Industry news

August 8, 2013: LME Said to Consider Three People for CEO; Bob Diamond in talks over trading venture investment; Hong Kong, China Futures Are Step to Convergence

The London Metal Exchange is said to have three top candidates for their CEO job. Ex-Barclays Bank head Bob Diamond considers taking a stake in Aquis Exchange. Hong Kong Exchanges prepares a new index futures product for trading that will for the first time track stocks in both Hong Kong and China.

First Read

ALTSO New York and Chicago Rocktoberfest Events Coming
ALTSO’s Rocktoberfest is a charity event that unites leaders from the financial services community for a night of rock and roll. Rocktoberfest features musicians from financial services who perform to raise money for A Leg To Stand On (ALTSO), a non-profit organization that provides free prosthetic limbs and corrective surgery to children in developing countries.

Last year, 1,200 supporters attended the NYC event. Rocktoberfest in Chicago was inaugurated last year with 300 enthusiastic guests. This year’s Rocktoberfest in Chicago will bring over 350 participants from the finance industry at Crossroads at House of Blues on October 3rd from 6pm to 11pm. This year’s Chicago sponsors group already includes CBOE, Cheiron Trading, CME Group, Eurex, IntercontinentalExchange (ICE) and Russell Investments. Sponsors for the 10th annual New York Hedge Fund Rocktoberfest on Oct 23rd at Capitale include Credit Suisse, Infineon Capital Management, JP Morgan, LMAX Exchange, Lyxor Asset Management and XFA.

Through the support of Rocktoberfest attendees in both Chicago and NYC, the charity has been able to treat nearly 10,000 children since the inauguration of their first program in 2002 in Ahmedabad, India.

Follow the link below for a video and details about how you can be a part of it!
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***** The John Lothian Production team put together this video promotion for ALTSO. I personally want to thank the team, including RJ Roxas, for doing an excellent job on this short promo for the events. We have a long history of supporting industry charities, and the quality and polish of this promo video took that contribution to a new level.

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Michael Lacson of SunGard Capital Markets Discusses The Latest Regulatory Technology
MarketsWiki.tv
Michael Lacson, director of presales, Protegent, of SunGard Capital Markets talks about how his firm developed compliance technology to deal with the new financial rules set by Dodd-Frank, as well as ESMA, EMIR and MIFID in Europe and those in Asia. Lacson spoke with JLN editor-in-chief Jim Kharouf about SunGard’s Protegent Compliance Platform, which features core components as well as key functions that are designed for compliance officers. The system, he says, is designed to change and adjust to new rules or changing regs that may come along in various asset classes.
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JLN Options: A Chat with Boris Ilyevsky on ISE’s New Options Exchange, ISE Gemini
The International Securities Exchange launched a second options exchange, ISE Gemini, on August 5, its latest effort to gain an edge in the hyper-competitive equity options field. JLN editor Sarah Rudolph spoke with Boris Ilyevsky, managing director of ISE’s options exchanges, about the Gemini’s pricing structure and first offerings, the difference between ISE’s two venues and the equity options landscape. ISE Gemini traded 400 contracts on its first day, according to the OCC.

Q: What is the rationale behind ISE Gemini’s pricing structure?

A: Gemini will have a maker-taker style fee schedule where resting orders and market maker quotes earn rebates and orders that remove liquidity pay a fee. This is generally in line with other maker-taker markets. It’s meant to attract liquidity from market makers, broker dealers, and both retail and institutional customers, to the extent that the resting order flow from that segment currently is attracted by the rebates offered at the other maker taker markets, such as BATS, NOM and NYSE Arca.

We intend to compete for that order flow on ISE Gemini, not just with the fees and rebates but with the benefit of a pro-rata and customer priority allocation model.
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Outages at BATS and Direct Edge: Are Technical Mishaps the New Normal?
Ivy Schmerken – Wall Street & Technology
Yesterday, BATS Global Markets had to stop trading on its main stock exchange for about 50 minutes, while its counterpart, Direct Edge Holdings also experienced an unrelated disruption. While the pair of outages was brief, they highlight the fragility and technical complexity of the nation’s 13 U.S. stock trading venues, and how a disturbance in one can impact the others.
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***** I have an idea. Let’s take too few data points and make a broad sweeping general conclusion about them.

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Computer Trading in Bonds Won’t Match Stock Level, McKinsey Says
Matthew Leising – Bloomberg
The corporate bond market is unsuitable for full electronic trading, according to a study by McKinsey & Co. and Greenwich Associates, even as Goldman Sachs Group Inc. and BlackRock Inc. expand their own systems.
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***** Also this in, apple sales will not match those of orange sales this year.

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Routing to the new markets
Dan Barnes – FOW
Competition between derivatives trading venues has historically been rare. Since Eurex stole the bund from Liffe in the late 90s there has not been a major liquidity shift from one market to another. This may change. Challengers to the well-established markets for exchange-traded products are launching, while new markets for over-the-counter products threaten a tug-of-war with established players. To offer access to these competitive venues, vendors must offer connectivity and order routing systems or aggregators that allow clients to choose where to go.
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***** So many venues, so many connections, so few resources.

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The New Finance Era: From HFT to Big Data
John Fawcett – Wall Street & Technology
High-frequency trading (HFT), the practice of using automated financial tools to rapidly trade large volumes of securities, is one of the buzzwords that has dominated financial media and has led to a stigma against quantitative finance as a whole. It’s time for investors, quants and the media to start focusing instead on the incredible possibilities for creativity, innovation and breakthrough strategies made possible by financial data science and algorithmic trading.
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***** “Algorithms remove human emotion and bias from trading decisions.” Baloney! There was a lot of emotion when Knight Trading had its problem, or many other examples on a daily basis. Algos are not pure robots. They still have teams of people watching over them who have an emotional connection, if not financial connection, to the success and failure of those algos.

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DTCC White Paper Identifies Greater Systemic Risk Complexities To Financial Markets
In its white paper released today entitled Beyond the Horizon: A White Paper to the Industry on Systemic Risk, The Depository Trust & Clearing Corporation (DTCC) identified a number of emerging trends that could potentially impact the industry’s ability to protect against new and unidentified threats to the financial system. The paper reports that despite progress over the past five years, systemic risks facing the global financial services industry are growing in complexity, are more difficult to anticipate and that new gaps continue to surface.
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Talking about Asia often leaves professionals from those regions a bit tongue-tied. When JLN decided to do a special report talking about Asia, many of those experts had the same question: “Which country? Asia is a big place.” Indeed, talking about Asia is difficult, given the number of markets and regulatory differences, not to mention geographic distance between various Asian financial centers.

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

- SPONSORS -

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Not Banks, but Still Lending Money and Drawing Investors
RANDALL SMITH – NYTimes.com
In one sense, much of Internet commerce is largely a matchmaking service, connecting people looking for relationships, taxis or spare bedrooms. One of the hottest areas is the market for personal loans, which is attracting money from venture capital investors, spurred by the fast growth of the largest online platform, Lending Club, and the paper profits for its early backers.
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Did We Waste a Recession?
ADAM DAVIDSON – NYTimes.com
Five years ago this month, before Lehman Brothers imploded and the global economy lurched to a halt, Fannie Mae issued a report that encapsulated the financial system’s biggest problem. The lender and its brother company, Freddie Mac, were declared insolvent and handed over to the U.S. government. Remarkably, five years after the crisis, the health of the financial industry is just as hard to determine.
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Less Than A Third Of Top CEOs Are On Social Media
Forbes
Warren Buffett has only tweeted twice since May 2, but he already has 542,000 followers. The first tweet simply said “Warren is in the house.” The second tweet, also on May 2: “Read my new essay on why women are key to America’s prosperity: http://cnnmon.ie/18eXfik .” Just two short tweets and he amassed more than a half a million followers.
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***** They may not be on social media directly, but their companies are on social media one way or another. Maybe it is best to keep your head under your pillow.

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MarketsWiki

MarketsWiki Page of the Day
ISE Gemini
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MarketsWiki Recent Updates

People

Damien Zinck; Thomas Krabbe; Boris Ilyevsky; Paul Lo; Brian Wagner; Thomas Mitchell; Stephen Grady

Companies, Organizations and Groups

Gain Capital; Pioneer Futures

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42,554,424 pages viewed, 7,613 articles, 162,867 edits
MarketsWiki Statistics

Lead Stories

London Metal Exchange Said to Consider Three People for CEO
Agnieszka Troszkiewicz & Nandini Sukumar – Bloomberg
The London Metal Exchange, the largest industrial-metals futures bourse, is considering three people for the role of chief executive officer, according to two people familiar with the process. They include Diarmuid O’Hegarty, the LME’s chief operating officer, and Garry Jones, the former CEO of NYSE Liffe, said the people, who asked not to be identified because the information is private.
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Bob Diamond in talks over trading venture investment
Daniel Schäfer in London – FT.com
Bob Diamond is considering backing a new European trading platform in a second possible investment by the former Barclays chief executive who was forced out last year following the Libor manipulation scandal. The 62-year-old banker is in talks with Aquis Exchange over an investment in the equities trading venture, which is set to be launched later this year, two people familiar with the plans said.
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Hong Kong, China Futures Are Step to Convergence: HKEx
Eleni Himaras – Bloomberg
Futures linked to the CES China 120 Index are a step toward the convergence of stock markets in Hong Kong and China, according to an official from Hong Kong Exchanges & Clearing Ltd. Futures tied to the gauge, which tracks the most liquid stocks listed in Hong Kong, Shanghai and Shenzhen, will begin trading in the special administrative region on Aug. 12. They will be the first derivative product that gives investors exposure to companies listed in both Hong Kong and China, said Calvin Tai, co-head of equities, fixed income and currencies at Hong Kong Exchanges, at a media briefing in Hong Kong today.
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Banks Struggle With Proprietary Bond-Trading Networks
KATY BURNE – WSJ.com
Some large banks’ efforts to grow proprietary bond-trading networks have stalled a year after they were launched, according to people briefed on the matter. Morgan Stanley hasn’t held a scheduled bond-trading session on its “Bond Pool” network for a few weeks, said people familiar with the platform. The firm typically ran two bond auctions per week, after launching the service last summer. Goldman Sachs Group Inc. has slowed the number of sessions on its “GSessions” platform to a trickle, having typically run several each week since its launch last June, these people said.
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Assessing the scale of metal warehouse trades
Izabella Kaminska | FT Alphaville
Earlier this week Morgan Stanley published an in depth look into the financing warehouse trades in metals — the ones most analysts have been in denial about (at least publicly) for at least five years — and why they are now, thanks to new LME proposals, finally easing. The note is titled: “Beginning of the end in warehouse trades: A game changer for base metals”. There were three notable observations.
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MCX hits new low despite company’s clarification
Business Standard
Multi Commodity Exchange of India (MCX) is locked in lower circuit for fifth day in a row, down 10% at Rs 299 on BSE, despite of the company’s clarification that it has a strong debt-free balance sheet with a networth in excess of Rs 1,200 crore as on June 30, 2013.
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Greek unemployment rate rises to 27.6 percent in May, new record
Reuters
Greece’s jobless rate rose to 27.6 percent in May from an upwardly revised 27 percent in April, the country’s statistics service (ELSTAT) said on Thursday.
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Exchanges & Trading Facilities

LME’s Head of Business Development Steps Down
Laura Clarke and Francesca Freeman – WSJ.com
The London Metal Exchange, one of the main global hubs for trading in base metals such as aluminum and copper, said Wednesday that its Head of Business Development, Chris Evans, has decided to leave. The departure of this key LME executive comes at a time of increased scrutiny of the exchange’s metal warehousing system.
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Dutch Telecom Ditches NYSE for Nasdaq
Jacob Bunge and Andrey Ostroukh – MoneyBeat – WSJ
The Nasdaq Stock Market scored a big win Wednesday in its perennial battle with the New York Stock Exchange over stock listings, landing the securities of Dutch telecom VimpelCom Ltd.
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CME Group Inc. Declares Quarterly Dividend
CME Group, the world’s leading and most diverse derivatives marketplace, today declared a third-quarter dividend of $0.45 per share, payable September 25, 2013, to shareholders of record September 10, 2013.
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Monthly Summary Bulgarian Stock Exchange-Sofia July 2013
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Athens Exchange Derivatives Market Monthly Statistical Bulletin July 2013
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TOM Insight July 2013
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TMX Group Equity Financing Statistics – July 2013: Toronto Stock Exchange, TSX Venture Exchange
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Moscow Exchange: Results Of Auction For Placement Of The Russian Federation Government Bonds, Issue No25082RMFS
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Hedge Funds & Managed Futures

The Nutritional Value of Data: Harvesting Alpha From Unstructured Noise
Paul Rowady – TABB Forum
Someday, unstructured data will approach extinction. Yes, spoken and written words may continue to defy structure, in the machine-readable sense; but even then we should expect improved recording and other digital character-recognition technologies to capture these most basic forms of human information transfer in a way that allows for subsequent, automated analysis.
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Several skills important for shorting stocks say hedge funds
Hedge Funds Review editorial – Risk.net
Shorting requires a trader to balance conviction in an idea and the desire to see it through to a profitable outcome with real risk management discipline
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Cargill reports fourth-quarter and fiscal 2013 earnings
Cargill today reported net earnings of $483 million in the fiscal 2013 fourth quarter ended May 31, up substantially from $73 million in the same period a year ago. Fourth-quarter revenues were $35.4 billion, a 4 percent increase from $34 billion in the year-ago period.
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Prop loss takes gloss off BTG’s client gains
Vivek Ahuja – Financial News
A one-billion Brazilian real ($435 million) negative swing in principal investment revenues overshadowed growth across BTG Pactual’s client-facing businesses in the second quarter.
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Eurekahedge data on individual hedge fund and FoHF performance
Risk.net
The latest statistical information on top performing FoHFs and hedge funds running arbitrage, relative value, distressed debt, event driven, fixed income, global macro and long/short equity strategies
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Deutsche Börse: RWE Bond With E1 Billion Volume Moves To Prime Standard For Corporate Bonds
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Banks & Brokers

RBC Capital Markets Head of Australia, Asia Equities Departs
Gillian Tan – MoneyBeat – WSJ
The head of global equities for RBC Capital Markets in Australia and Asia, Peter Main, has left the Canadian bank, a person familiar with the matter said Thursday.
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Citigroup Debt-Sales Team Defects to Sterne Agee After Pay Shift
Bloomberg
Sterne Agee & Leach Inc., the Alabama-based brokerage, hired five credit salespeople from Citigroup Inc. after the third-largest U.S. bank stopped paying them commission on what they earned for the firm.
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Deutsche Hires Goldman Currency Co-Head as Managing Director
Bloomberg
Deutsche Bank AG, the world’s biggest currency trader, said it hired Gaurang Chadha as a managing director in its North American foreign-exchange investor sales team in New York.
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Citi promotes Borch as new COO for investment bank in Asia -memo
Reuters via Yahoo! Finance
Citigroup Inc has named Michael Borch as its new chief operating officer for its corporate and investment bank in Asia-Pacific, replacing Chris Laskowski in the role, according to an internal memo obtained by Reuters on Thursday.
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Wells Fargo Reports Trading Losses on 5 Days as VaR Declines
Bloomberg
Traders at Wells Fargo & Co. , the most valuable U.S. bank, recorded five days of losses during the second quarter as the San Francisco-based lender expands its securities business.
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GAIN Capital Reports Strong Second Quarter on Record Net Revenue and Diluted EPS of $0.44
GAIN Capital Holdings, Inc., a leading global provider of online trading services, reported second quarter 2013 net income of $17.2 million, or $0.44 per diluted share, on net revenue of $73.0 million.
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E*Trade Drops Most Since April After Finra Probe: New York Mover
Bloomberg
E*Trade Financial Corp. shares fell, heading for the biggest drop since April, as the online brokerage said regulators were looking into how two of its units routed orders.
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Clearing & Settlement

Accenture, Broadridge blaze trail for cost-cutting banks with outsourcing venture
Heather McKenzie – Euromoney
The joint venture between Accenture and Broadridge to process and settle securities trades offers investment banks the opportunity to reduce costs and boost scale. Société Générale is on board. Is this a model for the future?
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FX Market Cleared Volumes Exceed $1 Trillion Notional
LCH.Clearnet Ltd, the UK-based CCP and subsidiary of the world’s largest multi-national clearing house, has cleared over one trillion US dollars in FX Non Deliverable Forwards trades (NDFs) since launching its award winning ForexClear service in March 2012.
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Indexes & Products

Russell Indexes and NYSE Technologies announce new Enhancements to RussellTick real-time market data program
Russell Indexes, a leading global index provider and NYSE Euronext, one of the world’s premier exchange operators and technology innovators, today announced new enhancements to RussellTick, an index feed for real-time, intra-day values for the Russell family of global indexes.
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Dow Jones S&P GSCI Index: Market Attributes – Performance Of The Commodities Market In July
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Dow Jones UBS (DJ-UBS) Commodity Index: Market Attributes – Performance Of The Commodities Market In July
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Technology

MarketPrizm Builds HKEx Co-Lo Hub
Faye Kilburn – WatersTechnology
Market data and trading infrastructure services provider MarketPrizm has established a point of presence at the Hong Kong Exchanges and Clearing’s (HKEx) Hosting Data Center (HDC) in the Tseung Kwan O Industrial Estate region of Hong Kong to provide clients with managed co-location services including access to low latency market data from the exchange.
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Swan Wealth Advisors Takes Omex for Order Routing
Timothy Bourgaize Murray – WatersTechnology
The buy-side risk management specialist, with $850 million assets under management and based in Durango, Colorado, will use Omex’s execution platform for implementing options strategies across its multiple custodians and sub-accounts.
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AlgoSpan Low Latency Exchange Access Infrastructure – Connects To The Order Machine (TOM)
AlgoSpan, the specialist market infrastructure provider, is pleased to announce that as of 1 August 2013, customers of AlgoSpan will be able to connect to TOM MTF over “AlgoNet”.
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ConvergEx Group’s LiquidPoint Launches New Market Data Service – Exchanges’ Complex Order Book Data Feed Now Available Via Normalized uCOB API
ConvergEx Group, a leading provider of global brokerage and trading-related services,today announced that LiquidPoint, its options technology business, has launched a new market data service that makes Complex Order Book data from all seven applicable options exchanges available through a single LiquidPoint API.
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Enforcement

NFA orders Pennsylvania commodity trading advisor Fidelity Planning Group to permanently withdraw from NFA membership and sanctions its principal, Terry James Dorrity
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[NFA] IKON Global Markets Inc. and Diwakar Jagannath
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Illegal activities as a dealer and distribution without prospectus – AMF charges against Frédéric Lavoie
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[BCSC] Securities regulator alleges that former broker engaged in illegal insider trading
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[BCSC] Securities regulator investigating potential breaches by Swiss-based financial institution
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ASIC: Instinet Australia Pty Limited Pays $130,000 Infringement Notice Penalty
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Environmental & Energy

Entergy Seeks To Lead On Climate Risk Mitigation
Gloria Gonzalez – Ecosystem Marketplace
Most of Louisiana’s oil and gas companies are on the defensive after a state entity sued nearly 100 of them for damages they caused by destroying protective wetlands. A handful of companies, however, have identified wetland restoration as a major goal – for their protection and the protection of the state. Here’s a look at one of the biggest. http://jlne.ws/17y4xu5
**The story notes: “In 2010, Entergy and America’s Wetland Foundation released a study that found that Gulf Coast communities could suffer more than $350 billion in economic losses over the next 20 years due to growing environmental risks.”

Many Residents in the Dark about California Carbon Cap-and-Trade, Survey Finds
Lisa Weinzimer – San Francisco Public Press
While 54 percent of state residents sampled had heard nothing about the new multibillion-dollar carbon market, 33 percent had heard a little and 12 percent a lot, the Californians and the Environment survey, which was released July 31, found.
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**JK – The conundrum for carbon markets – education, PR, marketing.

America is being left behind by energy innovators
Arnold Schwarzenegger – FT op/ed
Health, jobs and security depend on clean energy, says Arnold Schwarzenegger
In June, within the span of two days, I found myself in the seat of the European government and in the capital of an African nation that wants to lead its continent into the future. On the surface, Brussels, home of the European parliament, and Algiers, the capital of quickly growing Algeria, might not have much in common.
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PEGAS: Volumes For July 2013 – EEX Spot Market Products To Be Migrated On 28 August 2013
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Asia-Pacific

Distressed-Debt Investors Look Toward Asia
Isabella Steger – MoneyBeat – WSJ
As Asia’s economic growth sputters and banks face the prospect of rising bad debts, credit-focused hedge funds and private-equity firms are seeking opportunities to buy distressed debt.
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ADM wins Korean approval for GrainCorp deal, needs China
Reuters
Archer Daniels Midland Co (ADM.N) said on Wednesday that South Korea had cleared the grain trader’s takeover of GrainCorp Ltd (GNC.AX), leaving China and Australia as the last two countries that need to approve the deal.
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Margin trading in mainland index futures starts on Monday
The Standard
For just HK$12,000, investors will be able to bet on shares of top mainland companies from Monday. The amount is equivalent to just 6.5 percent of a single contract of the CES China 120 Index Futures worth HK$186,000, Hong Kong Exchanges and Clearing (0388) said yesterday.
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Frontier Markets

Kenya mulls minerals commodity exchange: Business and Finance
GEORGE OMONDI – africareview.com
The Kenyan government is considering setting up a futures market for minerals. Mining secretary Najib Balala has lined up establishment of minerals and metals commodity exchange among the ministry’s priorities for the next five years as it seeks to make Kenya a mining hub.
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