Agency (FSA) and Certified Public Accountants and Auditing Oversight Board (CPAAOB) exchanged the Letters on cooperation in the area of audit oversight with the Audit Oversight Board (AOB) of Malaysia on October 3, 2012.
Singapore Exchange Regulatory Update – Disclosure Of Interests Provisions For Listed Entities
Monetary Authority Of Singapore Simplifies And Enhances Requirements On Disclosure Of Interests In Listed Entities
ADX Receives Korean Exchange Bank
Dubai Aluminium Selects SunGard’s AvantGard for Treasury and Risk Management
Dubai Aluminium (DUBAL), one of the world’s largest single site aluminum smelters and the industrial flagship of the United Arab Emirates, has selected SunGard’s AvantGard Treasury (Quantum) for treasury management and hedge accounting. The solution will also help DUBAL manage foreign exchange, interest rate and commodity risk.
Pakistan Sukuk Rules, Nifty Index Rout, SEC: Compliance
Pakistan has drafted rules to develop the Islamic capital market as the central bank seeks to increase assets that comply with religious tenets to 15 percent of the total in five years.
Qatar National Bank Quarterly Profit Rises 11% as Lending Climbs
Qatar National Bank , the Middle East’s biggest lender by assets, posted an 11 percent increase in third-quarter profit as lending climbed. Net income rose to 2.11 billion riyals from 1.9 billion riyals a year earlier, the Doha-based lender said in a statement posted on the Qatar Exchange.
Egyptian Exchange: New System Of Calculating Closing Prices Is Active As Of 4 October 2012
Dr. Hassan Ghalibaf Asl Has Been Re-Elected As The CEO Of Tehran Stock Exchange
Malawi Stock Exchange Weekly Report
MCX Weekly Market Report September 28, 2012 – October 04, 2012
National Stock Exchange Of India Statement On Brief Halt In Trading In Cash Market Due To Erroneous Orders
Sallie Krawcheck Tells Us What She’s Been Doing Since Leaving Merrill Lynch
It’s been over a year since Sallie Krawcheck left her post as head of global wealth management at Merrill Lynch. We asked her what she has been doing these days.