Date: Oct 4, 2013
October 4, 2013: CFTC chairman Gensler to step down at end of 2013; Swiss Watchdog Probes Banks Over Possible Forex Manipulation; Hedge funds step into the shadows
The head of the CFTC, confirming the expected, is said to be departing from his job at the end of this year. No word yet on whether dancing lessons are on tap for 2014. Benchmark manipulation investigations proceed apace, as Switzerland’s regulators look into possible foreign exchange rate fixing. Hedge funds are beginning to expand into the repo market, giving banker residents there fresh competition.
ALTSO Draws a Crowd
The second annual Rocktoberfest charity event drew quite a crowd last evening in Chicago with more than 500 guests in attendance and six bands that featured musicians from the industry. A Leg To Stand On, which provides prosthetic limbs and treatment for children in several countries, was co-founded by hedge fund manager Mead Welles. The event raised $12,000 from its raffle last evening (that’s almost 50 prosthetic limbs for kids), not including tickets to the event at House of Blues. And for those hearty souls who stuck around till the bitter end, they got to see Jim Belushi play with a group from New York, Mo’ Betta Blues who are becoming blues legends one gig at a time (photo above by JLN’s RJ Roxas).
A tip of the cap to ALTSO and the event organizers, Ray McKenzie, Chuck Mackie and many others in Chicago who helped make the event a great one. Next up is HedgeFund Rocktoberfest in New York at Capitale on October 23.
New Leader Under Lens for Trading Commission
BEN PROTESS – NYTimes.com
As Gary Gensler’s tenure as a Wall Street regulator draws to a close, the White House has begun to vet a senior Treasury Department official as a potential replacement.
***DA: Fodder for a slow news day – anonymous report that the vetting process may have begun for this gentleman. Remember how quickly the last one, Amanda Renteria, fizzled out.
Futures Industry Remains Divided on Insurance
Jacob Bunge and Jamila Trindle – WSJ.com
CME Group Inc. on Wednesday criticized the idea of an insurance fund for futures traders, reflecting a rift in the industry over how best to protect its customers after a string of brokerage blowups. Extending private insurance to cover the funds of futures traders or setting up a government-mandated protection plan would cost too much while failing to adequately cover potential losses, CME Executive Chairman Terry Duffy said a hearing held by a panel of the House Agriculture Committee.
***DA: Another option is to keep clinging to the notion that each broker default is a one-off event.
**JK: 2 1/2 words: Third-Party Custodian
|Futures on the NYSE Arca Gold Miners Index: LIVE from October 7th
NYSE Liffe U.S .fosters product innovation in precious metals derivatives
NYSE Liffe U.S. will launch new futures contracts based on the widely followed NYSE Arca Gold Miners Index (“GDF futures”) on October 7th, 2013. These innovative new futures complement the existing market for the Market Vectors® Gold Miners ETP (GDX®) listed on NYSE Arca as well as options on GDX® traded on the NYSE Arca and NYSE Amex options platforms.
At launch, GDF futures will be supported by Designated Market Makers and cleared by The Options Clearing Corporation (OCC). These products will be listed alongside the mini gold and mini silver futures already trading on NYSE Liffe U.S. GDF futures will have a typical quarterly expiry cycle and will be cash settled on the final trading day against the closing value of the underlying GDM index.
MGEX Announces Results Of 2013 Board Of Directors Election
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization, announced the results of its annual Board of Directors election, held October 3, 2013. Re-elected to the Board were Richard A. Dusek and Marc L. Gordon. Newly elected to the Board was Murray Stahl. All will serve two-year terms.
CBOE’s SPXpm Options Establish New Daily Volume Record
Chicago Board Options Exchange, Incorporated today reported that trading volume in SPXpm — S&P 500 Index options that are PM-settled — established an all-time daily volume record yesterday as 54,611 contracts changed hands. Wednesday’s record surpassed the previous daily volume record of 39,472 SPXpm contracts traded on June 21, 2013.
***JM: SPXpm – for those times when your market is congested, but you still need sleep.
OptionsCity Software Appoints David Fisher to Board of Directors
OptionsCity Software, a leading provider of electronic trading solutions, today announced that David Fisher, CEO of Enova International, has been named to its board of directors.
ISDA’s Robert Pickel Discusses the Future of Financial Benchmarks (Part 2)
Robert Pickel is the CEO of the International Swaps and Derivatives Association (ISDA). Since joining ISDA in 1997, Pickel has worked to promote and advocate for OTC market participants and work with international regulatory bodies to harmonize regulation across jurisdictions. Pickel spoke with John Lothian News editor-at-large Doug Ashburn about the future of LIBOR and other financial benchmarks, possible alternatives to LIBOR, and how ISDA will work with regulators to smooth out and harmonize benchmarking standards.
Swaps Shift Sees Quiet Start as Tabb Says Most Users Wait
Matthew Leising – Bloomberg
Most money managers that use swaps didn’t trade on new government-mandated platforms yesterday because use of the systems remains voluntary, according to a poll conducted by Tabb Group LLC.
***DA: If a massive new infrastructure was built in the forest, would it make a sound?
Abusive trading patterns involve multiple exchanges, FINRA says
Wall Street’s securities regulator said on Thursday more than two-fifths of the abusive trading patterns detected by its new cross-market surveillance system involved more than one exchange and multiple participants.
**JK: Even as we approach Halloween, spoofing and layering are not good costumes.
Revolving Door Helps SEC, Chairman Says
Andrew Ackerman – MoneyBeat – WSJ
Washington’s revolving door is often used as a pejorative, but Mary Jo White said it’s personally helped her improve the Securities and Exchange Commission’s policing of Wall Street.
***JM: Look at it from a different angle. If the rule was, “Work at the SEC and you’re prohibited from private sector jobs afterwards,” who the heck would apply for work at the SEC?
Pitfalls in a Shifting Landscape: Trade Practice Issues for Futures and Swaps
Katten Muchin Rosenman
Join Katten partners Guy Dempsey Jr., Lisa Dunsky, Arthur Hahn and Christian Kemnitz at its New York office at 5:15 p.m. on Wednesday, October 23 as they discuss EFRP issues, SEF trade rules, wash trades and inadvertent self-matches, and disruptive trading practices. http://jlne.ws/174divk
Thomas Rollinger of Red Rock Capital Explains the Trouble with Trend Following and Why He Likes Sortino Ratios
Thomas Rollinger has a unique perspective on the markets.
As the managing partner and chief investment officer of Red Rock Capital, Rollinger joined the managed futures firm in March after being a long-time customer of the firm. But Rollinger also has an interesting background, as a student and colleague of Edward O. Thorp, who is also known as the “godfather of quants.” Rollinger co-developed and co-managed the systematic futures strategy which Thorp called “System X,” which was featured in Scott Patterson’s “The Quants” and well as in Jack Schwager’s book “Hedge Fund Market Wizards.”
Rollinger now works alongside Red Rock’s founder Scott Hoffman and helps run the 10-year-old Chicago-based firm’s programs which include: the Systematic Global Macro and the Commodity Long/Short program, which was launched just a few months ago.
JLN Managed Futures newsletter editor Jim Kharouf spoke with Rollinger about his experience and lessons learned from Thorp, as well as what’s been hampering trend followers as well as why the Sharpe Ratio doesn’t isn’t better than the Sortino Ratio.
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CFTC chairman Gensler to step down at end of 2013
Gary Gensler, chairman of U.S. financial markets regulator the Commodity Futures Trading Commission, will leave the agency at the end of the year, the Wall Street Journal reported, citing a person familiar with the matter.
Swiss Watchdog Probes Banks Over Possible Forex Manipulation
Switzerland’s financial markets regulator is investigating several Swiss banks in connection with the possible manipulation of foreign exchange rates, it said on Friday.
Hedge funds step into the shadows
Tracy Alloway and Arash Massoudi in New York – FT.com
Some of the world’s best-known hedge funds have stepped into the shoes of Wall Street banks and expanded into the $5tn “repo” market, where financial companies lend out their assets in exchange for short-term loans.
ICE and NYSE Euronext go where other exchanges have struggled
Philip Stafford in London, Arash Massoudi in New York and Jeremy Grant in Singapore – FT.com
IntercontinentalExchange’s purchase of NYSE Euronext has moved one step closer after passing a key European regulatory hurdle, but the $10bn deal has yet to spark another round of global industry consolidation.
Judgment Day for SEFs
Will Rhode – TabbFORUM
The official start for Swap Execution Facilities (SEFs) kicked off yesterday, and blood pressures ran high as electronic swaps trading went live. So just how much SEF trading did the buy side do on Day One? The short answer is, not much.
Derivatives trading: Not with a bang
IT WAS not the smoothest of starts. Swaps-market participants began to trade standardised derivatives on new electronic platforms called Swap Execution Facilities (SEFs) on October 2nd. Forcing over-the-counter derivatives trades—contracts that are transacted away from the gaze of regulators—on to visible trading platforms has long been a goal of world leaders keen to reform a shadowy market which they blame for the crisis in 2008. But inaugurating the new platforms could scarcely have been more chaotic.
IntercontinentalExchange Successfully Launches ICE Swap Trade
IntercontinentalExchange, a leading operator of global markets and clearing houses, has launched ICE Swap Trade, ICE’s CFTC-registered Swap Execution Facility, with trading activity in many different products in the energy and credit default swap markets.
NYSE Liffe Latest to Suspend Trading Over Glitch
Nick Cawley and Neelabh Chaturvedi – MoneyBeat – WSJ
A fresh reminder this morning that in a world where trading’s done at breakneck speed on eye-wateringly sophisticated systems, old fashioned breakdowns are still a fact of life.
SEC’s Gallagher Calls Exchanges’ Self-Regulatory Role Burdensome
Dave Michaels – Bloomberg
The U.S. Securities and Exchange Commission has moved too far toward treating exchanges like any other investment company by punishing them for technology glitches and mishandling market-data duties, Commissioner Daniel M. Gallagher said today.
FTT: just another online skateboarding dog clip
Richard Saunders – Financial News
In the avalanche of comment marking the fifth anniversary of Lehman Brothers’ collapse, there seems to be a broad consensus that a lot of work remains to be done before the banking system can be said to be fixed.
*** “The energy which was spent devising the FTT, now suffering a lingering demise, puts me in mind of someone checking Facebook updates and watching YouTube videos when they should be working.”
***JM: This just brings a happy tear to my eye to read.
CFTC substituted compliance process not clear enough – Risk.net poll
Nick Sawyer – Risk.net
Nearly three-quarters of respondents to a Risk.net poll say they do not understand how substituted compliance will work under Commodity Futures Trading Commission (CFTC) rules – creating huge uncertainty ahead of the end of an exemptive order, which is due to expire on December 21.
After Fraud, Regulators Go After a Bank
FLOYD NORRIS – NYTimes.com
You can’t run a Ponzi scheme without a bank. In such a scheme, money that is supposed to be invested is really used to line the pockets of the Ponzi promoter or to pay previous investors. A lot of money has to flow through bank accounts, and it flows in ways that differ from what the promoter tells investors is happening. Banks are in a unique position to notice what is going on before the money is all gone. But it is extremely rare for a bank to face sanctions for not noticing.
Let no back go unscratched in bank cash raising deals
Neil Collins – FT.com
Barclays completed its £6bn rights issue this week. As is the current custom, the issue was pitched so low – a 40 per cent discount – that even a US debt default wouldn’t make the new shares worth less than the offer price. It is true that the backers had effectively been on the hook for nearly two months, but it was a pretty comfortable hook.
Gensler refuses to budge on derivatives
Tom Braithwaite in New York – FT.com
Call it Gensler’s last stand. Most of his staff have been sent home because of the government shutdown, he is facing significant pressure to delay or moderate sweeping new derivatives rules and he is due to leave office by the end of the year. But Gary Gensler, chairman of the Commodity Futures Trading Commission, is sitting in the darkened headquarters of the agency in Washington and refusing to budge.
Salt Lake Regional Office Director Kenneth Israel to Retire From SEC After More Than 38 Years
The Securities and Exchange Commission today announced that Kenneth Israel, director of the Salt Lake Regional Office, is retiring after more than 38 years at the agency.
SEC Announces Two Promotions to Senior Positions in Division of Economic and Risk Analysis
The Securities and Exchange Commission today announced two promotions to senior positions in its Division of Economic and Risk Analysis (DERA). Scott Bauguess has been named deputy director, and Vanessa Countryman will become chief counsel.
Senior managers could be caught in regulatory crackdown
Claire Coe Smith – Financial News
Executives are expected to be the target in the next wave of the regulatory crackdown on banks and markets. Senior lawyers predict financial services executives will be next in the firing line as their institutions grapple with the implementation and enforcement of new rules.
Emir reporting questions pile up for corporates
Fiona Maxwell – Risk.net
Amid fundamental questions about the timing and scope of Europe’s new derivatives reporting rules, corporates are weighing whether to delegate the work to their dealers. But some large companies are not keen – and many banks are sitting on the fence.
SEC Announces Date for Annual Government-Business Forum on Small Business Capital Formation
The Securities and Exchange Commission today announced that it will hold its annual Government-Business Forum on Small Business Capital Formation on November 21 at its Washington D.C. headquarters.
ESMA Publishes Guidelines On Written Agreements Between Members Of CCP Colleges
ESMA has published Guidelines and Recommendations which define the written agreement that a CCP’s national supervisor should propose as part of its establishment of a supervisory college under EMIR.
The Importance of Independence – SEC Chair Mary Jo White – 14th Annual A.A. Sommer, Jr. Corporate Securities And Financial Law Lecture, Fordham Law School
Canadian Securities Regulators Adopt Amendments for Investment Funds Transitioning to IFRS
[FINRA] Remarks by Richard Ketchum From the Council for Economic Education
Exchanges & Trading Facilities
TMX Group CEO Kloet ’Looking at’ Crowdfunding Technology
Eric Lam – Bloomberg
TMX Group Ltd., owner of Canada’s largest stock exchange, is investigating the “potentially game-changing” use of crowdfunding as a source of capital markets investment, Chief Executive Officer Tom Kloet said.
London Metal Exchange lists Panama City, Florida for copper
The London Metal Exchange has listed Panama City, Florida, as a good delivery point for copper, the exchange said on Thursday.
BOX Options Exchange Price Improvement Activity For September
In the month of September, price improved contracts on BOX Options Exchange (“BOX”) averaged 170,115 per day. Overall average daily trading volume on BOX in the month of September was 346,895 contracts, a 4.4-percent increase over the previous month.
BM&FBOVESPA Publishes September Market Performance
In September 2013, the equities market’s (BOVESPA segment) financial volume totaled BRL 150.34 billion in 18,412,454 trades, with daily averages of BRL 7.15 billion and 876,784 trades. In August, financial volume totaled BRL 187.09 billion, the total number of trades 21,736,691, daily average financial volume BRL 8.50 billion and daily average number of trades 988,031.
ASX Group Monthly Activity Report – September 2013
The value of ASX-listed stocks, as measured by the All Ordinaries Index, rose 1.8% in September 2013. This performance was below rises in other major markets, including Japan up 8.0%, Germany up 6.1%, Hong Kong up 5.2%, Singapore up 4.6% and the US up 3.0%, and stronger than the UK up 0.8%.
ASX Compliance Monthly Activity Report – September 2013
BOX Options Exchange October 2013 InBOX
Montréal Exchange’s Quarterly Newsletter
Deutsche Börse: Subscription Launch Of Ferratum Capital Germany GmbH Corporate Bond
TSX Markets: Top 20 Largest Consolidated Short Position Report – September 30, 2013
Program Trading Averaged 24.7 Percent Of NYSE Volume During Sept. 23-27
Hedge Funds & Managed Futures
Stanley Fink’s Hedge-Fund Revival Sours as Losses Mount
Jesse Westbrook – Bloomberg
Stanley Fink, who oversaw a 10-fold increase in Man Group Plc (EMG)’s assets under management during his seven years as chief executive officer, is finding it harder to keep investors at his latest hedge-fund firm.
Ackman’s Pershing Square Takes $2 Billion Hit
JAMES STERNGOLD – WSJ.com
William Ackman’s bad year is taking a big toll. The activist hedge-fund manager has seen his firm’s assets under management decline by $2 billion from a high point earlier this year, largely due to investment declines, according to people familiar with its operations.
Allianz adds to Asian fund management
Joe McGrath – Financial News
Allianz Global Investors has revamped the management of its Total Return Asian Equity Fund, bringing in a former employee to manage the fund.
SAC Seeks Buyer for Reinsurer
LESLIE SCISM, JULIET CHUNG AND RYAN DEZEMBER – WSJ.com
SAC Capital Advisors LP is seeking a buyer for a Bermuda-based reinsurance company that the embattled hedge-fund firm launched in 2012, according to people familiar with the matter.
SAC’s Forceful Ways Shown in Massachusetts Citi Case
ALEXANDRA STEVENSON and BEN PROTESS – NYTimes.com
The hedge fund was so desperate for an upper hand that four of its employees pleaded with a Wall Street analyst one morning to reveal private insights.
U.S. judge says Argentina debt swap plan violates court order
Argentina’s proposal to use a debt swap to pay some of its creditors would violate a U.S. court injunction, a judge in New York said on Thursday.
Russian IPO breaks London ice
Richard Partington – Financial News
The announced float in London of Moscow-based credit card provider Tinkoff Credit Systems this morning ends a quiet period for initial public offerings from the country.
Banks & Brokers
Wall Street Banks, No Longer Invincible, Contemplate Their Death
Michael J. Casey – MoneyBeat – WSJ
Call it Wall Street’s “no code” instruction. That’s how medical practitioners describe a patient’s expressed desire not to be resuscitated if their breathing stops. In effect, it’s what the nation’s biggest banks have instructed their “doctors” – the Federal Reserve and the Federal Deposit Insurance Corporation – to do in case they end up on death’s door.
JPMorgan’s Dimon gives up chairman role at bank subsidiary
JPMorgan Chase & Co chairman and CEO Jamie Dimon has given up the title of chairman of the company’s main bank subsidiary to conform with a new internal policy on multiple roles.
Citadel, Two Sigma, Susquehanna vie for ETrade unit
Lynne Marek – Crain’s Chicago Business
Chicago hedge-fund firm Citadel LLC and two out-of-state companies, Two Sigma Securities LLC and Susquehanna International Group LLP, are on a short list of possible buyers for the Chicago-based market-making unit of ETrade Financial Corp. in a sale process that could wrap up soon, according to people familiar with the talks.
Goldman Banker With Year’s Top Tech Quarry
DAVID GELLES – NYTimes.com
Anthony J. Noto, a former Army Ranger and pro-football executive, may seem an odd fit among the cerebral recluses and flashy moneymen of the tech world.
Transaction banking set for makeover
Farah Khalique – Financial News
Transaction banking once had a reputation for being staid and boring, but it has been evolving into a more glamourous niche of the banking business – low risk, regular revenues and with the ability to build relationships. But its attractions are now under threat from rising costs and keener competition.
Clearing & Settlement
Australian Swap Dealers Begin Reporting OTC Derivatives Trades To ASIC Through DTCC’s Global Trade Repository Service
The Depository Trust & Clearing Corporation (DTCC) today announced that five of the major Australian banks active in the over-the-counter (OTC) derivatives market are now reporting their transactions to DTCC’s Global Trade Repository, under trade reporting rules recently finalized by the Australian Securities and Investments Commission (ASIC).
Delayed – Modifications to the Daily Settlement Price Methodologies for S&P 500 and NASDAQ-100 Futures
Due to the suspension of the CFTC regulatory review period, a result of the U.S. government shutdown, CME Group is delaying modifications to the daily settlement price methodologies for S&P 500 and NASDAQ-100 futures. These changes had been scheduled for October 7, 2013, as previously announced in SER-6657.
CME Group Clearing: Addition of Legal Entity Identifier (LEI) to SEF FIXML Confirmation Messages
Indexes & Products
ETF Risk European Rankings 2013
Luke Clancy – Risk.net
The inaugural ETF Risk European Rankings 2013 names the best providers in the exchange-traded fund (ETF) industry, as voted by institutional investors, consultants, trading houses, ETF issuers, research firms and exchanges
Tokyo Stock Exchange: 3 New ETNs To Be Listed On Oct. 28, 2013
Gilt-edged award for MarkitSERV at Financial News “Excellence in Trading and Technology”
The results from the Financial News’ 11th edition of the “Awards for Excellence in Trading and Technology, Europe 2013” were announced at a gala ceremony in London on Tuesday night.
NASDAQ OMX Launches iPad App For Workspace Virtual Data Room
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) has launched a new WorkSpace application for iPad, now available and accessible for download in the Apple iTunes store. The app is a state-of-the-art, mobile-optimized user experience designed to create a secure, streamlined business and document management process, while improving productivity for users.
Markit Licenses CDS Indices to Swap Execution Facilities
Markit, a leading, global financial information services company, today announced that it has licensed its Markit CDX North America IG, Markit CDX North America HY and Markit iTraxx Europe indices to leading swap execution facilities (SEFs).
Citigroup fined $30 million after analyst sent report to SAC, others
Citigroup Inc will pay a $30 million fine after one of its analysts improperly sent confidential research on an Apple supplier to big clients including Steven A. Cohen’s hedge fund SAC Capital Advisors, a securities regulator said on Thursday.
Environmental & Energy
Volumes on Prague power bourse hit record levels in September
Volumes on the Prague-based Power Exchange Central Europe hit record levels in September, boosted by market volatility and the launch of a new settlement system that cuts trading costs, the bourse’s chief executive said on Thursday.
Nasdaq Helps Set Up Iraq Erbil Bourse After Qatar Sale
Khalid Al-Ansary & Nayla Razzouk – Bloomberg
Nasdaq OMX Group Inc. (NDAQ) is helping to set up a trading system for the Erbil Stock Exchange, which Iraq’s semi-autonomous Kurdish region plans to start operating by June, the new bourse’s chairman said.
JSE’s rand swap clearing hopes in the balance
Matt Cameron – Risk.net
South African dealers are rejecting the Johannesburg Stock Exchange’s (JSE) plans for a local clearing service for rand-denominated interest rate swaps, arguing they will have to post more margin if they use it.
Jignesh Shah, NSEL conspired with defaulters: MMTC to AG
State-owned MMTC has told the Attorney General of India (AG) National Spot Exchange Ltd (NSEL) promoter Jignesh Shah, the board members of the exchange, its management, led by Anjani Sinha, and even the so-called defaulters had acted in collusion to dupe investors.
FMC bars NSEL, group companies from commodity auctions
The FMC today barred the National Spot Exchange and group firms from auctions of commodities held by the bourse after a complaint that firms related to the former managing director took part in the bidding process.
MCX dilutes stake to 3.4% in DGCX on rights issue
Country’s largest commodity bourse MCX on Thursday said it has diluted its stake to 3.4 per cent from the existing 5 per cent in the Dubai Gold and Commodities Exchange (DGCX) through rights issue option.
MCX Weekly Market Report September 27, 2013 – October 03, 2013
Malawi Stock Exchange Weekly Trading Report- 4th October, 2013
Malawi Stock Exchange Third Quarter Market Performance Report 2013