Industry news
Date: May 20, 2013
May 20, 2013: NYSE Busts Trades as Anadarko Falls to Penny; HKMEx surrenders trading license; Hemsley sees Bats take flight
A final-minute trading burst at the NYSE sent a stock’s price from $90 to $0.01 and back up again on Friday, causing the exchange to bust most of those trades afterwards. Fledgling Hong Kong Mercantile Exchange (HKMEx) ceased trading operations last week, relinquished its trading license and settled the handful of outstanding open contracts, vowing to renew operations in the future with new products. No longer just a trading platform, Bats Chi-X Europe starts its first week with the new designation of stock exchange.
First Read
Tim Lothian Graduates from High School
Timothy James Lothian, who you met as a cute little boy, a Cub Scout selling popcorn, has graduated high school. He received his high school diploma yesterday in a two hour ceremony at York High School, in Elmhurst, IL.
He will be headed to the University of Missouri’s Columbia School of Journalism in August. This summer he will be interning with John Lothian News working with our video team. During his senior year at York, Tim was part of the school paper and YTV, the school’s in house news and entertainment television station.
It is hard to believe he is done with high school and ready to move on to college, but he is. The question is whether his parents are ready for this. Only time will tell. BTW, Tim is still pursuing the rank of Eagle in Boy Scouts and expects to conduct his Eagle Project in the next 2 weeks. He turns 18 at the end of July, so he needs to finish everything by then. Thank you to all who helped him with his scouting experience, encouraging him and buying popcorn from him. It made a difference.
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FIA Appoints Director Of International Relations And Strategy
The Futures Industry Association today announced the appointment of Jacqueline Hamra Mesa as Senior Vice President and Director of International Relations and Strategy. Mesa will be responsible for helping develop, implement and manage FIA’s global regulatory and policy agenda.
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***** An excellent hire. I was saddened when I saw Ms. Mesa was leaving the CFTC and told her so when I was in Washington, DC. She told me she was still going to be around, and so she is. Congratulations to the FIA and Ms. Mesa on this excellent hire.
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CME Group Expands OTC Agricultural Offering with New USD-Denominated Palm Oil Swap
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it has expanded its centrally cleared, over-the-counter (OTC) agricultural swap offering through the introduction of a new U.S. dollar (USD)-denominated palm oil swap.
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***** Did you ever think you would see the day the CME Group would offer USD-denominated Palm Oil Swaps? Not me.
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Analysis: High speed trading a stiff challenge for U.S. regulators
Reuters via Yahoo! News
Financial trading in world markets has grown so lightning-fast that effective regulation is growing tougher by the second, increasing the threat of crashes sparked by hoaxes, electronic glitches or yet-unknown causes.
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***** Open outcry had regulators watching, but was mostly policed by the traders themselves. This is something that we have lost with the move to electronic trading. And it means the exchanges and the regulators have to have capabilities, responsibilities, technologies and experience that they did not possess before. Or so we hope.
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Yesterday’s stars are today’s crooks
Chris Newlands – FT.com
Another week, another fund manager arrested for alleged insider trading. This time around it is a former star manager at BlackRock, the world’s largest investment house.
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***** They are crooks because they got caught? They were not crooks before?
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Buyside cautious about broker service reboot
Anish Puaar – Financial News
The heads of trading at large asset managers appear, on the whole, to welcome effort by brokers to overhaul how they cover the equities markets. But some are worried that it could result in a loss of specialism and reduce the number of brokers who are experts in handling different types of order flow.
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Succeeding in the male-dominated world of the trading floor
Suzi Ring – Financial News
The progress of women through the glass ceiling took a knock last month when the Cranfield International Centre for Women Leaders reported that the overall percentage of female-held board directorships at FTSE 100 companies has stalled at 17.3%, casting doubt on a government-set goal of 25% by 2015.
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***** How does one go through a glass ceiling? One has to break it.
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Deaf ear turned to most whistleblowers
Vanessa Kortekaas – FT.com
More than three-quarters of whistleblowers working in financial services are ignored when they first raise concerns to their employers, according to research. Whistleblowing charity Public Concern at Work publishes a report on Monday showing 77 per cent of financial services whistleblowers are turned away when they tell their employer.
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***** Not everyone gets whistleblowing just right.
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Pressure on Bloomberg as its scope widens
Stephen Foley, Tracy Alloway and Andrew Edgecliffe-Johnson in New York, and Brooke Masters in London – FT.com
Since it was revealed a week ago that Bloomberg’s journalists were accessing more information on the firm’s commercial clients than those clients ever realised, the financial data firm has been fighting to restore the trust of Wall Street and the City. Regulators’ response, though, has been muted and indirect because, unlike most of the clients who rely on its ubiquitous terminal, Bloomberg is not heavily regulated. For now.
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***** Not a good time to be regulating “Freedom of the Press.”
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Rajat Gupta’s Lust for Zeros
ANITA RAGHAVAN – NYTimes.com
Late one Friday morning, Rajat Gupta was rushing through security at Philadelphia International Airport, carry-on in tow, when his cellphone rang. When Gupta heard from Goldman Sachs, on whose board he sat, it was often from its chief executive, Lloyd Blankfein. But on this morning, it was Gregory K. Palm, his old Harvard Business School classmate and the bank’s general counsel, on the line. Palm sounded unusually serious. So Gupta asked if he could call him back from the other side of security.
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Chicago Financial Communities to Join Forces at the Hedge Funds Care 11th Annual Midwest Charity Gala
The Midwest financial community will unite at the 11th Annual Midwest “Open Your Heart to the Children” Benefit organized by Hedge Funds Care. A highlight of the Chicago social calendar, the Benefit brings together the hedge fund, proprietary trading, private equity, and venture capital communities to provide direct support for local Chicago charities that prevent and treat child abuse. The Benefit will be held on May 22nd at 6:00 p.m. CST at Untitled (111 W. Kinzie Street, Chicago, IL 60654) an exciting new restaurant and live music venue in Chicago inspired by supper clubs of the prohibition era. The event will feature cocktails, a raffle, live entertainment, and premium liquor tastings. An after party will also take place at the same location starting at 9:30 p.m. CST. A limited number of tickets and sponsorships are still available.
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***** Don’t make Jim Kharouf write another commentary on charitable giving. Just sign up.
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Debby Hallett of Arthur Bell CPAs on Performance Reporting for CTAs & Managed Accounts
MarketsWiki.tv
Debby Hallett is director of performance analysis for Arthur Bell Certified Public Accountants, a firm specializing in audit, tax, accounting, and advisory services for the alternative investment sector. Hallett, a licensed CPA, focuses on CTA and fund manager reporting procedures. She spoke with John Lothian News Editor-at-Large Doug Ashburn about presenting performance when a managed account is a fund, the differences between fund performance and CTA program performance, performance record examinations, and why more CTAs are outsourcing performance reporting services to a third party provider.
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Technology Trends That Matter: Panel Discussion – based on the upcoming book “Architects of Electronic Trading”
W Chicago – City Center, 172 W. Adams St., Chicago
When: June 6, 2013 3:30 p.m. to 6:30 p.m.
Join Mike Persico of Anova Technologies, John Knuff of Equinix, Bernard Hosman of Eurex Exchange and Robert Walker of xCelor for a panel discussion on the latest trends in technology that are relevant for low-latency firms. You’ll hear how microwaves and FPGAs are changing the market landscape and how exchanges are integrating these technologies to enhance their offerings. Experts also will address how low-latency firms can embrace the emerging “Trading Smart” trend to gain a competitive edge. Special guest moderator, Suhit Gupta, former CTO of hedge fund Maverick Capital will frame the discussion around transformational technology and how technology gives savvy firms greater agility.
The content for the panel discussion is based on Stephanie Hammer’s book, Architects of Electronic Trading, which features interviews with a range of technology leaders that include this event’s panelists and others including Mark Gorton of Tower Research Capital, William Murphy of The Blackstone Group, W. Brennan Carley of Thomson Reuters and others.
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Lead Stories
NYSE Busts Trades as Anadarko Falls to Penny
MoneyBeat – WSJ
A sharp drop that drove Anadarko Petroleum Corp.’s to a penny in the last second of trading Friday exposes a vulnerability in trading rules adopted last month to curb sharp stock swings. Andarko’s stock fell from over $90 a share to as low as one penny in fraction of a second and then recovered, closing up $2.22, or 2.5%, to $90.03, according to FactSet. NYSE Euronext canceled all trades executed below $87.56 that took place between 3:59 p.m. EDT and 4:00 p.m., according to an alert sent to traders at 4:42 p.m.
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HKMEx surrenders trading license
The Asset
The Hong Kong Mercantile Exchange (HKMEx) has decided to voluntarily surrender the authorization to provide automated trading services (ATS) granted by the Securities and Futures Commission (the SFC). With immediate effect, no new orders may be placed and all open positions will be financially settled at the settlement price determined by HKMEx and its designated clearinghouse.
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***** This truly makes me sad. I hope they make it back with some new contracts.
Hemsley sees Bats take flight
Michelle Price – Financial News
Today, Bats Chi-X Europe, the pan-European trading platform, becomes a fully fledged stock exchange, the first of Europe’s new breed of alternative trading platforms to achieve that prestigious distinction.
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Tempers flare in ‘pay for order flow’ row
Michelle Price – Financial News
The UK options industry has rounded on the Financial Conduct Authority for failing to provide clear guidance governing the controversial practice of “payment for order flow”. Trading firms claim the lack of regulatory clarity is pushing the market into turmoil.
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Criminal Charges Weighed Against SAC
MICHAEL ROTHFELD and JENNY STRASBURG – WSJ.com
U.S. prosecutors are considering possible criminal charges against SAC Capital Advisors LP as a result of the government’s insider-trading investigation of the hedge-fund firm, according to people familiar with the matter.
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Bloomberg Appoints Samuel Palmisano as Independent Adviser | Bloomberg L.P.
Bloomberg LP announced today the appointment of Samuel J. Palmisano, the former Chairman and CEO of IBM, to serve as an independent adviser regarding the Company’s privacy and data standards. Mr. Palmisano will immediately undertake a review of the Company’s current practices and policies for client data and end user information, including a review of access issues recently raised by the Company’s clients.
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Oil Price-Fixing Probe Widens as Neste Helps EU Inquiry
Edward Klump, Asjylyn Loder & Lynn Doan – Bloomberg
The European oil price-fixing probe expanded as Neste Oil Oyj (NES1V), Finland’s only refiner, said it was asked to provide information regarding potential manipulation of global crude and biofuel markets.
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Chat launch to rival Bloomberg
Farah Khalique – Financial News
Market data rivals Thomson Reuters and Markit have teamed up with leading banks to build a new messaging service to challenge competitor Bloomberg.
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Demise of Swiss banking secrecy heralds new era
James Shotter in Zurich – FT.com
Over the past five years, Switzerland has fought tooth and claw to keep its 80-year-old tradition of protecting the secrecy of its banks’ clients alive. It is looking like an increasingly forlorn cause.
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Regulatory
Investor Group Asks S.E.C. to Intervene on Access to Shareholder Vote Totals
SUSANNE CRAIG and JESSICA SILVER-GREENBERG – NYTimes.com
The Council of Institutional Investors has asked the Securities and Exchange Commission to intervene after the main company that provides real-time tabulations on shareholder votes stopped giving this information to the groups that sponsor proposals.
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SEC must ride herd on credit rating agencies
Al Franken and Roger Wicker – CNN
Earlier this year, the Justice Department filed a $5 billion lawsuit against Standard & Poor’s — one of the nation’s Big Three credit rating agencies, which also include Moody’s and Fitch.
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Industry decries regulatory bottleneck
Sophie Baker – Financial News
Frustration is mounting across Europe, with the financial sector complaining it is being left in limbo by delays and confusion surrounding a swathe of regulations.
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Custodians in eleventh hour technology challenge
Dan Barnes – Financial News
Custodians are being forced to develop flexible technology to accommodate continuing uncertainty about new US tax evasion rules, even as the deadline for their implementation draws close.
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Concurring Statement Of Commissioner Scott D. O’Malia, Core Principles And Other Requirements For Swap Execution Facilities
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Dissenting Statement Of CFTC Commissioner Scott D. O’Malia, Process For A Designated Contract Market Or Swap Execution Facility To Make A Swap Available To Trade Under Section 2(H)(8) Of The Commodity Exchange Act
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Remarks At 12th European Corporate Governance & Company Law Conference By SEC Commissioner Daniel M. Gallagher
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Cross-Border at the Crossroads: The SEC’s “Middle Ground” by John Ramsay, Acting Director, Division of Trading and Markets, U.S. Securities and Exchange Commission
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ASIC consults on reforms for charitable investment fundraising
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The Autorité Des Marchés Financiers (AMF) And The Autorité De Contrôle Prudentiel (ACP) Provide A Reminder Of The Rules That Apply To Crowdfunding
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Exchanges & Trading Facilities
Bats Chi-X Europe plots ETF clean-up
Michelle Price – Financial News
Bats Chi-X Europe, the largest pan-European trading platform, is looking to shake up the region’s exchange-traded fund market with a new model for secondary trading.
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TOM (The Order machine) has moved to London
TOM is pleased to announce that the matching engine has successfully migrated from Stockholm to the new standalone environment in London this weekend.
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Aquis Exchange Links With Fixspec – Agreement Aims To Facilitate FIX Testing For Members
Aquis Exchange Limited, the proposed pan-European stock exchange, and FixSpec, the FIX certification and connectivity specialist, have entered into an agreement which will facilitate Member testing for FIX order entry specifications and offer an automated certification platform for Aquis Exchange.
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Lloyds Bank becomes a dedicated market maker on ORB
London Stock Exchange today welcomed Lloyds Bank to open London’s markets to celebrate the company becoming a dedicated market maker on its Order book for Retail Bonds (ORB). Lloyds Bank will quote continuous two-way pricing throughout the trading day in gilts and corporate bonds listed on ORB.
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[CBOE] Bid-Ask Differentials
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TOM MTF Statistics Week 20, 2013 – Goodbye Stockholm, Hello London
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Hedge Funds & Managed Futures
Tudor hedge fund hires leading IMF official
Robin Wigglesworth and Sam Jones in London – FT.com
Hedge fund billionaire Paul Tudor Jones has hired one of the International Monetary Fund’s most senior officials in a move highlighting the attraction of private sector careers for top public sector figures.
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Triton makes history with E3.3bn new fund
Kiel Porter – Financial News
Buyout firm Triton Partners made history last week closing its latest fund at E3.3bn – a record sum from a German-based manager.
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Paulson to Maverick Bet on Housing With Junk Insurers
Bloomberg
Hedge funds led by Paulson & Co. and Maverick Capital are piling into mortgage insurers in a bet that some of the companies worst hit by the U.S. housing crash will be among the biggest winners in the rebound.
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SAC Starts to Balk Over Insider Trading Inquiry
PETER LATTMAN and BEN PROTESS – NYTimes.com
The government’s insider trading investigation of the giant hedge fund SAC Capital Advisors entered a more contentious phase this week, with criminal authorities issuing a new round of subpoenas requesting information about the firm’s activities, according to lawyers briefed on the case.
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European pension funds switch out of equities
David Oakley, Investment Correspondent – FT.com
European pension fund managers are switching out of equities at a sharp pace amid worries that the market will turn and send deficits spiralling, putting question marks over the ability of some schemes to pay retirees.
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Brazil’s Vinci sets sights on global partners
Harriet Agnew – Financial News
Two years ago, Brazilian asset manager Vinci Partners decided to diversify its investments overseas. About 95% of its money was invested in Brazil.
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Hedge funds back to selling gold after propping market a month ago
Reuters via Yahoo! Finance
Hedge funds and other big speculators in commodities have started selling gold in a big way, trade data showed on Friday, just a month after they had supported the precious metal amid a record tumble in its price.
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CFTC Commitments Of Traders Reports Update
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Banks & Brokers
R.B.S. Appoints New Chairman for Asia
NEIL GOUGH – NYTimes.com
The Royal Bank of Scotland announced a new chairman for Asia on Monday, in the latest high-level executive change at the bank. R.B.S. said Donald Workman had been named executive chairman of its Asia unit, succeeding John McCormick, who is leaving the bank after 17 years of service.
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JPMorgan Chase Vote Tests Stockholders’ Power
New York Times
At JPMorgan Chase, the move to split the jobs of chairman and chief executive, now held by Jamie Dimon, comes as the bank is actually prospering.
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SEC asked to review shareholder voting rules over JPMorgan move
Reuters
The Council of Institutional Investors, which represents managers of pensions, endowments, and foundations with more than $3 trillion of assets total, has asked the Securities and Exchange Commission to review rules for shareholder voting.
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Goldman Sachs Eyes Japan Renewable Energy Investments
Bloomberg
Goldman Sachs Group Inc. plans to invest as much as 50 billion yen in renewable energy projects in Japan in the next five years, tapping demand for electricity produced from solar and wind-power generators.
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Bonus cap to catch tens of thousands more bankers in Europe
Daniel Schäfer and Patrick Jenkins in London – FT.com
Tens of thousands more bankers will be hit by the EU’s strict bonus cap under a proposal that severely tightens the political clampdown on financial sector pay.
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Goldman Sachs Selling ICBC Stake
PRUDENCE HO And YVONNE LEE – WSJ.com
Goldman Sachs Group Inc. is selling its entire stake in Industrial & Commercial Bank of China Ltd. 601398.SH +0.72% for around US$1.1 billion, exiting an investment it made in China’s biggest bank seven years ago. Goldman will no longer have a stake in ICBC once the current sale is complete, a person close to the Wall Street bank said.
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Clearing & Settlement
Integral Reassures Customers With Announcement About Plans to Launch SEF
Business Wire via Yahoo! Finance
Integral Development Corp. , a leading provider of FX trading solutions and services, announced today that it is ready to provide its customers with a Swap Execution Facility in time to meet stated deadlines by the U.S.
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Indexes & Products
20 Thai Stocks Added To MSCI Global Small Cap Indices Effective From June 1
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FTSE EPRA/NAREIT Real Estate Indices Surpass $10Bn In ETF-Linked AUM
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Technology
Wealth manager opts for single ops platform
Sophie Baker – Financial News
Wealth management group Ashcourt Rowan has outsourced its asset management administration and custody to TD Wealth Institutional, bringing the business on to a single operating platform.
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FIX Protocol Ltd. Publishes Updated Guidelines For Global Post-Trade Processing To Further Improve Market Efficiencies – Providing Buy And Sell-Side Firms With A Standardised Approach For More Effective Management Of Risk Issues, Enhanced Transparency, Reduced Costs And Greater Efficiencies For Equities Post-Trade Processing
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Enforcement
Judge blocks $13 million arbitration against SunTrust
Reuters via Yahoo! News
By Nate Raymond NEW YORK – SunTrust Banks Inc won a court order on Friday preventing a Connecticut-based hedge fund from moving forward with a $13 million arbitration over mortgage-backed securities.
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Environmental & Energy
CME Group sees first trade for RIN futures
Reuters
The CME Group’s newly-launched renewable identification number (RIN) futures contracts saw their first trade on Wednesday, according to a spokesman for the exchange operator.
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Asia-Pacific
Philippine Bourse to Boost Trading With New Products, Sicat Says
By Ian Sayson – Businessweek
Philippine Stock Exchange President Hans Sicat, who has been elected for a third term, said the bourse will focus in the next 12 months on introducing new products to boost trading in one of Asia’s smallest markets.
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Lawmakers question SFC handling of HKMEx closure
South China Morning Post
Legislators on Monday cast doubts on the securities regulator’s decision to allow the Hong Kong Mercantile Exchange to surrender its licence, instead of immediately suspending it, after it emerged that the firm had insufficient capital.
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Hong Kong’s Securities And Futures Commission: HKMEx Surrenders Its ATS Authorization
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HKMEx Successfully Closes Out All Open Positions
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Taiwan Futures Exchange Newsletter – May 2013
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Frontier Markets
KCA objects to PMEX futures trade in cotton
thenews.com.pk
The Karachi Cotton Association is to protest to the incoming federal government against introduction of futures trade in cotton by the Pakistan Mercantile Exchange (PMEX), a member of the association said on Thursday.
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DIFC Investments Names Chief Executive Of DIFC Properties – Brett Schafer Appointed To Lead Growth Strategy Of DIFC Properties
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NASDAQ Dubai Welcomes Emirates Islamic Financial Brokerage (EIFB) As A Member
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Abu Dhabi Securities Exchange Achieves 100% In Company Disclosure Compliance
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Malawi Stock Exchange Weekly Trading Report -17th May, 2013
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Closure Of Bursa Malaysia Berhad – Market Holidays
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