Industry news
Date: Oct 7, 2013
October 7, 2013: Eurex forced to delay forex derivatives launch; LME heeds calls for more transparency; BME on track to launch equities clearing house in 2015
Without a green light for its settlement system’s readiness, Eurex has to delay the start of their new forex trading system. The London Metal Exchange hears calls for greater transparency and decides to begin publishing position information for major players. Spanish stock exchange BME is on track to start its derivatives clearinghouse in 2015.
First Read
Jeffrey Maron of MarkitSERV Talks Plumbing: How SEF Reporting Infrastructure Works
MarketsWiki.tv
With the official launch of swap execution facilities (SEFs) on October 2, a new trading structure for OTC products is underway. Today, with almost 20 SEFs operational or in the works, the question for many market participants is how will all the trading and reporting work? JLN editor-in-chief Jim Kharouf sat down with Jeffrey Maron, managing director, product management for MarkitSERV, to talk about the reporting aspect of these swaps transactions.
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Four Potential Candidates for CFTC Chairman
Michael R. Crittenden, Scott Patterson and Jamila Trindle – MoneyBeat – WSJ
After nearly five years on the job, Commodity Futures Trading Commission Chairman Gary Gensler plans to leave the agency by the end of the year. The question now is who will be his replacement. Here’s a look at a list of possible successors:
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**JK – WSJ’s final four includes the master of FIA Law & Compliance opening ceremonies, Ron Filler. So why not include the most qualified man in retirement, Gary DeWaal?
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US regulators threaten new repo rules
Tracy Alloway and Michael Mackenzie in New York – FT.com
US regulators have threatened to introduce new reforms of one of the banks’ main funding markets, if the industry cannot find ways to reduce the risk of future ‘fire sales’ of assets.
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**DA: And if that doesn’t work, the industry may be sent to its room without any supper.
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FINRA mulls insurance for brokerage firms: WSJ
Reuters
The U.S. Financial Industry Regulatory Authority may require brokerage firms to carry insurance to cover the payment of arbitration awards to investors, the Wall Street Journal reported on Saturday.
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**JK – Will AIG be the underwriter?
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Warehousing to new supply – it’s LME week
Martin Sandbu and Jack Farchy – FT.com
Steel yourselves (and your livers): it’s that time of year again. LME week, the largest annual gathering of the metals industry, kicks off Monday in London. Here’s what we are expecting.
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**JK – Expect a long queue to get yourselves out.
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A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall
Yalman Onaran – Bloomberg
Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
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**JK – Armageddon the movie starred Bruce Willis, Ben Affleck and Liv Tyler. We get Harry Reid, John Boehner and Nancy Pelosi.
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In the weeds on the rocky road to an electronic OTC market
Allan D Grody – FOW
The system to electronically identify, trade and clear swaps has been designed by the CFTC, albeit in “consultation” with the industry’s many constituent and competing self-interests. In summary, it is an attempt at designing an automated market that bridges the mechanisms of interoperability of the fragmented infrastructure of the equity market with the vertical silo structure of the listed futures markets.
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Patrick L Young’s view on future trends for financial markets
Cinnober
We’re grateful to Patrick L. Young for his exclusive in-depth interview at the Cinnober head office about some of the hot topics in the financial industry. In the first of three videos from this interview, Patrick shares his view on where the financial markets will be in five years and how the exchange industry will be affected.
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**JK – Patrick Young talks about the wonders of Bitcoin, social impact bonds and other ideas.
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Corporate & Financial Weekly, Oct. 4, 2013
Katten Muchin Rosenman
This week’s edition contains a Finra proposed rule on ATS reporting, an SEC FAQ on Broker-Dealer Compliance, a CFTC staff FAQ on commodity options, and a slew of no-action letters concerning swap execution facilities.
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Gary DeWaal’s Bridging the Week: September 30 to October 4, and October 7, 2013 (Compliance Officers, SEFs and AIF Reporting)
In a week punctuated by the beginning of trading on Swap Execution Facilities and the simultaneous shut down of the US Commodity Futures Trading Commission, other important developments occurred internationally and in the US relevant to all financial service participants.
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Shares of Tweeter (Not Twitter) Halted
Steven Russolillo – MoneyBeat – WSJ
At 12:42 p.m. Eastern time, Finra halted trading in Tweeter Home Entertainment, having determined that “an extraordinary event has occurred or is ongoing that has had a material effect on the market for the” security, according to a notice posted on its otcbb.com website.
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***JM: Laugh, but by trading this I paid off a lot of losses from when I bought Fatesbook last year (which turned out to be an online tarot reading company).
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MarketsWiki.tv
ISDA’s Robert Pickel Discusses the Future of Financial Benchmarks (Part 2)
MarketsWiki.tv
Robert Pickel is the CEO of the International Swaps and Derivatives Association (ISDA). Since joining ISDA in 1997, Pickel has worked to promote and advocate for OTC market participants and work with international regulatory bodies to harmonize regulation across jurisdictions. Pickel spoke with John Lothian News editor-at-large Doug Ashburn about the future of LIBOR and other financial benchmarks, possible alternatives to LIBOR, and how ISDA will work with regulators to smooth out and harmonize benchmarking standards.
Watch Part 2 » | Watch Part 1»
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Lead Stories
Eurex forced to delay forex derivatives launch
Philip Stafford – FT.com
Eurex, Europe’s largest derivatives exchange, postponed plans to begin foreign exchange trading on Monday as the settlement systems used to finalise investors’ trades were not ready. The exchange, owned by Deutsche Börse, was due to launch trading in six popular foreign currency pairs today.
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LME heeds calls for more transparency
Jack Farchy in London – FT.com
The London Metal Exchange is set to start publishing information about the futures positions of hedge funds and other traders in response to calls for greater transparency.
jlne.ws/GIt4Hn
BME on track to launch equities clearing house in 2015
Anish Puaar – Financial News
Bolsas y Mercados Españoles is on track to establish its first equities clearing house by 2015, which is likely to reduce clearing costs and could help the Spanish stock exchange group claw back market share from Europe’s alternative venues.
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Europe’s high-speed traders hit by slump
Tim Cave – Financial News
Profits across many of Europe’s largest high-frequency traders slumped by nearly a half last year as they struggled with an industry-wide fall in volumes and regulatory attempts to curb high-speed trading.
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Gensler Assesses U.S. Swap Rules’ Debut by Phone Amid Shutdown
Silla Brush & Robert Schmidt – Bloomberg
Gary Gensler spent much of the past month fending off Wall Street’s campaign to slow the move to electronic swaps trading. So when the platforms went live last week, the top U.S. derivatives regulator wasn’t going to let a government shutdown stop him from monitoring its progress.
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MF Global Customers Seek Closure With Final Payments
Julie Steinberg – MoneyBeat – WSJ
It’s been a long two years for former customers of MF Global Inc., the brokerage unit of MF Global Holdings Ltd. The trustee, James Giddens, filed an allocation motion this week to recover the rest of the money, this time for all customers. The motion needs to be approved by a judge, and a hearing on the matter has been called for as soon as Oct. 31.
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U.S. hedge funds investing heavily in Greek banks: FT
Reuters
Hedge fund billionaire John Paulson’s Paulson & Co and a number of other U.S. hedge funds are investing aggressively into Greece’s struggling banking sector expecting it to turn a corner, the Financial Times reported on Sunday.
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Shadow Loans Sound New Alarm
IANTHE JEANNE DUGAN – WSJ.com
Debt-laden companies are on track to borrow a record $1 trillion this year in the nonbank “shadow lending” system, and regulators are sounding alarms about one of its fast-growing funders: individual investors.
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World Bank, Rooted in Bureaucracy, Proposes a Sweeping Reorganization
ANNIE LOWREY – NYTimes.com
Jim Yong Kim, the genial American physician who took over as the president of the World Bank last year, recently conducted a survey of its 10,000 employees. The survey revealed a “culture of fear,” pervasive “fear of risk” and a “terrible” environment for collaboration at the huge development institution, which lends more than $30 billion a year and works in more than 100 countries.
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Regulatory
At the S.E.C., a Question of Home-Court Edge
GRETCHEN MORGENSON – NYTimes.com
SINCE Mary Jo White settled in as chairwoman of the Securities and Exchange Commission, lots of tough talk has emanated from the agency about enforcement priorities. Just last week, Andrew Ceresney, co-director of enforcement, told an audience in New York to expect bolder actions out of the agency, especially when it comes to penalizing individuals.
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N.Y.’s Lawsky Signal Some Flexibility in Insurance Reserve Math
Leslie Scism – MoneyBeat – WSJ
Benjamin M. Lawsky, New York’s aggressive watchdog of financial-services companies, has offered an olive branch to the life-insurance industry following a war of words over their widely different views of how future obligations to millions of policyholders should be calculated.
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How Sharp Are the Swiss Regulator’s Tools?
John Letzing – MoneyBeat – WSJ
On Friday, the Swiss financial markets regulator, Finma, unveiled its latest focus: a probe of unnamed banks that may have been involved in manipulating foreign-exchange markets.
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SEC Names Karen L. Martinez as Director of Salt Lake Regional Office
The Securities and Exchange Commission today announced the appointment of Karen L. Martinez as director of the Salt Lake Regional Office.
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Big European companies reject third-party reporting for derivatives
Fiona Maxwell – Risk.net
Large corporates are ignoring a reporting short-cut in the European Market Infrastructure Regulation (Emir) that allows them to delegate the job to a third party, arguing they will be forced to do much of the work anyway and would still shoulder the risk of something going wrong.
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White on the Dark: The SEC Chair Discusses Market Structure and Self-Regulation
Streetwise Professor
SEC Chair Mary Jo White has made something of a stir with her recent speech on equity market structure. One interesting thing was her attempt to downplay regulation as a cause. This is a slippery and somewhat disingenuous argument.
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Exchanges & Trading Facilities
NYSE to End Subsidies for Nasdaq-Owned Market Service
Jacob Bunges – MoneyBeat – WSJ
NYSE Euronext will stop paying for New York Stock Exchange-listed companies to receive stock-market services provided by a former unit of Thomson Reuters Corp. that is now owned by rival Nasdaq OMX Group Inc.
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Metals Logjam Could Remain Even After Rule Change
FRANCESCA FREEMAN AND LAURA CLARKE – WSJ.com
The London Metal Exchange’s proposed overhaul of its warehouse system may not go far enough to significantly loosen the grip of traders and banks on the supply of commodities such as aluminum, producers and consumers of the metal said this past week.
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LME May Delay Decision on Warehouse Rules
ENDA CURRAN AND TATYANA SHUMSKY – WSJ.com
The London Metal Exchange may not decide on new rules for its global warehouse system at its October board meeting, according to the exchange’s owner.
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London’s junior market grows for first time since 2007
Reuters
London’s junior stock market grew for the first time in six years in the third quarter, according to research on Monday, as more companies joined than left.
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Indonesia Challenges LME in Bid to Set Global Tin Benchmark
Yoga Rusmana & Eko Listiyorini – Bloomberg
Indonesia, the world’s largest tin exporter, wants to displace the London Metal Exchange as the venue for setting the global benchmark by requiring that the metal be traded on a local exchange before export. Prices rose.
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US exchanges fight for Twitter’s listing
Arash Massoudi in New York – FT.com
Twitter has yet to disclose where it will list shares in its $1bn initial public offering, leaving open the question of whether it will choose the New York Stock Exchange or Nasdaq for the high-profile flotation.
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Deutsche Börse Will Be Exclusive Licensor Of BSE Market Data To International Clients
Deutsche Börse Market Data + Services and BSE today announced a partnership under which Deutsche Börse will act as the exclusive licensor of BSE market data and information products to all international clients. The new cooperation will benefit existing and potential customers by giving them access to both exchanges’ market data products under a single license agreement.
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BME launches fixed income alternative market for financing small enterprises
BME launched today the Mercado Alternativo de Renta Fija or MARF, a complementary and alternative channel for medium and small enterprises, almost exclusively reliant on the banking system.
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Romania’s Bucharest Stock Exchange eyes expansion
Balkans.com
After building a new market from scratch on the Warsaw Stock Exchange, Ludwik Sobolewski, the new CEO of the Romania’s Bucharest Stock Exchange (BSE), is aiming to make the local exchange a challenger to Budapest and Prague in the next two years.
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HKEx Monthly Market Highlights – September 2013
The average daily turnover for the first nine months of 2013 was $63,756 million, an increase of 20 per cent when compared with $53,143 million for the same period last year.
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HKEx On-Floor & Off-Floor Trading Statistics
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Warsaw Stock Exchange Derivatives Market In September 2013
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The Monthly Prompt – October 2013 v1
Welcome to The Monthly Prompt, the regular update from the London Metal Exchange.
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Reminder: Direct Edge Trading Notice #13-41: Direct Edge To Participate In Business Continuity Test – SIFMA Annual Industry-Wide Business Continuity Test
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TMX Group Equity Financing Statistics – September 2013 – Toronto Stock Exchange, TSX Venture Exchange
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Borsa Italia Monthly Update September 2013
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TOM MTF Statistics Week 40
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Hedge Funds & Managed Futures
Thomson Reuters to refocus after Libor loss
Philip Stafford in London – FT.com
Thomson Reuters is to revamp its benchmark fixings business as part of measures to defend its market leading position in Asia after losing the Libor franchise in the wake of the global rate-fixing probe. The data provider is moving to upgrade its rate-calculation business to meet tougher new international standards as it seeks to increase revenues.
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Shutdown Shuts Down Commitment of Traders Reports From CFTC
David Bird – MoneyBeat – WSJ
A weekly window into who’s doing what in commodities and foreign-exchange markets closed Friday as the government shutdown prevented the release of widely watched commitment of traders reports.
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Asset managers raise marketing game
Mike Foster and Sophie Baker – Financial News
Asset managers are raising their game in business development as they seek to market increasingly complex products to a range of clients and the market becomes more competitive.
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S&P Capital IQ Launches Company Credit Risk Data Service
Faye Kilburn – WatersTechnology
McGraw Hill Financial-owned data, research and analytics provider S&P Capital IQ will this week launch a new tool for assessing the probability of default for all public and private companies, dubbed PD (Probability of Default) Model Fundamentals, to enable financial institutions achieve a better overview of default risk.
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Hedge Fund Managed by Star Opens to Institutions
JULIET CHUNG – WSJ.com
A star mutual-fund manager is opening up his nascent hedge fund to institutional investors. Bruce Berkowitz, the 55-year-old president of Fairholme Capital Management LLC, launched the fund on Jan. 1 and it has grown to $140 million, largely with money from Mr. Berkowitz and his employees. He is now seeking outside institutional investors and hopes the fund will grow to $1 billion in assets in a year.
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Gibraltar rocks on for fund administration
Joe McGrath – Financial News
Gibraltar has seen assets under administration rocket from £214 million in 2006 to £3.48 billion by the end of last year as managers seek lower costs and quicker routes to launching funds.
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ICI fund raises hedging targets as new chief arrives
Mark Cobley – Financial News
The £9 billion ICI Pension Fund has raised its inflation and interest-rate hedging targets to 80% of its liabilities, a high level for a UK pension scheme, as the fund takes an increasingly cautious investment approach.
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BlackRock charts new course on active funds
Mike Foster – Financial News
Just over a year ago, BlackRock chief executive Larry Fink asked Quintin Price, head of alpha strategies, to save his struggling US active funds. Price says: “I’ve been asked to deliver a world-class alpha-generative platform, and that’s what I’m going to do.” No pressure, then.
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Closure Creates an Investor Opening
E.S. Browning – MoneyBeat – WSJ
As they sift through the Washington mess, some money managers think it could be a blessing, at least for their investments. With the government shutdown heading toward a second week, economists say it could hold back economic growth, business confidence and corporate earnings, but probably won’t cause a recession. Many money managers doubt the damage will be lasting. Any stock selloff, they say, would be a great buying opportunity.
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EDHEC-Risk Institute And Lyxor Launch A Research Chair And Explore The Next Generation Of Risk Parity Adapted To Time-Varying Market Conditions
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Banks & Brokers
Jamie Dimon’s Power Struggle: Loses Bank Chairman Role, A Bigger Blow May Come Next
Halah Touryalai – Forbes
It doesn’t seem like a big deal considering all the scrutiny he’s been under but Jamie Dimon’s move to give up the bank chairman role at JPMorgan Chase may be the beginning of something more ominous.
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Citadel Drops Out of Bidding for E*Trade Unit
JACOB BUNGE – WSJ.com
Citadel LLC isn’t bidding for a trading operation owned by E*Trade Financial Corp., according to people close to the talks.
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Bank trio pulls ahead of rivals in market shake-out
Matt Turner – Financial News
The top investment banks in Europe, the Middle East and Africa – led by Deutsche Bank, JP Morgan and Goldman Sachs – are pulling away from the competition and grabbing a bigger slice of fees generated by companies and issuers in the region than at any time since 2002.
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EU banking union faces fight over safety net funding
Alex Barker in Brussels – FT.com
Europe’s banking union project faces a protracted fight over who pays to repair the system, as the EU debates public backstops to plug any holes exposed by next year’s stress-test of lenders.
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O’Brien relishes a challenge
Sophie Baker – Financial News
Mike O’Brien likes a challenge. The 50-year-old triathlon nut has completed 15 races in the past four years and has three more coming up. It is a hobby that sets him up well for his role as the most senior figure in the institutional business at the $1.5 trillion JP Morgan Asset Management, where he has high aims.
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Clearing & Settlement
The new world of central clearing: The futurisation of OTC Swaps
John Omahen – FOW
The futures and derivatives landscape is in the midst of major transformation as the industry ponders direct trading on SEFs, the futurization of swaps, and the continuing impacts of global regulatory change. With the introduction of mandatory OTC clearing, costs have increased for the buy side, making futurised OTC contracts seem a promising solution to help restore profitability.
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CME Clearing – RBOB Gasoline vs. Euro-bob Oxy NWE Barges (Argus) (350,000 Gallons) Average Price Option
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CME Clearing: Calendar Spread Options Product Listing Schedule
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CME Clearing: Minimum Price Increment Change for Henry Hub Contracts
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Technology
Eight banks join chat network from Markit and Thomson Reuters
Reuters
Goldman Sachs Group Inc, JPMorgan Chase & Co and six other banks have agreed to join a new instant messaging network from Markit and Thomson Reuters Corp to connect disparate messaging systems.
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Brady Extends Its Cloud Services To Offer Solutions To Recycling Companies
Brady plc, the leading global supplier of trading, risk management and settlement solutions to the agricultural, metals, recycling, energy and softs sectors, announced today that its flagship recycling solutions, CRES and IMPACT are now available in a Cloud offering.
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Enforcement
Trial of Madoff Employees Will Look to Cooperator Frank DiPascali
ASHBY JONES – WSJ.com
As a top lieutenant to Bernard L. Madoff, Frank DiPascali Jr. spent much of the past three decades safeguarding secrets. But the 56-year-old Queens, N.Y., native is about to spill some of them.
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Email, undisclosed in SAC trader’s case, could help defense: sources
Reuters
In the coming trial of a SAC Capital Advisors hedge fund portfolio manager, Michael Steinberg, prosecutors are likely to present emails purporting to show he was being tipped about inside information on Dell Inc before trading on the stock.
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The FCA decides to ban and fine Timothy Roberts and Andrew Wilkins
The FCA has published decision notices against Timothy Roberts, the chief executive, and Andrew Wilkins, a former director of Catalyst Investment Group Limited.
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The FCA censures Catalyst Investment Group Limited for misleading investors and fines former compliance officer
The FCA has censured Catalyst Investment Group Limited for recklessly misleading investors when promoting bonds offered by ARM Asset Backed Securities SA (ARM) between November 2009 and May 2010.
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Environmental & Energy
The U.S. Is an Energy Superpower
Time
A new item by the Energy Information Administration (EIA) confirms what we’ve been reporting for a while now: the U.S. is an energy superpower. The EIA predicts that in 2013, the U.S. will be the world’s top producer of petroleum and natural gas hydrocarbons, surpassing Russia and Saudi Arabia, as the graph below shows:
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California, Quebec Carbon Deal Could Pave Way For Other Linkages
Ecosystem Marketplace
California and Quebec have signed an agreement to link their cap-and-trade programs via the Western Climate Initiative (WCI), a decision that could pave the way for linkages to other trading programs, observers said.
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EEX Trading Results In September
Record Volumes In Power And Emissions Trading – All-Time Volume Record On The Power Derivatives Market – More Than 100 Tonnes Of CO2 Traded For The First Time
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Asia-Pacific
SGX welcomes AsiaPhos to Catalist
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Frontier Markets
Twist in NSEL scam: 9 defaulting cos bogus
Mumbai Mirror
An entirely new murky facet of the Rs. 5,500 crore NSEL scam has emerged, with the Economic Offences Wing of Mumbai police discovering that nine of the 27 companies that defaulted in making payments to the exchange never existed.
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Nasdaq platform speeds up Nigeria bourse-dealers
Reuters
The Nigeria Stock Exchange’s adoption this week of the Nasdaq X-Stream trading platform has improved the speed of transactions, dealers said on Friday.
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Dubai wants to be center for Islamic business
Reuters
Dubai unveiled plans on Saturday to become a center for business that follows Islamic principles in areas from banking and insurance to food processing, tourism and education.
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Tehran Stock Exchange Trading Statistics Report 3Q13
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Miscellaneous
Ex-CBOT chief says he’s in Europe after warrant issued
Tom Polansek | Reuters
Former Chicago Board of Trade Chairman Patrick Arbor said on Saturday that he was in Europe, following a newspaper report alleging he had fled the United States to avoid paying millions of dollars to his ex-wife.
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