Industry news

Date: Aug 7, 2013

August 7, 2013: Warsaw Exchange Said to Plan Acquisition of 30pct Stake in Aquis; Alternative trading pioneers plot South Korea moves; Credit Suisse Onboards as First Clearing Firm with trueEX

The Warsaw Stock Exchange looks to expand beyond its home turf with a partial acquisition of Aquis Exchange. Japan’s alternative platform operators Chi-X and SBI Japannext look to South Korea as a good place to sell their services. New interest rate swap venue trueEX signs up Credit Suisse as its first clearing firm.

First Read

Sandor Talks About Inventing Markets
Dan Collins Report
Richard (Doc) Sandor has been described as brilliant by many but from my perspective his genius is in being able to see the essence of things; understanding the simple purpose of a product and applying it free from any preconceived parameters. Sandor, who created the first interest rates futures in the 1970s and late a market for carbon emissions, envisioned interest rate futures because he understood the basic purpose of futures and saw a need. He was free to look for industries and elements in the world that carried risk and looked to invent markets that would allow that risk to be hedged.

***** Dan Collins reports on Doc Sandor’s presentation at our last Intern Education Series event.


ISE Gemini Announces Successful Launch
The International Securities Exchange announced that ISE Gemini, ISE’s second options exchange, successfully completed its first day of trading yesterday. ISE Gemini launched trading with six symbols — Walt Disney Co. (DIS), NetApp Inc. (NTAP), Texas Instruments Inc. (TXN), Goldcorp Inc. (GG), NVIDIA Corp. (NVDA), and Dow Chemical Co. (DOW) — and plans to add additional products over the next several weeks until it has ultimately listed all of the most active options classes. The new exchange offers maker-taker pricing combined with ISE’s patented pro-rata and customer priority market structure.

***** When the moon is in the seventh house, and Jupiter aligns with Mars…….


Analysis: Commodity funds on track for big launch year in uncertain market
An ex-Glencore oil trader and a veteran grains merchant are among those behind the largest number of commodity fund launches in 3 years despite investor worries the multi-year rally in those markets is over.

***** Everyone is launching.


Asia: Pieces Falling Into Place

View Special Report »

Talking about Asia often leaves professionals from those regions a bit tongue-tied. When JLN decided to do a special report talking about Asia, many of those experts had the same question: “Which country? Asia is a big place.” Indeed, talking about Asia is difficult, given the number of markets and regulatory differences, not to mention geographic distance between various Asian financial centers.

The debate still goes on over which one or two or three are the most important in the region. Some say Japan, while others discuss Hong Kong’s status. Others like the positioning of Singapore. And this doesn’t include Australia, South Korea, Taiwan, mainland China or India. But collectively, the region is a force in the derivatives world. JLN interviewed seven executives on the changes, challenges and opportunities that exist in the region today.

View Special Report »





ICE Chief Shrugs Off Banks’ Exit From Commodities
Jacob Bunge and Saabira Chaudhuri –
The top executive of IntercontinentalExchange Inc. (ICE) said Tuesday that commodity futures trading activity would remain strong despite some Wall Street banks’ planned exit from commodities businesses.


OptionsCity Software appoints Terrence Gray as Chief Financial Officer
OptionsCity Software, Inc., a leading provider of electronic trading solutions, today announced Terrence Gray has been named Chief Financial Officer. In his new role, Gray will oversee all financial operations for the company, in addition to providing economic strategy and forecast.

***** CFOs are supposed to see things in black and white, Mr. Gray.


Key data released to traders before public: WSJ
Federal investigators have found holes in the government’s network for preventing key economic releases from being leaked to traders prior to being issued to the public, The Wall Street Journal reported on Tuesday, including the all-important monthly jobs report.

***** Was the information being leaked, or was it inadvertently available and traders knowingly grabbed it?


Why do banks own physical commodity assets?
Suzi Ring – Financial News
The average Joe on the street would be forgiven for thinking that banks are supposed to move money, not metal. But events in recent weeks have put paid to that misconception.

***** OK, I want to know the answer to this question and I don’t.


New Front in Legal Battle Over Options Contracts
A seven-year-long court fight between exchanges over a profitable corner of the stock-options market will carry on, despite a U.S. Supreme Court action on the matter in May. The International Securities Exchange is resuming a legal challenge in New York federal court that would force the rival Chicago Board Options Exchange to open up some of its flagship contracts to other exchanges, a spokeswoman for ISE said Tuesday.

***** The war continues with the renewed battled on a different field.


SEC says ex-Marine bilked vets in Chicago hedge fund fraud
A former Marine masqueraded as a successful hedge fund trader to defraud current and former military personnel, causing the U.S. Securities and Exchange Commission to obtain an emergency asset freeze to halt his scheme, the regulator said on Tuesday.

***** This story just makes me sick.



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Lead Stories

Warsaw Exchange Said to Plan Acquisition of 30% Stake in Aquis
Nandini Sukumar and Konrad Krasuski – Bloomberg
The Warsaw Stock Exchange is in talks to buy a 30 percent stake in Aquis Exchange Ltd., the London- based trading system, as central Europe’s largest bourse seeks to expand outside its home market, according to three people familiar with the situation.

Alternative trading pioneers plot South Korea moves
Michelle Price in Hong Kong – Financial News
Chi-X Global and SBI are looking to capitalise on new rules aimed at fostering competition in the South Korean market

Credit Suisse Onboards as First Clearing Firm with trueEX
Ivy Schmerken – Wall Street & Technology
Today, trueEX, the first electronic exchange for interest rate swaps, said that Credit Suisse completed the on-boarding necessary to enable the firm and its clients to access the trueEX Designated Contract Market (DCM) and related services.

BATS’ largest U.S. exchange hit by technical outage
Stock exchange operator BATS Global Markets said on Tuesday its largest U.S. exchange had an outage that lasted nearly an hour due to an internal network problem, the latest in a spate of technical problems to affect U.S. financial markets.

Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe
Matthew Leising – Bloomberg
The $2.5 billion of settlements reached in the London interbank offered rate rigging scandal are compelling banks to hand over information in the probe of a separate financial benchmark tied to interest-rate derivatives.

Bank of England Changes Policy Tack
The Bank of England on Wednesday made the biggest change to its monetary policy framework since 2009, giving an explicit pledge to keep its benchmark interest rate and bond-purchase program at current levels until the U.K.’s jobless rate falls to 7%.

U.S. judge says SEC can pursue Bitcoin-related lawsuit
U.S. regulators got the green light from a federal judge to proceed with their lawsuit against a Texas man accused of running a Ponzi scheme using Bitcoin, the virtual online money system.

Govt may ask Sebi to regulate spot exchanges
Santosh Tiwari – Financial Express
The government, as an interim measure, may hand over the regulation of spot exchanges to stock market regulator Securities and Exchange Board of India (Sebi) in the aftermath of the controversy surrounding the National Spot Exchange.

National Spot Exchange: What Went Wrong
Debiprasad Nayak – India Real Time – WSJ
The National Spot Exchange, India’s largest market for spot trading in commodities, last week halted trading in a majority of the commodities, citing a sharp fall in trading volume.

Deutsche Bank warns proposed tax could hurt Europe’s FX market
Aug 6 (IFR) – A proposed European financial transaction tax of 0.01% on all derivatives transactions could bring foreign exchange markets in Europe to their knees, according to Deutsche Bank analysts.

Wall Street watchdog says scammers going retro with phone calls
Wall Street’s industry-funded watchdog on Tuesday warned that scammers are turning to a rather old-fashioned strategy for defrauding investors – the phone call.


SEC not to move against hedge fund Magnetar over mortgages: WSJ
Reuters via Yahoo! News
The U.S. securities regulator has decided not to file civil charges against hedge fund firm Magnetar Capital LLC over its role in helping create mortgage securities that lost value during the financial crisis, the Wall Street Journal reported.

CFTC’s Division of Market Oversight Issues an Amendment to Previously Issued No-Action Relief for Certain Commodity Trading Advisors and Investment Advisors from the Prohibition of Aggregation for Large Notional Off-Facility Swaps

Firms Elect Two Industry Governors to FINRA Board of Governors, New Public Governor Appointed – FINRA
The Financial Industry Regulatory Authority (FINRA) today announced the results of voting that took place at its 2013 Annual Meeting today in Washington, DC. Governors Elected:
Small Firm Governor: Robert Keenan, Chief Executive Officer of St. Bernard Financial Services
Large Firm Governor: James D. Weddle, Managing Partner, Edward Jones

UK’s Financial Conduct Authority Appoints Four New Supervision Directors
The Financial Conduct Authority (FCA) has appointed four directors to lead key areas of its Supervision division. These appointments complete the senior structure in Supervision, and are the final step in implementing a new structure for the division.

Is the SFO’s overhaul too little, too late?
Joe McGrath – Financial News
Senior figures at the Serious Fraud Office may be pleased to see the back of July. The month drew to a close with headlines documenting an ongoing court spat with property investor Vincent Tchenguiz in which he is seeking £300 million for damages from the SFO for allegations that led to his arrest in March 2011.

FINRA Reminds Brokers That They’re Not Supposed To Help People Launder Money
Matt Levine – Dealbreaker
A while back Oppenheimer & Co. let some people trade illegally in some penny stocks and today they got in mild trouble for it, settling with FINRA over charges of selling unregistered securities, inadequate supervision, and inadequate anti-money-laundering compliance programs. Oppenheimer agreed to pay a $1.4mm fine and hire a bunch of stop-doing-that consultants to tell them to stop doing that.

Exchanges & Trading Facilities

LSE Goes Live with Pre-LOU
The London Stock Exchange (LSE) has launched its legal entity identifier (LEI) pre-Local Operating Unit (pre-LOU), including a portal with a consolidated view of data from the three other pre-LOUs currently issuing pre-LEIs.

NYSE Euronext Announces Trading Volumes For July 2013
NYSE Euronext today announced trading volumes for its global derivatives and cash equities exchanges for July 20131. Global derivatives average daily volume of 6.4 million contracts, excluding Bclear in July 2013 increased 3.2% compared to July 2012, but decreased 27.1% from June 2013. U.S. equity options volumes increased 2.1% compared to July 2012, but decreased 20.7% sequentially. ADV in U.S. cash equities and in European cash equities declined both year-over-year and month-over-month.

Connamara Systems Joins IPXI As Associate Member
Connamara Systems, LLC (Connamara), a provider of services to exchanges, swap execution facilities, commodity trading advisors (CTAs) and hedge funds, announced today that it has joined Intellectual Property Exchange International, Inc. (IPXI) as an Associate Member. The Exchange, which announced its first offering last month, appointed Connamara a new member of IPXI’s Market Operations Committee that oversees the operations and functioning of the trading platform in terms of best practices and procedures to ensure that trading on the exchange operates efficiently.

Eris Exchange: August 2013 Highlights
New Clearing Firms; Volume & OI Updates; Hedge Accounting Update; Trade Talk: Eris Invoice Spread

Demand for Liquidnet’s Commission Management Suite Extends to Europe
Business Wire via Yahoo! Finance
Liquidnet, the global institutional trading network, today announced the expansion of its commission management services to Members in Europe.

Brennan Warble Joins Liquidnet As Head Of US Sales
Liquidnet, the global institutional trading network, today announced that Brennan Warble has joined the company as Head of US Sales and a member of the global leadership team effective August 5th.

Moscow Exchange Monthly Market Report: July 2013

TSX Markets Top 20 Largest Consolidated Short Position Report – July 31, 2013

Hedge Funds & Managed Futures

Hedge Fund Association Adds High-Net-Worth Expert Hannah Shaw Grove to Advisory Board
Business Wire via Yahoo! Finance
The Hedge Fund Association announced today the appointment of prominent global wealth consultant Hannah Shaw Grove to its High-Net-Worth Advisory Board.

Legg Mason closes $500m emerging markets boutique
Sarah Krouse – Financial News
Legg Mason is closing Esemplia Emerging Markets, a boutique equity manager with £500 million under management. Twenty five staff at the business will be made redundant.

Archer Capital Cuts Fees After Struggling to Deploy Funds
Gillian Tan – MoneyBeat – WSJ
Australian private equity firm Archer Capital has lowered the management fee on its 1.5 billion Australian dollar (US$1.34 billion) fifth fund, according to people familiar with the matter. The 2% management fee has been cut by 20% to 1.6% temporarily, due to a slower use of funds than anticipated, the people said.

Pimco’s July Fund Flows Spark ‘Great Rotation’ Debate
Min Zeng – MoneyBeat – WSJ
Pacific Investment Management Co., home to the world’s largest bond fund, run by Bill Gross, lured cash into its stock funds in July while its bond fund business wobbled, offering fodder for the growing debate over a so-called “great rotation” from bonds to stocks.

Investors favour developed Europe and Australia-focused hedge funds
eVestment –
As European volatility increases, developed Europe-focused fund performance falls. Investors start to favour Australia-focused funds while alternative Ucits performance disappoints

UK pension assets hit £2 trillion
Joe McGrath – Financial News
UK pension fund assets hit £2 trillion for the first time at the end of December 2012, up from £1.9 trillion a year earlier, according to the latest figures from the Investment Management Association.

Pension Reform Could Disrupt Investment Funds
Detroit’s financial woes, exacerbated by underfunded pension liabilities, have brought renewed scrutiny to public pension plans. Senator Orrin Hatch, Republican of Utah, and others have suggested overhauling these plans to shift more responsibility to the private sector. Private insurance companies would assume responsibility for these defined benefit plans, offering annuities to beneficiaries in exchange for employer-paid premiums.

Banks & Brokers

U.S. regulator probing E*Trade’s customer order-routing practices
The Financial Industry Regulatory Authority is examining the way E*Trade Securities prices and sends customer stock orders to an affiliate, E*Trade said in a quarterly regulatory filing on Tuesday.

Knight and Getco record losses, mainly on KCG merger costs
Trading firms Getco Holding Co and Knight Capital Group, which combined in July to create KCG Holdings , both had losses in the second quarter, due mainly to merger costs.

Deutsche Bank Names Ex-Goldman Banker as Australia Country Head
Gillian Tan – MoneyBeat – WSJ
Deutsche Bank said Wednesday it has hired former Goldman Sachs Group Inc.banker James McMurdo as Chief Executive Officer of its Australia and New Zealand unit.

MF Global trustee Freeh seeks additional $1 million in fees
Former FBI chief Louis Freeh, the state-appointed trustee in the MF Global bankruptcy case, has asked to be paid another $1 million for winding down the failed brokerage.

U.S. accuses Bank of America of mortgage-backed securities fraud
Reuters via Yahoo! News
The U.S. government on Tuesday filed two civil lawsuits against Bank of America that accuse the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities.

Clearing & Settlement

Bloomberg and LCH team up to ease collateral strain
Anish Puaar – Financial News
LCH.Clearnet, the clearing house majority-owned by the London Stock Exchange, has entered into a partnership with Bloomberg to better control the rising collateral costs of swaps trades by bringing crucial analytics straight to traders’ desktops.

Bloomberg Integrates Margin Calculator for Swap Participants
To gain transparency and efficiency in today’s increasingly complex regulatory environment, Bloomberg Professional service subscribers can now access a derivatives margin calculator developed by LCH.Clearnet, Bloomberg announced today. Bloomberg is the first financial information platform to integrate LCH.Clearnet’s SwapClear Margin Approximation Risk Tool (SMART) to help market participants efficiently approximate the capital funding requirements needed for swaps clearing and comply with the latest Dodd-Frank mandates.

Indexes & Products

iSTOXX Efficient Capital Managed Futures 20 Index – July 2013

Warsaw Stock Exchange Announces The Introduction Of WIG30 And WIG30TR Indices

New issuer AVANA launches actively managed equity ETF on Xetra


KVH Launches Japan’s First End-To-End 100G Solution Network Upgrade Package With Cisco ASR9000 Routers Starting At A 5M JPY/month
Bundling KVH’s 100Gigabit Ethernet Network Services With Cisco’s Industry Leading 100G Routers At An Aggressive Price Point


SEC Charges Bank of America With Fraud in RMBS Offering
The Securities and Exchange Commission today charged Bank of America and two subsidiaries with defrauding investors in an offering of residential mortgage-backed securities (RMBS) by failing to disclose key risks and misrepresenting facts about the underlying mortgages.

UBS to Pay $50 Million to Settle SEC Charges of Misleading CDO Investors
The Securities and Exchange Commission today charged UBS Securities with violating securities laws while structuring and marketing a collateralized debt obligation (CDO) by failing to disclose that it retained millions of dollars in upfront cash it received in the course of acquiring collateral for the CDO.

Federal Court in Illinois Orders Chicago-Based Trader Bradley Scott Schiller to Pay more than $7.5 Million in Restitution and a Civil Monetary Penalty for a Multi-Million Dollar Commodity Futures Fraud
The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Thomas M. Durkin of the U.S. District Court for the Northern District of Illinois entered a Consent Order for Permanent Injunction (Order) requiring defendant Bradley Scott Schiller, of Chicago, Illinois, to pay restitution of approximately $4.565 million and a civil monetary penalty of $3 million for commodity futures fraud.

Securities regulator alleges that self-employed “Forex” trader committed fraud
The executive director of the British Columbia Securities Commission has issued a notice of hearing alleging that a self-employed trader in foreign exchange (Forex) committed fraud by concealing how he earned commissions, offered clients false guarantees to reimburse them for any losses, and engaged in unregistered trading.

SAC Prosecutor Hits the Media Trail
Since Preet Bharara’s appointment in 2009 as the United States attorney in Manhattan, his office has racked up more than 70 insider-trading convictions. The press-savvy Mr. Bharara is also racking up the media appearances.

NFA Regulatory Actions: Dean G. Tanella

NFA Regulatory Actions: Michael D. Minnoch

[ASIC] Proceedings against Melbourne man discontinued

ASIC commences legal action against Fast Access Finance

Environmental & Energy

EEX Trading Results In July
In July 2013, the total volume traded in power derivatives on the European Energy Exchange (EEX) amounted to 84.7 TWh compared to 59.7 TWh in July 2012. This represents an increase of 42 percent compared to the previous year. The Power Derivatives Market volume contained 36.4 TWh from OTC clearing.


StanChart, struggling in S. Korea, may sell consumer finance units
Standard Chartered Plc said it could sell two South Korean consumer finance units after taking a $1 billion writedown on its business there, underscoring the diminished potential of what the Asia-focused bank calls its most difficult market.

Frontier Markets

Mongolian bonds suffer amid frontier correction
Pan Kwan Yuk –
One day you are hot, the next day you are not – and so it is with Genghis bonds which have suffered a sharp market correction in the wake of June’s market rout.


ADM raises provision to settle bribery probe to $54 million
Archer Daniels Midland Co. said today it was preparing to pay more than twice as much as previously expected to settle a bribery probe with the U.S. government.

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