Industry news

Date: Jul 6, 2012

July 6, 2012: LME Iron Ore Ambitions At Risk After Steel Failure; SGX Seeks Slice Of Rmb Securities Market; NYSE Brokerage Plan That Doesn’t Display Orders Approved by SEC

The London Metal Exchange (and by extension, HKMEx) have big plans for iron ore products, but the exchange’s recent competitive failure with steel calls those plans into question.  Singapore Exchange announces that they’re ready to list, trade, quote and settle securities in renminbi.  NYSE Euronext’s controversial plan to offer undisplayed orders gets approval from the SEC.  And in First Read, John Lothian bids a fond farewell, though not to this newsletter or his company.

First Read

Taking My Own Advice
Recently several friends of mine have come to me after having been terminated by their brokerage firm or proprietary trading firm employers. I listened to their stories then gave them a pep talk about the bright opportunities in front of them in light of all the changes occurring the markets and industry. This week I took my own advice.

Yesterday, I resigned as a branch manager of The Price Futures Group, Inc., my employer since November of 1997. In December of 2011 I had stepped down as President of the Electronic Trading Division of the Price Group when we moved John J. Lothian & Company, Inc. to new offices in the CBOT Building. You could say my brokerage business was a casualty of the success of John J. Lothian & Company, Inc. and its media business. You could also say that MF Global’s bankruptcy was the final straw that killed it.

Before I talk about the future, let me say this about the past. I am eternally grateful for my time in the employ of The Price Group and particularly Tom Price. His kindness, honesty, integrity and honor are everything one could wish for in an employer and a friend. I shall always look upon my time at The Price Group fondly.

It was the entrepreneurial culture at The Price Group that helped spawn the John Lothian Newsletter. It was also Tom Price’s tolerance and patience that allowed me to be outspoken in a world where many people keep their opinions to themselves. I will never know how many times Tom had my back, but I always knew he had it. It is hard enough to find friends like that, let alone employers.

Yet, it was time for a change. The deal Tom and I negotiated back in 1997 when I joined The Price Group had become obsolete amid all the changes that occurred at firm as well as the industry. The plans I have in the brokerage space, as I still have significant ambitions there, require new structures, compensation schemes, reporting lines and corporate cultures. It had been clear to me for many months that I needed to do something new, it was just a question of how to do it.

This week I decided the best way to do it was to do it myself, and with all the resources of John J. Lothian & Company, Inc. I am not prepared today to detail those plans, except to say that I am taking my own advice from my column about the trading world being in recession. My plans will attempt to bring innovation, education and marketing to the futures brokerage world in a way that is collaborative with the industry.

Finally, let me say thank you to all my colleagues at The Price Group. You are an exceptional group of people and it has been my honor to work with you. I wish you nothing but success in the future. Thank you to each one of you.

~John J. Lothian


METALS MOVER: Peter Barrowcliff Joins Newedge Metals As COO
By Andrea Hotter – Dow Jones
Peter Barrowcliff has joined Newedge‘s metals desk as global chief operating officer, the company said Thursday.


Penson names former president interim CEO
Securities clearing firm Penson Worldwide Inc appointed co-founder and former President Daniel Son as its interim chief executive. Son, currently non-executive vice chairman of the board, will succeed Philip Pendergraft, who is retiring as the company’s CEO as well as from its board.


SEC Names Norm Champ As Director Of Division Of Investment Management
The Securities and Exchange Commission today announced that Norm Champ has been named Director of the agency’s Division of Investment Management. Mr. Champ has been serving as Deputy Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE). He assumes his new duties on July 9 and succeeds Eileen Rominger, who is retiring.


Trading floor culture no longer acceptable
By John Gapper – Financial Times
Two decades ago, I attended one of the most gripping press conferences of my life. It was called by Andrew Buxton, Barclays’ then-chairman, to apologise for the bank’s £414m loss, mainly on reckless property lending, and to announce that he would be halving his job by resigning as its chief executive.


The Gentlemen’s Club That Sets Libor Is Called Into Question
New York Times
The scandal surrounding, Libor, or the London interbank offered rate, has shown that the traditional way of setting it, a gentlemanly query of banks, may be outdated considering the enormous influence the rate has on markets.


Central Banks Helpless As Denmark Goes NIRP, Cuts Deposit Rate To NEGATIVE 0.2%
Zero Hedge
A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the ECB has not discussed this. Yet one bank which certainly has is the Danish Central Bank


Whilst my breath is still warm
Steve Grob
Director of Group Strategy, Fidessa
Good to see that the HFT community is finally starting to educate the regulators and policymakers. As we all know, the debate hinges on whether these firms are really acting as electronic versions of traditional market makers and, if they are, whether they should be subject to some of the same formal market making obligations. In particular, regulators have been gnashing their teeth over the fact that such firms are free to replace their quotes as often, or as “frequently”, as they like. The regulators argue that all this activity creates substantial noise that clogs up data pipes and distorts the true picture of the real price of a stock. In their defence, the HFTers argue that they have the right to re-price their “product” just as often as market conditions dictate and that, anyway, they aren’t breaking any laws.

JLN Options

Liquidity to disperse further as new options venues launch
The Trade News
The prospect of greater choice between US equity options exchanges is being treated with caution by market observers who claim that fragmentation is already making execution more difficult, especially for deals in institutional size. Hot on the heels of the launch of Nasdaq OMX’s third options exchange on 29 June, the Deutsche Börse-owned International Securities Exchange (ISE) announced on Monday a filing with the Securities and Exchange Commission (SEC) for a second exchange licence that would offer “market structure and pricing flexibility”.

ISE Will Optimise its Second Options Exchange
Securities Technology Monitor
The International Securities Exchange (ISE) will base its second options exchange on its home-grown Optimise technology. The venue that bills itself as the first all-electronics options exchange in the United States will open a second by year’s end. The company has has filed a Form 1 application for a second exchange license with the Securities and Exchange Commission.

FX Alliance launches multibank options trading
Automated Trader
FXall, the provider of electronic foreign exchange trading solutions, has announced that clients are now able to execute FX options on the FXall Trading platform. Clients can now submit FX option request-for-quotes (RFQs) to multiple banks and deal electronically on the same platform they use for trading in spot, forwards, swaps, non-deliverable forwards (NDFs), precious metals and money markets.

**DA: The forex world has been among the slowest to migrate its options trading to an electronic format. Perhaps this is the one we have been waiting for.

JLN Interest Rates

Bank of England maintains Bank Rate at 0.5% and increases size of Asset Purchase Programme by £50 billion to £375 billion

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to increase the size of its asset purchase programme, financed by the issuance of central bank reserves, by £50 billion to a total of £375 billion.

UK output has barely grown for a year and a half and is estimated to have fallen in both of the past two quarters. The pace of expansion in most of the United Kingdom’s main export markets also appears to have slowed. Business indicators point to a continuation of that weakness in the near term, both at home and abroad. In spite of the progress made at the latest European Council, concerns remain about the indebtedness and competitiveness of several euro-area economies, and that is weighing on confidence here. The correspondingly weaker outlook for UK output growth means that the margin of economic slack is likely to be greater and more persistent.

CPI inflation fell to 2.8% in May and is likely to edge down further in the near term. Commodity prices have fallen, which should help to moderate external price pressures. And pay growth remains subdued. Given the continuing drag from economic slack, that should ensure inflation continues to ease into the medium term.


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Patrick Birley


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Lead Stories

LME iron ore ambitions at risk after steel failure
By Silvia Antonioli – Reuters
Traders are not likely to take notice of the London Metal Exchange’s plans for a new iron ore contract after widespread disappointment over its handling of steel billet futures and while competition is strong from other exchanges.

SGX seeks slice of Rmb securities market
By Jeremy Grant in Singapore – Financial Times
The Singapore Exchange has signalled its ambition to capture a slice of trading in securities denominated in renminbi, announcing it will list, quote, trade, clear and settle securities denominated in the Chinese currency. The move comes as the gradual internationalisation of the renminbi is prompting some exchanges to offer products denominated in the currency in anticipation that investors eventually will trade securities and derivatives on exchanges in significant amounts.

NYSE Brokerage Plan That Doesn’t Display Orders Approved by SEC
The U.S. Securities and Exchange Commission approved a pilot plan that will allow some orders to go undisplayed on the New York Stock Exchange as a way for the biggest stock trading venue to attract individual investors.

FPC considered dropping liquidity rules
By Brooke Masters, Chief Regulation Correspondent – Financial Times
The Bank of England’s new systemic regulator considered suspending the UK’s world-leading liquidity requirements to stimulate lending, according to minutes of its meeting released on Friday.

Exclusive: Defecting U.S. brokers bring along $59 billion assets
Reuters via Yahoo! News
More than $59 billion in assets switched hands within the U.S. brokerage industry this year, as veteran financial advisers managing large pools of client assets left their firms in the wake of growing frustrations about their parent banks.

Risky bets likely for dragging U.S. banks: regulator
Reuters via Yahoo! News
Banks may take on excessive risk to make up for a dragging housing market and low revenues, a U.S. banking regulator said on Thursday. In its first “Semi Annual Risk” report for Spring 2012, the Office of the Comptroller of the Currency said the slow economic recovery, low interest rates and bad loans continue to drag down profits, which may encourage banks to boost leverage and lower underwriting standards to increase profitability.

RBS Withdraws From Tibor Panel
Royal Bank of Scotland has pulled out of the panels that set Tibor, Japan’s version of Libor, amid a global probe into alleged manipulation of interbank lending rates by traders at investment banks, the Financial Times reports.

Trade Group for Bankers Regulates a Key Rate
It was big news when the Barclays chairman, Marcus Agius, resigned Monday over his bank’s role in the Libor rate-fixing scandal. Less noticed was his other resignation that same day. Mr. Agius also quit as chairman of the British Bankers’ Association, or B.B.A., the powerful trade group that, among other things, oversees Libor.

Finance Officials Face Tough Tasks
Euro-zone leaders left some tricky items in the inboxes of their finance officials after the agreement they stitched together early on June 29. Not only did they set their subordinates the enormous task of creating a euro-zone banking supervisor in just six months, but they also left them the job of fleshing out what they called short-term measures.

Bank Chief Wary of New Role
European Central Bank President Mario Draghi warned that expanding the institution’s powers into banking regulation could put its credibility at risk unless strong protections are put in place. Euro-zone leaders want the ECB to play a central role in banking regulation as part of a broader effort to harmonize supervision across the currency area. But Mr. Draghi’s comments raise some questions about the viability and timing of those plans.

Italy Approves E4.5 Billion in Spending Cuts for 2012
Italy’s government late Thursday approved E4.5 billion ($5.58 billion) in spending cuts for 2012 aimed at slashing the size of Italy’s bloated public sector and delaying a new tax increase until after the first half of 2013. The cuts come as Prime Minister Mario Monti fights to shore up Italian finances in line with European Union requests.

Five reasons the summer curse may strike
By Gillian Tett – Financial Times
In recent days, several of America’s largest investment groups, such as Fidelity and Northern Trust, have been discreetly reviewing their staff holiday plans. The reason? Right now, with the summer heat rising, the mood in the financial markets seems relatively calm.


Barclays’ US deal rewrites Libor process
By Kara Scannell in New York and Brooke Masters in London – Financial Times
Barclays’ settlement with US regulators over the rigging of Libor is likely to have far-reaching implications for how benchmark interest rates are set in the future.

Embattled FSA Is Under Fire for Libor Policing
The global scandal over banks’ attempts to manipulate a key interest rate is raising questions about whether the U.K.’s financial regulator missed warning signs about problems with the rate. The Financial Services Authority’s responsibilities include protecting the integrity of U.K. markets, but former regulators say that for years, the agency didn’t actively police the setting of the London interbank offered rate, the benchmark for trillions of dollars of loans world-wide.

EU delays market legislation vote
By Philip Stafford – Financial Times
European parliamentarians have postponed a vote on its key market legislation for at least three months to allow more time to agree compromises on the text. The Economic and Monetary Affairs committee on Thursday formally pushed back a vote due on Monday that covered three drafts of Europe’s markets directives and regulations – known as Mifid, Mifir and the Market Abuse Regulation.

Delay Seen (Again) For New Rules on Accounting
A long-awaited U.S. decision on whether to switch to global accounting standards—a holy grail for many companies with overseas operations—is likely to be delayed until next year. After weighing the issue for nearly 2½ years, the Securities and Exchange Commission’s staff expects to issue a final report within weeks on International Financial Reporting Standards, the accounting rules adopted by most other countries.

ESMA Publishes MiFID Guidelines To Enhance Investor Protection

European Commission Delegated Regulation On Short Selling And Credit Default Swaps – Frequently Asked Questions

Vienna Stock Exchange Monthly Statistics – June 2012

Exchanges & Trading Facilities

NYSE Euronext to Launch Retail Liquidity Program
Press Release
NYSE Euronext (NYX) has received approval from the U.S. Securities and Exchange Commission (SEC) to establish a first-of-its-kind Retail Liquidity Program, a market innovation that produces cost savings for individual investors through price improvement on retail equities trading order flow for New York Stock Exchange (NYSE) and NYSE MKT listed and NASDAQ UTP-traded equity securities.

NYSE Euronext signs cooperation agreement with Cape Verde Stock Exchange
Macau Hub
Via its subsidiary Euronext Lisbon, NYSE Euronext has signed a cooperation agreement with the Cape Verde Stock Exchange, NYSE Euronext said in a statement issued in Lisbon.

NYSE Hosts Fifteen U.S. Military Veterans for Eight-Week Veteran Associate Program
Fifteen veterans representing several branches of the U.S. Armed Forces are currently participating in the inaugural NYSE Euronext Veteran Associate Program (VAP), a pioneering initiative that provides recent military veterans from across America with valuable business experience in the financial services industry during an eight week engagement at the New York Stock Exchange (NYSE).

EEX and TEIAS sign Memorandum of Understanding for a cooperation on the establishment of a Turkish Energy Exchange
Today, the European Energy Exchange (EEX) and TEIAS, the Turkish Electricity Transmission Company, have signed a Memorandum of Understanding for a co-operation on the establishment of an organized energy market.

TMX Group and MaRS join forces to drive impact investing in Canada
TMX Group Inc. today announced its commitment to contribute to the development of the impact investing field in Canada as a founding supporter of the MaRS Centre for Impact Investing (the Centre).

Federation Of Euro Asian Stock Exchanges Newsletter June 2012

TMX Top 20 Largest Consolidated Short Position Report – June 30, 2012

Burgundy Monthly Statistics June 2012

Burgundy: 49 % Of Trading In Swedish Equities On Alternative Marketplaces

Bulgarian Stock Exchange Market Statistics – June 2012

MEFF Volumes – June 2012

Athens Exchange Derivatives Market Monthly Statistical Bulletin June 2012

Xetra/FWB: IPO In Prime Standard: Ming Le Sports AG

Hedge Funds & Managed Futures

Quants Post Worst Month Since October as Winton Slumps 3.2%
Hedge funds that use quantitative strategies executed by computers suffered their biggest losses last month since October after being whipsawed by Europe’s sovereign debt crisis.

JAT Capital, Down 20%, Is a Lesson in Volatility
A year ago, John A. Thaler was the talk of Wall Street. His hedge fund was up more than 30 percent, defying a broad slump in the market and the debt turmoil in Europe. Investors, starved for returns, scrambled to hand him their money. This year, things appear to have cooled off for Mr. Thaler. Rapidly.

Piece of Cake! Hedge Fund Manager Falcone Plans Fraud Defense That Casts Blame on Help
The New York Observer
Let’s say you’re a hedge fund manager, and the Securities and Exchange Commission comes calling with allegations that you fraudulently withdrew $113.2 million in client funds to pay your personal taxes; that worse, you ignored an adviser’s suggestion that you borrow against your St. Bart’s estate or National Hockey League franchise to keep the tax man at bay;

Jim Rogers: The Huge Gold Sell-Off Might Only Be Halfway Done
Business Insider
“I’ve actually owned gold for longer than 11 years. I’m not buying now. Gold went up 11 years in a row, which is extremely unusual for any asset. I don’t know of any asset in history that’s gone up 11 years in a row without a correction.

Banks & Brokers

EBS volumes up 5% month-on-month in June
ICAP, the world’s leading interdealer broker, announces today that average daily volumes on the BrokerTec and EBS platforms for June were US$707.6bn, down 1% from May. For the month of June, there was a year-on-year decrease of 22%.

Barclays Downgraded as Rate-fixing Scandal Continues
Barclays bank suffered a further blow Thursday when the outlook for its credit rating was downgraded as a result of the rate-rigging scandal that forced the resignation of chief executive Bob Diamond.

JPMorgan Told to Explain Withholding Energy-Probe E-Mails
JPMorgan Chase & Co. was ordered by a federal judge to explain why it shouldn’t be compelled to turn over e-mails sought by U.S. regulators in a probe of potential energy-market manipulation.

Who Wants to Start a Bank? No One
Another significant change, and one that is certainly not for the better, is the demise of small banks. In 1997, when I began covering the U.S. financial-services industry, there were 9,143 banks scattered across the country. The number now: 6,263.

Banco Santander: One Man’s Fear Is Another Man’s Opportunity
Spanish banks have been in the headlines for months now, as investors (and the Spanish government) ponder their solvency and fate. One bank that is attractive to investors is arguably one of the most misunderstood banks trading: Banco Santander(SAN).

HSBC Millionaire Client Fined After Hiding Funds in Geneva Bank
Michael Shanly, a millionaire British property developer, was ordered to pay 830,000 pounds by a London court after failing to disclose offshore funds at HSBC Holdings Plc ’s Swiss private bank.

E*TRADE Financial Corporation Announces Second Quarter 2012 Earnings Conference Call
Business Wire via Yahoo! Finance
E*TRADE Financial Corporation today announced that it will report its second quarter 2012 financial results after the close of the U.S. financial markets on Thursday, July 19, 2012.

Clearing & Settlement

CME Clearing – Performance Bonds / Margins
Performance Bond Requirements – Crude Oil, Electricity, Metals, Natural Gas, NGLS, and Refined Products Outrights Effective Monday, July 9, 2012

Indexes & Products

Vanguard Indexing Guru Gus Sauter on ETFs, High-Frequency Trading
ETF Trends via Yahoo! Finance
Vanguard Chief Investment Officer Gus Sauter is one of the key figures in the history of low-cost index funds and ETFs. He played a big role in developing the trading systems Vanguard uses in its massive index funds and also led the firm’s entry to the ETF market.

Markit, a leading, global financial information services company, today announced the forthcoming launch of the Markit iTraxx CEEMEA, the first credit default swap (CDS) index referencing corporate debt in Central & Eastern Europe, Middle East & Africa.

ETFGI Global ETF And ETP Industry Insights, Q2 2012


FFastFill Receives– SOC2 accreditation (Formally SAS70)
FFastFill, the leading provider of Software as a Service (SaaS) solutions to the derivatives industry, announces today that all its services which were formerly certified by the Statement on Auditing Standards No. 70 (SAS 70) audit program have transitioned to the Service Organization Control Reports (SOC 2 – including the SSAE16 framework) framework, in accordance with American Institute of Certified Public Accountants (“AICPA”) guidance.

Trayport ETS: New Trading System On CEGH Gas Exchange Of The Vienna Stock Exchange


A Matter of Disclosure
By Eric Jacobson | Morningstar
The wheels of justice may turn slowly, but they do turn. It has been more than three and a half years since the 2008 financial crisis saw the implosion of two Oppenheimer bond funds. The managers of both Oppenheimer Core Bond (OPIGX) and Oppenheimer Champion Income (OPCHX) had made large bets on a slice of the commercial mortgage-backed securities market by purchasing so-called total return swaps for the portfolios.

Environmental & Energy

World Bank Blocks Recast of Trading Emissions Contracts
The World Bank declined requests by Trading Emissions Plc to renegotiate carbon credit-purchase agreements between the bank’s climate funds and emerging-nation suppliers, according to Simon Shaw, adviser to the company.

**RKB — The numbers at issue: Trading Emissions said in March it has an outstanding bank guarantee to the World Bank for 20.8 million euros ($26 million) for industrial-gas emission credits it is obliged to buy through the bank-managed Umbrella Carbon Facility through 2014. Its average contracted price for future deliveries of credits is 6.29 euros a metric ton, compared with today’s December contract level of 4.12 euros.

U.K. Climate Expert Warns Korea Over Excess Permit Allocation
South Korea should avoid giving away too many carbon permits as it starts a cap-and-trade system to cut greenhouse gases, a U.K. climate diplomat said.

Australian firms’ carbon cost to be lower than expected – study
Environmental Finance
Australian businesses will pay up to 45% less than forecast under the country’s Carbon Pricing Mechanism (CPM), which came into force this week, due to low European emissions prices and regional offset prices, according to a carbon analysis firm.

**RKB — Melbourne-based RepuTex today said it expects a carbon price of A$8-15 (US$8.20-15.40) in the run-up to 2020 – far below the government’s A$40 estimate.


Approval of Business Restructuring Plan in accordance with the Act on Special Measures concerning Industrial Revitalization and Innovation of Industrial Activities
Today, Tokyo Stock Exchange Group, Inc. and Osaka Securities Exchange Co., Ltd. received approval from the Prime Minister on the business restructuring plan in accordance with the Act on Special Measures concerning Industrial Revitalization and Innovation of Industrial Activities. The Companies had jointly applied to the Prime Minister for approval of said business restructuring plan regarding their business combination.

Korea Exchange acts and thinks globally
Market Watch
Korea stock exchange’s chief Bongsoo Kim sees globalization as the road to success for the world’s ninth-largest stock exchange and the biggest derivatives market.

Summary Of June 2012 Activities At TOCOM – TOCOM June 2012 Volume Averaged 96,725 Contracts Per Day
The Tokyo Commodity Exchange (TOCOM) announced today that June 2012 trading volume averaged 96,725 contracts per day, down 7.2% from May 2012.

HKEx Monthly Market Highlights – June 2012

HKEx Trading Statistics For June 2012

Hong Kong’s Securities And Futures Commission Extends Consultation Period For Review Of Sponsors Regulation

Hong Kong’s Securities And Futures Commission Prosecutes PME Group And Its Director For False Or Misleading Announcements

Hong Kong’s Securities And Futures Commission: Jail Sentence And Fine Against Insider Dealer Restored After Final Appeal

Monetary Authority Of Singapore Imposes Composition Amount Of $35,000 On MAA Financial Planners Pte Ltd

Shanghai Stock Exchange Holds Training Class For Guiding Rational Investment In Fujian

Shenzhen Stock Exchange: To Reinforce The Awareness Of Risk Prevention, To Participate In New Share Trading With Caution

Frontier Markets

MCX Weekly Market Report June 29, 2012 – July 05, 2012

Palestine Exchange Monthly Newsletter

Malawi Stock Exchange Weekly Trading Report

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