Industry news
Date: Mar 26, 2013
March 26, 2013: ICE to study cutting soft commodities trading hours; SEC Approves Nasdaq’s USD 62 Million Facebook IPO Payment Plan; Eurex Clearing Supervisory Board appoints new members
IntercontinentalExchange considers creating shorter trading hours for its soft products, hoping to increase liquidity by packing trades tighter together. The SEC gives a thumbs-up to Nasdaq’s offer to pay sixty mil to parties injured by its Facebook IPO problems; other folks (such as bank UBS) find the plan less than satisfactory and continue to advocate a different solution. In Europe, Eurex Clearing announces a list of fresh faces appointed to serve on the executive board.
First Read
Chris Ferreri of ICAP on SEFs, IDBs and the Futurization of Swaps
MarketsWiki.tv
Chris Ferreri is a managing director at ICAP North America, where he oversees ICAP ETC, the company’s hybrid brokered OTC solution. He was the first chairman of the Wholesale Markets Brokers’ Association Americas Inc. (WMBA Americas), and served again as chairman in 2012.
Ferreri spoke with John Lothian News Editor-at-Large Doug Ashburn at the Futures Industry Association Boca 2013 conference about the CFTC’s delay in finalizing rules on swap execution facilities (SEFs), the futurization of swaps, and the future of inter-dealer brokerage. Ferreri stresses the need for voice broking services alongside electronic order books, and reminds that the migration from voice to electronic platforms is not seamless among asset classes. He also requests regulatory consistency among modes of execution. Finally, Ferreri discusses the history of innovation among IDBs and suggests that, after a period of transition to the new regulatory regime, the industry will continue to innovate and evolve.
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Editors need editors like matzo balls need jalapenos
Andy Yemma
I proved my own point yesterday when I commented on a metaphor that compared commodity bubbles to bath bubbles. I should have read Financial Times markets reporter Gregory Meyer’s lead a bit more carefully. He got it right. Apologies, sir, and thanks for being a good sport. Meanwhile, I was asked over the past weekend to bring some matzo balls to a family Passover Seder. So I decided to make some… and for good measure made a few “jalapeno-tomato” matzo balls, which were a surprise hit with the crowd at my wife’s cousin’s house. Recipe here: http://tinyurl.com/c8wk2tg. As my colleague Martin Mosbacher observed: “Great balls of fire.”
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Eurex Clearing Supervisory Board appoints new Executive Board members
In its meeting on 21 March 2013, the Supervisory Board of Eurex Clearing AG decided on the new composition of the Executive Board of Eurex Clearing. Thomas Book, who has been a member of the Eurex Clearing Executive Board since March 2007, was appointed as Chief Executive Officer (CEO) of Eurex Clearing. Newly appointed to the Executive Board of Eurex Clearing were Heike Eckert (44) as Chief Operating Officer, Thomas Laux (39) as Chief Risk Officer and Eric Müller (39) for Treasury. Andreas Preuss and Jürg Spillmann will continue as Executive Board members of Eurex Clearing.
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*** AY: More evidence that clearing is becoming the most important and competitive segment of financial markets.
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MarkitSERV Launches Clearing Certainty Hub for OTC Derivatives Market
MarkitSERV, the most widely-used electronic trade processing service for OTC derivative transactions, today announced the launch of MarkitSERV Credit Centre, a pre-trade credit checking solution for the OTC derivatives market. The ultra-low-latency system required for Credit Centre is provided by TRADExpress from Cinnober, a leading global supplier of solutions and services to major trading and clearing venues.
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*** AY: Yes, clearing is like the “Borg” on Star Trek: “Resistance is financial.”
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CME Group Announces Commodity Trading Challenge Winners
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the winners of the 2013 Commodity Trading Challenge. The four-week electronic trading competition allowed teams of undergraduate and graduate students to trade Crude Oil, Gold and Corn Futures in a real-time, simulated environment on CQG’s trading platform. Nearly 1,500 students from more than 320 schools around the world participated in this year’s challenge.
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*** AY: Congrats to the winners and the CME for promoting economic education.
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The Morning Download: SWIFT Data Beats Economic Forecasters
Michael Hickins – The CIO Report – WSJ
SWIFT, the international banking transactions network, is changing its value proposition by becoming a purveyor of critical information rather than simply a way of executing transactions.
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***AY: SWIFT is using its transaction data to predict GDP figures; a powerful application of Big Data.
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Dark Pools Hamper Market Efficiency, Should Be Avoided, ASX Says
Bloomberg
Dark pools reduce efficiency by dividing markets and should be avoided unless there’s a good reason, such as block trades, to use them, said ASX Ltd. Chief Executive Officer Elmer Funke Kupper.
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*** AY: More great publicity for dark pools (not).
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ICE to study cutting soft commodities trading hours
Reuters
IntercontinentalExchange Inc will consider cutting trading hours for soft commodities in a bid to improve liquidity, president and chief operating officer of ICE Futures U.S. Ben Jackson said on Friday.
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**JK – Just because CME is doing it…
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Swap regulations hold key to future of OTC algorithmic trading
Peter Madigan – Risk.net
The growth of algorithmic and high-frequency trading (HFT) in the past decade has been accompanied by a rising tide of anger and fear, which reached its high-water mark in the months following the so-called flash crash in US equity markets on May 6, 2010. In theory, algorithms provide greater efficiency to end-users, by linking fragmented trading venues, bolstering liquidity and delivering better prices. In practice, critics claim that when the algos are deployed by HFT firms, the opposite is true.
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*** AY: The great debate continues. HFT: liquidity provider or volatility inciter? You decide.
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ICAP Australia launches wholesale brokered wool market
ICAP, the world’s leading interdealer broker and provider of post trade risk and information services, today announced the launch of a new wholesale brokered Wool market for Australia’s main export destination: China.
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*** AY: A lot of demand in China and a lot of wool in Australia. Good plan.
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NYSE Director Cites Health Reasons for Board Departure
By Jacob Bunge – Dow Jones
An NYSE Euronext (NYX) director said Monday that she plans to leave the transatlantic exchange group’s board for health reasons, and also cited the board’s planned realignment under an agreed takeover deal. Patricia Cloherty, 71, a member of the NYSE board since 2009, said that ongoing trouble with her back prompted a personal decision to eventually depart all of the half-dozen boards on which she serves.
(via email)
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HFT’s critics have driven reforms
Mr R.T. Leuchtkafer. – FT.com
Sir, After taxing them, slowing them down, making them change their algorithms, and launching enforcement investigations, some or all of which caused a “change in the behaviour of market participants”, the Australian Securities & Investments Commission tells us that worries about high frequency traders are exaggerated (“Australia finds no HFT foul play”, March 19).
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For Some, Wall Street Hiring On Upswing
Forbes
In two short months, thousands of eager college graduates with newly minted MBAs will try to get a foot in the door at some financial service firm promising to pay more than the median U.S. income, even for interns. Wall Street is hiring, but not where most people are looking.
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**JK – I just want to say one word for you, just one word.
Yes, sir.
Are you listening?
Yes, I am.
Compliance!
***AY: Mrs. Robinson?
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He Has Millions and a New Job at Yahoo. Soon, He’ll Be 18.
By BRIAN STELTER – NY Times
Nick D’Aloisio, a programming whiz who wasn’t even born when Yahoo was founded in 1994, sold his news-reading app, Summly, to Yahoo.
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**JK – Is it too late to hire Nick as our intern?
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Why the world needs reckless bankers
Michael Pettis – FT.com
Conventional wisdom has it that the financial crisis originating in the US proves that the “Anglo-Saxon” financial model is too dangerous and too deeply flawed to have much to teach the rest of the world. If it were any good, after all, how could we have suffered the spectacular near-collapse of the US and UK banking systems?
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VU University economist sheds light on 2010’s ‘Flash Crash’
Albert Menkveld, Professor in Finance at VU University Amsterdam, had exclusive access to the ‘black box’ with data of this Flash Crash. On Tuesday April 2 he will present new facts in his inaugural lecture “Why not replace bankers by robots? Evidence from securities trading.” The report of his research on the Flash Crash will be available online on April 2 at 16:45 (CET).
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***AY: Reckless bankers or robot bankers: which do we need? You decide.
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Lead Stories
SEC Approves Nasdaq’s $62 Million Facebook IPO Payment Plan
Jenny Strasburg and Jacob Bunge – Dow Jones
The U.S. Securities and Exchange Commission approved Nasdaq OMX Group Inc.’s ( NDAQ ) plan to pay customers as much as $ 62 million for losses stemming from last year’s bungled Facebook Inc. ( FB ) stock-market debut, according to an order made public Monday morning by the regulator, although the approval doesn’t close the door to future lawsuits.
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UBS: $62 million from Nasdaq is paltry compensation for Facebook IPO debacle
New York Post
Nasdaq got approval from regulators yesterday to pay out $62 million to trading firms hurt by Facebook’s botched share sale — but UBS is having none of it. The Swiss bank giant has already filed an arbitration demand against Nasdaq, saying the payout doesn’t begin to cover the $356…
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Sending a Message for Backpedaling on Settlements
PETER J. HENNING – NYTimes.com
When a company accepts a deferred prosecution agreement to resolve a criminal investigation, one requirement is that it cannot backtrack on an admission of guilt. Standard Chartered learned the hard way that prosecutors take these agreements quite seriously when an executive tries to soft-pedal any corporate wrongdoing.
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IMF economist warns central banks may grow too powerful
Reuters via Yahoo! Finance
Major central banks could become too powerful if they are given far-reaching new powers but remain fully independent from politics, Olivier Blanchard, the chief economist of the International Monetary Fund (IMF), said on Monday.
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Peregrine trustee submits $3.7M bill
Reuters
The trustee unwinding Peregrine Financial Group is seeking to be paid $3.7 million, the maximum allowed under bankruptcy law for his role in returning some money to former customers of the failed broker.
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Cyprus Bailout Shows Strictness but Signs of Disarray
STEVEN ERLANGER and JAMES KANTER – NYTimes.com
The Cyprus deal announced Sunday, another late-night showdown in Brussels that looked like a shambles, laid down some important new markers for the future of the European Union and the countries that use the euro. The big European powers used the crisis to establish some new, more punitive rules for countries needing emergency aid.
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It’s Getting Tough to Be a Homebody
FRANCESCO GUERRERA – WSJ.com
To get a sense of where Wall Street is heading, read its lips. Behind closed doors, top bankers sound more like Weight Watchers representatives than swashbuckling financial titans.
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Regulatory
FSA finalises proposals for the regulation and supervision of benchmarks
The Financial Services Authority (FSA) has finalised new rules and regulations for financial benchmarks. This follows the recommendations of the Wheatley Review of the London Inter-Bank Offered Rate (LIBOR).
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Stevens Says G-20 Should Focus on Reform Implementation in 2014
Bloomberg
Reserve Bank of Australia Governor Glenn Stevens said the Group of 20 should focus on implementing rule changes in the financial system rather than adding new reforms when Australia takes over the presidency next year.
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European Commission probes economic impact of reforms
Michelle Price – Financial News
The European Commission has launched an assessment of the combined effects of its financial reforms on the European economy.
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Remarks Before The ASIC Forum By SEC Chairman Elisse Walter – Australian Securities And Investments Commission (ASIC) Forum Sydney, Australia (Via Videoconference)
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Key Note: Symposium On Building The Financial System Of The 21st Century: An Agenda For Europe And The United States By SEC Commissioner Daniel M. Gallagher
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[France] AMF and the australian ASIC update MOU on assistance and mutual cooperation
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[France] AMF Position – recommendation 2011-25: A guide to monitoring collective investment schemes
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Canadian Securities Administrators announce March 26 as Check Registration Day
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Exchanges & Trading Facilities
Cayman Islands Stock Exchange uses Xetra for trading securities
Today the Cayman Islands Stock Exchange (CSX) migrated its electronic securities trading to Deutsche Börse’s Xetra trading system. Xetra trading participants can now use Deutsche Börse’s infrastructure to easily access a non-European financial market. It also gives six new market participants from the Cayman Islands access to an extensive pan-European network of traders.
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EEX supports initiative of nine European associations: European electricity & gas sector strongly supports anti-VAT fraud measures proposed by the European Commission and the Irish Council Presidency
Since 2009, our nine European associations, comprising regulators, exchanges, brokers, clearing houses, gas and electricity transmission system operators, energy trading firms as well as gas and electricity utilities, have united to take action to combat VAT fraudsters’ attempts to penetrate our markets, as previously mentioned in our December 2011 Joint Statement.
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In time, higher volume after CME cuts grain futures hours
Dairy Herd
CME Group’s plan to scale back its trading day for grain contracts will likely provide a boost to volume and liquidity, but traders said it will take time for investors to return to the market.
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[CBOE] Format change to Market Maker Equity Trade (MMET) and Market Maker Stock (MMSTK) Position Files
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NYSE Euronext welcomes NYSE-listed Eli Lilly and Company to its European market
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NYSE to Suspend Trading in the Series A Convertible Preferred Shares of beneficial interest of Vornado Realty Trust
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Moscow Exchange Weekly Market Report: March 11-15, 2013
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Nordic Growth Market (NGM) Is Proud To Welcome Oak Capital As A New Member Of The Exchange
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KCBT: Good Friday Holiday Hours – Schedule For Days Surrounding Good Friday Holiday
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Hedge Funds & Managed Futures
Debt Flagged by Fed Bought by Funds Copying 2007: Credit Markets
Bloomberg
Money managers from Ares Management LLC to Onex Corp. are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank regulators warned last week is becoming riskier.
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Aberdeen attracts £3.5bn in two months
David Oakley, Investment Correspondent – FT.com
Investors rushing to benefit from a new year stock market rally helped Aberdeen Asset Management attract £3.5bn of net new money in first two months of 2012, the company reported on Monday.
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A Chinese asset manager quietly adds some well-connected investors ahead of its IPO
Quartz via Yahoo! Finance
If China’s Cinda Asset Management wanted to line up some influential stakeholders ahead of a planned $3 billion IPO, it couldn’t have done much better than quietly signing up one fund owned by the grandson of former Chinese Jiang Zemin and another stacked with former Western political leaders like George H.W. Bush.
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Former Commodities Corporation Alums Launch Witherspoon Asset Management
Three veteran investment professionals have teamed up to form Witherspoon Asset Management LLC (“Witherspoon”), a Princeton-based investment adviser. Witherspoon’s principals are Lee Gladden as CEO, Thomas Kuntz, CFA as Chief Operating Officer, and Tyler Vernon as Managing Director. Both Gladden and Kuntz share a background from Commodities Corporation.
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QE Correlation Does Not Imply QE Causation
Minyanville via Yahoo! Finance
Following this week’s FOMC meeting Chairman Bernanke held a press conference to allow members of the financial media to ask questions about the direction and efficacy of monetary policy. Chairman Bernanke has tried to increase transparency by providing more communication of monetary methodologies and intentions, however the members of the media have failed miserably at extracting information that is not already spoon-fed to the markets.
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Man extends funding of Oxford-Man Institute to 2018
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Banks & Brokers
Russians seek ways to beat Cyprus curbs
Courtney Weaver in Limassol – FT.com
With most banks in Cyprus due to reopen on Thursday, the island’s many Russian depositors are scheming ways to beat the looming limits on withdrawals and money transfers designed to stem a run on the banks.
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An apology over the proposed bonus cap
William Wright – Financial News
I feel that an apology is in order. Over the past few weeks, I may have inadvertently given the impression that the cap on bankers’ bonuses – which was confirmed by the European Parliament last week – might have been part of a thoughtful and rational set of reforms by European policymakers to reduce systemic risk.
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Goldman Rejects Proposal That Firm Run for Elected Office
Bloomberg
Goldman Sachs Group Inc. , the investment bank nicknamed “Government Sachs” because of senior executives who have moved into public posts, won’t be entering politics itself.
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Republic Of Cyprus Ministry Of Finance Bank Holiday Declaration
Following the agreement reached between the Eurogroup and the Cypriot Government it is deemed necessary, on grounds of public interest in order to ensure financial stability, to declare the 26th and 27th of March 2013 as a bank holiday. During the bank holiday, no banking transactions will be carried out.
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Tapping into the buyside
Dominic Hobson – Financial News
Tri-party repurchase agreement agents that are managing the valuation and movement of collateral between broker-dealers and cash-rich banks are increasingly seeing the buyside as natural clients for their product.
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Clearing & Settlement
DTCC confident it can overcome obstacles in clearing revolution
Tim Cave – Financial News
Companies can often run aground when trying to export successful business models. A failure to cater to local tastes and customs, or to adapt to unfamiliar regulatory regimes, can derail even the best-laid plans. The Depository Trust & Clearing Corporation has arguably faced that dilemma in building a European clearing franchise to complement its US business.
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London Stock Exchange Group Plc – Acceptance Condition Satisified For Majority Acquisition Of LCH.Clearnet
On 7 March 2013, LCH.Clearnet Group Limited (“LCH.Clearnet”) and London Stock Exchange Group plc (“LSEG”) announced a revised recommended cash offer by London Stock Exchange (C) Limited, a wholly owned subsidiary of LSEG, for a majority stake in LCH.Clearnet.
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Indexes & Products
Moscow Exchange Indices Weekly Review: March 18-22, 2013
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Tokyo Stock Exchange Has Published The Index Value Of TSE Home Price Index For January
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Technology
SuperDerivatives – SuperDerivatives to add vast mutual funds data coverage to DGX real-time market data platform
SuperDerivatives,a world leader in multi-asset real-time market data, analytics and derivativestechnology including front office, portfolio revaluation and trade execution will further enhance its DGX platform and respond to strong client demand with the addition of mutual funds market data.
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Enforcement
NY brother of hedge fund founder pleads not guilty
Associated Press via Yahoo! News
The brother of a jailed one-time billionaire hedge fund boss has entered a not guilty plea to federal insider trading charges.
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SEC press release creates waves in Boston criminal trial
Sarah N. Lynch and Nate Raymond – Reuters
A U.S. federal judge in Boston wants answers from a U.S. Securities and Exchange Commission attorney, questioning whether a news release about an investment adviser may have tainted a separate criminal trial of the same individual on a tax matter.
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Environmental & Energy
Britain’s Centrica to buy U.S. natural gas in landmark deal
Reuters
Britain’s Centrica PLC signed a long-term deal to import U.S. natural gas on Monday, the first pact of its kind for the island nation as it weathers a winter energy crisis.
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U.S. shale no panacea for Japan’s crippling energy bills
Reuters
U.S. shale gas may not be the panacea being touted by Japan’s politicians and companies to sharply reduce the country’s crippling energy bills.
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New panel to advise EPA on ‘fracking’
The Hill’s E2 Wire
The Environmental Protection Agency (EPA) on Monday announced the formation of an independent body to peer-review that agency’s research on hydraulic fracturing, as the Obama administration weighs new regulations.
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Asia-Pacific
Japanese Investors Start to Cut the Cord
KANA INAGAKI And DANIEL INMAN – WSJ.com
As global investors load up on Japanese stocks in a bet that the economy will break out of a two-decadelong slump, the country’s affluent mom-and-pop investors are venturing into global markets at the fastest pace in years.
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Philippines SEC Releases New Guidelines on Foreign Ownership
Dow Jones
The Philippines Securities and Exchange Commission released a new draft of guidelines for determining foreign ownership in industries such as real estate, telecommunications and other utilities based on a 2011 Supreme Court ruling, after an earlier draft of such rules was criticized.
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Japan Exchange Group Published The Medium-Term Management Plan And The IT Master Plan
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Japan Exchange Group Medium-Term Management Plan For FY2013 To FY2015
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Tokyo Stock Exchange And JASDEC’s Joint Service Enhancement Of Corporate Action Information Service
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Korea Exchange: Revision Of Margin Rates Of Derivatives Products
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HKEx: Forfeiture Of Unclaimed Final Dividend For 2006
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Frontier Markets
Brazil: Humbled heavyweight
Joe Leahy – FT.com
Brazil’s motorcycle industry reflects a wider malaise in Latin America’s biggest economy. Two-wheeler sales were growing quickly until 2011, when millions of new lower-income consumers took advantage of easy access to loans to buy a new Honda or Yamaha. Last year, however, that changed as consumer credit became harder to secure, causing production to plunge by more than a fifth. It is a trend that has continued into this year.
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BRICS Nations Plan New Bank to Bypass World Bank, IMF
Bloomberg
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
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ADX Partakes In Middle East Securities Forum 2013
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Miscellaneous
Book About Personal Finance Industry Assailed As Peppered With Distortions, Misstatements
Forbes
How-to financial books continue to proliferate, flooding Barnes & Noble and other outlets — determined to guide people on investment issues essential to their lives and prospects.
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