Industry news

August 12, 2013: Dark pool trading soars to record levels in Europe; CFTC subpoenas metals warehousing firm as inquiry heats up; U.S. Said to Plan to Arrest Pair in Big Bank Loss

Trading on dark pools hit an all-time high in July, getting a boost from lower volatility and higher high-frequency trading. As the metals warehousing inquiry expands, the CFTC sends out subpoenas to a metal warehousing firm seeking information on their dealings with the London Metal Exchange. Though the London Whale himself is said to escape prosecution, two others at JPMorgan may be arrested in connection with that bank’s oversized trading.

First Read

Kara Stein Sworn in as SEC Commissioner
The Securities and Exchange Commission today announced that Kara M. Stein was sworn into office as an SEC Commissioner this afternoon by SEC Chair Mary Jo White. Ms. Stein replaces former Commissioner Elisse Walter
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***** The SEC changeover continues.

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The real companies making Chicago’s tech scene hum
SANDRA GUY – Chicago Sun Times
Chicago’s history as a hub of trading firms and traders buying and selling options, futures, wheat and yes, in the old days, pork bellies, has morphed into a hotbed of virtually invisible, technology-focused companies that make the markets go. One of them, Spot Trading, has a history of developing its own trading technology and recently expanded its focus beyond trading listed equity options into trading stocks, futures and commodities.
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***** Hmm, a prop trading firm making news, good news.

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Analyst: We Were Wrong on NYSE-ICE Deal; It’s a Good Deal
David Benoit – MoneyBeat – WSJ
“We were wrong,” isn’t typically the headline of an analyst report. But Brad Hintz of Sanford Bernstein issued a lengthy mea-culpa on his original opinion of one of the highest-profile deals of the year: The sale of the storied New York Stock Exchange with the upstart IntercontinentalExchange
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***** I have been wrong before, too. I just cover it up better.

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CME Group announces the first Aluminum Midwest Premium contracts traded
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the first Aluminum MW U.S. Transaction Premium Platts (25MT) Futures (AUP) contracts were traded on Thursday 8 August. This trade was brokered by Jeffries Bache. Yesterday’s trade was a 54 lot strip transaction for November and December 2013 between a physical trader and a major dealer.
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***** The aluminum market is a hot topic.

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Deutsche Börse’s News Service for Traders Draws Scrutiny of Investigators
BRODY MULLINS and SCOTT PATTERSON – WSJ.com
Several times a month, the Labor Department invites news reporters to a sealed room for an early look at soon-to-be-released reports such as the unemployment rate. One organization attending in recent years stands out from the rest.
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***** Maybe you need to know and maybe you don’t.

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Hirander Misra stages a comeback with derivatives exchange group
Tim Cave – Financial News
Hirander Misra, a co-founder and former chief operating officer of trading platform Chi-X Europe, has launched a new derivatives exchange group which is in the final stages of syndicating stakes to strategic investors. Misra has teamed up with Vijay Angelo, a former co-head of fixed income at broker Vantage Capital Markets, to launch the Global Markets Exchange Group International LLP, according to a statement seen by Financial News.
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***** Hello GMEX.

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Brazil’s BM&F Bovespa Again Delays Clearinghouse Deadline
Luciana Magalhaes and Matthew Cowley – WSJ.com
Brazilian stock and options exchange BM&F Bovespa SA has again delayed plans to open up its clearinghouse to competition. “If all goes as planned, and also depending on regulatory approvals, it will be possible to allow third parties to use the clearing for derivatives from August or September 2014 and the clearing for equities for third parties from 2015,” BM&F Chief Executive Edemir Pinto said during a press conference to discuss second-quarter results.
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***** Once they get it going, it should never stop.

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NY Stock Exchange Internships For Veterans
Vivian Giang – Business Insider
High unemployment among veterans is exactly what Duncan L. Niederauer, CEO of the NYSE Euronext, wants to end. Last year, Niederauer launched the NYSE Veteran Associate Program, a 10-week paid internship program that offers veterans hands-on experience and training alongside a NYSE staff. In its sophomore year, the program has 29 vet interns from the ages of 23 to their mid-50s.
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***** We had two of the greatest vets participate in our intern education series, sent by NYSE Euronext. In fact, they were the first two to sign up.

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Russia embraces high-frequency trading
Anish Puaar – Financial News
Efforts to attract more high-speed trading to Russia are gathering pace, with the Moscow Exchange launching a number of initiatives designed to increase liquidity and open the market to international trading firms.
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***** From Russia with love to the HFT crowd.

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Lesson from NSEL fiasco: Never take risks without a buffer in place
Uma Shashikant – The Economic Times
There is the danger of too much information being made available to the common reader on the National Spot Exchange Limited ( NSEL) crisis. However, it’s difficult to let go of a live example to illustrate fundamental principles. There is no magic or mystery in finance. The premise for sustainable, stable and good quality structures in finance is actually quite simple. Without adequate capital from investors willing to take risks, it is not possible to keep the promises to other investors who expect fixed returns.
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Bridging the Week: August 5 – 9 and August 12, 2013
Gary DeWaal and Associates LLC
This week, Gary DeWaal’s Bridging the Week examines interesting and important international developments impacting the financial services industry, including: DTCC (USA) publishes an important “think piece” on systemic risks increasingly impacting industry participants; the UK FCA penalizes a senior compliance officer for not performing his job adequately; ASIC (Australia) penalizes a brokerage firm for not adequately dealing with wash trading by a client — despite having a well-regarded compliance monitoring system that flagged the relevant trades; ESMA (Europe) updates its EMIR Q&As; FINRA (USA) fines a brokerage firm for AML violations and for missing red flags
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Business Boot Camp for Commodity Trading Advisors, Chicago, September 18
Horizon Cash Management
Business Boot Camp for Commodity Trading Advisors is designed to educate and advise managed futures managers about the key ingredients necessary for building a successful asset management business. The curriculum will provide value to emerging managers, firms that want to enhance their internal processes, and businesses in need of fresh approaches to best practices. The afternoon seminar will cover top line business subjects to introduce concepts and/or serve as a good business refresher, followed by a networking reception.
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****** Do I have to shave my head?

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CFA/CDA 2013 Summer China-U.S. Futures Industry Forum
The China Futures Association (CFA) and the Chinese Derivatives Association (CDA) will host a group of senior executives from Chinese FCMs and exchanges, including China Financial Futures Exchange, Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange and the China Futures Margin Monitoring Center. The event will feature an industry update and a networking session with a group from the fastest growing segment of the global futures industry.
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***** I suggest you attend if you can.

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MarketsWiki

MarketsWiki Page of the Day
Ryan S. Lothian
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MarketsWiki Recent Updates

People

Bradley G. Griffith; Patrick Fay; Gail Osten; Adena T. Friedman

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Lead Stories

Dark pool trading soars to record levels in Europe
Anish Puaar – Financial News
European share trading taking place in anonymous, off-exchange venues known as “dark pools” reached its highest-ever level in July, amid lower volatility and a growing proliferation of high-frequency trading on the platforms.
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Exclusive: CFTC subpoenas metals warehousing firm as inquiry heats up
Reuters
The U.S. commodities market regulator has subpoenaed a metals warehousing firm, seeking all of its documents and communications related to the London Metal Exchange since January 2010, as an inquiry into complaints about inflated metals prices gathers steam.
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U.S. Said to Plan to Arrest Pair in Big Bank Loss
BEN PROTESS and JESSICA SILVER-GREENBERG – NYTimes.com
Government authorities are planning to arrest two former JPMorgan Chase employees suspected of masking the size of a multibillion-dollar trading loss, a dramatic turn in a case that tarnished the reputation of the nation’s biggest bank and spotlighted the perils of Wall Street risk-taking.
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Money Funds Embrace a Rule They Shunned
ANDREW ACKERMAN – WSJ.com
WASHINGTON—An unexpected ally is emerging in the Securities and Exchange Commission’s effort to force money-market mutual funds to abandon their signature $1 share price: banks and other money-fund sponsors that previously opposed or were wary of such a change.
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Commodity market regulator to step in if NSEL defaults
Economic Times
The commodity market regulator is preparing a course of action if the troubled bourse National Spot Exchange fails to pay up by the middle of this week as promised by it. In a report finalised over the weekend, the Forward Markets Commission (FMC) has recommended involving other government agencies to track the money if there is a default.
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FTIL, MCX shares fall as investors await NSEL settlement plan
Livemint
Shares of Financial Technologies (India) Ltd declined again on Monday, falling as much as, as investors anxiously awaited the settlement plan by its embattled unit National Spot Exchange Ltd expected by Wednesday.
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With I.P.O.’s on the Rise, Analysts Get New Scrutiny
PETER LATTMAN and SUSANNE CRAIG – NYTimes.com
The market for initial public offerings has made a comeback, surging to levels not seen since before the financial crisis. At the same time, concerns have resurfaced over the role of Wall Street research analysts in these lucrative deals.
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Keep spot exchanges in the spotlight
G. Chandrashekhar | Hindu Business Line
The NSEL imbroglio has trained attention on the working of spot exchanges and the risks associated with a lack of strict regulatory oversight. While the futures exchanges are by and large well regulated, the same cannot be said of spot exchanges. But do we need spot exchanges? Yes, we do.
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Throwing the baby out with the bathwater
Matthew Attwood – Financial News
Bankers concede that they may have lost the battle to head off the blanket imposition of a leverage ratio – a minimum 3% of total assets for all – due within five years. But they are now raising the alarm about the unintended consequences of what they regard as a blunt instrument for de-risking the world’s banks.
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Currency broker FxPro set to enter world of social trading
Vanessa Kortekaas – FT.com
Currency broker FxPro is set to become the latest investment platform to dive into the world of “social trading”, in a bid to lure investors who are immersed in Twitter and other forms of social media .
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Regulatory

Geoffrey Aronow Named Chief Counsel and Senior Policy Advisor in Office of International Affairs
The Securities and Exchange Commission today announced that Geoffrey Aronow has been named chief counsel and senior policy advisor in the Office of International Affairs (OIA).
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SEC Issues Risk Alert On Options Trading Used To Evade Short-Sale Requirements
The Securities and Exchange Commission today issued a Risk Alert to help market participants detect and prevent options trading that circumvents an SEC short-sale rule.
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Bafin Said to Finalize First Deutsche Bank Libor-Report
Bloomberg
Deutsche Bank AG may be told as soon as this month by the German financial regulator to improve its controls to prevent a repeat of attempts to manipulate benchmark interest rates, according to a person familiar with the matter.
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SLOB vs. CLOB
Streetwise Professor
I just read Haim Bodek’s “The Problem of HFT.” It reinforced my belief in what I’d long concluded, namely, that the problematic aspects of HFT result from the decision of the SEC to create a Simulacrum Limit Order Book-a SLOB-rather than a true Central Limit Order Book-a CLOB-when it promulgated RegNMS.
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Exchanges & Trading Facilities

TSX Listing Loses Luster for Gold Producer Newcrest
Rhiannon Hoyle – MoneyBeat – WSJ
Interest in gold may be dulling among North American investors, if Newcrest Mining Ltd.’s recent experience is anything to go by. Wind the clock back one year and the world’s fourth-biggest gold miner was trumpeting the virtues of a North American listing, where many of its investors are based. Now, it plans to delist from the Toronto Stock Exchange after finding the benefits were outweighed by costs it can ill-afford.
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CME Group Announces Multiple Open Interest and Volume Records in Global Crude Oil Complex
CME Group, the world’s leading and most diverse derivatives marketplace, today announced multiple open interest and volume records in its crude oil complex.
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July 2013: Lower Trading Activity – The Statistical Monthly Report Contains The Latest Trade And Turnover Figures For SIX Swiss Exchange And Scoach Switzerland Ltd.
In July 2013, the number of transactions on SIX Swiss Exchange declined by -6.7% to 2’883’010 compared to the previous month. All trading segments were affected, with Equities (incl. Funds + ETPs) recording the smallest decline with -6.2%. However, compared to the same period in the previous year, the number of transactions is 6.0% higher with a total of 20’700’401.
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NZX Dairy Derivatives – Trading Hours Change
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NYSE MKT Issues Short Interest Report
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NYSE Group Inc. Issues Short Interest Report
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NYSE Euronext Welcomes Cvent to the New York Stock Exchange as it Makes its Public Debut
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TOM MTF Statistics Week 32, 2013 – Record Volumes On TOM MTF
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Hedge Funds & Managed Futures

SAC Is Bracing for an Investor Exit
JENNY STRASBURG – WSJ.com
SAC Capital Advisors LP executives are preparing for investors to pull virtually all of what remains of the embattled hedge-fund firm’s outside capital and are discussing ways to streamline the company in light of its shrinking size, according to people familiar with the matter.
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DealBook: Fearing Loss of Capital, SAC Talks of Layoffs
New York Times
The beleaguered hedge fund SAC Capital Advisors is bracing for investors to pull virtually all of their remaining money, a humbling blow to a once-powerful firm hobbled by criminal insider trading charges.
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Citigroup Equity Derivatives Head Lord Leaves for BlackRock
Bloomberg
Rachel Lord, head of corporate equity derivatives at Citigroup Inc. , left to join BlackRock Inc. , one of the U.S. bank’s biggest clients. Lord, who joined Citigroup in 2009 after more than a decade at Morgan Stanley , will run the European arm of iShares, BlackRock’s exchange-traded funds division, the New York-based money manager said in a memo to employees today.
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Basel III compliant bonds face tough sell
Paul J Davies – FT.com
Banks in some of Asia’s biggest markets are ahead of their European peers in two important ways – they have plenty of capital and they have already implemented the Basel III bank capital rules drawn up in response to the financial crisis.
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Attribution Builds Trust with Clients and Consultants
Becca Lipman – Wall Street & Technology
eVestment, a global provider of institutional investment data intelligence and analytic solutions, announced a new attribution platform on its institutional holding database, eVestment Analytics. The attribution tool will provide deeper insight for asset managers, consultants and plan sponsors into how portfolio returns are generated.
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Look Who’s Locking Horns Over Retirement Accounts
Jason Zweig – MoneyBeat – WSJ
In the next few weeks, the way investors get advice could change forever. By law, a fiduciary—like a doctor or a lawyer—must act in the best interests of his client and seek to avoid all material conflicts of interest. Investment advisers are required to act as fiduciaries, but stockbrokers and insurance agents generally aren’t—yet.
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UPDATE 2-Norway oil fund concerned about tax evasion
Gwladys Fouche and Joachim Dagenborg | Reuters
Norway’s $760 billion oil fund, the world’s biggest investor, said on Friday tax evasion was a growing concern which it may have to address in future.
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CalPERS Announces Selection Of Enterprise Strategy And Performance Division Chief
The California Public Employees’ Retirement System (CalPERS) has named Sabrina Stroud as the Division Chief for the organization’s Enterprise Strategy and Performance Division. She will begin her new role at CalPERS on August 19, 2013.
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CFTC Commitments Of Traders Reports Update
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Banks & Brokers

Ex-Argentina central banker Blejer tipped for Israel central bank post
Reuters
A former head of Argentina’s central bank Mario Blejer has emerged as a top candidate to run the Bank of Israel after two nominees dropped out in an embarrassment to Prime Minister Benjamin Netanyahu.
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Deutsche Bank Names Asia Heads of Corporate Banking and Securities
Isabella Steger – MoneyBeat – WSJ
Deutsche Bank AG has reshuffled management of its corporate banking and securities division in the Asian-Pacific region.
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Morgan Stanley veteran aims to climb debt mountain
Dan Dunkley – Financial News
A 22-year veteran at investment bank Morgan Stanley, who last year scaled Mount Everest, is taking on a new challenge by launching a European private debt firm amid growing appetite from investors for exposure to the asset class.
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E*Trade Sends More Trades Outside Firm as Routing Is Scrutinized
JACOB BUNGE – WSJ.com
E*Trade Financial Corp. has dramatically reduced the number of customer stock orders sent to an internal trading unit, which the discount broker is trying to sell amid regulatory scrutiny of its order routing practices.
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Morgan Stanley Strategist Kitano Leaves After 3 Months
Bloomberg
Hajime Kitano, the only Japan-based equity strategist at Morgan Stanley MUFG Securities Co., left last week after just over three months on the job.
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Back From Bankruptcy: CIT And John Thain’s Stunning Turnaround
Forbes
Wall Street is a forgiving place. How else would you explain the stunning turnaround of former Merrill Lynch CEO John Thain and the once bankrupt CIT Group? Well, a healthy business helps too.
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Clearing & Settlement

CME Clearing – Performance Bond Requirements: CBOT New Agricultural Products- Effective Friday, August 9, 2013
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Indexes & Products

Warsaw Stock Exchange Announces The Composition Of The WIG30
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Technology

Orc Group Holding AB and Orc Group invite to an investor telephone conference on August 27
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Enforcement

Insider-Trading Case Highlights Ties of Friends, Family
JEAN EAGLESHAM – WSJ.com
Married in 2007, millionaires in 2012, fugitives in 2013—now, Shawn Hegedus and Danielle Laurenti sit in Mecklenburg County jail in North Carolina, awaiting federal trial. In one hot week last summer, prosecutors allege, the couple made more than $1 million from insider trading, spent most of it on 550 gold bars in midtown Manhattan and laundered $100,000 in a Las Vegas casino.
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FCA fines Guaranty Trust Bank (UK) Ltd £525,000 for failures in its anti-money laundering controls
Financial Conduct Authority
The Financial Conduct Authority (FCA) has fined Guaranty Trust Bank (UK) Ltd (GT Bank) £525,000 for failings in its anti-money laundering (AML) controls for high risk customers between May 2008 and June 2010.
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AMF cautions about Martin Boyer offerings
The Autorite des marches financiers cautions consumers about solicitations conducted on the Internet by Martin Boyer seeking investments in the stock market and promising returns of up to 1,000%.
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BCSC panel finds that B.C. man committed fraud
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ASIC successful in appeal against Storm settlement deal
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Environmental & Energy

Forrister And Bledsloe Misunderstanding The Difference Between Cap And Trade And A Carbon Tax
Forbes Contributor Network
A small point in an otherwise rather good NYT Op/Ed on the various methods of taking action about carbon emissions and climate change. Their political argument, that regulation is very much a second best solution but if Congress won’t allow anything else then, well, whaddayagonnado I have some sympathy with. However, there’s a definite economic problem with this statement of theirs:
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ETS link can only hurt us
The Australian
IN early June, the winds in the state of Denmark were still. The turbines on the nation’s wind farms were turning slowly. In the suburbs of Copenhagen and other major towns and cities, the price of Denmark’s reliance on renewable energy was exacting a heavy toll on the householders.
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Is Obama’s Own Party Waging War on Energy Plans?
By Daniel J. Graeber – Wall Street Cheat Sheet
The White House last week announced it was clearing out its in-box for liquefied natural gas export licenses by signing off on plans for a terminal in Lake Charles, La. The third such measure could lead to the delivery of as much as 2 billion cubic feet of natural gas to foreign markets for the next 20 years.
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Asia-Pacific

China dream sours for foreign companies
Tom Mitchell in Beijing – FT.com
The “Chinese dream” articulated by China’s new president, Xi Jinping, is fast becoming a nightmare for some of the world’s most powerful corporations.
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China to set up more private banks to help small firms
Reuters
China’s cabinet has unveiled plans to set up more private banks to boost financial support for cash-starved smaller firms, in the latest bid to bolster the slowing economy.
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Bond traders lash out in China
Carrie Hong | Reuters
Mr Song was so angry that a trader at China Pacific Insurance had walked away – “defaulted”, in his words – after agreeing a price for a bond trade that he turned to the internet to vent his frustration.
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Korean Companies Struggle to Gain Traction in Japan
ERIC PFANNER – NYTimes.com
Brandishing a new Sony Xperia as she left a mobile phone shop in a trendy part of Tokyo, Nisako Hanawa, a 17-year-old student, explained that she had chosen that brand “because of its cool design and its good reputation.”
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Frontier Markets

CTT wipes out non-agri business in agri centric exchanges
Business Standard
The levy of commodity transaction tax (CTT) has almost wiped out trading business in non-agri segment on agri centric derivatives exchanges. While weak sentiment pulled down overall business across all exchanges, non-agri segment suffered sharper than agri commodities in terms of turnover in July this year.
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Emerging World Loses Lead in Economic Growth
WSJ.com
Momentum in the global economy is shifting to the developed world, away from the emerging economies that had led growth since the financial crisis.
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