Date: Jun 20, 2012
June 20, 2012: Credit Suisse: Exchanges Should Have Legal Protections Trimmed; US Watchdog Hits at ‘Risky’ London; Hedge funds battered by euro crisis
An exec at Credit Suisse says that stock exchanges shouldn’t be able to ruin transactions for others and then be exempted from responsibility. Gary Gensler of the CFTC says that London traders cause trouble for U.S. companies, and that better cross-border protection is a good idea. Hedge fund managers at a Monaco conference sing a gloomy song, as the eurozone crisis is seen to have a significant impact on their business. In today’s First Read, you’ll find an array of corporate departures (though none from JLN); analysis of regulatory initiatives; and a pointer to Jon Matte’s essay in yesterday’s JLN Forex newsletter. Matte’s piece suggested that there may be a better place to start on fixing financial problems than in the middle.
BATS Chi-X Europe’s Paul O’Donnell To Return To Morgan Stanley
BATS Chi-X Europe, the largest pan-European equities market operator by market share and notional value, today announced that Chief Operating Officer Paul O’Donnell will depart the firm at the end of the summer for personal reasons.
CBOE Plans Process to Trade SPX Variance Strips
The Chicago Board Options Exchange (CBOE) has announced that it plans to introduce, starting July 27, a process for trading SPX Variance Strips — a portfolio of S&P 500 Index options (SPX) intended to replicate S&P 500 implied variance exposure — in a single transaction.
**JK – How do traders explain this to their children?
NYSE Euronext welcomed by the Chinese Securities Association of Hong Kong as its first special member
NYSE Euronext is pleased to announce that it has joined the Chinese Securities Association of Hong Kong as its first special member. The CSAHK provides a platform for strengthening relationships with prominent market participants in the region and NYSE Euronext will be the first international exchange to join the Association.
**JK – We are all special in one way or another.
Dow Jones President Todd Larsen Resigns
By JOHN JANNARONE – WSJ
Dow Jones & Co. president Todd Larsen stepped down Tuesday after two years in the role and 13 years at the company. Mr. Larsen’s departure was widely expected after Lex Fenwick arrived earlier this year as the company’s new chief executive officer, according to people close to the situation.
NYSE Euronext highlights World ALS Day
Eric Nolet, general director of the ALS Foundation of the Netherlands, opens the trading day to highlight World ALS Day.
CQG expands in APAC with KGI Futures
CQG has entered into a new FCM partnership agreement with Hong Kong-based KGI Futures. The partnership expands CQG’s APAC presence, which includes the establishment of its Shanghai data center and direct connectivity to the Hong Kong Futures Exchange (HKFE).
CFTC Moves to Brake High-Speed Traders
BY SCOTT PATTERSON AND JENNY STRASBURG – WSJ
U.S. regulators are about to take a big step toward reining in high-frequency trading: defining what it is. On Wednesday, a Commodity Futures Trading Commission subcommittee is expected to propose a roughly 60-word definition of high-frequency trading that would define it broadly, a bad sign for traders who had hoped for narrower language.
**JK – John Lothian is participating in today’s Technology Advisory Committee meeting wearing a classic summer suit, but he will be forward thinking.
Almqvist: What next for market surveillance in Europe?
Magnus Almqvist, Sungard – FOW
The passage of the Dodd Frank Act, the Market Abuse Directive (MAD) and MiFID, as well as the newly issued Guideline 2012/122 from the European Securities and Markets Authority (ESMA), which covers algorithmic and direct market access (DMA) electronic trading, is clear evidence that the regulation of financial markets continues to go through unprecedented rate of change.
**JK – I was taught MAD meant mutually assured destruction.
OTC clearing VI: Will OTC clearing increase systemic risk?
William Mitting – FOW
The ultimate intention of the mandate to centrally clear standardised OTC derivatives was intended in part to reduce systemic risk in the financial system. However, could an unintended consequence be that it actually increases the problem of too big to fail and increases systemic risk?
**JK – Craig Pirrong opines on the subject. Are we concentrating risk or mitigating risk, or both?
Government Ignoring High Frequency Arms Race; ‘Scandal’ In the Making
By Geoffrey Rogow and Jacob Bunge – Wall Street Journal Blogs
Private and government organizations that release market-moving data must decide whether they want to embrace the algorithmic trading industry or spend heavily to keep it out, said a former head of the U.S. government’s statistics agency.
Hong Kong Exchanges’ Bid For LME Will Give China More Power In Global Commodity Trading
Agustino Fontevecchia – Forbes
Why would the Hong Kong Exchanges pay so much, about 160 times net income (compared with 66 times for the CME’s bid for CBOT) for the LME?
**JK – Ahem. LME doesn’t offer gold futures. You might of wanted to know that before you wrote the article.
***JM: Probably for the same dark, conspiracy-laced reason that ICE bid almost exactly the same amount. Evidently, ICE is secretly also run by Chinese interests. Woooo.
Goldman Sachs, Global Meltdown, Romney Inspire Trillin
Zinta Lundborg – Bloomberg
When Lloyd Blankfein said Goldman Sachs was doing “God’s work,” Calvin Trillin was inspired to write a poem, including the lines: “The Lord has got this itch/To see the Goldman Sachs folks filthy rich.”
The Sad Story Of A Former Lehman Star Just Ended In Suicide
Carrie Hojnicki – Business Insider
For Charles Hopper, a former star at Lehman Brothers, the hurt of the financial crisis never subsided. Last month, after years of failed recoveries and financial instability, the 63-year old hanged himself in the garage of Greenwich, CT home, leaving behind wife Kathryn and three formerly-estranged children, the Post reports
Many countries around the world continue to wrestle with wobbling economies. The U.S. has its “fiscal cliff” event this year. Europe struggles mightily to hold the eurozone together, even as it questions the value of the currency that it created. Asia shows signs of vulnerability to the other problem areas, and China says, “Nothing is wrong; please ignore the occasional cracking sounds that fill the air.”
It occurs to me that we haven’t gone out and simply fixed all of our problems in part because there may not be a right answer to choose. There are plenty of opinions on what is best to do, of course, but while suggestions for action (both practical and loony) abound, what is absent is the ability to identify with certainty that the outcome will be as intended.
We can create a balanced budget, but will that really fix the economy; and if so, how will we know it’s fixed, and when? We can put in another round of federal stimulus, but we don’t really know exactly what that will do, or for how long, or what we’ll need to do next.
If it were really so easy to create a cause-and-effect solution to our economic problems, it seems reasonable that we would have found and implemented it centuries ago. Looking through history, beginning with yesterday, it’s clear that such a solution has not to date presented itself. So what we are left with are nations filled with people who must make their sharpest guess, hope for the best and see what happens.
But I don’t want to stop at the possibility that we aren’t fixing our problems because we can’t. I want to look further for what is going wrong. Allow me to explain what I mean.
For the rest of the commentary, visit http://jlne.ws/L0O1rl
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Credit Suisse: Exchanges Should Have Legal Protections Trimmed
By Jacob Bunge
Stock exchanges should be stripped of legal protections that safeguard their owners from liability for some trading losses, according to a senior executive of Credit Suisse Group AG.
US Watchdog Hits at ‘Risky’ London
By Tom Braithwaite, Shahien Nasiripour and Brooke Masters, Financial Times
US lawmakers and regulators have attacked London as a source of financial crises and promised tougher crossborder rules in the wake of $2 billion of trading losses at the UK unit of JPMorgan Chase.
Hedge funds battered by euro crisis
By Sam Jones in Monaco – Financial Times
“A sunny place for shady people” was how Somerset Maugham once described the French Riviera. For many of the hedge fund managers gathered in the principality of Monaco this week, however, it is rather more gloomy than shady.
Data Prove Ratings Fail as Flipped Coin Enslaves Nations
By John Detrixhe, Zeke Faux and Katie Linsell – Bloomberg
Britain is forcing Stephen Jobling and his stroke patients to defend the nation’s AAA credit rating. Staffing at the National Health Service hospital ward where Jobling works was reduced by about half in the U.K.’s deepest drive since World War II to shrink its deficit. The goal was to avoid losing the top credit score, which might risk higher interest expenses, according to the government of Conservative Prime Minister David Cameron.
Hedge fund firm Man Group names Peach Asia head
Reuters via Yahoo! Finance
Man Group Plc has named Tim Peach as managing director and head of its operations in Asia Pacific, a spokeswoman for the $59 billion hedge fund firm told Reuters on Wednesday.
Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?: View
By the Editors – Bloomberg
When JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon testifies in the U.S. House today, he will present himself as a champion of free-market capitalism in opposition to an overweening government. His position would be more convincing if his bank weren’t such a beneficiary of corporate welfare.
House panel sticks with CFTC funding cut
Reuters via Yahoo! News
WASHINGTON – On a party-line vote, the House Appropriations Committee voted for a 12 percent cut in funding for the U.S. futures regulator on Tuesday, moving a step closer to a showdown with the Senate, where a large increase is proposed.
The CFTC Announces The Departure Of Chief Economist Andrei Kirilenko To The Massachusetts Institute Of Technology
Chairman Gensler, Commissioner O’Malia Praise The Chief Economist – Dr. Kirilenko Plans End-Of-Year Departure
Bair-Led Group Says U.S. Must Speed Up Systemic Designations
By Jesse Hamilton and Emma Fidel – Bloomberg
U.S. financial regulators should speed up designation of systemically important nonbank firms to bolster efforts to prevent a repeat of the 2008 credit crisis, according to members of the newly formed Systemic Risk Council.
Testimony Before The U.S. House Committee On Financial Services – CFTC Chairman Gary Gensler
FSA reveals suspicious price moves remain high
Reuters via Yahoo! News
A fifth of company announcements in Britain are preceded by unexplained share price moves, the Financial Services Authority said on Tuesday, in its final report before being wound up next year.
Transatlantic Trade Associations Call for Urgent Re-Engagement on the Pre-Crisis Dialogue on Regulatory Recognition and Accreditation
Regulators on both sides of the Atlantic must come together with real intent to establish a framework of inter-jurisdictional regulatory recognition and accreditation inorder to address concerns over extraterritoriality and protectionism, a new report “Inter- jurisdictional Regulatory Recognition: Facilitating Recovery and Streamlining Regulation” states.
“I Have One Word For You: Technology” Remarks By CFTC Commissioner Scott D. O’malia At Sifma Tech Leaders Forum 2012, New York City, New York
“The Good Doctors” Keynote Address Of CFTC Commissioner Bart Chilton To The Mutual Fund Directors Forum, 2012 Policy Conference, Washington, DC
UK’s Financial Services Authority Publishes Annual Report For 2011/12
The Financial Services Authority (FSA) has published its annual report for 2011/12. The annual report is a key component of the FSA’s accountability framework. The report outlines how the FSA has performed against the priorities set out in its 2011/12 Business Plan and its statutory objectives.
Financial Stability Board Publishes Third Progress Report On Implementation Of OTC Derivatives Market Reforms
Financial Stability Board Reports To G20 Leaders On Financial Regulatory Reform Progress
Financial Stability Board: Study On The Potential Unintended Consequences Of Regulatory Reforms On Emerging Market And Developing Economies
EU-US Coalition On Financial Regulation – Inter-Jurisdictional Regulatory Recognition: Facilitating Recovery And Streamlining Regulation
Exchanges & Trading Facilities
Deutsche Börse says NYSE merger veto was flawed
Dow Jones Newswires
German exchange operator Deutsche Börse has brought charges against the European Union for vetoing its merger with US rival NYSE Euronext, accusing it of making serious errors in assessing the plan. According to a filing published in the EU’s Official Journal June 16, Deutsche Börse argued that the Commission fumbled the agreed merger that otherwise would have created the world’s largest combined platform for trading stocks and derivatives.
Eurotunnel to switch to NYSE Euronext
By Philip Stafford – Financial Times
Eurotunnel, which operates the tunnel between the UK and France, is to become the first company to list on the London-based market operated by NYSE Euronext, the transatlantic exchanges operator.
ION Trading to Provide Connectivity to Eris Exchange
Eris Exchange, a US-based futures exchange, today announced that ION Trading, a provider of electronic trading, pricing and risk management systems across asset classes, will introduce a new gateway providing connectivity to Eris Exchange in July.
A SUPERVISORY BOARD FOR THE EUROPEAN POWER EXCHANGE EPEX SPOT
The European Power Exchange, EPEX SPOT SE, has transformed its corporate governance into a company with a two-tier system as of 18 June 2012. The General Assembly of EPEX SPOT, composed of its shareholders, appointed a Supervisory Board which counts 12 members.
SIX To Provide Access To TARGET2-Securities European Settlement Platform For Swiss Financial Center
The SIX Board of Directors agreed to sign the ECB’s Framework Agreement concerning Europe’s envisaged centralized settlement platform. In signing the agreement, SIX, through SIX Securities Services, will become the first non-EU central securities depository to offer access to the TARGET2-Securities (T2S) platform.
BM&FBOVESPA Signs Commitment To The Promotion Of Responsible Investment
The ‘Sustainable Stock Exchanges’ Report Singles Out BM&FBOVESPA And The Johannesburg Stock Exchange As Sustainability Benchmarks
NYSE Euronext welcomes the first Portuguese company on NYSE Alternext
NYSE Euronext welcomes Groupe Eurotunnel as the first company on its London market
[CBOE] SPX Variance Strips
NASDAQ OMX Holds Second Quarter 2012 Investor Conference Call
ASX To Launch Centre Point Block
Hedge Funds & Managed Futures
Peter Thiel Launches New Venture Firm With $400 Million Under Management
Billionaire Peter Thiel announced today that he’s started Mithril Capital Management, a new globally-focused venture firm with $402 million under management.
Sovereign Wealth Funds Could Be Private Equity’s New Best Friend
With private equity firms testing the limits of limited partners’ ability and willingness to fill their new-fund coffers, sovereign wealth funds (SWFs) are emerging as a potential source of capital to help bridge the fund-raising gap.
Hedge funds bet on big Bunds sell-off
By Sam Jones in Monaco and Robin Wigglesworth in London – Financial Times
Leading hedge fund managers are betting on a significant sell-off in German government bonds in the coming months after a sharp fall in yields on the debt paper driven by a flight to safety in the eurozone.
enermet Trading To Launch A Unique And Innovative Temperature Forecast
Powernext and Metnext are pleased to announce the launch of a new unique temperature forecast through its pan-European weather and energy forecast service, enermet Trading.
SIFMA Releases 2012, 2013 Economic Forecast
Banks & Brokers
JPMorgan CEO: We were honest about losses
JPMorgan Chase’s Chief Executive Jamie Dimon appeared before lawmakers on Capitol Hill again Tuesday, saying his bank was upfront with investors about its multibillion-dollar trading loss.
JPMorgan Risk Hidden by Reporting, Comptroller Curry Says
Thomas Curry , comptroller of the currency, said regulators were caught off guard by a trading loss of at least $2 billion at JPMorgan Chase & Co. because the bank’s reporting lacked detail.
JPMorgan risk disclosures called murky versus peers
Reuters via Yahoo! News
JPMorgan Chase & Co gives investors a murkier view of its risk compared to what U.S. competitors disclose, an analyst said on Tuesday. The bank tells investors the maximum money it can expect to lose on 95 percent of the trading days in a quarter, leaving investors unsure about maximum losses for the other 5 percent of days.
Jefferies Sounds Cautious Tone After Q2 Earnings Slow
Investment bank Jefferies recorded profits and revenue that were down slightly from a year ago in its second quarter, but the figures were still ahead of the Street’s consensus view.
Royal Bank of Scotland announces 618 more job cuts
AFP via Yahoo! News
State-rescued Royal Bank of Scotland on Tuesday said it planned to axe 618 jobs at its department offering financial advice to customers.
RBS’s Hester Says Solution to Europe Debt Crisis May Take Years
Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester said it may take years before Europe finds a solution to the debt crisis as some countries struggle to regain competitiveness.
Capital Question Stalks Bank CEO
BY DAVID ENRICH, ANITA GREIL AND DANA CIMILLUCA – WSJ
Brady Dougan, long lauded for safely steering Credit Suisse Group AG through the financial crisis, finds himself under mounting pressure over the bank’s recent performance.
Clearing & Settlement
LCH Lifts Margin Costs for Trading Most Spanish Government Bonds
LCH Clearnet Ltd., Europe’s biggest clearing house, raised the extra deposit it demands from clients to trade most Spanish government bonds.
Calypso Partners with AcadiaSoft’s MarginSphere to Enrich Collateral Management Capabilities
Calypso Technology, Inc., a provider of an integrated trading, risk and processing platform to capital markets, today announced a new marketing partnership to integrate AcadiaSoft’s MarginSphere service, an electronic messaging and workflow solution for OTC collateral, with the Calypso system.
Indexes & Products
Are ETF Launches Sputtering?
IndexUniverse.com via Yahoo! Finance
As you’d expect, we closely monitor new fund launches here at IndexUniverse. In the last few weeks and months, we noticed that the spigot of new funds has been tightened.
State Street Global Advisors Launches New Fixed Income SPDR ETFs
USCF Launches Metals Futures ETF
Bonds.com Provides Centralized Marketplace For U.S. Corporates
Interactive Data and Scivantage to Develop Integrated Web-Based Wealth Management Workstation
Interactive Data Corporation, a provider of comprehensive market data solutions for wealth management firms, today announced that it is expanding its relationship with Scivantage, an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting and wealth management applications, to deliver an enterprise web-based workstation for wealth management professionals.
Deltix appoints Paul Strehle as Business Development Manager
Deltix, the provider of software for the development and deployment of advanced alpha generation and execution strategies has appointed Paul Strehle as Business Development Manager, based in the Deltix head office in Natick, MA.
SIFMA President & CEO Tim Ryan’s Remarks At SIFMA’s Tech Leaders Forum & Expo – June 19, 2012
Panel Says MSSB Must Pay Recruited Brokers $5 Million
An arbitration panel ruled that Morgan Stanley Smith Barney must pay a total of about $5 million to two brokers who claimed the firm made false promises when it recruited them from wirehouse rival UBS AG.
[ASIC] Avant to change insurance policy advertising
[ASIC] More than $1 million to be refunded to BMW finance customers
Environmental & Energy
Natural gas discoveries put E. Africa on world energy map
Massive offshore gas discoveries in East Africa are catapulting the region into a major player in the global energy arena, bringing billions in investment that could transform entire economies.
Climate change: S Africa in front line of global warming battle
At the UN climate change conference last year, it became clear that South Africa, the host nation, was a frontline in the battle against the effects of global warming.
Analysis: Brazil struggles to cash in on carbon credits
A patchwork of regional legislation and complex rules governing land ownership have so far kept Brazil from cashing in on what could potentially be the world’s biggest carbon offset market.
Japan Asset Manager’s Employees Arrested
BY HIROYUKI KACHI – WSJ
Japanese police on Tuesday arrested the president of asset manager AIJ Investment Advisors Co. and three others after they allegedly sold funds with the knowledge that performance figures had been fabricated, the latest development in a scandal that has rocked the country’s pension fund industry.
China May Launch Hong Kong ETFs This Summer
ETF Trends via Yahoo! Finance
The Chinese government has kept a firm grip on its domestic equities market, isolating its stock markets from direct foreign access. However, China and Hong Kong may begin to allow free access to stocks in each others’ markets for the first time through exchange traded fund investment products, according to a report Tuesday.
Thai Bourse Hosts “SET in the City” to attract investors in northeast
The Stock Exchange of Thailand (SET) will hold the investment event “SET in the City” in Udornthani, a major northeastern province, as part of its plan to continually expand the investor base in the country’s provinces. The event will focus on providing investment expertise to boost people’s wealth via stocks, derivatives and mutual funds.
Shanghai Stock Exchange on Track for Options Plan
The Shanghai Stock Exchange is on track to launch options for individual securities, which would give investors a new financial instrument to manage risks and profit from market volatility, people familiar with the situation told Dow Jones Newswires Wednesday.
KKR builds Singapore team as SEAsia competition intensifies
By Stephen Aldred – Reuters
KKR & Co LP is setting up its first deals team in Singapore as the U.S. private equity firm seeks to invest about $1 billion in Southeast Asia through its second Asia fund, sources with knowledge of the matter said.
Shenzhen Stock Exchange Rallies Efforts To Enhance Investor Protection
HKFE Announces Revised Margins For HKEx Futures
Malaysian Fund managers Visit The Stock Exchange Of Thailand
Africa’s richest man back as head of Nigerian stock exchange
AFP via Yahoo! News
Nigerian tycoon Aliko Dangote, Africa’s richest man according to Forbes magazine, was Tuesday reinstated as president of the Nigerian Stock Exchange, the position from which he was removed two years ago.
MSCI Seen Overlooking Taiwan With UAE Staying Frontier Market
South Korea and Taiwan haven’t addressed concerns such as creating offshore currency markets that excluded the two emerging markets from being given developed status last year, HSBC Holdings Plc analysts led by Tom Zhou wrote in a June 18 report.
Indonesia Commodity and Derivatives Exchange (ICDX) Launches 27 Currency Pair Contracts
Indonesia Commodity and Derivatives Exchange (ICDX), the leading futures exchange in Indonesia, has successfully obtained the approval to launch 27 currency pair contracts from the Commodity Futures Trading Regulatory Agency (COFTRA) on June 6, 2012.
TABB Group Forecasts Bursa Malaysia Derivatives Futures Volume Will Rise Nearly 50% By EOY 2013
Expanding Economy, Improved Access To Markets, Regulatory Easing And Support From CME Group And Brokerage Community Point To Growth And Opportunity For Malaysia
Public Workers Face Continued Layoffs, Hurting the Recovery
By SHAILA DEWAN and MOTOKO RICH – NY Times
Companies have been slowly adding workers for more than two years. But pink slips are still going out in a crucial area: government.