Industry news

August 19, 2013: Warsaw to take 30pct stake in Aquis Exchange; SEC approves ICE’s planned takeover of NYSE; Public Funds Take Control of Assets, Dodging Wall Street

The Warsaw Stock Exchange steps up to take a significant ownership stake in the new Aquis Exchange. The SEC gives a thumbs-up to the ICE-NYSE merger; at least, for the parts over which it has jurisdiction. Pension funds around the world consider how to manage their money on their own instead of working with private equity funds. Maybe all they need is a good discount brokerage account?

First Read

CME under fire over cash for trades in Brent
Ajay Makan in London and Gregory Meyer in New York – FT.com
The biggest US futures exchange’s campaign to break into North Sea oil has been marked by unusual trading patterns as computerised firms engineer ways to exploit a cash-for-volume scheme, according to market participants. CME Group has promised a pot of as much as $1m a month to the biggest traders in its upstart Nymex Brent crude futures contract, a June filing shows, as it attempts to wrest market share from ICE Futures Europe, the exchange that launched Brent in 1988.
jlne.ws/17DFirJ

***** The pay for marketmakers for new contracts seems to be getting better.

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Exchanges return to their SME roots
Anna Irrera – Financial News
Europe’s leading stock exchanges are returning to their roots. The London Stock Exchange Group, NYSE Euronext and the Icap-owned ISDX Exchange are among a number of markets that have launched new segments or initiatives to help small and medium-sized companies raise finance in the past year.
jlne.ws/17DFirL

***** The competition from crowdsourcing is something to watch.

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Hedge funds need to tackle insider trading perception
Risk.net
No one likes being fooled, being seen as a fool, thought to have been foolish. But that is exactly what most hedge fund managers are, or at least according to economic theory, a ‘greater fool’: the idea that it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone – a bigger or greater fool – who is willing to pay the higher price.
jlne.ws/17DFkQo

***** If you are playing a game and don’t know who the patsy is, you are the patsy.

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Bridging the Week: August 12-16 and 19, 2013
Gary DeWaal and Associates LLC
This week, Bridging the Week reviews “Lessons Learned” from enforcement actions brought against two former JPMorgan traders as well as: the CFTC, FINRA and the SEC provide guidance for business continuity plans after surveying financial intermediaries’ response to Superstorm Sandy; IOSCO and CPSS seek advice on recovery plans for financial market intermediaries such as clearing houses and trade repositories; the CFTC issues final risk management standards for systemically important designated clearing organizations; ASIC announces new high frequency trading guidance effective February 2014
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***** No obscure dentistry references from me this week.

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Chicago Mercantile Exchange Amends Electronic Audit Trail Requirements
Katten Muchin Rosenman LLP
The Chicago Mercantile Exchange issued a market regulation advisory relating to electronic audit trail requirements for orders entered into the Globex platform through the CME iLink gateway.
jlne.ws/17DFiI3

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Despite Drop in Commodity Prices, Farmland Values Rise
PAUL SULLIVAN – NYTimes.com
DAN LINDSTROM remembers looking at a piece of Nebraska farmland six or seven years ago that cost $3,300 an acre. Raised on a farm, he ran the numbers with his brother who is farming the family land and concluded that it was too expensive. He figured that with a 2 to 3 percent return, it made more sense to put the money into a dividend-paying stock and have his brother lease additional land. A few weeks ago, Mr. Lindstrom said similar land sold for nearly $11,000 an acre.
jlne.ws/17DFiI5

***** It is hard to buy the breakouts in something like farmland.

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Kickstarter and the wisdom of crowdfunders
Gillian Tett – FT.com
People who donate to Kickstarter are affirming their values, identity and sense of community
jlne.ws/17DFiI6

***** This is an interesting story.

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Steer Clear of Investing Apps
Steven Russolillo – MoneyBeat – WSJ
Paying bills or playing Angry Birds on your phone? Both are fine ways to utilize a mobile device. But investing from your smartphone? That’s another story.
jlne.ws/17DFiI7

***** I have only banked from my phone, not traded.

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Wanna Be an Entrepreneur? Skip the Ivy League
MoneyBeat – WSJ
The rising mountain of student debt is forcing some to abandon startup dreams. Over at Accelerators, Vivek Wadhwa, vice president of academics and innovation at Singularity University, offers up some simple advice: If you want to be entrepreneur, don’t apply to elite, expensive colleges.
jlne.ws/17DFiI8

***** Risk and reward. If you have the ability to take more risk, you can get greater reward. If you have a bunch of student debt, you are less likely and able to take risk.

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Study Shows Men With Beards Can Look Up To 8 Years Older
Huffington Post
Bradley Cooper, Ryan Gosling and other celebrities who have recently sported facial hair may want to rethink their decision. A new survey finds that men with beards look as much as eight years older than those who are clean shaven, according to a report in the Daily Mail.
jlne.ws/17DFiI9

***** The gray in my beard hardly makes me look 8 years older. I feel more like 10 years older.

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MarketsWiki.tv

Richard Bornhoft, founder of the Bornhoft Group, discusses what he looks for in CTAs
MarketsWiki.tv

Richard Bornhoft is founder, president and CIO at Bornhoft Group and has specialized in the creation and oversight of CTA-managed futures portfolios for more than 30 years. He sat down with JLN editor-in-chief Jim Kharouf to talk about the managed futures space, the opportunities in the space and the challenges that are still facing the industry.

Watch the video »

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Lead Stories

Warsaw to take 30pct stake in Aquis Exchange
Philip Stafford – FT.com
The Warsaw Stock Exchange confirmed on Monday it will take a 30 per cent stake in Aquis Exchange, a new European trading venue, in a deal that values the start-up at just over £18m.
jlne.ws/17DFl6F

SEC approves ICE’s planned takeover of NYSE
Reuters
The Securities and Exchange Commission has approved the takeover of NYSE Euronext by IntercontinentalExchange, according to a regulatory filing made available on the regulator’s website early on Friday.
jlne.ws/17DFiIe

Public Funds Take Control of Assets, Dodging Wall Street
NATHANIEL POPPER – NYTimes.com
Investors responsible for more than $2 trillion recently gathered at a resort in the Canadian Rockies, far from the news media and, more important, far from Wall Street. Those in attendance, including leaders of Abu Dhabi’s sovereign wealth fund and France’s pension system, were there to consider ways to put their money to work together without paying fees to private equity firms and hedge funds.
jlne.ws/17DFl6H

Rich Ricci considers investment in new UK exchange
Tim Cave – Financial News
Rich Ricci, a former chief executive of Barclays’ corporate and investment bank and once right-hand man of the UK lender’s chief executive Bob Diamond, is in talks to take a minority stake in a new London trading platform, Financial News has learnt.
jlne.ws/17DFiIh

Computer error blamed in Everbright trading mishap
Josh Noble in Hong Kong – FT.com
A computer system malfunction, rather than human error, has been identified as the cause of Friday’s trading problems at Everbright Securities that caused a flash rally in the Shanghai equity market.
jlne.ws/17DFl6I

Hiring in China by JPMorgan Under Scrutiny
JESSICA SILVER-GREENBERG, BEN PROTESS and DAVID BARBOZA – NYTimes.com
Federal authorities have opened a bribery investigation into whether JPMorgan Chase hired the children of powerful Chinese officials to help the bank win lucrative business in the booming nation, according to a confidential United States government document.
jlne.ws/17DFiYx

FMC okays NSEL settlement plan; doubts account books
Indian Express
Commodity markets regulator Forward Markets Commission (FMC) has for the time being approved National Spot Exchange Ltd’s (NSEL)plan to settle Rs 5,600 crore in dues. The regulator has also ordered the appointment of a forensic auditor as it has “serious doubt” over the credibility of accounts and information given by the exchange.
jlne.ws/17DFl6M

NSEL confident of settling dues ahead of schedule
Business Standard
National Spot Exchange Ltd (NSEL) is confident of settling the Rs 5,600-crore dues to investors earlier than the 30-week schedule it had declared last week.
jlne.ws/17DFl6O

MCX says no exposure to crisis-hit NSEL, stock surges 5%
Business Standard
Shares of Multi Commodity Exchange of India Limited (MCX) is locked in upper circuit of 5% at Rs 255 on BSE, in otherwise weak market; after the company said it has no exposure to crisis-hit National Spot Exchange Limited (NSEL), which had to settle dues worth Rs 5,600 crore to investors after it suspended trading.
jlne.ws/17DFiYy

Jignesh Shah, Massey also “concerned” about quality, quantity of NSEL stocks
Business Standard
Two directors of the beleaguered National Spot Exchange (NSEL) expressed their concerns about the quantity and quality of the stocks lying in the exchange’s warehouses to the commodities market regulator Forward Markets Commission (FMC).
jlne.ws/17DFl6U

Greek privatisation chief dismissed over holiday flight
Reuters
Greece dismissed the chairman of its privatisation agency on Sunday after a newspaper exposed how he used the private plane of a businessman who had just bought a state company to go on holiday.
jlne.ws/17DFiYA

Warehouse upheaval to pile pressure on aluminium smelters
Reuters
Proposed rule changes for industrial metals warehouses and increased scrutiny by regulators are likely to unleash stored aluminium, adding to the global surplus and forcing more smelters to shut.
jlne.ws/17DFl6W

Philippines Shuts Financial Markets, Offices Amid Floods
Cecilia Yap & Joel Guinto – Bloomberg
Three people were killed and three are missing after heavy rains flooded the Philippine capital and nearby provinces, shutting financial markets, schools and government offices.
jlne.ws/17DFlna

Ben Bernanke’s Huge Gift to Taxpayers
Rick Newman | The Exchange
Critics of the Federal Reserve often accuse it of printing money. What they may not realize is that the Fed has been printing profits, too.
jlne.ws/14QkPE0

Regulatory

Obama to meet with financial regulators on Wall Street reform law
Reuters
President Barack Obama will sit down with the leading U.S. financial market regulators on Monday to discuss their progress in implementing the 2010 Wall Street reform law, the White House said on Sunday.
jlne.ws/17DFiYJ

New City watchdog bares its teeth
Tim Cave – Financial News
The value of fines handed out last month by the UK’s new Financial Conduct Authority exceeded the penalties imposed over the first three months of its existence, as its ramps up a tougher approach to policing the markets.
jlne.ws/17DFlnb

Regulators refocus on risk data fundamentals
Risk.net
For too long, regulators have issued complex rules while seemingly oblivious to the fact that banks will struggle to comply, argues David Rowe. A new initiative around effective risk data aggregation and reporting represents an overdue focus on the fundamentals
jlne.ws/17DFlnd

Regulators Issue Joint Staff Review of Firms’ Business Continuity and Disaster Recovery Planning
The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight today joined the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in issuing a staff advisory on business continuity and disaster recovery planning.
jlne.ws/17DFiYK

Myners calls for action over ETP ‘stability risk’
Joe McGrath – Financial News
Former City minister Lord Paul Myners has urged the Financial Conduct Authority to do more to protect financial stability, which he believes could be at risk from the way exchange-traded products track illiquid assets.
jlne.ws/17DFiYL

ASIC consults on a proposed replacement of the Training Register
jlne.ws/17DFlni

[Japan] FSA publishes Weekly Review No.59
jlne.ws/17DFiYP

Exchanges & Trading Facilities

Direct Edge Offers Advice to Brazil’s CVM on Launching Competitive Exchanges
Ivy Schmerken – Wall Street & Technology
Electronic stock exchange operator Direct Edge sent a letter to Brazilian regulators offering advice and analysis on opening their market to competition between trading platforms. The 21-page letter was written in response to Brazil’s regulator Comissao de Valores Mobiliiarios’s (CVM’s) request for comments, suggestions and opinions regarding the transition to allowing competition between multiple trading platforms.
jlne.ws/17DFlnl

SIX Swiss Exchange introduces Sponsored Access
Today, SIX Swiss Exchange launched Sponsored Access, providing the global trading community with an additional connectivity option to benefit from the world’s fastest and most advanced trading technology. Sponsored Access offers a new way to enjoy a direct, low-latency connection to the highly liquid and efficient marketplace for Swiss and international securities.
jlne.ws/17DFjf5

TOM keeps up pressure on Liffe
Anish Puaar – Financial News
The Order Machine, a Netherlands-based options trading venue part owned by Nasdaq OMX, has maintained its market share in Dutch index options, despite a legal challenge from NYSE Euronext.
jlne.ws/17DFlnq

NZX doubles profit after bumper year
AAP
NZX, the market operator, doubled first-half profit as it benefited from new listings, a surge in trading activity and fees for running market operations.
jlne.ws/17DFjf6

NZX Half Year 2013 Results
Press Release
jlne.ws/17DFjf8

CME cuts margins for agricultural products
jlne.ws/17DFlDH

TOM MTF Statistics Week 33 2013
jlne.ws/17DFjfe

[CBOE] Trader E-News
jlne.ws/17DFlDK

Hedge Funds & Managed Futures

Newedge’s Commodity Indices Positive in July though CTAs Continue to Struggle
The Newedge Commodity Trading Index and its sub-components posted strong returns in July. The top year-to-date performer remains the Newedge Commodity Trading Index (Equity), which led all indexes with a 2.12% return in July and is up 13.48% over the seven month period.
jlne.ws/17DFjfj

Buyside staffing levels break through pre-crisis peak
Sophie Baker – Financial News
Headcount across the UK asset management industry has broken through pre-crisis levels.
jlne.ws/17DFlDM

Investors advance into multi-asset funds
Sarah Krouse – Financial News
Multi-strategy funds topped the wish list of investors in June with E1.6 billion pouring into the sector, according to data provider Morningstar.
jlne.ws/17DFjvA

Brazilian Fund, Under Fire, Has a Defender
VINOD SREEHARSHA – NYTimes.com
GP Investments, one of Latin America’s largest private equity funds, has come under fire over its executives’ compensation while its stock price languishes, but the fund is receiving some support from Wall Street.
jlne.ws/17DFlDQ

Corporate Bond E-trading Market Grows Slowly But Surely
Becca Lipman – Wall Street & Technology
A recent report by McKinsey & Co. and Greenwich Associates concluded the market is not ready for electronic trading of fixed income. Michael Chuang, CEO and founder of iTB Holdings, a company that continues to add clients to their fixed income electronic trading platform, would disagree.
jlne.ws/17DFjvC

Cohen Said to Refuse SAC Client Push to Return Cash Early
Katherine Burton & Saijel Kishan – Bloomberg
Steven Cohen’s $14 billion SAC Capital Advisors LP, which last month was indicted by the government as a “veritable magnet for market cheaters,” has refused clients’ requests that the firm speed up payouts on the billions of dollars earmarked for withdrawals, according to three people familiar with the discussions.
jlne.ws/17DFjvF

An SAC Loyalist Weighs the Cost
JULIET CHUNG and JENNY STRASBURG – WSJ.com
The criminal indictment of SAC Capital Advisors LP in late July caused even more investors to flee the embattled hedge-fund firm. And then there is Ed Butowsky.
jlne.ws/17DFlDV

Horlick’s Rockpool in the red
Mike Foster – Financial News
Nicola Horlick’s Rockpool Investments has suffered a net loss of £1.3 million in its first trading period between October 2011 and March 2013.
jlne.ws/17DFlDW

CFTC Commitments Of Traders Reports Update
jlne.ws/17DFlDY

Banks & Brokers

Goldman seeks to lure other banks to bond trading platform
Tracy Alloway in New York – FT.com
Goldman Sachs has been trying to recruit other banks to its electronic bond trading platform, in a move which highlights some of the tentative industry efforts under way to boost liquidity in the $9.1tn market for corporate debt.
jlne.ws/17DFjvL

UBS wealth managers shift focus from secrecy to returns
James Shotter in Zürich – FT.com
Since Sergio Ermotti, UBSchief executive, launched a radical overhaul of the Swiss lender’s strategy last autumn, the reshaping of its investment banking arm has been firmly in the spotlight.
jlne.ws/17DFlUe

Merrill Lynch…in Name Only
Shayndi Raice – MoneyBeat – WSJ
Bank of America Corp. could merge its Merrill Lynch & Co. subsidiary into the parent company as early as the fourth quarter of the year, according to a regulatory filing.
jlne.ws/17DFjvR

Peter Pao Joins BGC Hong Kong As Director, Greater China
BGC Partners, Inc., a leading global brokerage company servicing the wholesale financial and real estate markets, today announced the appointment of Peter Pao as Director, Greater China. Mr. Pao, who brings more than thirty years of broking experience and capital markets expertise, joins BGC Hong Kong to manage its business across Greater China and to pursue regional business opportunities.
jlne.ws/17DFjMa

Regulator probes Deutsche Bank over money laundering controls: report
Reuters
German regulator BaFin is looking into whether Deutsche Bank should improve the controls it has in place against money laundering, a German paper reported.
jlne.ws/17DFlUl

UBS Promotes Chris Hagstrom to Oversee Prime Brokerage in U.S.
Bloomberg
UBS AG , Switzerland’s largest bank, named Chris Hagstrom to a newly created role as head of prime brokerage for the U.S., overseeing services for hedge funds.
jlne.ws/17DFjMe

Clearing & Settlement

NASDAQ OMX Clearing Becomes Second Largest IRS Clearing House In Europe
NASDAQ OMX announces that the total cleared volume of SEK denominated interest rate swaps has reached SEK 100 billion, equal to E12 billion, making NASDAQ OMX Clearing the second largest IRS clearing house in Europe. Clearing of SEK IRS was introduced in 2012 and members began submitting interbank trades on April 22, 2013.
jlne.ws/17DFjMf

Clearing house failure could imperil buyside assets
Michelle Price – Financial News
Buyside firms could be liable for losses in the event a clearing house fails, according to a proposal outlined by a key regulatory body last week.
jlne.ws/17DFjMj

Technology

Pershing Chooses Valdi for Connectivity
WatersTechnology
Pershing, a BNY Mellon subsidiary, has selected SunGard to provide market connectivity to its newest broker-dealer in Canada.
jlne.ws/17DFlUq

Enforcement

Swiss lawyer pleads guilty in U.S. tax evasion case
Reuters
A Swiss lawyer accused of helping U.S. clients conceal millions of dollars in offshore accounts pleaded guilty to conspiracy to commit tax fraud in federal court in New York on Friday.
jlne.ws/17DFjMm

Virginia’s first lady held stock in company in probes -report
Reuters
The first lady of Virginia bought and held Star Scientific stock when she and her husband Governor Robert McDonnell were promoting the nutritional supplements maker, the Washington Post reported on Saturday.
jlne.ws/17DFmHK

Damages sought for Libor fixing
Madison Marriage – FT.com
Investors including PGGM and AP7 – two of Europe’s biggest pension funds – are examining how to pursue legal claims against banks accused of having manipulated the London Interbank Offered Rate.
jlne.ws/17DFlUu

Environmental & Energy

Energy firms find Emir thresholds too close for comfort
Stella Farrington – Risk.net
The European Market Infrastructure Regulation will force non-financial counterparties to clear trades in over-the-counter derivatives once they reach a set of notional thresholds. And despite their original expectations, many energy companies could be closer than they think.
jlne.ws/17DFmaI

Asia-Pacific

China Everbright Securities slapped with restrictions after trading fluke
Reuters
China has slapped restrictions on the number of new stock index futures positions that Everbright Securities can build after a glitch in the brokerage’s systems caused a brief spike in the country’s stock indexes last week.
jlne.ws/17DFmHL

Layoffs Taboo, Japan Workers Are Sent to the Boredom Room
HIROKO TABUCHI – NYTimes.com
Shusaku Tani is employed at the Sony plant here, but he doesn’t really work. For more than two years, he has come to a small room, taken a seat and then passed the time reading newspapers, browsing the Web and poring over engineering textbooks from his college days. He files a report on his activities at the end of each day.
jlne.ws/17DFmaL

China wants fewer curbs in free trade zones to lure foreign investment
Reuters
China hopes to suspend its laws governing foreign investment in proposed free trade zones, the cabinet said, in a sign the world’s second-biggest economy could open further to foreign competition.
jlne.ws/17DFmaM

SGX Consults Public On Reduced Board Lot Size
Singapore Exchange (SGX) is consulting the public on its proposal to reduce the standard board lot size of securities listed on SGX from 1,000 to 100 units, with a view to reducing it to 1 unit in the longer term. The reduction of the board lot size to 100 units as a first step will allow SGX to assess the market impact before unitising the standard board lot.
jlne.ws/17DFmaP

Lai Sun Garment Names Former Goldman Sachs China Banker as CEO
Isabella Steger – MoneyBeat – WSJ
Hong Kong conglomerate Lai Sun Garment (International) Ltd. has appointed a former managing director and head of China mergers and acquisitions of Goldman Sachs Group Inc. as its chief executive.
jlne.ws/17DFmHR

Thai Listed Firms Report THB 410 Bln Net Profits In H1/2013 – First-Half Net Profits Of Listed Companies Up 18 Pct Y-O-Y
jlne.ws/17DFmaR

Frontier Markets

First Islamic financial services firm launched
Business Standard
Kerala industries minister P K Kunjalikkutty announced the launch of Cheraman Financial Services Ltd (CFSL), first Islamic financial services company in the country.
jlne.ws/17DFmHX

Investec Australia to Cut More Jobs
Gillian Tan – MoneyBeat – WSJ
South African bank Investec Ltd. is cutting 30 back-office staff in Australia, resulting in around 50 job losses after its decision to shut its Australian resources arm last week.
jlne.ws/17DFmaV

AFRICA INVESTMENT: London, New York, Hong Kong and … Nairobi?
Reuters
When Kenyan infrastructure firm TransCentury wanted to issue a $75 million corporate bond, it was forced to look to the Indian Ocean island of Mauritius, Africa’s leading offshore financial centre some 3,000 km (1,900 miles) away.
jlne.ws/17DFmHZ

Malawi’s First Commodity Exchange Delivered by InterContinental Systems’s Technology Solutions
InterContinental Systems is pleased to announce that AHL Commodities Exchange Ltd. has successfully started live operations in Malawi using exchange technology provided by ICS.
jlne.ws/17DFmaW

Abu Dhabi Securities Exchange Achieves 98.5% In Disclosure Compliance
jlne.ws/17DFmI0

Joint Press Release From The Egyptian Exchange (EGX) & The Egyptian Financial Supervisory Authority (EFSA)
jlne.ws/17DFmb0