NYSE and Nasdaq consider helping each other out with the stability of their exchange availability and technology. In another heartwarming tale of “hands across enemy lines”, Deutsche Bank is said to be talking with rivals about creating a new bond trading platform. And rounding out today’s feel-good headlines, Nasdaq plans to create a startup nest of sorts in which young tech companies can be incubated.
ISDA’s Robert Pickel Discusses the State of Cross-Border Regulation of Swaps (Part 1)
Robert Pickel is the CEO of the International Swaps and Derivatives Association (ISDA). Since joining ISDA in 1997, Pickel has worked to promote and advocate for OTC market participants and work with international regulatory bodies to harmonize regulation across jurisdictions. Pickel spoke with John Lothian News editor-at-large Doug Ashburn about the cross-border issues that are still “works in progress,” an international standard for initial margin currently under development at ISDA, and the status of trade repositories around the world.
IntercontinentalExchange to Launch ICE Swap Trade for OTC Energy Markets
IntercontinentalExchange, a leading operator of global markets and clearing houses, announced that it will provide trade execution services for its financially settled, bilateral over-the-counter energy markets through ICE Swap Trade, ICE’s swap execution facility, which is expected to launch on October 2, 2013.
***** Get ready to SEF like you have never SEFed before.
NYSE Euronext Named a Top Leader in Disclosure and Performance in Annual CDP S&P 500 Climate Change Report
NYSE Euronext today announced that it has been named to the CDP S&P 500 Climate Disclosure Leadership Index (CDLI) for the fourth year in a row, and has also been named to the CDP S&P 500 Climate Performance Leadership Index for the second year in a row. In addition, the company continues to be the only global exchange operator to be named to these indices.
***** Why break a sweat when you are being acquired by ICE.
LCH.Clearnet reshuffles management amid chief search
Philip Stafford – FT.com
The transatlantic clearing house, now 59 per cent controlled by the London Stock Exchange Group, has given interim executive powers to its chairman while it continues to search for a new group chief executive.
***** Unfortunately, Craig Donohue is already taken.
Five-year silver probe is closed – FT.com
Gregory Meyer in New York
The US commodities regulator has said it failed to uncover evidence of illegal trading after a five-year investigation into the silver market. The rare announcement by the Commodity Futures Trading Commission came after its enforcement staff spent more than 7,000 hours reviewing transaction data and interviewing witnesses, the agency said.
***** Here is challenge for you. Find a picture or video of Andrew Maguire, the London metals trader who supposedly gave evidence to the CFTC about manipulation in the silver markets. Why are there no pictures of him?
***JM: I heard that Maguire is sharing a flat with Satoshi Nakamoto (the shadowy inventor of Bitcoin).
CFTC Closes Investigation Concerning the Silver Markets
***** This is the second significant investigation into the silver markets by the CFTC in the last 10 years. I doubt it will be the last, as the tin hat crowd complaints will crescendo again in the years to come.
ICAP settlement a blow to Michael Spencer, epitome of City
Philip Stafford – FT.com
ICAP’s settlement with global regulators is a personal blow to Michael Spencer, one of the City’s richest and most high-profile businessmen.
***** Yes, it is. But he will survive and recover from this. Entrepreneurs are a tough breed.
MarketAxess SEF And Traiana Complete Live Trade With Pre-Trade Credit Checks
Traiana and MarketAxess SEF Corporation today announce the completion of the first live credit default swap (CDS) index trade using Traiana’s CreditLink service as the credit hub to verify pre-trade credit limits. JP Morgan acted as the clearing member for the major buy-side participant on the trade.
***** The week before the Oct. 2 deadline.
Fed policy was not leaked early, says study
Arash Massoudi in New York and Robin Harding in Washington – FT.com
A leading high-frequency trading firm said on Wednesday that the US Federal Reserve’s September decision on monetary policy did not leak to market participants early, contradicting claims by the Chicago-based research firm Nanex.
***** I like Virtu’s explanation better.
CBOT Building OpenHouse
The Chicago Board of Trade Building is participating in OpenHouse Chicago on October 20 and will open its doors and Vault Doors to the public. If you ever wanted to check out the CBOT Building’s Vault, this is your chance. You can find out more information about the CBOT Building and the OpenHouse Chicago website at jlne.ws/15wpZ8e
***** The Chicago Board of Trade Building has a giant vault in its basement that was used to hold gold and silver. The exchange got out of the metals storage business when the vault was too small to handle the demand for metals storage. Check it and other aspects of the CBOT Building during OpenHouse Chicago.
Brookfield buys CME Group’s NYMEX building -NY Post
CME Group Inc‘s New York Mercantile Exchange building, home of the city’s commodity trading pits, has been sold to a unit of Toronto-based Brookfield Asset Management Inc, the New York Post newspaper reported on Wednesday.
***** Did the CME sell the KCBOT Building yet too?
‘NSEL client money used for defaulters’
The National Spot Exchange has used clients margins money to fulfill obligations of defaulters. This was revealed by Grant Thornton, the forensic auditor of the NSEL, which submitted its report to the exchange on September, forwarded to the Forward Markets Commission (FMC) on Wednesday, the regulator overseeing Rs 5,600 crore payment crisis of the Financial Technologies group spot exchange.
***** Sounds like this is becoming a giant ponzi scheme.
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NYSE, Nasdaq Consider Cooperating to Address Glitches
JACOB BUNGE – WSJ.com
With technology glitches becoming more common, the country’s two stock-exchange giants are pondering a scenario some might have considered unlikely: teaming to protect one another in the event of breakdowns.
Deutsche Bank Said to Propose Creating Bond Platform With Rivals
Matthew Leising – Bloomberg
Deutsche Bank AG (DBK) is trying to drum up interest with some of its largest competitors to create a multi-dealer U.S. bond trading platform at the same time that asset managers discuss ways to make buying and selling debt easier, according to people familiar with the matter.
Nasdaq plans to incubate young tech companies
New York Post
Nasdaq CEO Bob Greifeld isn’t sweating Twitter’s stock listing. While the exchange boss is expected to lose the high-profile deal to archrival the New York Stock Exchange, Greifeld is looking to get the inside track on the next hot crop of young tech companies before they go public.
CFTC Issues Notices of Temporary Registration as a Swap Execution Facility to tpSEF Inc. and Tradition SEF, Inc.
The U.S. Commodity Futures Trading Commission has approved the applications of tpSEF Inc. and Tradition SEF, Inc. for temporary registration as swap execution facilities pursuant to section 5h of the Commodity Exchange Act and section 37.3(c) of the Commission’s regulations.
‘Lord Libor’ trio put ICAP at heart of rate-rigging scandal
Caroline Binham and Philip Stafford in London and Kara Scannell in New York – FT.com
Three former interdealer brokers including one dubbed “Lord Libor” were charged with wire fraud and conspiracy on Wednesday as their former employer ICAP was revealed by US and UK authorities as a linchpin in the global rate-rigging scandal.
Citigroup to Pay $395 Million to Settle Freddie Mac Claims
Citigroup has agreed to pay $395 million to the government-controlled mortgage finance company Freddie Mac to settle claims on home loans it had sold to it.
Bank physical commodity trading is desirable, not essential
Mark Pengelly – Risk.net
In an effort to convince regulators of the merits of physical commodity trading by banks, the Securities Industry and Financial Markets Association commissioned a report by Colorado-based research firm IHS, which was released on September 19. That report includes five case studies that demonstrate exactly what banks do in physical commodities, and laments that their role is essential but poorly understood.
Greece does not need third bailout, seeks debt ‘reprofiling’ – deputy PM
Greece does not require a third bailout and can cover its needs without further burdening its current backers, by improving the terms of its debt and possibly returning to the bond market next year, the country’s deputy prime minister said on Wednesday.
[Icap – Libor] What traders shouldn’t say over the phone or email, via the CFTC
Are We on Our Way to Basel IV?
Mayra Rodriguez Valladares – TabbFORUM
The Basel Committee unexpectedly admitted that Basel III may have become too complex. In indicating a willingness to rethink the risk-weighted asset methodology for risk measurement, however, the committee may well be on its way to making Basel III even more complicated.
US lawmakers pressure CFTC over new rules
Gina Chon in Washington – FT.com
A bipartisan group of US Congressmen sent a letter on Wednesday to the Commodity Futures Trading Commission to express concerns that farmers will face increasing costs as part of customer protection rules that the agency is finalising.
Britain Sues Over Caps on Bankers’ Bonuses
JULIA WERDIGIER – NYTimes.com
Britain said on Wednesday that it had filed a lawsuit at the European Court of Justice contesting a proposed cap on bankers’ bonuses.
The new economics of investment banking
William Wright – Financial News
A spoonful of sugar may make the medicine go down, as Mary Poppins said/sang. But, when it comes to reform, regulators really don’t care whether the banks choke on their new rules.
Regulatory Harmonization, Not Imperialism: A Workable Cross-Border Framework – Keynote Address By CFTC Commissioner Scott D. O’Malia, The Global Forum For Derivatives Markets (34th Annual Burgenstock Conference), Geneva, Switzerland
Statement Of SEC Chair Mary Jo White At The SEC Open Meeting – Municipal Advisors And Pay Ratio Disclosure
Statement Of CFTC Chairman Gary Gensler On Settlement Order Against ICAP
“Champagne And Ferraris” – Statement Of CFTC Commissioner Bart Chilton On The ICAP Order
50 new Ville de Montréal contracts now covered under Integrity in Public Contracts Act
The Autorité des marchés financiers (“AMF”) wishes to inform business enterprises bidding on 50 new contracts covered by the latest Order in Council – Certain contracts of Ville de Montréal that they must first file an authorization application with the AMF by the bid submission deadline.
[India] Private Equity funds face ‘associate’ googly
Private equity (PE) firms picking substantial minority stakes in companies might have to prepare themselves for additional compliance requirements under the new Companies Act. The new law introduces a new concept of associate companies.
Exchanges & Trading Facilities
LSE lands deal for Italian retail platform
Tim Cave – Financial News
The London Stock Exchange Group has beaten off competition from rival exchanges, including Nasdaq OMX and the Six Swiss Exchange, to acquire a controlling stake in an Italian retail bond trading platform.
NYSE Euronext Lisbon and ATP work in partnership to attract more companies to the Stock Exchange
oday, NYSE Euronext Lisbon (Portuguese Stock Exchange) and the Associação Têxtil e Vestuário de Portugal (ATP, the Portuguese Association of Textiles and Clothing) are signing a cooperation agreement with the aim of encouraging and supporting the listing of new companies on the Stock Exchange.
NASDAQ OMX Introduces Trading In Actively-Managed Funds
NASDAQ OMX today introduces trading in Actively-Managed Exchange Traded Funds in Sweden and Finland. Actively-Managed ETF is a new type of product in the Nordic countries and aims for greater return on investment through active management, compared to passively-managed ETFs which track a predefined index.
CBOE Holdings Announces Date Of Third-Quarter 2013 Earnings Release And Conference Call
CBOE Holdings, Inc. (NASDAQ: CBOE) will announce financial results for the third quarter of 2013 before the market opens on Friday, November 1, 2013. A conference call with remarks by CBOE Holdings, Inc. senior management will begin at 7:30 a.m. Central Time.
NYSE Group Inc. Issues Short Interest Report
Oslo Børs: Appeal On Violation Charge Forwarded To The Stock Exchange Appeals Committee
Hedge Funds & Managed Futures
Cohen’s SAC Capital up 13 percent for year: source
Steven A. Cohen’s SAC Capital Advisors hedge fund has posted strong returns so far this year even as it deals with a criminal indictment charging the $14 billion fund with being a breeding ground for insider trading.
BOE Sets Sights on Hedge Funds as Potential Stability Risk
MARGOT PATRICK AND JASON DOUGLAS – WSJ.com
The Bank of England on Wednesday trained its sights on hedge funds as a potential source of instability in the financial system, underscoring regulators’ increasing concern about risks that might develop outside banks and other big institutions.
U.S. judge won’t dismiss Argentine central bank from bondholder case
Argentina’s central bank lost a bid Wednesday to dismiss a lawsuit by bondholders seeking to hold it responsible for the country’s obligations on defaulted debt, in the latest victory for holdout creditors.
Hedge backtesting for model validation
Lee Jackson – Risk.net
Derivatives pricing and expected exposure models must be backtested as a basic regulatory requirement. But what does this mean exactly, and how can it be used to reserve against model risk? Lee Jackson introduces a general backtesting framework for market-calibrated models, making the link with financial theory, and shows how it can inform recalibration and help insulate banks from model failure
Chicago can’t let Archer Daniels Midland move its headquarters elsewhere
Joe Cahill – Crain’s Chicago Business
Archer Daniels Midland Co. put Chicago in another must-win contest this week, when the grain processor announced plans to move its headquarters from downstate Decatur to a yet-to-be-determined larger city.
ADM expects GrainCorp deal by year-end, new Australian govt key
Archer Daniels Midland Co said it expects to complete its acquisition of Australian grain handler GrainCorp Ltd by the end of the year, as it hangs on approvals from Australia’s new government and other regulators.
Banks & Brokers
JPMorgan in talks to settle government probes for $11 billion: sources
JPMorgan Chase & Co is in talks with government officials to settle federal and state mortgage probes for $11 billion, two people familiar with the matter said on Wednesday.
***JM: As an alternative, maybe they could create an ongoing payment agreement where in exchange for paying the regulators a billion a year, they can do whatever they want.
J.P. Morgan Possible Settlement: Nearly Two London Whales
David Benoit – MoneyBeat – WSJ
Even to J.P. Morgan, $11 billion is no small chunk of change. The new amount being discussed in a potential settlement, which includes payments to borrowers, would be far bigger than any fine the bank has paid and would likely settle many claims against it, if it can be reached.
Libor scandal shows pressures on ‘honest brokers’
Evidence that interdealer brokers at ICAP conspired to rig Libor for a bank trader raises questions over such firms’ role as honest go-betweens among banks and highlighted the pressure customers can put on them.
Things Traders Say, ICAP Edition
WILLIAM ALDEN – NYTimes.com
Curry meals, steaks, Champagne and a Ferrari. Those were some of the rewards promised to brokers at the financial firm ICAP in exchange for helping to manipulate the benchmark London Interbank Offered Rate, or Libor, according to American and British regulators, which fined the firm a combined $87 million on Wednesday.
Think the Icap Libor Fine Is Small? Think Again
Phillipa Leighton-Jones and David Cottle – MoneyBeat – WSJ
In simple terms the penalty levied on London-based broker ICAP for the alleged participation of some of its staff in rigging the Libor rate is much less than the fines handed down to Barclays, the Royal Bank of Scotland and UBS.
Barclays to shut wealth management services in 130 countries
Barclays Plc will stop offering wealth management services in about 130 countries by 2016 and cut jobs in the unit as part of an effort to rein in costs and boost profit.
Citigroup moves to block new arbitration by Abu Dhabi fund
Citigroup Inc has gone to court to block a new effort by Abu Dhabi Investment Authority to pursue an arbitration over a $7.5 billion investment the sovereign wealth fund made in the bank amid the subprime mortgage meltdown in 2007.
Macquarie Boosts U.S. Equities Arm
Gillian Tan – MoneyBeat – WSJ
Australian investment bank Macquarie Group Ltd. has continued to bolster its U.S. equities arm, hiring the former head of sales for KCG Holdings Inc.’s institutional electronic trading unit, Knight Direct.
RBS too big in UK inflation swap market, says RBS market risk chief
Matt Cameron – Risk.net
The positions built up by Royal Bank of Scotland (RBS) in the UK inflation swap market are too large, according to Martyn Brush, chief risk officer for RBS Markets and global head of traded market risk for the bank. Brush said the size of the positions would be a problem if banks – including RBS – were downgraded and counterparties chose to exercise ratings-triggered termination clauses in their trades.
Deutsche Bank warns of lower investment bank revenue
Deutsche Bank warned that investment banking revenue would be significantly lower in the third quarter and it will set aside more money to deal with litigation.
Former Booz & Co chief joins Ondra
Giles Turner – Financial News
The former chief executive of management consultant Booz & Co has joined London-based advisory boutique Ondra Partners as a senior adviser.
New Designation For Financial Advisors Seeks To Reassure Skeptical Consumers | Reuters
The American College of Financial Services announced today that it is launching the Financial Services Certified Professional designation – a rigorous program designed to help advisors understand client needs in a comprehensive manner rather than directly “selling product” without due diligence.
Clearing & Settlement
LSEG confirms LCH.Clearnet Management Changes
Indexes & Products
BlackRock launches short-maturity bond ETF
BlackRock Inc, the largest provider of exchange-traded funds through its iShares business, is set to launch a new actively managed ETF focused on short-maturity bonds that will begin trading Thursday.
REDI and Citadel Technology Tackle the “Holy Grail”
Ivy Schmerken – Wall Street & Technology
REDI Global Technologies, the recent financial technology spinoff from Goldman Sachs, struck a partnership Citadel Technology to provide an integrated order execution management system or OEMS, to the buy side community.
TMX Atrium Upgrades Frankfurt To Amsterdam Route – Further Enhancing The TMX Atrium European Connectivity Fabric
SEC Charges CEO of Video Game Company and Purported Consultant in Revenue Inflation Scheme
The Securities and Exchange Commission today announced charges against the founder of a religious-themed video game manufacturer and his friend for scheming to falsely inflate the company’s revenue by nearly 1,300 percent in a one-year period through sham circular transactions.
CFTC Charges ICAP Europe Limited, a Subsidiary of ICAP plc, with Manipulation and Attempted Manipulation of Yen Libor
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order against ICAP Europe Limited (ICAP), an interdealer broker, bringing and settling charges of manipulation, attempted manipulation, false reporting, and aiding and abetting derivatives traders’ manipulation and attempted manipulation, relating to the London Interbank Offered Rate (LIBOR) for Yen.
NFA Regulatory Actions: FX Bootcamp LLC and Wayne A. McDonell
UK’s Financial Conduct Authority Fines Clydesdale Bank £8.9 Million For Failing To Treat Its Mortgage Customers Fairly
FCA review of medium-sized firms’ PPI complaints handling finds significant room for improvement
The Financial Conduct Authority (FCA) today published the findings of a complaints handling review of 18 medium and small sized firms currently handling payment protection insurance (PPI) complaints.
Jefferies to pay $7 mln in auction-rate securities arbitration
Investment bank Jefferies Group LLC, a unit of Leucadia National Corp, has been ordered by an arbitrator to pay $7 million to an investor over an auction-rate securities dispute.
Environmental & Energy
EU to Defend Limited Carbon Market for Airline Emissions
The European Union signaled it will defend its right to continue a limited carbon market for airlines until 2020 under a deal being discussed at a meeting of the International Civil Aviation Organization.
Abbott May Lack Company Support for Killing Aussie Carbon Price
Australia’s new prime minister can’t count on big polluters to support his plan to stop charging them for greenhouse-gas emissions, according to the Carbon Market Institute.
EPA chief hits road to sell climate change rules
The Hill’s E2 Wire
Environmental Protection Agency Administrator Gina McCarthy is ramping up her PR campaign to win backing for carbon emissions limits for power plants.
Japan opens door to foreign hedge funds
Roxane McMeeken – Financial News
There are only a handful of home-grown hedge funds in Japan but changes to the rules for asset managers last year have made it easier to launch an investment management business. However, significant barriers to entry remain in the country.
China banks face daunting money squeeze
Henny Sender – FT.com
The path of financial reform in China is becoming ever more tortuous. Bankers gathered at a Singapore summit last weekend say the next step on the path is interest rate deregulation, which could come in the next 18 months, bringing in its wake myriad headaches both for the banks and for many of their customers.
Asian countries face swaps reform challenge
Anish Puaar – Financial News
Regulators in Asia’s emerging economies need to take a cautious approach when drafting new rules for over-the-counter derivatives markets to avoid pushing large international banks to other jurisdictions, according to a new report.
South Korea Woos Foreign Capital
Kanga Kong and Isabella Steger – MoneyBeat – WSJ
South Korea is taking steps to encourage private-equity investment, but regulators and investors say the stigma of foreign capital is still something the country has to grapple with.
Templeton Closes Frontier Fund to New Investors on Record Inflow
Templeton Emerging Markets Group closed its fund that invests in the least-developed markets to new money, as record cash inflows turn stock indexes from Dubai to Argentina into the world’s best performers this year.
FT shareholders find AGM a disappointment
The 25th annual general meeting (AGM) of Financial Technologies Ltd, promoter of crisis-ridden National Spot Exchange Ltd (NSEL), saw a fair amount of turmoil inside and outside the venue, though it finally didn’t amount to anything substantial.