John Lothian Newsletter: CFTC Approves Tradeweb Swap Execution Facilities, Hedge Funds Cut Back on Fees, Citigroup to close trading desks on CBOT floor: source

Sep 9, 2013

TradeWeb to open two swap execution facilities.  Hedge funds under pressure to lower fees. The trading floor on the CBOT is a little emptier after Citigroup closed its trading desks there.

First Read

Joseph Granville, Bearish Stock Newsletter Publisher, Dies at 90
By Nikolaj Gammeltoft
Joseph Granville, a newsletter writer and technical analyst who moved stock markets with bearish calls in the 1970s and ’80s, has died. He was 90. Granville died in a hospice in Kansas City, Missouri, said Laurel Gifford, a spokeswoman for St. Luke’s Health System. No cause of death was provided. The Kansas City Star newspaper reported that he died on Sept. 7.

***** If you were were around in the 1980s, you knew the name Joe Granville. Interesting fact: Joe Granville attended high school in Woodstock, IL, the same town where the movie “Groundhog Day” was filmed.


Eric Miller, Noted Strategist of 1980s Bull Market, Dies at 85
Eric T. Miller, the longtime chief strategist for Donaldson Lufkin & Jenrette who called the stock-market bottom in 1982 and became a go-to analyst of the bull market that followed, has died. He was 85.


Updates from the management of the CBOT Building from their Facebook page

Thank you for your patience during the current elevator construction. Here is a sneak peak update: new elevator openings for elevator cars 1A – 4A are being installed this month; which includes extending the existing flooring and the installation of new steel beams and elevator doors.










We hope you had a fun filled Labor Day weekend, here is a sneak peek at how we spent our Labor Day: The new escalator and ceiling grid for the 2nd floor lobby renovation has been installed! Our next and current task is the installation of glass railings and trims for the escalator. Take a look at our photo for a sneak peak.

**** The CBOT Building is a sponsor of MarketsWiki.  They are working hard on rehabbing the building, especially the first and second floor, including a new 2nd story lobby.  Here was there updates from their Facebook homepage.


Financial Crisis: Lessons of the Rescue, A Drama in Five Acts
David Wessel – The Wall Street Journal
Five years after the near-collapse of the global financial system, Americans could justifiably celebrate victory. After all, the U.S. economy is growing, and, measured per capita, is back to where it was before the crisis. Unemployment is falling. Banks have regained their vigor and paid back nearly all the $245 billion taxpayers pumped into them. The stock market has recovered all the ground it lost. So has household net worth.

****** What financial crisis?


CFTC to Vote Again on Commodities Speculation Limits
Regulators are making a second run at a rule designed to limit speculation in commodity markets, a year after the Commodity Futures Trading Commission’s initial attempt was tossed out by a federal court.

****** I would like to limit the CFTC’s limits on positions.


Inside the End of the U.S. Bid to Punish Lehman Executives
At a closed-door meeting in early 2011, Wall Street regulators were close to throwing in the towel on their biggest case. The Securities and Exchange Commission’s eight-member Lehman Brothers team, having hit one dead end after another over the previous two years, concluded that suing the bank’s executives would be legally unjustified.

****** What financial crisis?


FIA Releases Drop Copy Recommendations
The Futures Industry Association today released a set of recommendations for increasing the usefulness of drop copy systems in exchange-traded markets. Drop copy systems, which provide a way to monitor trading activity in very close to real-time, are currently offered by many trading venues and have become a critical component in the risk management processes of brokers, trading firms and end-users. The purpose of the FIA recommendations is to promote the wider adoption and increased standardization of drop copy functionality. The FIA paper also recommends extending drop copy functionality to all types of trading venues and incorporating additional features to meet regulatory reporting requirements and other needs.

***** I loved drop copies for real-time risk management, back in 2000.


New venues put cat among the pigeons
Anish Puaar – Financial News
The coming revolution in how derivatives are traded and cleared is spawning contenders to NYSE Euronext-owned Liffe and Deutsche Börse’s Eurex, which have dominated the European markets in interest rate futures for years.

****** I don’t eat pigeon and I don’t like cats. I don’t even like cats that eat pigeons.


Settlement reached in Reserve Primary Fund lawsuit
Money market pioneer Bruce Bent and others involved in the management of Reserve Primary Fund have reached a settlement worth at least $54.5 million in a shareholder lawsuit stemming from the fund’s collapse at the height of the financial crisis.

***** What financial crisis?


Peregrine Founder Wasendorf to Face Questions From Son
A judge ruled Friday that Russell Wasendorf Sr., the founder of Peregrine Financial Group Inc., can face questions from his son as both confront a lawsuit from customers of the failed brokerage firm.

******* And he is going to tell the truth now because……


G-20 Ignores Elephant in Room: Unstable Global Financial System
Michael J. Casey – The Wall Street Journal
Imagine the frustrations of Indian, Indonesian and Brazilian delegates to the Group of 20 summit in St. Petersburg last week. Throughout the summer, their currencies got clobbered — the Indian rupee was down almost 20% between May and the end of August – all because of decisions made thousands of miles away at the U.S. Federal Reserve in Washington.

******* A little taper never hurt anyone.


Rising interest Rates – A Game Changer
Matthew Bradbard and Kevin Davitt, RCM Asset Management
With Markets now focused on ‘When’ not ‘IF’ the Fed will start Tapering, it is high time for market participants to examine their portfolios and intelligently position thems3elves for a rise in interest rates. Take advantage of managed futures and take a more nuanced approach to diversifying your portfolio than simply taking a long-term bearish stance on bonds/bullish stance on rates. (PDF)

***DA: Managed futures can be used as a “taper-killer” according to this white paper.


Leigh Faber

Leigh Faber Discusses Family Offices and Allocating to Managed Futures

Leigh Faber is a veteran of the alternatives space, who has conducted over hundreds of due diligence reviews in her career on behalf of family offices. She has covered hedge funds, commodity trading advisors, private equity, venture capital, and other alternative investments. She spoke with John Lothian News editor-in-chief Jim Kharouf about the differences between family offices and other institutions when seeking an allocation to managed futures. The key, according to Faber, is education – on both sides. Managers must explain performance, investment strategy and risk in an easy-to-understand manner, and managers themselves must be sensitive to the nature of family office wealth and how objectives may differ from those of pensions and endowments.

Watch the video »


MarketsWiki Page of the Day
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Lead Stories

CFTC Approves Tradeweb Swap Execution Facilities
Tradeweb Markets, the leading global provider of fixed income and derivatives marketplaces, announced it has received temporary registration approval for its two wholly-owned swap execution facilities (SEFs) from the Commodity Futures Trading Commission (CFTC).

Hedge Funds Cut Back on Fees
Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2% of assets under management and 20% of investment profits on the endangered list.

White House considers top female Treasury official for Federal Reserve post, sources say
Ylan Q. Mui – The Washington Post
The White House is considering nominating a top female official at the Treasury Department to fill one of the vacant seats at the Federal Reserve, according to two people familiar with the process, amid criticism over the role of women in the Obama administration.

Citigroup to close trading desks on CBOT floor: source
Julie Ingwersen | Reuters
Citigroup Inc will close its trading desks on the Chicago Board of Trade’s grain and financial floors at the end of September and will move most of its floor staff to Citi’s office in Chicago, a source familiar with the situation told Reuters on Friday.

NYSE Euronext to Invest in Start-Up for Private Stock Placements
Since its origins under a buttonwood tree over 200 years ago, the New York Stock Exchange has billed itself as a top place for companies to list their publicly traded stocks. But with a new investment, the Big Board’s parent company is looking to get into the business of private placements.

Sebi inks info-exchange pacts with 31 Eropean regulators
Business Standard
For a greater oversight of hedge funds and other Alternative Investment Funds (AIFs) with cross-border presence, Sebi has reached regulatory cooperation and information exchange pacts with its counterparts in 31 European countries.

U.S. regulators in talks with EU on energy price probe
U.S. regulators are in talks to join European officials in their investigation of the oil markets, a European politician said, as both sides hunt for signs that trading benchmarks have been compromised.

Fired MF Global workers to appeal dismissal of lawsuit
MF Global employees fired after the broker’s epic collapse will appeal a court ruling dismissing their allegations that they were not given proper notice of their terminations.

Where the lines between members, clients blur
Business Standard
All those mentioned in the list of defaulters to National Spot Exchange Ltd (NSEL) with addresses in Andhra Pradesh are either producers, or connected to producers, or importers of sugar, steel ingots, chrome and coal. However, none of them was ready to explain why they ended up as defaulters if the money was paid only in exchange of goods.

NSEL payments: Some small investors still left out
Business Standard
Although the crises-ridden National Spot Exchange Ltd (NSEL) has come out with a special payout to its small investors, as many as 41 such investors, mainly from Ahmedabad, claim to have been left out.

Why Have Markets Learned Nothing in the Last 50 Years?
By Matt Levine
An editorial last week about financial market liquidity, by my new colleagues at Bloomberg View, cited this fascinating paper by Jennie Bai, Thomas Philippon and Alexi Savov called “Have Financial Markets Become More Informative”?* The answer is no.

Weil on Finance: Lehman Brothers and Tulip Mania
By Jonathan Weil – Bloomberg
Happy Monday, View fans. Here’s a look at some of what I’ve been reading this morning.


EC poised to row back on commodities benchmarks
Suzi Ring – Financial News
The European Commission looks set to row back on a number of controversial proposals to regulate commodities benchmarks, contained within its wider benchmark reform, after an industry backlash arguing the new rules would make the market more opaque.

Now or Never for Japan Reforms
Aaron Black – The Wall Street Journal
Japan is in a celebratory mood. While the public is euphoric at winning the race to host the 2020 Olympic Games, investors are toasting figures showing brisk economic growth. But to ensure a true national revival, Japan’s leaders must seize this moment to push forward with difficult reforms.

BSE, NSE ask Sebi for clarity on listing norms for bourses
Business Standard
More than a year after Sebi allowed them to get listed, the stock exchanges have sought clarity from the market regulator on the applicable rules and procedures governing their listing.

Basel bites banks’ interest rate derivatives trading
Anish Puaar – Financial News
New data from the Bank for International Settlements has shown the lowest level of bank-to-bank trading of interest-rate derivatives for almost 20 years, offering evidence that banks have brought balance sheets under control in light of new capital and liquidity rules.

Basel Needs Help Combating Money-Laundering
Mayra Rodriguez Valladares – TabbFORUM
Lax controls on money laundering and the financing of terrorism increase operational risk, which is neglected by most bank management and can negatively affect a bank’s earnings and capital.

FSA Weekly Review No.62 September 9, 2013 : Financial Services Agency

Exchanges & Trading Facilities

NYSE Euronext Hikes EU Cash Feed Prices, Introduces New Delayed Data Fee
Faye Kilburn – WatersTechnology
NYSE Euronext is increasing the price of its European cash market data feeds and indexes, and also plans to introduce new license fees for redistribution of delayed versions of the products, to bring its policy into line with industry standards, Inside Market Data has learned.

Warsaw exchange looks beyond borders for growth
Tim Cave – Financial News
Adam Maciejewski, in his eighth month as chief executive of the Warsaw Stock exchange, is a man in a hurry. The 19-year WSE veteran was handed a one-year contract in January, sources familiar with the situation said, to improve the bourse’s tarnished reputation and diversify it into new asset classes and geographies.

BATS Tests Disaster Recovery Site for US Businesses for 2nd Time in 2013
Ivy Schmerken – Wall Street & Technology
BATS Global Markets said that it successfully operated its US businesses from its disaster recovery (DR) site yesterday as part o its business continuity planning process. This marked the second time that BATS has operated its US businesses from it DR site, with the first time occurring in March 14th.

Toronto Stock Exchange Reaches A New Exchange Traded Product Milestone
Toronto Stock Exchange (TSX) today announced that it now has more than 300 exchange traded products (ETPs) listed. Purpose Investments Inc. listed five exchange traded funds (ETFs) this week, which enabled TSX to achieve this new milestone.

Nyse Mkt To Delist Securities Of Geopetro Resources Company

TMX Group Equity Financing Statistics – August 2013

TOM MTF Statistics Week 36, 2013

Program Trading Averaged 28.7 Percent f NYSE Volume During Aug. 26-30

Hedge Funds & Managed Futures

FTfm survey: Fund market rocked by sexism claims
By Madison Marriage
One in two female fund management staff have been subjected to regular harassment or sexist behaviour in the office, shattering the illusion that asset management represents the softer side of financial services.

Norway Conservatives look to part-privatise companies
Richard Milne in Oslo –
Norway’s probable next government is looking to part-privatise a slew of state-owned companies as eight years of centre-left rule seems set to come to an end.

Private equity has little success with legal buyouts
Becky Pritchard – Financial News
It was dubbed the “big bang for lawyers” and was supposed to drag law firms into a modern era, allowing private equity and other external investors to sink their money into the legal sector for the first time. But since the Legal Services Act came into force in January 2012, there has been precious little dealflow to show for it.

Behavioral Indicator Vendor Titan TA Closes
Max Bowie – WatersTechnology
Titan Trading Analytics, the Edmonton, Canada and Atlanta, GA-based provider of trading signals based on behavioral analytics, has shut down as a result of “financial difficulties” and an inability to meet its financial obligations, Inside Market Data has learned.

Meet the 2013 Rising Stars of Asset Management
Financial News
This is the third FN 40 Under 40 Rising Stars of Asset Management, Financial News’ editorial pick of the brightest up-and-coming men and women in the industry.

When Half-Right Forecasts are Deadly
Joshua M Brown | The Reformed Broker
PIMCO got it half-right with its New Normal forecast early in the post-crisis period – they nailed the economic environment we’d be in but completely missed one of the top ten stock market rallies of all time.

Argentina asks U.S. court for rehearing in fight with bondholders
Argentina urged a U.S. appeals court Friday to reconsider an order last month requiring it to pay $1.33 billion in favor of hedge funds that have refused to participate in two debt restructurings that sprang from Argentina’s 2002 default.

CFTC Commitments Of Traders Reports Update

Banks & Brokers

Culture clash means banks must split, says former Citi chief
By John Authers
If anyone is qualified to judge the success of combining investment and commercial banks in the same institution, it is John Reed. As chief executive of Citicorp in the 1980s and 1990s, he evangelised the attempt to create a “one-stop shop” selling many different products and took the bank into its historic merger with Travelers Group to form Citigroup in 1998.

Bank of America to Pay $39 Million in Gender Bias Case
Bank of America agreed on Friday to pay $39 million to women who worked in its Merrill Lynch brokerage operation, another costly settlement of a discrimination case filed by its employees.

M&A bankers elbow each other out of ‘the room’
Matt Turner – Financial News
Whenever a big deal is announced, bankers rush to claim bragging rights, arguing their rivals weren’t “in the room” during the key discussions. The Vodafone-Verizon deal is no exception.

Ex-JPMorgan Banker Young Joins Highbury as Partner
Gillian Tan – MoneyBeat – WSJ
Former J.P.Morgan banker Alan Young has become a partner at Highbury Partnership Pty Ltd, a firm founded by former J.P.Morgan head of equities Matthew Roberts.

Ex-Nomura research chief joins Shareholder Executive
Matt Turner – Financial News
Paul Norris, a former head of global markets research and senior managing director at Nomura, has joined the government’s Shareholder Executive as an executive director.

Vickers calls for doubling of bank capital levels
By Patrick Jenkins, Banking Editor – FT
The chief architect of Britain’s post-crisis regulatory reforms believes banks’ capital levels should be at least twice as high as the level recommended two years ago by the government-appointed commission he led.
Sir John Vickers, the Oxford academic who chaired the Independent Commission on Banking, told the Financial Times that in a “blue-skies” world banks’ core tier one capital ratios would now be 20 per cent, rather than the 10 per cent recommended by the ICB that has already become the norm for UK lenders.

Clearing & Settlement

Trade Group Weighs ICAP’s Future Role in Rates Benchmark -Sources
Katy Burne – Dow Jones
A financial trade group is weighing possible changes in its relationship with ICAP Plc (IAP.LN IAPLY), a brokerage firm whose role in administering an interest-rate benchmark is being probed by federal regulators, according to people familiar with the matter. A committee of the International Swaps and Derivatives Association, which 15 years ago created the reference rate now underpinning trillions of dollars of financial market trades, has been looking at ways to revamp its daily “ISDAFIX” benchmark, the people said.
(via email)

CME Clearing – Performance Bond Requirements: Nymex New Products- Effective Friday, September 6, 2013

Indexes & Products

BlackRock ETP Landscape: Outflows Amid Uncertainty
The BlackRock ETP Landscape, Industry Highlights, August 31, 2013, provides commentary on the Exchange Traded Products (ETPs) industry as of August 2013. With uncertainty about economic growth and Federal Reserve policy, the Global ETP industry experienced outflows of ($15.0bn) in August, the second month of redemptions this year following very strong asset gathering in July.

HSBC to cut Hong Kong exchange-traded funds
Sarah Krouse – Financial News
HSBC plans to close all but one of its Hong Kong-listed exchange-traded funds two years after their launch.

iSTOXX Efficient Capital Managed Futures 20 Index: August 2013 – Monthly Report & Commentary

Component Change Made In STOXX Global Select Dividend 100 Index – Changes Are Due To Fast Exit Rule


Barchart Unveils New Data-Trading Terminal
Max Bowie – WatersTechnology
Chicago-based data and analytics vendor Barchart has released Barchart Trader, a new data workstation built from scratch to deliver a new and modern interface that can broaden the vendor’s potential audience and make it easier for traders to access content and analytics, and which incorporates trading capabilities from Denver, Colo-based data, charting and trading provider CQG.

FT splashed on MarkitHub
Markit, a leading, global financial information services company today announced that world class business news and analysis from the Financial Times is now available via Markit Hub.

Markit’s Gould and Hunt Relocate to Asia-Pac
Faye Kilburn – WatersTechnology
Markit president and co-founder Kevin Gould has relocated to Singapore to spearhead Markit’s expansion in the Asia-Pacific region, the vendor announced today.

RTS Launches RTD Tango QUANT Version 2.0
Updated comprehensive tool enables quantitative traders to design, optimize, analyze and execute fully automated trading strategies based on technical analysis


SEC Charges Former Vice President of Investor Relations With Violating Fair Disclosure Rules
The Securities and Exchange Commission today charged the former head of investor relations for a Tempe, Ariz.-based solar energy company with violating rules requiring fair disclosure of information when he alerted certain analysts and investors about an upcoming major development.

SEC Charges Former Vice President Of Investor Relations With Violating Fair Disclosure Rules
The Securities and Exchange Commission today charged the former head of investor relations for a Tempe, Ariz.-based solar energy company with violating rules requiring fair disclosure of information when he alerted certain analysts and investors about an upcoming major development.

NASDAQ OMX Stockholm Orders New Wave Group AB To Pay A Fine

Exclusive: Japan regulator probing Deutsche Bank entertainment of pension clients – sources
Nathan Layne – Reuters
Japan’s securities market watchdog is investigating whether Deutsche Bank AG employees provided excessive entertainment to Japanese pension fund executives in breach of regulations, sources with knowledge of the matter said.

Environmental & Energy

U.S. Northeast Carbon Permits Sell Out Again in Auction
Regional Greenhouse Gas Initiative Inc., the nonprofit that administers the U.S. Northeast’s carbon-emissions program, raised $102.6 million as it sold every available permit for the third consecutive auction.

**RKB — Press release and results, here.

Abbott Faces Senate Carbon Test After Australia Election Victory
Tony Abbott will be forced to negotiate with minor parties in the Senate as he seeks to scrap carbon pricing and a mining tax, after his coalition won the biggest parliamentary majority since at least 2004 in Australia’s election.

Factbox: Key policies for Australia’s new conservative government
Key policies of Australia’s new conservative Prime Minister Tony Abbott, who swept into office in Saturday’s national elections, ending six years of center-left Labor party rule.


China data lifts global shares, doubts creep in over Fed
Richard Hubbard – Reuters
An upswing in Chinese exports lifted world equity markets on Monday, though worries about Syria and uncertainty over when and by how much the U.S. central bank will cut its stimulus program saw investors hedge their bets.

South Korea probes three foreign brokerages including Goldman
South Korean financial regulators are reviewing three foreign brokerages including Goldman Sachs Group Inc’s local unit for possible breach of domestic capital markets regulations, a source at one of the regulators said.

China Everbright Securities reports August losses of $85 million from trading scandal
China Everbright Securities (601788.SS) incurred net losses of 523.1 million yuan ($85.47 million) in August as a result of a glitch in its trading system that prompted record fines from the regulators, the brokerage said in a notice posted late on Friday.

China locks foreign investors out of another bad-debt cleanup
Chinese banks have a colossal mess of bad debts to clean up for the second time in as many decades, but they are unlikely to call in the financial world’s most efficient mop and broom.

WMP crackdown spurs China structured products market
Viren Vaghela –
China’s crackdown on wealth management products (WMPs) and the easing of derivatives regulation is creating the impetus for the birth of a new market, according to observers.

Hedge fund chief says Japan needs another big round of stimulus
Hedge fund titan Ray Dalio said on Friday the Japanese economy will need another big round of stimulus to boost sluggish growth, and some emerging markets are on the path to crisis.

Hong Kong Monetary Authority (HKMA) And The Securities and Futures Commission: Regulators Release Conclusions On Further Proposals For Regulating OTC Derivatives Market

Frontier Markets

Investors Bet On Battered Markets
Erin McCarthy – The Wall Street Journal
Battered by the turmoil in emerging markets this year, some big-name investors say they are coming back for more.
Mark Mobius’s Templeton Developing Markets Trust, which manages $2.1 billion, is down 8.6% this year after markets like India and Indonesia plummeted. Still, Mr. Mobius is holding on in these markets and has bought select stocks in Russia and Mexico.

Upside: Emerging-Market Bond Bargains
Leave it to investors to run screaming from a fire sale. During the bond bubble, investors stretched for yield in all sorts of risky places, including government and corporate debt issued by emerging markets such as Poland, Brazil and Malaysia.

DGCX 2013 Volumes Cross 10 Million Mark
Year-to-date volumes on the Dubai Gold and Commodities Exchange (DGCX) have surpassed the 10 million volume mark for the first time in the Exchange’s history. The milestone, reached on August 23, was achieved in a total of 164 trading days. Total 2013 volumes stood at 10.37 million contracts at the end of August, a rise of 80% from the previous year.

Cost of oranges betrays lack of zest in Indonesia’s economy
Indonesia’s government is confident that a slide in economic growth, exacerbated by recent capital flight from emerging markets, is a hiccup that will soon pass. The price of oranges in a Jakarta market gives a clue why that faith looks misplaced.

Malawi Stock Exchange Weekly Trading Report – 6th September, 2013


Taxpayers Turn U.S. Farmers Into Fat Cats With Subsidies
By David J. Lynch & Alan Bjerga – Bloomberg
A Depression-era program intended to save the nation’s farmers from ruin has grown into a 21st-century crutch enabling affluent growers and financial institutions to thrive at U.S. taxpayer expense.

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