Industry news

October 8, 2013: BATS Chi-X Europe Launches Pan-European Listings Business; CME takes on LME with aluminium contract; Spain Launches Bond Market for Small Businesses

BATS Chi-X Europe announces its intention to list equities in Europe, and BlackRock’s ETF platform will be the first lister. CME Group follows through with last year’s aluminum contract idea. Spain’s stock market plans to open a corporate bond market for SMEs.

First Read

Troop 117 Wins Trebuchet and Milk Jug Boat Competitions
John Lothian

My son Robby’s troop won two competitions this weekend at a bi-district Boy Scout Ranchoree in Rochelle, IL. The scouts of the troop won the pumpkin and gourd-chuckin’ trebuchet contest and tied for first in the milk jug boat race.

The scouts blew away the competition at the trebuchet competition, hurling a gourd within 15 feet of the back end of the firing range setup for the competition. No other troop came even close.

In the milk jug boat race, the assembled a boat made from milk jugs glued shut and some 2×4’s screwed together. With 2 boys on the boat, they worked their way through the competition to get into the championship race. With a sudden rain storm in their faces, my son Robby Lothian and and a fellow scout raced to a tie in final heat. Robby jumped into the water and pushed the boat ashore where the rest of the team grabbed the boat and brought it to finish line.

The boys took 1st place in 2 of the 3 contests they entered, only losing out in the Iron Skillet Competition. They did earn 4 pumpkin pies for their two wins, which was a tasty breakfast on Sunday morning.

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Why the arcane business of swaps is good for Chicago
By Lynne Marek
The $630 trillion swaps market is beginning to flow into Chicago, bringing with it hundreds of millions of dollars in trading activity and the jobs to support it. The new business is expected to push revenue up 6 percent by 2015 at Chicago-based exchange operator CME Group Inc. and offer new revenue for other exchanges, too.
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***JK – New tagline: “Chicago, where the world comes for swaps”

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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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***** Italy, where the world goes after it leaves Chicago in a hurry.

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Markit sends rivals message of intent
Philip Stafford and Tracy Alloway – FT.com
Less intrusive than a phone call, more personal than an email. For many traders instant messaging has become the main way market participants keep in contact with customers and other traders. However, behind this most modern of communication tools lies an often controversial battle between the world’s largest investment banks and the market’s critical data providers over the cost and influence involved in providing what has become an industry utility.
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***JK – OMG, can you believe what Markit said about Bloomberg today?

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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.

Watch the video »

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IntercontinentalExchange Completes Trading And Clearing Transition For ICE Endex Futures Markets
IntercontinentalExchange, a leading operator of global markets and clearing houses today announced the completion of the trading and clearing transition for the ICE Endex futures markets to the ICE trading platform and ICE’s European clearing house, ICE Clear Europe.
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LME CEO Defends Exchange Amid Industry Unease
Francesca Freeman and Ben Winkley – WSJ.com
The new head of the London Metal Exchange on Monday was quick to defend the more-than-century-old institution amid industry unease about transparency and criticism of long waiting times for metal deliveries at LME warehouses. Speaking at the start of LME Week, the annual gathering in London of the metals industry, Garry Jones said he comes to the new role “with no hidden agenda.”
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***JK – The British have a long history of waiting in line, why not for metals? It’s fun.

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How Investors Lose 89 Percent of Gains from Futures Funds
David Evans – Bloomberg
The pitch was enticing. At a time when the Standard & Poor’s 500 Index had suffered a decline of 41 percent in the previous three years, Morgan Stanley was offering its clients the possibility of some relief. In a prospectus, the New York securities firm invited its customers to put their money into a little-known area of alternative investing called managed futures.
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***JM: This article reads more like “Reefer Madness” than what Bloomberg usually produces. I love a good expose, but this one is just lame. Next up, potatoes… that contain STARCH! Dun dun DUNNN… c’mon. You wrote this like fees are somehow imposed by surprise, David; nobody should pay 10% admin fees, and it’s not a “managed futures” problem if people do. It’s a “gullibility” problem.

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A changing of the guard in commodities hedge funds
Harriet Agnew – Financial News
The kings of commodities hedge funds are dead, long live the kings of commodities hedge funds. A super-cycle during the last decade, driven by high demand from China, created fertile ground for funds making big, directional bets. However, in more recent years clear trends have deserted the market and volatility has reduced, according to hedge fund managers, resulting in mixed performance and some high-profile closures.
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***** Big trends make a lot of people look smart.

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Walking dead update
Dan McCrum | FT Alphaville
The latest monthly performance figures for the hedge fund industry are out — and those funds still breathing had a good-ish month, up 1.6 per cent on average in September, according to HFR.
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***** The lack of big trends make a lot of people look less smart.

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Twitter Is Still Run in an Inefficient Way: Gellert [Video]
Bloomberg
Rapid Ratings Chairman and CEO James Gellert discusses rating the financial health of Twitter. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television’s “Market Makers.”
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***DA: After watching Gellert explain financial health ratings in the context of the Twitter IPO, head on over to MarketsWiki.tv to see what he had to say about the FCM community in our Restoring Customer Confidence series.

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Pre-Trade Pricing & Risk Management – Overcoming Technology Challenges
Numerix
Join us on Wednesday, October 9th at 10:00am EDT as featured speakers Allen Whipple of Quartet FS and Denny Yu of Numerix discuss how the need for faster and better pre-trade analytics has evolved and how institutions are dealing with the technology challenges – and uncovering opportunities in the process.
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***DA: Real-time pre-trade credit checks and risk management are THE most critical challenges in today’s trading environment. Come hear what the data experts have to say.

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MarketsWiki

MarketsWiki Page of the Day
Bolsas y Mercados Espanoles
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MarketsWiki Recent Updates

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Jeffrey Maron; Edward Brown; Brad Levy; Antonio J. Zoido Martinez

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Mercado Español de Futuros Financieros; Bolsas y Mercados Espanoles; McKay Brothers LLC

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CBOE S&P Short Term Volatility Index

Statistics

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MarketsWiki Statistics

Lead Stories

BATS Chi-X Europe Launches Pan-European Listings Business
BATS Chi-X Europe today announced plans to launch its pan-European listings business and iShares, the exchange-traded funds platform of BlackRock, will become the first issuer to list on the Regulated Market segment of the exchange.
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CME takes on LME with aluminium contract
Jack Farchy – FT.com
CME Group, the world’s largest futures exchange, will launch an aluminium contract to challenge the London Metal Exchange’s dominance of the largest base metals market as it suffers a storm of public criticism. Harriet Hunnable, head of metals at the Chicago-based group, said its plans for an aluminium contract were “very progressed”.
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***JM: I should hope it’s “very progressed”; this idea got floated back in August of last year.

Spain Launches Bond Market for Small Businesses
WSJ.com
Spain’s stock-market operator Monday launched a corporate-bond exchange for small and midsize companies, the first of its kind in the country, to give them a way to get financing at a time when bank loans are scarce.
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SEC sees flaws in new Treasury asset manager report: sources
Reuters
Federal securities regulators had warned of flaws in a U.S. Treasury draft report that could lead to costly regulations on large asset managers, people familiar with the matter told Reuters on Monday.
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EU Regulators Start Inquiry Into Currency Rate-Manipulation
Aoife White and Gaspard Sebag – Bloomberg
European Union antitrust regulators are examining the possible manipulation of currency rates, following a Swiss probe into whether banks colluded to manipulate the $5.3 trillion-a-day foreign exchange market.
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Eurex Exchange Welcomes First Direct Exchange Member In Korea
Eurex Exchange, the international derivatives marketplace, announced today that it admitted its first directly connected trading participant in Korea – Woori Futures. As part of Woori Financial Group, the brokerage firm offers a wide range of brokerage services and aims to expand its service by connecting to leading international exchanges.
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Asia Goes Slow on High-Speed Trading
Michelle Price – MoneyBeat – WSJ
High-speed trading firms revolutionized stock trading in the U.S., but many have faced challenges in Asian markets. Most regulators in the Asian-Pacific region, eager to protect individual investors and the dominant exchanges, have declined to implement the changes that would open many stock markets to profitable high-speed trading. And a number of trading glitches in the U.S.—most notably the May 2010 “flash crash,” in which the Dow Jones Industrial Average lost about 1,000 points in minutes before recovering—has made them more reluctant.
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US banks run out of time to kick reserve release habit
Tom Braithwaite – FT.com
Prop desks are passé, M&A has meagre pickings, and graduates wanting to make a fast buck in trading cannot compete with computers that work 24 hours a day and are made of metal and plastic. So what area of the industry should an enterprising young banker be interested in? Why, reserve releases, of course.
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SocGen CEO says tax havens’ days are numbered
Reuters
The practice of funnelling money to tax-free or low-tax countries such as Switzerland in order to avoid paying more punitive taxes at home is finished, the head of French bank Societe Generale said on Tuesday.
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Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds
Keri Geiger, Matthew Leising & Sara Forden – Bloomberg
Markit Group Ltd., the data provider controlled by Wall Street firms including JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), probably won’t face U.S. sanctions for impeding competition in the $22 trillion credit-derivatives market, according to two people with direct knowledge of the four-year investigation.
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Regulatory

An elegant solution to a conspiracy problem
Dan McCrum | FT Alphaville
OK, hands up. We did not pay attention in March when Canadian securities regulators proposed to tighten rules for when investors must disclose their activities to the rest of the market. The CSA is still considering, and the Globe and Mail reported on Monday that it’s not just activists who are wary.
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US regulators plan ‘time out’ for repo
Tracy Alloway and Michael Mackenzie in New York – FT.com
Faced with an unruly child, an exasperated parent will often impose a “time out”. That is one strategy some think could help calm the next major episode of a bank running into trouble in the “repo market”, where financial institutions pawn their assets in exchange for trillions of dollars’ worth of short-term loans.
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CFTC offers little relief to confused Sefs
Galen Stops – FOW
The confusion prevalent amongst market participants regarding the Sef rules, and in particular the now infamous “footnote 88”, forced the CFTC to issue three no-action relief letters delaying the implementation of some of the Sef rules for one month.
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[NFA] Filing Requirements for Exemptions Notices under CFTC’s Recently Adopted Harmonization Rules
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[NFA] U.S. Government Shutdown – CFTC DSIO Contacts
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CSA Announces Change in Cutover Date for Information Management Services
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B.C. Securities Commission launches year three of province-wide Be Fraud Aware Campaign
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Exchanges & Trading Facilities

NYSE Liffe expands Bclear Universal Stock Futures to Canadian and South African stocks
NYSE Liffe, the European derivatives division of NYSE Euronext (NYX), today announced that it has introduced Universal Stock Futures on Canadian and South African stocks on Bclear, the Exchange’s trade administration and clearing service.
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Five Things to Know About LME Week
Francesca Freeman – MoneyBeat – WSJ
A trader gestures from inside the open outcry pit as he works on the trading floor of the London Metal Exchange. Traders can’t lose contact with that red sofa if they want to trade. To London, where the London Metals Exchange, one of the most arcane exchanges, holds its annual LME Week, a gathering to meet clients and talk shop. It started Sunday.
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LME Warehouse Proposal Feedback ‘Very Divergent,’ Says HKEx CEO
WSJ.com
The range of views received by the London Metal Exchange on its proposed alteration to its warehousing rules could leave some stakeholders unhappy when a final decision is made, the chief executive of the LME’s owner Hong Kong Exchanges & Clearing Ltd. said Monday. HKEx chief executive Charles Li also said there is a chance some changes may be made to the proposed rulebook alterations when the LME’s board meets to review the consultation feedback and vote of the proposal later this month.
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London Metal Exchange to keep UK home base, new CEO says
Reuters
The London Metal Exchange will keep its London home base and not move to Asia, its new CEO said on Monday in his first public remarks since taking up the role officially last week.
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Marriott Moving Its $12B Biz To NASDAQ From NYSE
Forbes
Hotel giant Marriott International has found a new home to trade its shares. The Bethesda, MD company said today it’s decided to transfer the listing of its common stock to the NASDAQ exchange from the New York Stock Exchange.
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CME Group to allow talks before some grain options trades
Reuters
CME Group Inc on Monday said it will begin allowing customers to discuss the details of electronic grain and oilseed options trades during certain times before the orders are executed.
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CME issues contingency plan for October lean hogs settlement
Reuters
The CME Group Inc on Monday outlined how it will determine final settlement prices for its October 2013 lean hog futures and options next week if the U.S. government shutdown persists.
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WSE working on new strategy
Warsaw Business Journal
The Warsaw Stock Exchange is working on a strategy spanning up to 2020, which should be ready by the end of this year, the bourse’s CEO Adam Maciejewski said at a debate hosted by the Polish Press Agency. Parts of the strategy will be revealed at a press conference in early December, he added.
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NYSE Technologies welcomes Banco Carregosa as its first SuperFeed customer in Portugal
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WSE Ranks Second By Number Of IPOs In Europe
According to the latest quarterly PwC IPO Watch Europe report concerning the number and value of initial public offerings (IPO) on the leading European exchanges, WSE ranked second by the number of IPOs in Europe.
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Vienna Stock Exchange Monthly Statistics – September 2013
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Vienna Stock Exchange Monthly Statistics: Derivative Market – September 2013
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Irish Stock Exchange Statistics September 2013
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Athens Exchange Monthly Statistical Bulletin – September 2013
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Bulgarian Stock Exchange Monthly Summary – September 2013
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QIWI Depositary Shares Start Trading On Moscow Exchange
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Trading Hours For Osaka Securities Exchange – FX Margin Trading: The End Of Daylight Saving Time
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Hedge Funds & Managed Futures

Asset-Management Study Is a Headache in 31 Pages
Francesco Guerrera – MoneyBeat – WSJ
It is always the quiet ones. Of all the acronym-laden Washington agencies, few would have expected the OFR to drop a bombshell on the $53 trillion asset-management industry. But that is exactly what happened last week, when the Treasury Department’s Office of Financial Research, an almost-forgotten offshoot of the postcrisis regulatory onslaught, released a small report with a big impact.
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Asset Managers Respond to Report on Whether They Are Systemically Important
Francesco Guerrera – MoneyBeat – WSJ
A number of asset managers responded to a report last week by the Office of Financial Research for the Financial Stability Oversight Council, suggesting the industry is vulnerable to a financial crisis. A trade association weighed in as well. The responses follow:
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Hedge fund DE Shaw shuts doors to new investors
Sam Jones, Hedge Fund Correspondent – FT.com
One of the most profitable hedge funds has closed its doors to new clients, calling time on the industry’s ability to square vast inflows of money with the promise of market-beating returns.
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A Recent Flourish for Winton Capital
ANITA RAGHAVAN – NYTimes.com
Winton Capital Management is showing some improvement in the art of investing. Winton Capital, the money manager well known for its quirky and outspoken founder, a Cambridge University theoretical physicist, recovered from its worst performance since 2008 and posted a gain last month.
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U.S. venture funds raise $4.1 billion, down 18 percent
Reuters
U.S. venture capital firms raised $4.1 billion last quarter, down almost 18 percent from the same period in 2012, according to data from the National Venture Capital Association and Thomson Reuters released on Monday.
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Many U.S. investment advisers fall short on record-keeping: study
Reuters
Many U.S. state-registered investment advisers are failing to follow basic industry record-keeping rules, according to a nationwide series of examinations by state regulators.
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U.S. Supreme Court won’t hear Argentina bond dispute appeal
Reuters
The U.S. Supreme Court on Monday declined to hear a preliminary appeal filed by Argentina over its battle with hedge funds that refused to take part in two debt restructurings stemming from the country’s catastrophic 2002 default.
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Cargill in final talks over ADM cocoa unit
Emiko Terazono in London and Gregory Meyer in New York – FT.com
Cargill, the world’s top agricultural trading house, is in final negotiations for the purchase of rival Archer Daniels Midland’s $2bn cocoa business, although a potential deal is likely to face challenges from antitrust authorities in Europe.
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ISDA study finds CDS activity is increasing
ISDA has released a report that shows an increase in credit default swaps activity. The organization also notes that using gross notional as the measure of CDS activity might not be the best way to understand and analyze the market. “Market risk transaction activity, which measures trading volume during a period of time … is the optimal measure,” according to ISDA.
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Banks & Brokers

A New Investment Bank, Kimberlite, to Focus on Advice
WILLIAM ALDEN – NYTimes.com
Wall Street’s big banks advertise themselves as full-service shops, boasting that they can offer a range of services to institutional clients. But one new investment bank is taking the opposite approach. The Kimberlite Group, a boutique firm that will open its doors on Tuesday, says its specialized focus is a benefit.
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Mortgage-Investor Group Raises Concerns about Legal Settlements
NICK TIMIRAOS – WSJ.com
A group representing mortgage-bond investors has raised concerns with Attorney General Eric Holder over potential legal settlements with banks that they say could stick investors with some of the tab.
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Robert B. Zoellick to Serve Goldman Sachs as Chairman of International Advisors
The Goldman Sachs Group, Inc. (NYSE: GS) today announced that Robert B. Zoellick, former president of the World Bank Group, will serve as chairman of Goldman Sachs’ international advisors. In this role, Mr. Zoellick will advise the firm on global strategic issues and oversee the work of our 16 international advisors.
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Schwab Delays ETF 401(k) Platform Launch
Hung Tran – Index Universe
Charles Schwab, the big and influential discount broker, is delaying the much-anticipated rollout of a 401(k) retirement plan that will use ETFs three years after making the initial announcement at an asset management conference in March 2011.
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Cash management: Cash sizzles at Sibos
Duncan Kerr – Euromoney magazine
Sibos in Dubai was abuzz with a new spirit of confidence and collaboration among banks, but beneath the surface the battle to secure existing clients by doing more with them and to attract new ones is intensifying.
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Cash management in Brazil: Local knowledge bears fruit
Euromoney magazine
Local banks like to see themselves as uniquely suited to offering cash management services to Brazilian companies. But the global banks are also getting up to speed on idiosyncratic client requirements and local regulation.
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Australia & New Zealand Banking Group Limited (ANZ) Drives Expansion Across Multiple Lending Sectors With Misys
ANZ Pursues Standardisation And A Consistent Global Customer Experience Across Its Global Wholesale Lending Businesses By Selecting Misys Loan IQ
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Clearing & Settlement

Dubai Commodities Clearing Corporation And Clearstream Cooperate In Collateral Management
Clearstream and the Dubai Commodities Clearing Corporation, the central counterparty of the Dubai Gold & Commodities Exchange, have agreed to cooperate on collateral management for CCP margining.
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SIX X-Clear Applied To ESMA For Reauthorization As A Third-Country CCP
On 3 September 2013, ESMA published its advice to the EU Commission, concluding that the Swiss regulatory regime for central counterparties is considered equivalent to EU regulation.
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CME Clearing: NYMEX Options Expiration Operational Procedures for the Trading Floor and Clearing Members (GX) Effective Tuesday, October 8, 2013
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CME Margins: Performance Bond Requirements – Electricity, Ethanol, Petroleum Cracks, and Weather Outrights – Effective Tuesday, October 8, 2013
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CME Clearing: OTC Swaps Straight Through Processing Notice
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Indexes & Products

BlackRock endorses Bats ETF platform with first listings
Tim Cave and Sarah Krouse – Financial News
Bats Chi-X Europe, the region’s largest equities trading platform, has received endorsement from BlackRock for its new exchange-traded fund platform.
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Two New ComStage Equity Index ETFs Launched On Xetra
ETFs Provide Access To A-Class Shares In Chinese Companies And The MSCI World Index Focused On Emerging Market Countries
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Moscow Exchange Indices Weekly Review: September 30 – October 4, 2013
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S&P GSCI Commodities Indices Performance In September 2013
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S&P Dow Jones-UBS Commodity Index Market Attributes Report – September 2013
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STOXX Introduces Strong Quality Index Family
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Technology

Eagle Alpha Brings Twitter To The City
A new way of accessing untapped alpha-generating information has arrived, thanks to a compliance-friendly way to access tweets. The service, Social Sonar, has been developed by Eagle Alpha, a firm specialising in the curation of the web.
jlne.ws/1cqT86M

Eagle Alpha Launches Twitter Tool
Marina Daras – WatersTechnology
Eagle Alpha has launched Social Sonar, a tool that identifies data on stocks and global macro topics published on Twitter, with the aim of giving traders the information ahead of mainstream news.
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Fixnetix Wins Best Company For Innovation At The 4th Annual IAIR European Award
Trading Technology Services Provider Earns Accolade For Pre-Trade Risk Control.
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Enforcement

Supreme Court Ponders Suits in Stanford Fraud Over Securities That Never Existed
ADAM LIPTAK – NYTimes.com
On the first day of its new term, the Supreme Court heard arguments in a case arising from one of the most brazen frauds in recent history, the $7 billion Ponzi scheme orchestrated by R. Allen Stanford.
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Cuban Says He Was Taken Aback by S.E.C. Charges
LAUREN D’AVOLIO – NYTimes.com
Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team, testified on Monday that he was cooperating with the Securities and Exchange Commission as early as 2004 in an inquiry into an Internet search engine company and was taken aback when he turned on the news one day in 2008 and heard that the agency was charging him with insider trading.
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Fund manager Falcone banned from insurance unit: NY officials
Reuters
Hedge fund manager Philip Falcone, banned from the securities industry for five years by U.S. regulators, is also being banned for seven years from decision-making roles at Fidelity & Guaranty Life Insurance, a unit of his firm, New York officials said on Monday.
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NFA Regulatory Actions: Marc M. Jacobs
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Environmental & Energy

New Jersey Sets Hearing on Rejoining RGGI Carbon-Trading Program
Bloomberg
New Jersey lawmakers scheduled a hearing to discuss rejoining a carbon-emissions trading system that serves nine northeast states.
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Obama Climate Change Adviser Zichal to Leave Administration
Bloomberg
Heather Zichal, the top White House adviser on energy and climate change, is leaving the administration of President Barack Obama after five years.
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Mexico’s carbon tax faces headwinds from energy revamp
Reuters
Mexico’s plan to become the first major oil-producing emerging economy to introduce a carbon tax has a problem: It clashes head-on with the government’s ambitions to lower the cost of electricity and boost energy output.
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Asia-Pacific

China’s planned iron ore futures a threat to dominant swaps market:
Manolo Serapio Jr and Ruby Lian – Reuters
China’s imminent launch of its first iron ore futures contract could pose a threat to the $28 billion swaps market in the commodity by exploiting massive untapped hedging potential at home. The contract to be offered by the Dalian Commodity Exchange likely before year-end will be China’s latest stab at boosting its power to price the world’s second-largest traded commodity after oil as a more volatile iron ore market exposes its legion of steel mills to more risks.
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Illiquidity premium taxes Asian regulators
Blake Evans-Pritchard – Risk.net
During the past few years, there has been a significant amount of debate in Europe about how to value long-term liabilities that are technically illiquid and not immediately callable by the policyholder. This issue is now growing in importance in Asia, as falling interest rates make it harder for insurers in the region to meet their long-term guarantees.
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Mizuho’s top management knew of organized crime loans
Reuters
Officials at Mizuho Financial Group, Japan’s second-biggest bank, admitted top management knew at least three years ago about loans to criminal groups, highlighting the entrenched position of organized crime in the Japanese business world.
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HKEx Announces Temporary Holiday Risk Management Arrangements
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Frontier Markets

30 NSEL warehouses empty, 17 fake: EOW
The Times of India
The economic offences wing (EOW) recorded the statements of 14 people accused in the Rs 5,600-crore NSEL cheating case. Jignesh Shah of Financial Technologies (FTIL), which owns NSEL, is likely to be summoned on Wednesday.
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Has market making given BSE a new lease of life?
Livemint
Regulators and policymakers may take their own time in deciding the fate of exchanges owned by the Financial Technologies (FT) Group; but some market participants seem to have concluded that the damage is irreparable. According to a BSE Ltd spokesperson, “After the lacklustre start (of MCX Stock Exchange), (and the) failure and loss of trust in FT group operated exchanges, BSE remains the only competitor to the National Stock Exchange (NSE).”
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Palestine Exchange Investor Monthly Newsletter Issue #42, September 2013
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