Industry news

August 22, 2013: SEC scrutinises Goldman’s trading failure; ICE hires banks to advise on flotation of NYSE’s Euronext; NASDAQ OMX to separate exchange and clearing operations

The SEC is looking to Goldman Sachs’ recent bad-trade incident to help formulate a broader response to that type of issue. IntercontinentalExchange picks three banks to help it offload the Euronext part of NYSE Euronext as part of the exchange merger. Nasdaq OMX preps to split up its exchange and clearing operations in its Stockholm unit, in order to comply with EU regulations.

First Read

Eurex to Offer Ruble Derivatives With Moscow Exchange
Bloomberg
Eurex will begin offering Russian currency derivatives with the Moscow Exchange, a day after announcing plans to enter the foreign-exchange market for the first time.
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***** Why are Russians more polite than Italians? Because they don’t lira.

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Fund brands matter but returns are key
Sarah Krouse – Financial News
A strong fund management brand helps boost inflows when performance is strong, but will not stem outflows when returns suffer, according to new research.
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***** Brand matters until it does not.

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Towards a lower-octane commodities business
Jon Macaskill – Euromoney magazine
The end of the commodities super-cycle of rising prices is being accompanied by a series of humiliating reverses for some of the biggest bank traders in the energy and metals markets. These banks might struggle to retreat to a sustainable, client-based commodities business model, given over-ambitious former revenue targets, the over-sized egos of some of the main players involved, and the extent to which they have alienated customers and regulators.
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***** Are you saying some traders are arrogant? I am shocked!

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Lance Zinman, Katten Muchin Rosenman, SEC Hedge Fund Marketing Rule
MarketsWiki.tv

Lance Zinman is a law partner at Katten Muchin Rosenman and head of the firm’s Chicago financial services practice. He regularly advises hedge funds, commodity pools, commodity trading advisors and proprietary trading firms on compliance and regulatory matters. He sat down with John Lothian News Editor-at-Large Doug Ashburn to discuss the SEC rule on private fund solicitation, released July 10, 2013. In the interview, Zinman cuts through the misinformation and explains the key points of the rules. He also explains how the 506 exemption may not be claimed by anyone with a “disqualifying event” and other limitations. He also highlights a few areas in which the rule is unclear or needs to be harmonized with other regulators such as the CFTC. According to Zinman, it remains to be seen whether this rule will truly usher in a new wave of marketing on behalf of hedge funds and other private funds.

Watch the video »

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The Climb And Slide Of Ambitious Indian Entrepreneur, Jignesh Shah
Forbes
The story of the phenomenal rise of National Spot Exchange Limited promoter Jignesh Shah is rapidly turning into a tale of an ignominious descent. Shah’s decade-and-a-half old empire built with enormous entrepreneurial grit has started to crumble.
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***** Unless you have a firm foundation, you will ultimately crumble.

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Moore Capital settles platinum, palladium lawsuit for $48.4 mln
Reuters
Louis Bacon‘s Moore Capital Management has agreed to pay $48.4 million to settle a class-action lawsuit asserting that the hedge fund manipulated platinum and palladium prices, the plaintiff’s lead attorney said on Wednesday.
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***** Here is a story for the tin hat crowd, except it was not a big name bank acting for a government that was manipulating the market. And it was the platinum and palladium markets, not gold or silver. Don’t worry, they will extrapolate to make their story work in their heads.

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H.K. Mercantile Exchange ‘Victim’ of False Papers, Cheung Says
Eleni Himaras – Bloomberg
Barry Cheung, the chairman and largest shareholder of Hong Kong’s failed commodities exchange that is being investigated by police, said it had received false financial documents. “We have been victims in all of this,” Cheung said by phone today. “We were provided with documents we did not know were false.”
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***** Round up the usual suspects.

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‘Sea turtles’ who swim out again
Alicia Clegg – FT.com
When foreign investment took off in China in the 1980s, Dinggui Gao enrolled locally for an MBA. If this impressed his neighbours, however, it was possibly because they were fans of American basketball rather than of US management programmes. “Hardly anyone in China had heard of the MBA, but the NBA was very popular,” he recalls. “A Chinese newspaper even ran advertising explaining that they had nothing to do with each other.”
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***** This may be a case for the BBA, or the CBA, or maybe even the TVA.

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Amid Equities Rebound, European Dark Trading Hits New Heights
Rebecca Healey – TabbFORUM
The long-only investor has returned to European equities and, as a result, so has the volume of European equities executed in the dark. After a continued decline since 2009, institutional market activity increased from 18.55% of European notional turnover in 2012 to 20.93% in the first half of 2013.
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***** The surf is up in dark pools.

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Americans don’t know anything about interest rates and portfolios
The Reformed Broker
Shocking but not shocking survey sponsored by Edward Jones asks Americans about the impact of interest rates on their investments and retirement portfolios: According to a recent survey by financial services firm Edward Jones, 63 percent of Americans don’t know how rising interest rates will impact investment portfolios such as 401(k)s, IRAs and other savings platforms. In fact, a full 24 percent say they feel completely in the dark about the potential effects.
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***** Duh. Interest rates have been going down for more than a generation, or two. And when they are flat and low, do you really care? That is a problem.

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Orc and Blue Trading Systems Enhance Trading Opportunities
Orc’s partnership with Blue Trading Systems is designed to leverage Orc’s expertise in the electronic options markets with Blue Trading System’s experience in floor markets. The combined solution uses Orc’s API’s to integrate BlueTrade’s tablet system with Orc’s electronic options platform. Please watch our webinar to see how the joint solution works, what both the floor and screen traders will see during their trading activity and how our partnership will enhance your trading opportunities.
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***** Floor markets? What are floor markets?

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Goldman Gratuity Rankles Hoyt Scolding Newspersons: Compliance
Joseph Cotterill | FT Alphaville
Editors Seen Quaking After Ex-NYT Ombudsman Assail Blankfein To Stiletto Hugging Headlines Client-Data Collateral Damage:
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***JM: Ok, good, so it’s not just me who can’t understand headlines…

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JPMorgan Chase Not Akin to Nazis, Report Finds
SUSANNE CRAIG – NYTimes.com
An outside review of Bloomberg L.P.’s practices found that a controversial article that compared the damage in an Italian town after a bad deal with JPMorgan Chase to the fallout from the Nazis’ occupation in World War II went “too far.”
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***** Some stories you just can’t make up, or analogies, unless of course you are Bloomberg. Then you stick to your guns even when slapped in the face with a trout.

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Another financial movie vote
John Nelson – Applied Research
(Regarding Jay Sorkin’s “The Top Ten Movies About the Markets”, published last Friday on the JLN blog)

If you are keeping a list … I always like this movie: Rollover. It didn’t get very good reviews, but I think that’s because the finance was too complex for the general public.

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MarketsWiki

MarketsWiki Page of the Day
Infinium Capital Management, LLC
jlne.ws/16x3blC

MarketsWiki Recent Updates

People

Drew Shields; Kurt Oeler; R. Scott Parsons

Companies, Organizations and Groups

Infinium Capital Management, LLC; Forex Capital Markets; Eurex; Delta Strategy Group; U.S. Futures Exchange

Statistics

43,015,657 pages viewed, 7,628 articles, 163,582 edits
MarketsWiki Statistics

Lead Stories

SEC scrutinises Goldman’s trading failure
Arash Massoudi, Kara Scannell and Tracy Alloway in New York – FT.com
US regulators and enforcement officials are scrutinising the systems malfunction at Goldman Sachs as part of a broad response to the latest high-profile trading failure to damage investor confidence, say people familiar with the matter.
jlne.ws/13Tm8M6

ICE hires banks to advise on flotation of NYSE’s Euronext: sources
Reuters
IntercontinentalExchange has hired three banks to advise on the listing of Euronext, whose sale is crucial to its $8.2 billion takeover of NYSE Euronext, three sources familiar with the situation said.
jlne.ws/13Tm7bh

NASDAQ OMX to separate exchange and clearing operations
Automated Trader
NASDAQ OMX has announced a new operating structure for the local entity in Stockholm, Sweden, as a part of the continued compliance with key EU regulation EMIR.
jlne.ws/13Tm8M9

China vets brokerages’ computer systems after $3.8 billion buy error
Reuters
China’s more than 110 brokerages will come under government scrutiny after Everbright Securities mistakenly made 23.4 billion yuan ($3.82 billion) of buy orders, collectively the biggest erroneous trade in Chinese stock market history.
jlne.ws/13Tm8Mb

U.S. options exchanges wrap up review of errant options trades
Reuters
U.S. options exchanges on Wednesday wrapped up their review of a flood of erroneous options trades that roiled the market the previous day, and were linked to a computer trading glitch at Goldman Sachs Group. But it remained unclear how many trades were being canceled.
jlne.ws/13Tm7rD

[NSEL] Proceed with auction of collateral: FMC
Business Standard
A day after raising doubts on the reliability of the commitment given by the crisis-ridden National Spot Exchange Ltd (NSEL), the Forward Markets Commission (FMC) on Wednesday directed the former to commence auctioning of realisable assets of defaulters on its platform.
jlne.ws/13Tm7rG

NSEL auditor in the dock over stock positions
Business Standard
An association of brokers led by Motilal Oswal and Anand Rathi is planning to take the auditors of National Spot Exchange Ltd (NSEL) to court for providing an incorrect picture of the exchange’s stocks. It would also lodge a complaint with The Institute of Chartered Accountants of India.
jlne.ws/13Tm7rK

NSEL default: Spot exchange regulation issue remains
Business Standard
The crisis of payment settlement at National Spot Exchange Ltd (NSEL) is likely to persist till the question of which entity is to regulate such exchanges isn’t clear.
jlne.ws/13Tm7rM

Long battle awaits NSEL investors
Business Standard
The National Spot Exchange (NSEL) has been able to pay only half the money due to investors in its first payout on Tuesday. While NSEL Investors’ Forum is considering taking the legal route and may file a suit against the exchange and its promoters, there are many legal options available for anxious investors stuck in this mess.
jlne.ws/13Tm7I0

BJP smells big scam in NSEL, seeks high-level probe
Business Line
The Opposition Bharatiya Janata Party is making every effort to draw political mileage from the National Spot Exchange Ltd (NSEL) “scam.” The party had raised the issue in the Rajya Sabha and had alleged that one Central Minister was also involved in the multi-crore scam. The party is now considering legal measures to counter the Centre on the issue.
jlne.ws/13Tm8Md

Short sellers suffer worst losses in a decade
Juliet Chung and Rob Barry – MarketWatch
Short sellers are facing their worst losses in at least a decade, a Wall Street Journal analysis has found, as many of the rising stocks they bet against have only continued to soar. That has stung several high-profile hedge-fund managers, including William Ackman and David Einhorn, who have placed prominent short bets.
jlne.ws/1d57FoP

Justice Department planning new action against financial firms-report
Reuters
U.S. Attorney General Eric Holder is preparing to announce new cases related to the economic meltdown in the coming months as the Justice Department nears decisions on a number of probes involving large financial firms, the Wall Street Journal reported.
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Regulatory

SEC Is Set to Propose New Rule on CEO Pay
ANDREW ACKERMAN – WSJ.com
The Securities and Exchange Commission will soon thrust CEO compensation back into the spotlight when it proposes a long-delayed rule requiring companies to disclose the pay gap between chief executives and rank-and-file employees.
jlne.ws/13Tm7I6

Isda principles reignite cross-border swaps concerns
Anish Puaar – Financial News
The International Swaps and Derivatives Association has laid out key principles global regulators should follow to establish consistency across new swaps rules, demonstrating there is still a need for greater coordination despite last month’s political agreement between the US and Europe.
jlne.ws/13Tm8Mm

FCA Board appoints new members to the Regulatory Decisions Committee
Financial Conduct Authority
The Regulatory Decisions Committee (RDC) is responsible for taking decisions on whether to refuse or grant contested applications into the regulated community and issuing warning and decision notices for certain enforcement cases on behalf of the FCA.
jlne.ws/13Tm7I9

Online FATCA registration system launched
Alistair M. Nevius, J.D. – Journal of Accountancy
The IRS on Monday announced the launch of an online system that foreign financial institutions can use to register with the agency to meet their obligations under the Foreign Account Tax Compliance Act. The system allows institutions that must register with the IRS to create an account and provide the required information.
jlne.ws/13Tm92A

Exchanges & Trading Facilities

Derivatives top agenda for ASX chief
Michelle Price in Hong Kong – Financial News
The chief executive of the Australian Securities Exchange has said the company will focus on expanding its derivatives business over the next 12 months, as regulatory efforts to overhaul the global swaps market gather pace in Asia Pacific.
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SIX Swiss Exchange: Training Document For Traders Updated
SIX Swiss Exchange has updated the preparation documentation for the trader examination to reflect the most important new changes.
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MIAX Options Exchange Equity Rights Program
The Exchange anticipates implementing an equity rights program pursuant to which units representing the right to acquire equity in the Exchange’s parent holding company, Miami International Holdings would be issued to a participating Member in exchange for a cash payment and the achievement of certain volume thresholds on the Exchange over a 23 month period.
jlne.ws/13Tm7If

Moscow Exchange And Eurex To Cooperate On FX Trading
Press Release
jlne.ws/13Tm7Ih

New York Stock Exchange Announces Revised Date of Review of Decision to Remove Verso Paper Corp. From the List
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ASX Limited Full-Year Result To 30 June 2013
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TSX Markets Top 20 Largest Consolidated Short Position Report – August 15, 2013
jlne.ws/13Tm92P

Hedge Funds & Managed Futures

Millennium duo plans record $1.4 billion Asia hedge fund – sources
Reuters via Yahoo! News
By Nishant Kumar HONG KONG – Two top executives of Millennium Management LLC are preparing to start a $1.4 billion hedge fund in Asia, people familiar with the matter told Reuters, in what would be the region’s largest such fund launch.
jlne.ws/13Tm92R

Hedge Funds Severely Underperforming This Year
Steven Russolillo – MoneyBeat – WSJ
It’s been a great year for the stock market. It’s been a tough year for a hedge-fund manager. A typical hedge fund has risen 4%, on average, this year through Aug. 9, according to an analysis conducted by Goldman SachsGS -1.54%. That performance compares to a 20% total return (including dividends) for the S&P 500 over the same time frame, meaning the market has outperformed an average hedge fund by five times this year.
jlne.ws/13Tm7YB

SALT’s Scaramucci Raises Fund-of-Hedge-Funds Assets, Asian Bets
Bloomberg
SkyBridge Capital LLC, organizer of the biggest U.S. hedge-fund event, raised its assets by 24 percent to $8.3 billion and allocated more money to Asian managers ahead of its second conference in the region.
jlne.ws/13Tm9j8

BlackRock taps Aviva for new property fund manager
Sarah Krouse – Financial News
BlackRock has hired a portfolio manager from rival Aviva Investors to manage its new long lease property fund, as the world’s largest fund manager continues to bolster its property business.
jlne.ws/13Tm7YC

Hedge fund inflows resume in July
Harriet Agnew – Financial News
Hedge fund inflows resumed in July after a blip in June, according to data provider EurekaHedge.
jlne.ws/13Tm9jb

Blackstone to sell London office stake to GIC – report
Reuters via Yahoo! Finance
LONDON – Singapore’s sovereign wealth fund GIC is in exclusive talks to buy Blackstone Group’s stake in the Broadgate office and retail complex in London for 1.7 billion pounds, Britain’s Times newspaper said.
jlne.ws/13Tm7YD

New Credit Suisse Hedge Fund Index Commentary Offers Insight into July Hedge Fund Performance
jlne.ws/13Tm9jf

Bramson steps down from F&C
Sarah Krouse – Financial News
Edward Bramson, who staged a management takeover of F&C Asset Management in 2011 with his activist investment company Sherborne Investors, is stepping down from his role as chairman of the asset manager with immediate effect, the firm said on Thursday.
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Minutes Of The Federal Open Market Committee, July 30-31, 2013
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Banks & Brokers

Goldman assessing fallout from options trading glitch
Reuters
Goldman Sachs Group Inc is assessing the financial damage caused by a trading glitch that led to a flood of erroneous options trades, as U.S. regulators began looking into what caused the problem.
jlne.ws/13Tm7YH

Wells Fargo to cut 2,300 mortgage jobs as refinancing slows
Reuters
Wells Fargo & Co, the largest mortgage lender in the United States, will cut 2,300 jobs in its home loan business because fewer customers are refinancing as interest rates rise, according to an internal memo reviewed by Reuters.
jlne.ws/13Tm9jo

U.K. Banks Face More Compensation Claims
WSJ.com
U.K. regulators Thursday said that more than a dozen banks and credit-card issuers may have to pay out a total of £1.3 billion ($2.04 billion) to compensate customers wrongfully sold credit-card and identity-theft insurance, the latest allegation of improper selling to hit the British finance industry.
jlne.ws/13Tm9jp

Sants continues compliance hiring spree
Giles Turner – Financial News
Recent regulatory focus has zeroed in on capital raising at UK bank Barclays, but behind the scenes chief of compliance Sir Hector Sants has quietly been building his empire.
jlne.ws/13Tm9zC

Clearing & Settlement

ConvergEx Group Expands Institutional Clearing Business with Four Senior Hires
ConvergEx Group, a leading provider of global brokerage and trading-related services, today announced that it is significantly expanding its institutional clearing business. As a first phase of growing the business, ConvergEx has recently completed the build out of its Equities Finance desk.
jlne.ws/13Tm7YI

Technology

Quantifi Powers Price-Spread Calculator for ICE Credit Futures
Quantifi, a leading provider of analytics, trading and risk management solutions for the global OTC markets, today announced the launch of an industry price-spread calculator for credit index futures listed on ICE Futures U.S., which is a subsidiary of IntercontinentalExchange, a leading operator of global markets and clearing houses.
jlne.ws/13Tm7YK

Xignite Adds FTSE Data to Index Platform
WatersTechnology
jlne.ws/13Tm9zG

Why Is Goldman Sachs Having Trading Glitches?
Phil Albinus – Wall Street & Technology
Even an investment powerhouse that is awash in cash, smart people, and presumed state-of-the-art IT can experience a spectacular trading error. But why are they even happening?
jlne.ws/1844IgY

Enforcement

CFTC Seeks to Revoke Registration of Chicago Trading Managers LLC
The U.S. Commodity Futures Trading Commission (CFTC) today filed a Notice of Intent (Notice) to revoke the registration of Chicago Trading Managers LLC (CT Managers). CT Managers is currently registered with the CFTC as a Commodity Pool Operator and Commodity Trading Advisor.
jlne.ws/1d2tMwX

CFTC Seeks to Revoke the Commodity Pool Operator and Commodity Trading Advisor Registrations of Veruus Wealth Management, LLC
The U.S. Commodity Futures Trading Commission (CFTC) today filed a Notice of Intent (Notice) to revoke the registrations of Veruus Wealth Management, LLC (Veruus), a registered Commodity Pool Operator and Commodity Trading Advisor.
jlne.ws/13RzOY9

SEC Charges North Carolina-Based Investment Adviser for Misleading Fund Board About Algorithmic Trading Ability
The Securities and Exchange Commission today announced charges against a North Carolina-based investment adviser and its former owner for misleading an investment fund’s board of directors about the firm’s ability to conduct algorithmic currency trading so they would approve the firm’s contract to manage the fund.
jlne.ws/13Tm9zL

UK’s Serious Fraud Office liaising with U.S. on ‘London Whale’ case
Reuters
Britain’s Serious Fraud Office is liaising with U.S. counterparts in their investigation into the scandal linked to a trader dubbed the “London Whale” that cost JPMorgan Chase & Co $6.2 billion last year, the government department said on Wednesday.
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FINRA Smoking Out Marijuana Stock Scams
Law.com
Just say no: That’s what the Financial Industry Regulatory Authority is advising potential investors in a new warning about a medical marijuana stock scam.
jlne.ws/13Tm8f7

Environmental & Energy

China grid says half of $100 bln high-voltage network under way
Reuters
China is already building, or has approved, more than half of a $100 billion network of high-voltage power lines to connect remote energy producing regions to the east coast, a top official at the state grid firm told Reuters.
jlne.ws/1dvoAzy

Wind Turbine Makers Poised for Return to Profitability
Bloomberg
Wind-turbine makers are poised to make their first profit in years after shutting underused factories and abandoning a drive for growth at all costs.
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**RKB — The exception, below?

Vestas Replaces CEO With Runevad as Losses Widen
Bloomberg
Vestas Wind Systems A/S (VWS), the Danish turbine maker that’s been unprofitable for two years, replaced its chief executive officer after a worse-than-expected loss.
jlne.ws/175JYZ7

Asia-Pacific

Singapore bank expands Indonesian links to Jakarta
Jeremy Grant – FT.com
United Overseas Bank, one of Singapore’s three largest banks by assets, on Wednesday unveiled a new “advisory unit” in Jakarta as part of plans to double its lending to companies wanting to enter Indonesia for the first time.
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Philippines Reopens For First Day Since Emerging Market Selloff
Mia Lamar – MoneyBeat – WSJ
Investors itchy to trade in the Philippines will get their first chance this week Thursday after severe floods and a public holiday closed markets there, allowing stocks to sidestep the emerging markets rout that sent Indonesian shares sliding 9% in two days and Thai stocks notching their biggest one-day drop in months.
jlne.ws/13Tm8fa

TSE Announces “Looking at Companies through the “Empowerment of Women” “
For the third round of theme issues, we have selected companies under the theme of “Empowerment of Women,” teaming up with the Ministry of Economy, Trade and Industry, which has been pursuing policies to promote the utilization of female human resources in order to revitalize the Japanese economy.
jlne.ws/13Tm8fb

Frontier Markets

Turkey: Too Little, Too Late
Emre Peker – MoneyBeat – WSJ
The dust has settled on Turkey’s surprise decision to raise lending rates Tuesday. In a nutshell, the market’s response is: meh.
jlne.ws/13Tm8ff

Business trickles back to Gulf dealmakers
Dominic O’Neill – Euromoney magazine
Along with Dubai’s property rebound, Gulf stock indices – which have outperformed other emerging markets this year – suggest a gradual uptick in confidence in the Middle East’s investment banking industry. According to Dealogic, in the 12 months ending July 2013, Middle East investment banking revenue (excluding Israel) was higher than in both of the two previous 12-month periods.
jlne.ws/13Tm8fj

[India] Now, AMCs to keep an eye on foreign MF distributors
Business Standard
Foreign distributors of mutual funds (MFs) will now be monitored by asset management companies (AMCs) engaging them. According to a circular issued by the Association of Mutual Funds in India (Amfi), AMCs will now be responsible for the compliance of foreign distributors, in the absence of an Amfi registration.
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Miscellaneous

THE ECONOMIST LAUNCHES CAMPAIGN THAT WILL TAKE OVER EIGHT CITIES ACROSS THE US
The Economist announced today the launch of its latest advertising campaign, which is part of its marketing strategy to drive brand awareness in the United States. This campaign will be in market in Chicago from August 19th through September 30th and will then take over major metropolitan US cities including Boston, Philadelphia, Denver, Atlanta, Austin, Minneapolis, and Seattle.
jlne.ws/13Tm9Q9

Bloomberg puts in place new trader info safeguards
AP
Financial data and news company Bloomberg LP said Wednesday that has put in place new policies and procedures designed to prevent its journalists from accessing the subscriber information of its Wall Street clients.
jlne.ws/13Tm8vy

Venable Adds Former Investment Management and Tech Industry General Counsel Michael R. Manley as Partner in New York Office
Adding an experienced corporate and securities lawyer to its New York office, Venable LLP announced that Michael R. Manley, a veteran general counsel serving investment management firms and operating companies, had joined the firm as a partner.
jlne.ws/13Tm9Qc