Date: Sep 13, 2013
September 13, 2013: Derivatives Would Face Transaction Fees Under Obama Proposal; US exchanges to create kill switches following Nasdaq outage; US regulator may delay swaps trading platform compliance
In the US, the Obama administration proposes the creation of transaction fees in order to fund the CFTC. Hauled into a parent-teacher conference by the SEC, exchange leaders agree to develop new structural solutions to reduce the risk and frequency of market outages. Noting that only two of twenty SEF applicants have been approved by the CFTC, two commissioners want to push back the compliance deadline date of October 2.
That ***JM guy
John Lothian is either still in Washington today, or he just likes my comments so much that he wants me to post more today. So. Read on.
Regulating Automated Trading, Not Just Chilton’s Cheetahs
Zachary Ziliak runs Ziliak Law, LLC, a law firm that focuses on the needs of trading companies and the vendors that service them. Prior to law school, Ziliak worked in the financial sector as a trader and quantitative analyst. He then spent six years in Mayer Brown’s Litigation & Dispute Resolution practice, with a concentration in complex financial, mathematical, and computer-related concerns, before breaking off in May 2013 to found his own firm. As such, he is particularly suited to comprehending the legal ramifications of algorithmic and high frequency trading regulation. Following is his summary and commentary of the CFTC Technology Advisory Committee meeting, September 12, 2013.
***JM: This is a great overview of yesterday’s TAC meeting. We don’t have room to include the whole article, but we’ve hosted it on MarketsReformWiki, and it’s very much worth following that link.
Tickets are going fast for A Leg to Stand On’s 2nd Annual Rocktoberfest Benefit at the Chicago House of Blues on Oct 3rd
If you haven’t bought your ticket for ALTSO’s Rocktoberfest benefit yet you should do it soon! It is looking like this year’s benefit will beat last year’s in attendance.
With Chicago Sponsors, Cheiron Trading, Gator Trading, CME Group, ICE, CBOE, Eurex, Russell Investments, Yahoo Finance, Drury Capital and more, it is clear the Chicago financial community is giving ALTSO strong support. In addition there will be great musical entertainment from the Wrong Boys, Mo Beta Blues, The Stone Daddies and others including a performance by former CME CEO Jim McNulty’s band, Hayes-McNulty.
Get your tax deductible tickets here: jlne.ws/161WTXY
***JM: For more details with a soundtrack, check out the MarketsWiki.tv video that explains about ALTSO and Rocktoberfest, at jlne.ws/18bdxaK
MarketsWiki Invites You!
Sarah Rudolph – JLN
We’re having a MarketsWiki party and invite you to join us on Friday, Sept. 20, in an all-day bout of wikiing. If you would like to update your company’s MW page, add in a new page for a new hire, or add information about the people, products, exchanges and issues involving the financial markets, please join us either from the comfort of your own chair or sofa, or here, live and in person at our offices at 141 W. Jackson, Suite 1602.
For those in Chicago who would like to join us at JJLCO headquarters, we will begin at noon and you can stay as long as you like. We will provide lunch to give you the energy to edit. Feel free to bring a laptop if you have one – we have a few we can provide as well.
Don’t know how to Wiki? Don’t sweat it – we’ll show you how along with all the proper wiki etiquette so you can show off to your friends and colleagues at the weekend cookout.
Everyone who contributes on that day will get a special mention in the John Lothian Newsletter the following Monday, and will be eligible to win a $50 gift card. And who doesn’t want $50?
So come join us online, or face-to-face for a day of fun and help update the best source of information on the industry – MarketsWiki.com
If you are interested, please RSVP to: SarahRudolph@johnlothian.com
What: Friday Wiki Party
When: September 20, 2013; Noon CST
We can do better than the defunct financial transaction tax
Hugo Dixon – FT.com
The European Commission has made a pig’s ear of its proposed financial transaction tax. But it is not too late to salvage something from the mess and reform taxation in a way that makes the financial system safer and more efficient.
***JM: Step 1: Do… well, any large number of other things.
ASX Chief Thinks Nasdaq-NYSE Merger Makes Sense
Gillian Tan – MoneyBeat – WSJ
The head of Australia’s largest exchange believes Nasdaq OMX Group Inc. should consider buying NYSE now that IntercontinentalExchange Inc.‘s $10.3 billion takeover of NYSE Euronext is close to completing.
***JM: Perhaps Nasdaq might want to wait until NYSE would actually come up for sale? Yeah, I know, “details, details”.
Is another CME take another tilt at Deutsche Borse?
Tim Cave – Financial News
Business and politics rarely mix, but for Europe’s financial sector the two are becoming increasingly interconnected. In the wake of the financial crisis, populist policies such as financial transactions taxes, curbs on derivatives and high-frequency trading have come to play a growing role in election campaigns. Which is why who owns stock exchanges is such a sensitive issue.
***JM: “It’d be a real shame if even more customers were to stop coming to his restaurant, wouldn’t it, Louie?” Seriously, though, what’s political last week is still political next week; I doubt the election will change much.
Insane financial system lives post-Lehman
Gillian Tett – FT.com
Five years ago, the markets plunged into an Alice-in-Wonderland world. For when Lehman Brothers collapsed, the repercussions were so violent investors were faced with confronting “six impossible things before breakfast” each day, to paraphrase Lewis Carroll.
***JM: If pain or regret were effective modifiers of future behavior, we’d have a very different planet right now. Also, fewer hangovers.
SEC Chair White Statement on Meeting With Leaders of Exchanges
Securities and Exchange Commission Chair Mary Jo White today issued the following statement after meeting with leaders of the equities and options exchanges, FINRA, DTCC, and the Options Clearing Corporation
***JM: Can’t they just write 100 times on the blackboard, “I will never let my exchange fail again.”?
Report: Obama to tap Summers as next Fed boss
Kim Hjelmgaard, USA TODAY
Former Treasury Secretary Lawrence Summers will be named the next chairman of the Federal Reserve by President Obama, according to a report in a Japanese newspaper.
***JM: Please avert your eyes as I indulge my inner teen… HA HA HA LAAAAME …ok, I’m done.
We need a bit more love on Wall Street
Gary Silverman in New York – FT.com
We’re only a few days away from the fifth anniversary of the fall of the Lehman Brothers and that’s left me thinking about love. I’m not feeling any particular pangs for “the Gorilla” – as Dick Fuld, the investment bank’s chief executive, used to be known on the trading floors – or his now dispersed band of highly leveraged primates.
***JM: Easier to tell a tiger to stop hunting for its food, I’m afraid.
Bolt Trading Systems needs a salesperson
Bolt Trading Solutions, developer of the Bolt trading software, is looking for a driven, experienced Salesperson with a background in the commodity derivative trading industry. For details and contact info, visit the MarketsWiki Job Postings page at jlne.ws/14RaSAy
Register for FIA Expo by September 13th to receive our lowest rates!
FIA Futures and Options Expo is the biggest event of the year for listed derivatives market participants. Over 5,000 industry professionals will be in attendance to hear from the biggest names about the hottest topics. More than 100 exhibitors will be showcasing their products and services. Networking opportunities will be available at social events, lunches and receptions. The Great Chicago Steak Out will conclude the conference and give participants the opportunity to meet with colleagues and experience the finest Chicago steakhouse cuisine, all while benefiting the FIA Futures Cares charity. What are you waiting for? Register today!
The Options Industry Council Announces Investor Education Day In New York September 21
Options are an ideal tool for a variety of investors and market conditions. The popular, and free, all day options education program is taught by experienced instructors from the various options exchanges and OIC professionals. This event is the third of five IED’s OIC is hosting in various cities across the country this year to help investors develop their knowledge and ability to responsibly trade options.
6th Annual Global Exchange Leader Conference
Tuesday, October 01, 2013; Convene (Formerly Sentry Centers) Midtown East 730 Third Ave
Rosenblatt’s Global Exchange Leader Conference brings CEOs and leaders of the world’s most prestigious market centers and related financial services companies together with portfolio managers, analysts and traders from influential asset managers and proprietary trading firms. No other event provides a more focused, exclusive forum for investors to gain insight into the global exchange industry — and for CEOs and leaders to network with one another, major shareholders and other market participants. Our program combines individual company presentations with a series of educational panels and opportunities for extended Q&A and 1-on-1 sessions with speakers.
For more details and contact information, visit jlne.ws/15prTFN
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Derivatives Would Face Transaction Fees Under Obama Proposal
Silla Brush – Bloomberg
Derivatives would face new transaction fees to pay for the U.S. Commodity Futures Trading Commission budget under a proposal President Barack Obama’s administration submitted to Congress.
U.S. exchanges to create kill switches following Nasdaq outage
U.S. stock exchanges agreed with regulators on Thursday to reforms including a “kill switch” to stop trading during emergencies, after a software glitch with Nasdaq’s stock quote processor last month led to a three-hour trading halt.
U.S. regulator may delay swaps trading platform compliance
The U.S. swaps regulator may give new exchange-like platforms more time to comply with its rules, senior officials signaled, to let the industry sort out a spate of logistical issues before trading starts.
Deutsche Börse plans derivatives clearing house in Asia
Jeremy Grant in Singapore – FT.com
Deutsche Börse, the German exchange operator, is planning to build a derivatives clearing house in Asia, based in Singapore, as part of a strategic push into the region, two people familiar with the matter said. The development is a sign of how Asia is emerging as the next battleground between the world’s largest exchange groups as its capital markets mature beyond equities trading and respond to growing appetite among traders and companies for derivatives, especially in commodities.
European Trading at Seven-Year Low as Hedge Demand Drops
Cecile Vannucci, Alexis Xydias & Nandini Sukumar – Bloomberg
Options trading on European shares is falling to a seven-year low as declines in equity volume reduce the need for investors to hedge.
2 Consultants to Banking Industry Come Under Scrutiny
BEN PROTESS and JESSICA SILVER-GREENBERG – NYTimes.com
They are known as Wall Street’s shadow regulators. And after years of guiding banks through problems like money laundering and foreclosure abuses, their influence has soared. Now, regulatory scrutiny of the consulting industry itself is intensifying.
ISDA to Change Calculation for Swaps Rate Amid Regulatory Probe
Matthew Leising – Bloomberg
The International Swaps & Derivatives Association plans to change how it calculates a benchmark measure of interest-rate swaps that U.S. and U.K. regulators are investigating for possible price manipulation.
***JM: For one thing, we’re going to stop letting other people calculate it.
ED panel finds money laundering, Fema violations by NSEL members
A working group headed by the Enforcement Directorate on Thursday submitted a report to the finance ministry on the crisis-ridden National Spot Exchange Ltd (NSEL). The report found violation of the Foreign Exchange Management Act and the Prevention of Money Laundering Act by some borrowers on the exchange. Officials said instances of illegal transfer of money between members of NSEL using the exchange platform were also found.
NSEL settlement hopes propel FT stock
Financial Technologies (India) Ltd (FTIL), promoter of the crisis-ridden National Spot Exchange Ltd (NSEL), has gained around 115 per cent since August 30 amid expectations that the group could get some relief from the speculated sale of NK Proteins, a borrower company.
When Accountants Act as Bankers
FLOYD NORRIS – NYTimes.com
Here’s a novel concept: Accountants have an obligation to always work in the public interest. That is the law in Britain, a regulatory tribunal declared this week. The tribunal ruled that Deloitte L.L.P. had failed in its professional responsibilities in its work for MG Rover, the failed automaker, and for the “Phoenix Four,” four businessmen who took over the automaker in 2000 and ran it into the ground, taking out millions of pounds for themselves in highly dubious transactions before the company failed.
Iceland Backs Further Away From EU
CLEMENS BOMSDORF – WSJ.com`
COPENHAGEN—Iceland has dissolved its European Union negotiation committees, backing further away from its one-time ambition to join the bloc. While the decision came last week, officials have not been working on EU accession matters since a new government took office in May.
Clarus Proposes Alternative to Swaps Rate Regulators Are Probing
Matthew Leising – Bloomberg
Software services company Clarus Financial Technology has proposed an alternative to a benchmark measure of interest-rate swaps that’s based on trades submitted to a derivatives repository.
Central bankers criticize SEC’s money-market proposals
Heads of the 12 U.S. Federal Reserve regional banks on Thursday strongly criticized a component of a U.S. Securities and Exchange Commission proposal aimed at preventing runs on money-market funds, saying it does little to change current rules.
FIA PTG statement on today’s CFTC TAC meeting
FIA Principal Traders Group commends the Commission’s Technical Advisory Committee (TAC) for facilitating this constructive dialogue. We stress the importance of industry participation and were pleased to see references to some of FIA PTG’s own recommendations in the CFTC Concept Release announced this week. As we have previously stated, FIA PTG members support a well-regulated marketplace and empirically driven approaches to regulatory reform.
[Video] The SEC Works on Its Street Cred
Paul Vigna – MoneyBeat – WSJ
With the five-year anniversary of the financial crisis fast approaching, time is running out for the SEC to bring any civil cases before the statute of limitations runs out. While the government watchdog has worked in the past few years to toughen up its oversight of the Street, questions still remain about how much progress its made. Jean Eaglesham stopped by the MoneyBeat set to talk about her page-one story on the new SEC.
A lose-lose situation?
Christian Voigt – FOW
There are currently 15 Swap Execution Facility applications lodged with the US CTFC at various stages of registration. With experience in other asset classes showing that while many new entrants may emerge only a few will succeed, many in the industry are wondering which of these new Sefs will make it beyond their first birthday.
Industry ‘won’t bother’ with one-time rehypothecation
Nick Sawyer – Risk.net
The derivatives industry is unlikely to use a new provision allowing limited rehypothecation of the margin on uncleared trades, because end-users will see no benefit, critics claim. The provision appeared in final margin requirements for non-cleared derivatives, published on September 2 by the Working Group on Margining Requirements (WGMR), a body jointly run by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions.
SEC Names Paul Levenson as Director of Boston Regional Office
The Securities and Exchange Commission today announced that Paul Levenson has been named director of the Boston Regional Office, where he will oversee enforcement and examinations in the New England region.
FINRA Foundation Survey Reveals Over 80 Percent of Respondents Are Exposed to Financial Scams
The FINRA Investor Education Foundation today issued a new research report—Financial Fraud and Fraud Susceptibility in the United States—which reveals that over 80 percent of respondents have been solicited to participate in potentially fraudulent schemes, and over 40 percent of those surveyed cannot identify some classic red flags of fraud.
ESMA: Trade Repository Registration Approval Not Expected Before 7 November, Reporting To Begin February 2014
Statement Of CFTC Chairman Gary Gensler Before The Technology Advisory Committee
Current SEC Priorities Regarding Hedge Fund Managers – Norm Champ, Director Of The Division of Investment Management, PLI Hedge Fund Management Conference, New York, New York
Statement Of CFTC Commissioner Chilton To The CFTC Technology Advisory Committee
Monitoring Note on the Effects of Regulatory Reforms on Emerging Market and Developing Economies
The FSB, in collaboration with the International Monetary Fund (IMF) and the World Bank, prepared a study in June 2012 to identify the extent to which the agreed regulatory reforms may have unintended consequences for EMDEs.
Exchanges & Trading Facilities
Non-US platforms shun US banks over Sef rules headache
Joe Rennison – Risk.net
Trading platforms outside the US are turning away US market-makers because of a requirement that they register as a swap execution facility (Sef) even if they do not trade products subject to the Dodd-Frank Act’s Sef-trading mandate, according to market participants. The safest way to avoid that burden is to shut out US-regulated entities.
SGX SICOM Rubber Futures Achieves Record
Singapore Exchange (SGX) is pleased to announce that its global benchmark SICOM Rubber Futures contracts achieved a new single-day record yesterday.
Comex Suspended Gold Trading for 20 Seconds After Price Slump
CME Group Inc.’s Comex halted trading in December gold futures for about 20 seconds today at 2:54 a.m. New York time after prices declined, said Damon Leavell, a spokesman for the exchange.
Statement From Robert Greifeld, CEO, NASDAQ OMX On Today’s SEC Industry Meeting
TOM Insight August 2013
Program Trading Averaged 27.1 Percent Of NYSE Volume During Sept. 3-6
CBOE Holdings To Present At UBS Best Of Americas Conference; Webcast At 4:00 AM
Hedge Funds & Managed Futures
Morgenthaler Partners Hang Out a Shingle With $175 Million Fund
WILLIAM ALDEN – NYTimes.com
Three partners at the venture capital firm Morgenthaler Ventures are striking out on their own, with a new fund to make early-stage investments in software companies.
Macro hedge-fund manager joins Swedish state fund
Mark Cobley – Financial News
A senior portfolio manager at the Swedish hedge fund group Brummer & Partners has left to become chief investment officer of AP3, joining the E28 billion Swedish state pension fund for the second time.
Platts Launches Sugar Industry’s First-Ever One-Stop Solution For Data
Platts, a leading global agriculture, energy, metals and petrochemicals information provider, has this week launched Platts Market Data – Sugar, a comprehensive, daily data package containing global price assessments and freight rates for raw and white sugar from Brazil, Thailand, Europe and other locations.
ALM’s 7th Annual Hedge Fund General Counsel Summit Comes to New York City, September 30-October 1, 2013
GlobeNewswire via Yahoo! Finance
NEW YORK — ALM’s Corporate Counsel will host the 7th Annual Hedge Fund General Counsel Summit, from September 30-October 1, at the University Club in New York City.
Who’s a better investor: Computer or fund manager?
Computers have several advantages over human beings – they are unbiased, willing to admit mistakes and quick to make decisions – and advances in artificial intelligence mean they could become even more crucial to the investing industry.
Banks & Brokers
JPMorgan to spend $4 billion on compliance and risk controls: WSJ
JPMorgan Chase & Co (JPM.N) plans to spend an additional $4 billion and commit 5,000 extra employees to fix risk and compliance issues after a slew of investigations by regulatory authorities, the Wall Street Journal reported on Thursday.
JP Morgan to securitise equity release portfolio
JP Morgan is working on a securitisation of part of its portfolio of equity release mortgages, according to two people familiar with the deal.
Deutsche’s Australia M&A Head Takes Sabbatical
Gillian Tan – MoneyBeat – WSJ
Deutsche Bank AG’s head of M&A for Australia, Mike Roche, has taken a sabbatical to mark his 20th year working for the German bank, people familiar with the matter said.
HSBC Cuts Off Some Small-Business Clients
SHAYNDI RAICE – WSJ.com
HSBC Holdings PLC told some of its small-business clients in the U.S. this week the bank will no longer serve them, according to a letter sent to clients that was reviewed by The Wall Street Journal.
Labour watchdog visits Goldman Sachs in Zurich over working hours
Reuters via Yahoo! Finance
ZURICH – Goldman Sachs’ offices in Zurich were inspected by a labour watchdog following a complaint by an employee group that it kept inadequate records of working hours and overtime.
Sallie Krawcheck on Wall Street’s Gentlemanly Groupthink
By Diane Brady – Businessweek
Indexes & Products
BlackRock’s iShares names new EMEA fixed income head
BlackRock’s exchange-traded funds (ETFs) business iShares has appointed a new fixed income chief in Europe, Middle East and Africa (EMEA) as it steps up efforts to meet growing demand for index-tracking bond investments in the region.
Brazil Index to Drop Penny Stocks
ROGERIO JELMAYER – WSJ.com
SÃO PAULO—Brazil’s stock-exchange operator said it planned to remove penny stocks from the Ibovespa index as part of a change in methodology, a move that could result in the exclusion of shares in troubled oil firm OGX Petróleo e Gás Participações SA from the country’s benchmark index.
Ibovespa – New Methodology
Charles River Solution and SJ Levinson & Sons Announce Strategic Partnership
Becca Lipman – Wall Street & Technology
On Tuesday morning Charles River, a front- and middle-office investment management solutions provider, announced a partnership with SJ Levinson & Sons. The partnership will leverage SJ Levinson’s global equity Transaction Cost Analysis (TCA) to Charles River Investment Management Solution’s (Charles River IMS) client base. According to the press release, River’s buy-side clients can now lower trading costs by measuring investment strategies and broker performance more effectively in one system.
Precise Time Stamping In Demand for High Frequency Traders
Ivy Schmerken – Wall Street & Technology
Banks and brokerage firms catering to high frequency trading firms use sophisticated switches in their data centers to measure the speed of packets moving across their networks. More accurate time stamping has become critical to banks that provide service level agreements (SLAs) to their clients.
Panel: Latency Monitoring More Important than Low Latency
Faye Kilburn – WatersTechnology
Whereas 10 years ago, low latency was the preserve of a select few firms whose sole focus was chasing zero, the commoditization and ubiquity of low-latency technologies has made raw speed more of a necessity to keep pace with the rest of the market, and less of a genuine competitive differentiator, said panelists at IMD Chicago.
Options Partners with Varonis to Deliver Security, Governance, Transparency and Peace of Mind to Clients
Options, the leading private financial cloud provider for the global capital markets industry, has today announced that it has partnered with Varonis to deploy its data governance software to the Options PIPE platform. The partnership will see the infrastructure as a service (IaaS) firm offer clients complete visibility, security and control on all their data.
Investor Analytics Announces The Launch Of VisualVaR
Investor Analytics LLC, a global leader in risk analysis and risk management solutions, announces today the launch of VisualVaR – a new approach in communicating Risk using intuitive visual diagrams that explicitly reveal the amount of diversification in a portfolio.
Thomson Reuters Delivers Significant Enhancements to Help Financial Services and Multi-Nationals Meet Their Know Your Customer (KYC), AML and FATCA Obligations
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced significant enhancements to enable organizations globally to better meet their regulatory obligations.
Numerix CrossAsset Server Real-Time Calculation Engine Recognized for Pricing & Risk Analytics Technology Innovation across the Asia-Pacific Region
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced it was named Technology Innovation Provider of the Year, Asia by Structured Products Magazine. Numerix also made an impressive showing in this year’s Asia Risk Technology Rankings, jumping to 7th overall in the incredibly competitive field, and 3rd overall in the Derivatives Pricing & Risk Analytics category.
Raymond James Leverages Fuzzy Logix In-Database Analytics on IBM Netezza and SQL Server
Fuzzy Logix, a leading analytics software and professional services company, today announced that Raymond James is leveraging its in-database analytics solutions on IBM Netezza (PureData) and SQL Server for investor portfolio performance reporting.
Australian analyst pleads guilty to insider trading in New York
An Australian financial analyst pleaded guilty in federal court on Thursday to trading on inside information ahead of the $1.2 billion acquisition of software company SPSS by IBM in 2009.
Ex-RBS trader in Hong Kong sentenced to 50 months in jail
A former Royal Bank of Scotland Group Plc trader was sentenced to 50 months in jail on Friday after pleading guilty to fraud in a case that dates back to 2010, according to a person at the bank with direct knowledge of the case.
Environmental & Energy
U.S. ’Collision Course’ Looms Over Water, Energy: Report
The U.S. would be wise to adopt more aggressive measures to avert water and energy shortages as population and power consumption rise, according to a report.
COLUMN-Australia is another nail in cap and trade: Wynn
Australia’s proposal to ditch cap and trade market in favour of a weakened scheme follows reduced or abandoned carbon markets in Europe and the United States and does not bode well for planned schemes around the world.
Dem senator: Carbon tax ‘inevitable’
The Hill’s E2 Wire
Sen. Sheldon Whitehouse (D-R.I.) wants a tax on carbon emissions, but he’s backing up Sen. Mark Begich’s (D-Alaska) claim that the Alaska Democrat didn’t vote for the concept in March.
Man, Och-Ziff among hedge funds to get China quota for investment overseas – report
China has granted six foreign hedge fund management companies quotas to raise yuan in China and invest it abroad, the 21st Century Business Herald reported, citing an unidentified source with knowledge of the decision.
Shanghai lines up first foreign hedge fund entrants
Paul J Davies in Hong Kong and Simon Rabinovitch in Shanghai – FT.com
Six global hedge funds are set to secure the first-ever approval to raise money from institutions within China for investing overseas, a key reform in the opening of the country’s closely guarded capital account.
Malawi Stock Exchange Weekly Trading Report – 13th September, 2013
MCX Weekly Market Report September 06, 2013 – September 12, 2013
De La Rue set to benefit from switch to plastic banknotes
Gill Plimmer – FT.com
More than 20 years after the Australian government decided banknotes need no longer grow on trees, the Bank of England has outlined plans to switch its currency to plastic – durable, beautifully decorated and, above all, hard to counterfeit.