Industry news

July 30, 2013: SEC Approves ISE’s Form 1 Application for ISE Gemini; Hedge Fund’s Suit on Fannie and Freddie May Spell Trouble for U.S.; Solid start for NLX but the real challenges lie ahead

The International Securities Exchange receives SEC approval to begin operation of its new Gemini options exchange, and plans to open its doors in early August. A lawsuit against the US government by a hedge fund may finally pry open the lid on bailout practices. New exchange Nasdaq OMX NLX is up and running, gradually gaining ground in London.

First Read

Last Intern Education Series Event Today
Today is the last event in our Intern Education Series. Today’s event will be held at the CBOE, not the CBOT as originally announced. We conclude with Richard Sandor, Terry Duffy, Rick Lane, June Furlan, Ben Van Vliet and Sam Mele as presenters.

The video for the series is expected to be released starting in September. We are seeking a global sponsor for the video series. Contact me at johnlothian@johnlothian.com if you are interested.

We want to thank all of the speakers for the event, as well at the CME Group and CBOE for providing the venues. Additionally, we want to thank The IFM for their Series 3 courses and materials which we have given away at each event.

Lastly, thank you to all the interns and their employers for participating in the series. We could not be happier with the participation we had and the great turnout from the interns. Thank you all.

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Wife of Former CBOT Chairman Passes Away; Carole C. Mallers Died Saturday
John Lothian
The wife of former CBOT Chairman William J. Mallers, Sr., and mother of Joanna, Tom and William, Jr., passed away Saturday at the age of 80. Carole C. Mallers had been in hospice care since Monday after setbacks occurred after she underwent brain surgery for a tumor just over a month ago, a friend of the family said.

Here is the obituary from the Chicago Tribune

Joanna Mallers is a Vice President with Mizuho Securities USA Inc. Tom Mallers is a compliance officer with Rosenthal Collins Group

I worked for the Mallers in the 1980s at First American Discount Corporation, a futures commission merchant founded in 1983 at the start of the discount commissions era of futures trading. My condolences to the whole Mallers family on Carole’s passing.

~John J. Lothian

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Changing of the guard: Mike Cahill talks about new CEO post at OCC, and how things aren’t really changing
Jim Kharouf – John Lothian News
Yesterday, Mike Cahill was named as the next CEO of OCC, (formerly Options Clearing Corporation. The move marks a historical changing of the guard at OCC. Cahill, currently president and COO at OCC, will take the post on January 1, 2014 and succeeds Wayne Luthringshausen, who has held the chairman and CEO posts for 40 years and is retiring at year end. The executive chairman’s position will be separated from the CEO post, and a search is still ongoing for that person.
JLN editor-in-chief Jim Kharouf spoke with Cahill about the new post and what is next for the OCC.
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**** I can guarantee the OCC will continue to March Fourth.

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Options Clearing Corp. promotes Michael Cahill to CEO
Lynne Marek – Crain’s Chicago Business
Options Clearing Corp. will promote Michael Cahill to serve as its next CEO, and it plans to create an executive chairman role, the Chicago-based organization said in a news release. OCC, which provides clearing and settlement services to 17 options and futures contract exchanges and trading platforms, also said longtime Chairman and CEO Wayne Luthringshausen plans to retire in December.
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**** Congratulations to Michael Cahill on the promotion and to Wayne Luthringshausen on a great run.

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IntercontinentalExchange Announces August 12 Launch of 25 New Oil and Freight Futures Contracts
IntercontinentalExchange, a leading operator of global markets and clearing houses, today announced the introduction of 25 new oil and freight contracts on August 12, 2013. The new contracts, which will be available for trading at ICE Futures Europe and cleared at ICE Clear Europe, include 24 global crude oil, gasoline, middle distillate, fuel oil and ethanol futures and options contracts and one wet freight futures contract.
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***** And the grand total of energy contracts at ICE is how many?

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CBOE to add VIX trading hours in September, after delay
Reuters
CBOE Holdings Inc said on Monday it will expand trading hours for futures on the CBOE Volatility Index in late September, after a technical glitch delayed the change.
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***** What the world needs now is…. more VIX?

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Upstart Pitches Trading Sanctum
SCOTT PATTERSON – WSJ.com
Some big Wall Street firms are throwing their weight behind an upstart trading platform pitching itself as an antidote to a mounting problem in the stock market: predatory high-frequency trading. The platform, IEX Group Inc., will go head-to-head in October with established stock exchanges and “dark pools,” private trading venues that don’t publish buy and sell prices for stocks. Its aim is to nullify certain advantages enjoyed by high-speed traders, such as the ability to detect large orders by less fleet-footed traders and make trades ahead of them.
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***** The Antidote Exchange.

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Tax questions cloud prospects for CME swap future and Mac swaps
Tom Osborn – Risk.net
The US taxman is holding back growth in CME Group’s new swap futures contract, according to some market participants. This is a consequence of the product’s design, in which users can end up taking delivery of an over-the-counter swap at an off-market rate when the contract reaches expiry. The fear is that US tax rules may treat this as a loan, which prompted some users to roll their positions at the product’s first two maturity dates in March and June, rather than allowing them to expire. The CME is now trying to clarify the product’s treatment with the Internal Revenue Service (IRS).
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***** It ain’t over until it is over. The battle continues.

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Did ‘Golf Pro Culture’ Sandbag SAC’s Compliance Specialists?
Law.com
Your company can have all the compliance professionals in the world but, in the end, culture trumps compliance. In the case of embattled hedge fund giant SAC Capital, that appears to be by a factor of 38:1.
jlne.ws/16yuevx

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MarketsWiki

MarketsWiki Recent Updates

People

Christopher K. Hehmeyer; Ananda Radhakrishnan; June Furlan; Andy Milnes; Michael E. Cahill; David S. Mitchell; Philip McBride Johnson; Thomas J. Erickson; Richard Sandor; Wayne Luthringshausen; George Hanley

Companies, Organizations and Groups

TeraExchange; Aquis Exchange Ltd; European Securities and Markets Authority; OCC

Products

NYMEX energy products

Statistics

42,227,796 pages viewed, 7,605 articles, 162,565 edits
MarketsWiki Statistics

Lead Stories

SEC Approves ISE’s Form 1 Application for ISE Gemini
The International Securities Exchange (ISE) announced that the SEC has approved its Form 1 application for ISE GeminiTM, ISE’s second options exchange that will complement its existing market. Set to launch on August 5, 2013, ISE Gemini will ramp up over several weeks, beginning with a small number of symbols and eventually trading all of the most active options classes.
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Hedge Fund’s Suit on Fannie and Freddie May Spell Trouble for U.S.
STEVEN M. DAVIDOFF and DAVID ZARING – NYTimes.com
The lawsuit brought by the hedge fund Perry Capital against the federal government over the Fannie Mae and Freddie Mac bailout may be the case that finally subjects the government’s bailout practices to closer outside scrutiny.
jlne.ws/16yugU6

Solid start for NLX but the real challenges lie ahead
William Mitting – FOW
Within 48 hours of receiving regulatory approval, NLX opened its doors for trading on Friday May 31. At the launch, Charlotte Crosswell, chief executive of the multi-lateral trading facility, heralded a new age of competition in European derivatives trading.
jlne.ws/16yugU7

Philadelphia latest U.S. city to sue banks in Libor scandal
Reuters via Yahoo! News
The city of Philadelphia is the latest of a series of U.S. municipalities, following Houston a week ago, to sue some of the world’s biggest banks for financial losses incurred in the Libor interest-rate rigging scandal.
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Europe’s CEOs ‘not so pessimistic’
CNBC
Business confidence among European CEOs bounced to a two-year high in the second quarter, according to a new survey, with these executives now more optimistic than those in Latin America.
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Bank of Cyprus depositors lose 47.5 pct of savings
Associated Press via Yahoo! News
NICOSIA, Cyprus — Depositors at bailed-out Cyprus’ largest bank will lose 47.5 percent of their savings exceeding 100,000 euros, the government said Monday.
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Regulatory

Regulators Face Scrutiny on Banks’ Commodities at Senate Hearing
Bloomberg
U.S. banks’ ownership and trading of physical commodities will face further scrutiny tomorrow when the heads of the Commodity Futures Trading Commission and Securities and Exchange Commission testify before lawmakers.
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U.S. regulators moving cautiously on mortgage reforms
Emily Stephenson | Reuters
U.S. bank regulators, wary of upsetting the fragile housing market, are moving cautiously in fashioning dozens of new rules to prevent reckless underwriting and other mortgage market abuses.
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Linedata Service Tackles Hedge Fund Compliance
Thomases – WatersTechnology
Linedata, the Paris-based solutions provider, has unveiled Linedata Compliance Managed Service to address the complexity of global hedge fund regulations by incorporating rule monitoring across different geographies and jurisdictions.
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Exchanges & Trading Facilities

TeraExchange Files SEF Application With CFTC
TeraExchange filed its application to become a Swap Execution Facility (SEF) with the Commodity Futures Trading Commission (CFTC) on Friday July 26th, 2013. TeraExchange will empower market participants to trade across various financial instruments including Interest Rate Swaps, CDS Indices, CDS Options and Single Name, NDFs and other cleared OTC products.
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NYSE Euronext earnings rise helped by cost cuts
Reuters
NYSE Euronext, which is being bought for $8.2 billion by IntercontinentalExchange, reported a 38 percent rise in second-quarter earnings, helped by cost cuts and one-off gains, the transatlantic exchange operator said on Tuesday.
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NYSE Euronext Announces First Quarter 2013 Financial Results
Press Release
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Japan Exchange Group Consolidated Financial Results For Three Months Ended June 30, 2013, Unaudited
The consolidated results of the JPX during the consolidated cumulative first quarter were operating revenue of Y36,099 million, operating expenses of Y18,156 million, operating income of Y17,943 million, and ordinary income and income before income taxes and minority interest was Y18,655 million, and net income was Y11,209 million.
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Hellenic Exchanges S.A. – HELEX H1 2013 Financial Results – E35.8m Net After Tax Profits
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CBOE Futures Exchange’s Expanded Trading Hours Initiative To Begin In Late September
Press Release
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ASIC Equity Market Data For The Quarter Ending June 2013
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Amendment To MIAX Options Fee Schedule Extended Through August 30, 2013
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NYSE MKT Issues Short Interest Report
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Hedge Funds & Managed Futures

Investors take steam out of secondaries funds market
Alec Macfarlane – Financial News
In the aftermath of the financial crisis, the market for second-hand private equity fund stakes knew no bounds. Deals hit a fresh record of $26 billion last year – as investors sold fund stakes to gain liquidity and some institutions reduced their exposure to the asset class.
jlne.ws/16yuhqV

Prosiris Global Opportunities Fund: Prosiris Capital Management
Kris Devasabai – Risk.net
Prosiris Capital Management, named the best emerging hedge fund manager at the Americas Awards 2013, has made strong returns investing in credit assets that were overlooked by its peers
jlne.ws/16yuhqX

Fidelity, with $3 billion in cash management accounts, is bigger than some banks
Boston Globe
When Fidelity Investments decided to move aggressively into consumer banking, it didn’t do so subtly. In a marketing paper issued for customers earlier this summer, the firm wrote, “Do you really need a bank”
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Xetra/FWB: Subscription Launch For TAG Immobilien AG Corporate Bond – Inclusion In The Prime Standard For Corporate Bonds Planned
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Banks & Brokers

Legal Costs Hit Deutsche Bank
ULRIKE DAUER – WSJ.com
Deutsche Bank AG said Tuesday second-quarter net profit halved compared with a year earlier, as it put aside money for legal costs. But the bank also reached a capital ratio of 10% under future Basel III requirements for banks, which it had targeted for the first quarter of 2015.
jlne.ws/16yuhr1

JPMorgan to settle over power rigging charge
Gregory Meyer and Tom Braithwaite in New York and Jack Farchy in London – FT.com
JPMorgan Chase was expected to announce a settlement with the Federal Energy Regulatory Commission as early as Tuesday after being formally charged with rigging power markets in California and the Midwest.
jlne.ws/16yuhr4

Santander Readies for ‘Period of Growth’ as Profit Rises
CHRISTOPHER BJORK – WSJ.com
Banco Santander SA Tuesday posted a sharp rise in second-quarter profit, as the Spanish lender set aside less cash to cover bad debts at home, offsetting a weaker performance in Latin America.
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UBS to buy back toxic assets fund from Swiss National Bank
James Shotter in Zürich – FT.com
UBS said that it will buy back the fund set up to help deal with its toxic assets at the height of the financial crisis, as the Swiss bank reported a 32 per cent rise in net profits in the second quarter.
jlne.ws/16yuhr7

Barclays reveals £12.8bn balance sheet hole
Patrick Jenkins, Banking Editor – FT.com
Barclays has revealed a £12.8bn hole in its balance sheet as it announced a £5.8bn rights issue, buttressed by a plan to shrink its balance sheet and issue £2bn of contingent convertible debt.
jlne.ws/16yuhr9

Nomura’s Nazar heads to BAML
Matt Turner – Financial News
Saba Nazar, the global co-head of financial sponsors at Nomura and one of the most influential women working in European markets, has opted to rejoin former colleagues at Bank of America Merrill Lynch.
jlne.ws/16yuhHD

Tullett Prebon says trading still challenging
Reuters
Tullett Prebon Plc reported a 3 percent drop in first-half revenue on Tuesday, as challenging market conditions and subdued trading weighed on the inter-dealer broker’s business.
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Indexes & Products

MCX-SX Flagship Index ‘SX40’ Wins Golden Peacock Eco-Innovation Award 2013
jlne.ws/16yuhHF

Tokyo Stock Exchange Has Published The Index Value Of TSE Home Price Index For May
jlne.ws/16yuhHG

Moscow Exchange Indices Weekly Review: July 22-26, 2013
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Technology

OCC’s DuChene warns smaller banks to beware of cyber threat
Jessica Meek – Risk.net
As cyber threats continue to grow for financial institutions, it’s no surprise that regulators are becoming increasingly concerned about the operational risks they give rise to. The OCC’s Carolyn DuChene talks to OpRisk about banks’ increased reliance on technology and the dangers that come with it
jlne.ws/16yuhHH

Fidelity Worldwide Investment In Australia Joins Calastone
Calastone, the global transaction network for the superannuation and managed fund industries, today announces that Fidelity Worldwide Investment (‘Fidelity’) has joined their Global Funds Transaction Network in Australia.
jlne.ws/16yuhHJ

Interactive Data Reports Second-Quarter 2013 Results
Marketwire
BEDFORD, MA– – Interactive Data Corporation today reported its financial results for the second quarter ended June 30, 2013. Interactive Data’s second-quarter 2013 revenue increased 1.7% to $225.1 million from $221.2 million in the second quarter of 2012.
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Enforcement

CFTC Orders William J. Hionas And His Florida Firms, Pan American Metals Of Miami And Pan American Metals Of Miami Beach, To Pay Approximately $4.7 Million In Restitution And A Monetary Penalty For Fraudulent Off-Exchange Transactions In Precious Metals
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against two Miami, Florida, companies, Pan American Metals of Miami, LLC and Pan American Metals of Miami Beach, Inc. (together, the Pan American Companies), and their owner and principal, William J. Hionas, for engaging in illegal, fraudulent off-exchange financed transactions in precious metals with retail customers.
jlne.ws/16yukmN

***** This is one of the most egregious cases I have ever read. The details include a solicitation of a person in hospice.

In Surprise, Tourre Defense Calls No Witnesses
SUSANNE CRAIG and MICHAEL J. DE LA MERCED – NYTimes.com
Lawyers for Fabrice Tourre, the former Goldman Sachs trader accused of defrauding investors in a mortgage deal six years ago, rested their defense on Monday without calling any witnesses, a surprise move that now sets the stage for the closing of one of the most prominent cases from the financial crisis to go to trial.
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US courts allow IRS to aide Norway in tax evasion investigation
Reuters
Federal courts in six U.S. states have entered orders allowing the Internal Revenue Service to serve so-called “John Doe” summonses on U.S. banks seeking information about unknown individuals who have used certain credit or debit cards in Norway, the Department of Justice said on Monday.
jlne.ws/16yukmQ

SEC Charges School District And Muni Bond Underwriter In Indiana With Defrauding Investors
The Securities and Exchange Commission today charged a school district in Indiana and its municipal bond underwriter with falsely stating to bond investors that the school district had been properly providing annual financial information and notices required as part of its prior bond offerings.
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ASIC cancels licence of Australian Public Trustees Limited
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Environmental & Energy

Why It Finally Makes Political Sense to Talk About Climate Change
National Journal
New polls show that voters increasingly view climate global-warming deniers as cranks. The White House is paying attention. In the summer of 2009, a dozen Democratic members of Congress took a deep breath and put their political futures on the line, voting for historic global-warming legislation President Obama had told them was a top priority. After the bill squeaked through the House, Democrats pleaded with the White House: After taking this risk, they needed Obama to go to bat for them—and the bill—with speeches, campaign appearances, constituent outreach, anything.
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For the Masters of commodities at JPMorgan, a sense of deja vu
Reuters
Fifteen years ago, a boom in global commodity trading was underway, and JPMorgan was late to the game.
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**RKB — Flashback to 2004 and the building of a big carbon desk.

Merkel’s Green Shift Backfires as German Pollution Jumps
Bloomberg
Germany’s air pollution is set to worsen for a second year, the first back-to-back increase since at least the 1980s, after Chancellor Angela Merkel’s decision to shut nuclear plants led utilities to burn more coal.
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Asia-Pacific

China Opts for Only Small Steps to Stimulate Economy
BILL BISHOP – NYTimes.com
Beijing continues to resist a new large fiscal stimulus package, despite a report last week that the nation’s manufacturing sector had contracted in July at its fastest pace since last summer. Instead, the government announced a “mini stimulus” that included a tax cut for small companies, a reduction of red tape and costs for exporters, and the opening of investment in railroad construction to private capital.
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TSE: Outline of New Jointly Developed Index
Japan Exchange Group, Inc. and Tokyo Stock Exchange, Inc. along with Nikkei Inc. announce the basic concept of the new index, which is now jointly developed.
jlne.ws/16yukD9

Hong Kong Regulator Seeks to Wind Up China Metal Recycling
Isabella Steger – MoneyBeat – WSJ
Hong Kong’s securities watchdog is seeking a court order to wind up China Metal Recycling Holdings Ltd. 0773.HK -0.95% following allegations that the listed company exaggerated its financial position.
jlne.ws/16yukDb

Indonesia youth flock to Japanese lessons
Ben Bland in Jakarta – FT.com
Rikho Sinurat studied Japanese at his Indonesian high school because he was a fan of the best-selling Dragon Ball and One Piece manga comics, but he continued in university for a more prosaic reason.
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Shenzhen Stock Exchange Market Bulletin 29 July,2013
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HKFE Announces Revised Margins For Futures Contracts
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Frontier Markets

Dubai Mercantile Exchange Appoints Head Of Customer Relations
DME, the premier international energy futures and commodities exchange in the Middle East, today announced the appointment of James Lear as Head of Customer Relations.
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Index reshuffle could spell gains for Morocco and Nigeria
Sarah Krouse – Financial News
The balance of power within the MSCI Frontier Markets Index is set for a dramatic shift over the next 12 months after the index provider’s decision to upgrade the United Arab Emirates and Qatar and downgrade Morocco.
jlne.ws/16yukDh

Flemings seeds new Investec fund
Sarah Krouse – Financial News
Fleming Family & Partners, the multi-family office, has seeded a new Africa-focused fixed-income fund with Investec Asset Management, aiming to tap into a corner of the emerging market investment universe that is less correlated to global “risk-on, risk-off” swings.
jlne.ws/16yuiew

Within BRICs, Only China To Get Richer
Forbes
Brazil, Russia and India: welcome to middle class hell.
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