Industry news

August 21, 2013: HKEx offers LME CEO job to Triland Metals executive Martin Pratt; Eurex to Enter Currency Market With Derivatives; Goldman faces losses on erroneous trades

Hong Kong Exchanges offers the job of London Metal Exchange CEO to… somebody that nobody seemed to expect. Eurex Exchange announces plans to start new FX trading products. Goldman Sachs floods options markets with unintended orders, and now the cleanup process begins.

First Read

ICE could shake up London sugar with container delivery
Reuters
The new owners of London-listed white sugar futures may breathe fresh life into the contract by offering container delivery, catching up with a growing trend in the industry. The Intercontinental Exchange (ICE), which already owns a U.S.-listed raw sugar contract, is setting up a committee to review the less liquid London-listed contract, part of its purchase of NYSE Euronext for $8.2 billion.
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***** I always loved those straws of sugar in London. They know sugar containers.

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SEC Deals With Turnover at the Top
JEAN EAGLESHAM – WSJ.com
Mary Jo White is the Securities and Exchange Commission‘s third boss in nine months. And it is even harder to keep up with the rest of the turnover near the top of the nation’s securities-law enforcer.
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***** Regulatory change causes turnover at key regulators. It is the nature of the beast.

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NYSE builds business around resilient infrastructure services
Joab Jackson – PC Advisor
After the terrorist strikes of Sept. 11, 2001, the New York Stock Exchange (NYSE) learned some valuable lessons in keeping a time-sensitive financial trading network alive during a time of crisis.
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***** Yes they have.

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This is Why the CoLo Business is Lucrative for Exchanges
Ivy Schmerken – Wall Street & Technology
Even with a fall-off in trading volumes, offering colocation (CoLo) services to Wall Street banks, high frequency trading firms and market makers is still a top revenue generator for major stock exchanges operating their own data centers.
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***** Exchanges offer CoLo because they are participating in the capture of the bid offer spread by charging high prices for access. It is no different from when members had to buy a membership in order to get the same kind of information in the pit. The manner in which the exchange profits has changed, but not the basic economics. The more trading, the more spread to be captured, the greater the exchanges can charge for colocation services.

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Intern death leads to calls for shake-up of City bank culture
Daniel Schäfer, Sharlene Goff and Alastair Hewet in London – FT.com
Banks in the City of London are facing calls to overhaul the working culture for younger staff following the death of a 21-year-old intern at Bank of America. Moritz Erhardt, an intern at Bank of America Merrill Lynch in London, was found dead last week in the shower of his temporary residence in east London, it emerged yesterday.
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***** This is a sad and unnecessary outcome. Interns should not be made to work 100 hours. This is just plain stupid.

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Damned if you do…
Philip McBride Johnson – FOW
As a 75-year-old with a semi-literate degree in financial markets, I have never seen anything quite like it. For most of my adult life, good economic news meant strong stock and bond markets. Today, the opposite seems true.
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***** No disrespect to my friend Mr. McBride Johnson, but he must not have been paying attention to the market enough. This happens all the time.

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A Timeline of the Evolving Compliance Landscape: New Regulations That Will Affect Broker Dealers
Firm58
As part of its commitment to avoiding another financial crisis, the SEC is demanding that broker dealers make new investments in trading surveillance. To do that, the SEC and FINRA are tacking on new requirements that will push broker dealers to add new compliance tools to their repertoires.
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***** Compliance is Firm 58’s big issue.

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Order Up! More Happy Meals for the Stuffed Investor
MoneyBeat – WSJ
Tuesday, The Wall Street Journal introduced readers to what’s known as the Happy Meal offering. It’s a maneuver some cash-strapped companies turn to when they are having trouble selling bonds. To make the bonds more appetizing to hedge funds, the companies offer to lend million of shares to the hedge funds to short. If the company does well the bonds are convertible into stock and if the company performs poorly, the fund now has the tools for betting against the company. That got MoneyBeat thinking: What other investment pairings could we make out of tasty treat names?
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***** Chocolate Bond Bonds?

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More candidates for “Best Trading Movie”
Larry Schneider – VP, Exchange Analytics (and former CME member)
(Regarding Jay Sorkin’s “The Top Ten Movies About the Markets”, published last Friday on the JLN blog)

Great list but you left off Limit Up, a movie where a floor clerk sells her soul to the devil for the secret at trading soybean futures; and Up the Sandbox, starring a very young Barbra Streisand, who has to learn to trade pork belly futures in order to make enough $$ to pay off the loans her husband owes a loan shark. And though a TV show, not a movie, I’d include the episode from TAXI, where Louie DePalma becomes a stockbroker.
(via email)

***** Personally, I would have added “The Good, The Bad and the Ugly.”

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MarketsWiki

MarketsWiki Page of the Day
Dr. James A. Overdahl
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MarketsWiki Recent Updates

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R. Scott Parsons; Steffen Gemuenden; Dr. James A. Overdahl; Mary Ellen Scanlin; Ray Carmichael; Stanley Adelman

Companies, Organizations and Groups

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Lead Stories

HKEx offers LME CEO job to Triland Metals executive Martin Pratt – sources
Reuters
Hong Kong Exchanges and Clearing Ltd has offered the job of London Metal Exchange chief executive to Martin Pratt, two sources familiar with the matter said, picking a veteran broker to lead the bourse through the most tumultuous period in its 136-year history.
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Eurex to Enter Currency Market With Derivatives
Nandini Sukumar – Bloomberg
Eurex will enter the foreign-exchange market for the first time as Europe’s largest derivatives exchange seeks to expand into an asset class dominated by its American rival CME Group Inc.
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Goldman faces losses on erroneous trades
Arash Massoudi and Tracy Alloway in New York and Neil Munshi in Chicago – FT.com
A computer glitch at Goldman Sachs could cost the investment bank $100m or more after it inadvertently made a large number of erroneous options trades on Tuesday that disrupted trading across multiple US exchanges, market participants told the Financial Times.
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NYSE Said to Choose JPMorgan, SocGen for Euronext IPO
Nandini Sukumar & Ruth David – Bloomberg
NYSE Euronext, the bourse operator being acquired by IntercontinentalExchange Group Inc., has tapped JPMorgan Chase & Co. and Societe Generale SA (GLE) to help arrange the initial public offering of its European equity operations, four people with knowledge of the matter said.
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On Wall Street, a Reversal of Fortune
CHRISTIAN BERTHELSEN AND TATYANA SHUMSKY – WSJ.com
Aluminum deliveries into warehouses run by big banks and trading firms have plunged this summer, highlighting Wall Street’s retreat from the once-lucrative commodities business amid stagnant markets, new rules and regulatory scrutiny.
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NSEL’s first installment 48% short of pay-out target
Business Standard
The first installment of scheduled pay-out at the crisis – ridden National Spot Exchange Ltd (NSEL) faced around 48 per cent deficit in pay-in by borrowers with the exchange received only Rs 92.12 crore until Tuesday evening.
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NSEL sacks MD, six others after payment default
Business Standard
The board of National Spot Exchange Ltd (NSEL) removed seven top officials, including CEO & MD Anjani Sinha and CFO Shashidhar Kotian, for failing to repay investors on the first day of payout. The exchange was able to raise only Rs 92.73 crore — just about 53 per cent of the Rs 174. 72 crore committed.
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The new man at NSEL
Business Standard
P R Ramesh, set to take the reins at the National Spot Exchange (NSEL) as an Officer on Special Duty, is an old hand from the Securities and Exchange Board of India (Sebi), having worked in various roles spanning surveillance, demutualisation of exchanges and corporate finance for over a decade.
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Long battle awaits NSEL investors
Business Standard
The National Spot Exchange has been able to pay only half of the money due to its investors — only Rs 92.73 crore of the Rs 174.72 crore committed in the first tranche. While NSEL Investors’ Forum has plans of considering the legal route and may file a suit against the exchange and its promoters, legally there are many options available for the anxious investors who have their money stuck in this mess.
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Giant NSEL payment blues hamper FT
Business Standard
As trouble brewed at Financial Technologies-promoted National Spot Exchange Limited, the FT stock came under pressure, falling from Rs 730 in mid-July to recent lows of Rs 105.45.
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Regulatory

Jane Jarcho Named Head of SEC’s Investment Adviser/Investment Company Examination Program
The Securities and Exchange Commission today announced that Jane E. Jarcho has been named as the National Associate Director of the Investment Adviser/Investment Company examination program in the Office of Compliance Inspections and Examinations (OCIE).
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The S.E.C.’s Tougher Stance
WILLIAM ALDEN – NYTimes.com
The Securities and Exchange Commission has signaled that it was now taking a harder line on securities settlements, as it extracted its first admission of wrongdoing under a new policy, DealBook’s Alexandra Stevenson reports.
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ISDA Outlines Approach On Cross-Border Issues:Principles Address Inter-Jurisdictional Recognition Of Derivatives Regulation
The International Swaps and Derivatives Association, Inc. (ISDA) today announced that it has outlined a set of principles designed to help achieve the widely held goal of a more harmonized framework of international derivatives regulations.
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ESMA Publishes Opinion On Draft Regulatory Technical Standards On Types Of AIFMs
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ASIC Guidance On Rules For ASX 24
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ASIC Publishes Sixth Market Supervision Report
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Exchanges & Trading Facilities

Volumes grow on NYSE’s retail service
Anish Puaar – Financial News
NYSE Euronext’s US retail initiative, a service that was previously described as raising “novel market structure issues” by the Securities and Exchange Commission, has traded almost two billion shares since its launch just over a year ago.
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Exchanges prosper against merger backdrop
Tim Cave – Financial News
The reputation of most investment banks may be tarnished as they lurch from one scandal to the next, but for the world’s largest stock exchanges these are halcyon days.
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TMX Quantum XA Implementation On TMX Select Complete
TMX Group today announced the successful implementation of its new high performance trading engine, TMX Quantum XA, on TMX Select. The final group of symbols commenced trading on the new technology at the opening of the market yesterday, completing the phased migration.
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Moscow Exchange Successfully Finishes Consolidating Trading Platforms
Moscow Exchange has successfully finished consolidating its Securities, FX, and Derivatives Markets’ trading platforms within a single technological venue, namely the M1 data center in Moscow. The move was part of the exchange”s technological infrastructure development strategy.
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Moscow Exchange: Updated Admission Rules And Certain Trading Rules Provisions To Take Effect
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Hedge Funds & Managed Futures

FXCM Eyes Stake in Infinium
JACOB BUNGE – WSJ.com
Currency brokerage FXCM Inc. is in talks to invest in Infinium Capital Management LLC, a struggling high-frequency trading firm, people close to the discussions said.
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Family comes first for risk-averse fund managers
Reuters
Investors seeking less volatile returns from their stock portfolios are turning their attention to family-owned firms that play for pride as well as profit.
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KKR Bets On Open Waters With New Maritime Financing Unit
Forbes
Private equity giant KKR sees big opportunity in the maritime industry, and it’s launching a new financing business to capitalize on its growth.
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Banks & Brokers

Goldman Sachs says exchanges working to resolve options trading issue
Reuters
Goldman Sachs said on Tuesday the U.S. stock exchanges are working to resolve an issue in options trading, which resulted in a review of a number of potentially erroneous options trades at the start of trading.
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Banks’ physical commodity trading comes under scrutiny
Alexander Osipovich – Risk.net
Amid a review of a 2003 determination by the Federal Reserve, the involvement of US banks in physical commodities has come under fire from regulators, politicians and the media. Could they really be forced to exit physical trading?
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Lloyds Strengthens Capital Base With Sale of Assets
Peter Evans – MoneyBeat – WSJ
Lloyds Banking Group PLC Wednesday said it agreed to sell more than 500 million pounds ($861 million) of assets in two separate cut-price deals, part of the 39%-government-owned bank’s strategy of selling off international assets to strengthen its capital base.
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JPMorgan close to picking two new directors: source
Reuters
JPMorgan Chase & Co is close to naming two new directors with finance and risk management expertise to its board, a source close to the matter said, as the largest U.S. bank faces a new wave of regulatory scrutiny.
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J.P. Morgan Hires UBS’s Senior Prime Broker in Asia
Isabella Steger – MoneyBeat – WSJ
J.P. Morgan Chase & Co. has named a new head of prime brokerage account management for Asia Pacific, as investment banks jostle to win business in the region’s growing hedge-fund industry.
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As Japanese Rivals Expand Abroad, Korean Lenders Fight It Out at Home
Kanga Kong – MoneyBeat – WSJ
Hana Financial Group Inc., one of South Korea’s four largest banking groups, clinched U.S. approval last week to buy a majority stake in New York-based BNB Financial Services Corp.
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Many Wall St. Banks Woo Children of Chinese Leaders
DAVID BARBOZA – NYTimes.com
For more than a decade, Wall Street’s biggest banks have hired the sons and daughters of senior Chinese government officials in the hopes that they can open doors and secure deals in the world’s fastest-growing major economy.
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This is Why Merrill Lynch is Overhauling Their Platforms
Becca Lipman – Wall Street & Technology
Merrill Lynch is consolidating the plethora of programs that have sustained their adviser accounts into one organized platform. Despite some controversy, analysts seem excited for change.
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Sage Trader Hires 2 Sales-Traders From EDF&Man
Ivy Schmerken – Wall Street & Technology
SageTrader LLC, a San Francisco-based broker-dealer, has hired a New York-based sales team formerly with ED&F Man Capital Markets, to expand into the mid-sized proprietary trading and hedge fund market.
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Banking on broking clients
Richard Partington – Financial News
For corporate brokers, getting the right mix of clients is something that can split opinion. Some say large companies offer the promise of large fees. Others say medium-sized clients offer long-term loyalty.
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Clearing & Settlement

Over 600,000 Trades Submitted for Clearing via MarkitSERV Following CFTC Mandate Markit
Markit, a leading global financial information services company, today announced that more than 600,000 trades have been submitted to clearinghouses by MarkitSERV in the period between March 11, when the Commodity Futures Trading Commission made clearing of certain over-the-counter (OTC) derivatives mandatory, and the end of July. MarkitSERV is the most widely-used trade processing service for OTC derivatives.
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ISDA 2013 EMIR Portfolio Reconciliation, Dispute Resolution And Disclosure Standard Amendment Agreement
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CMEGroup – NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (PAO, PO) Effective Wednesday, August 21, 2013
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Indexes & Products

TSE to Begin Calculating TOPIX Net Total Return Index
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EMEA Leads The Way In Stellar Month For FTSE Mondo Visione Exchanges Index
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Technology

Bandwidth Selects Delta Stream for Real Time Business Intelligence and Network Quality Alerts
First Derivatives, the leading provider of software and consulting services to the capital markets industry, announces that its Delta Stream product will be used by Bandwidth, a fast growing and innovative communications technology providers in the US, to fulfill real time systems monitoring requirements.
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Otkritie Adds Second London Presence, Beckoning Global HFT
Timothy Bourgaize Murray – WatersTechnology
The new connection at Equinix’s LD4 datacenter, located in Slough, offers closer proximity to colocated servers of over 80 exchange and trading platforms across 30 European markets. Otkritie will also soon claim the lowest latency connection between Moscow and London, at 38.35 milliseconds.
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BCS Bows Low-Latency Moscow-London Connectivity
Max Bowie – WatersTechnology
BCS Prime Brokerage, the UK-based arm of Russian trading firm BCS Financial Group, has rolled out a new fiber network route between Moscow and London, to enable BCS clients in each location to obtain data and trade on exchanges in the other market center with roundtrip latency of 39 milliseconds.
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Enforcement

SEC Charges Former Oppenheimer Private Equity Fund Manager with Misleading Investors about Valuation and Performance
The Securities and Exchange Commission today charged a former portfolio manager at Oppenheimer & Co. with misleading investors about the valuation and performance of a fund consisting of other private equity funds.
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Alleged kingpin of U.S. penny stock fraud arrested in Thailand
Reuters
Authorities in Thailand have arrested a Canadian man accused of masterminding a $140 million plan to defraud investors in U.S. penny stocks, as well as another man who allegedly ran the scheme, federal prosecutors in New York said on Tuesday.
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JPMorgan Said to Face Justice Department Probe of Energy Trading
Bloomberg
JPMorgan Chase & Co. faces a Justice Department probe of its energy-trading practices after the bank settled a regulator’s market-manipulation complaint last month, a person with direct knowledge of the matter said.
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U.S. judge OKs Citigroup $730 mln bondholder settlement
Reuters
A federal judge has approved a settlement in which Citigroup Inc agreed to pay bondholders $730 million to resolve claims that the bank concealed its exposure to billions of dollars of toxic mortgage assets prior to the financial crisis.
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Sebi busts SMS scam; warns against unsolicited investment tips
Business Standard
Using its newly-granted powers to access call data records and conduct surprise visits, capital markets watchdog Sebi has unearthed a large-scale SMS scam wherein fraudsters were luring gullible investors with promise of daily returns of up to Rs 75,000 through mobile messages.
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ASIC removes mortgage broker from industry
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Sydney businessman convicted on ASIC charges
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[ASIC] Former Wealthsure financial adviser pleads guilty to criminal charges
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Environmental & Energy

Analysis: Foes of Obama climate policy prepare battle over cost of carbon
Reuters
Three months ago, the Obama administration made a little-noticed but potentially pivotal move in the stepped-up fight against climate change: it boosted the U.S. government’s official estimate of the future economic damage caused by carbon pollution.
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Coal Foe Named to FERC Is Latest Obama Pick Drawing Ire
Bloomberg
President Barack Obama’s nominee to head a little-known energy commission has become the latest appointee drawn into the contentious debate over climate change.
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Federal report supports carbon pricing
PostMedia News
Canada supports putting a price on carbon emissions as part of a global climate change strategy, say newly released records prepared at the highest levels of the federal government.
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Asia-Pacific

New Chinese Agency to Increase Financial Coordination
New York Times
The move is an apparent attempt to reduce risk and wean the economy off of easy credit and steer it toward slower, more sustainable expansion.
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Investigators Peter Humphrey, Yu Yingzeng Arrested
China Digital Times
Fraud investigators Peter Humphrey, a British citizen, and his wife Yu Yingzheng, a naturalized American citizen, have been formally arrested after being detained for six weeks.
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Thai Bourse Shortens IPO Schedule To Speed Up Listing Process
The Stock Exchange of Thailand (SET) will shorten the initial public offering (IPO) time frame to enable IPO shares to trade on the exchange within three working days after the subscription date ends, down from the previous four working days, to reduce risks for stockholders, effective from September 9.
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SGX Proposes Board Changes
The Board of Singapore Exchange (SGX) is pleased to announce the proposed appointment of Mr Ng Kok Song as an independent director of SGX.
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Everbright Securities bungles bond trading after stock error
The Asset
Everbright Securities (EBS) says in a filing to the Shanghai Stock Exchange that one of its traders mistakenly sold 10 million yuan (US$1.63 million) of government bonds with a yield of 4.20% in the interbank market on August 19. The yield was 25bp higher than similar bonds at Friday’s close.
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Everbright shares tank after trading blunders
CNN Money
China Everbright Securities shares tumbled 10% Tuesday as investors punished the company for executing fat-finger trading errors on back-to-back days.
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SGX Annual Report 2013 Is Published!
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HKFE Announces Revised Margins For PetroChina Futures
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Frontier Markets

Rocky Road Predicted For Egypt’s Stock Exchange
NPR
The Egyptian Exchange was shut down at the end of last week as protests and violence raged in Cairo and elsewhere. It re-opened on Sunday, but trading hours were shortened to give employees more time to get home before curfew. Many foreign investors reportedly pulled out of the exchange earlier this year.
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RBI allows non-bank Islamic finance firm
Business Standard
The Reserve Bank of India (RBI) has allowed a firm in Kerala to operate as a non-banking financial company (NBFC) that follows Islamic principles – a small step towards developing sharia-compliant finance in the country.
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FCM360 Expands in Johannesburg with South Africa Based SI Futures
PR Newswire
NEW YORK, Aug. 20 2013 /PRNewswire/ — FCM360 and SI Futures, a leader in South Africa’s financial technology marketplace, have aligned to provide high-speed, low-latency trading connectivity to Africa’s fastest growing financial services market, Johannesburg, SA.
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Semi Annual Disclosure 2013: Net Profit After Tax Of Listed Companies On The Palestine Exchange (PEX) Is 120 Million USD
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