Industry news

October 10, 2013: JPMorgan launches commodity business sale; LME set to push ahead with delivery shake-up; RBS sends forex trader’s records to regulator

JPMorgan puts its physical commodity business up for sale and puts on a starting price tag at over $3 billion. Maybe they should just hand it over to the CFTC as payment for past sins. The London Metal Exchange says yes, they will indeed forge ahead on their delivery plans, though they may change those plans a little if needed. In the developing foreign-exchange manipulation scandal, bank RBS sends trader and transaction records to Swiss regulators.

First Read

Managed Futures Bloomberged, Part 1
John J. Lothian
Wow! That was quite the trashing of managed futures in a Bloomberg story by David Evans on Tuesday. The Gawker website took the story about managed futures to new depths with this headline:

Here Is Perhaps the Single Biggest Ripoff on Wall Street

If I was selling junk bonds, penny stocks, stock loans, reverse mortgages, or synthetic collateralized debt obligations, I would be feeling pretty good right now. Those managed futures charlatans are the new bad boys of Wall Street. Yeehaa!

Having been a commodity trading advisor for nearly a decade, I found the article appalling on multiple levels. On one level I found it appalling for its cherry picking, something that industry professionals are disciplined for when they do. Yes, there are funds with high fees. And there are funds that lose money. And there are funds that lose money partly because they have high fees.

Picking those funds to write about, condemning an entire asset class/product line in the process, does not give a complete picture of managed futures. Nor is it a fair picture. It is cherry picking.

Making money is no sure thing. In fact, every disclosure document is required to state the following: “Past performance is not necessarily indicative of future results.” If a trader made money in the past, there is no guarantee that he or she will make money in the future. It is as simple as that.

Futures trading is a high-risk endeavor that is not for everyone. If you can’t lose it, don’t use it.

For the rest of this article (which you really should finish – it’s good stuff), visit the JLN blog at jlne.ws/1flNcgF

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CME’s Duffy says exchange is braced for turbulence
Sital S. Patel – MarketWatch
The head of the CME Group said his firm has survived by focusing on risk management —and that the biggest futures exchange is ready for the turbulence that would come in the Treasury futures market if the debt ceiling is not raised in time.
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***** I was wondering why Terry Duffy was showing the airplane passenger crash position on CNBC. Also, remember to put the oxygen mask on yourself before helping others.

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SEC Launches Market Structure Data and Analysis Website
The Securities and Exchange Commission today unveiled a dynamic new website to provide investors and others with the ability to interactively explore a range of new market metrics and access empirical research and analyses that further inform the broader public debate on market structure.
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***** SEC does something right while the CFTC does their best King Leonidas/10 impersonation.

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Largest FCMs to Get Larger Under New Rules
Matt Simon – TabbFORUM
As derivatives reform takes hold, business is likely to consolidate with the largest US futures commission merchants, which have sufficient means to access resources and technology to provide best-in-class solutions for market participants.
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***** And then there was one.

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Exchanges and Traders Grapple Over HFT ‘Problem’
Peter Chapman – Traders Magazine
Six years after the practice first gained widespread notice, participants, regulators, academics and pundits are no closer to agreeing on whether or not high frequency trading (HFT) is a scourge or a blessing. That became clear yesterday at Baruch College’s annual Financial Markets Conference, a gathering attended by regulators and exchange and brokerage officials, as well as a few buysides.
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***** The battle is the same, the techniques are slightly different.

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NYSE Euronext Update On Acquisition By IntercontinentalExchange
ICE and NYSE Euronext have established a closing date of November 4, 2013 for their previously announced transaction. The November 4, 2013 closing date is predicated upon the receipt by IntercontinentalExchange and NYSE Euronext of remaining European regulatory approvals prior to such date, and may be extended to a later date by further public announcement should any necessary approvals remain outstanding at such date.
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***** Hello FIA EXPO.

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FINRA’s Dark Pool Proposal Needs A Brighter Light
Joe Saluzzi and Sal Arnuk – Wall Street & Technology
Four years after the SEC first proposed rules (that have still not been approved) to deal with dark pools, FINRA has now proposed some rules of their own. FINRA is looking to add some transparency to the murky world of dark pools by proposing that alternative trading systems (ATS) start reporting some statistics.
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***** Half steps won’t renew customer confidence in the markets.

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Chocolate whispers: ADM and Cargill’s antitrust headache
Emiko Terazono in London – FT.com
With Cargill and Archer Daniels Midland expected to agree to a second M&A cocoa deal in a year, things are hotting up in the world of chocolate.
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***** Really, Hot Chocolate is your cliche?

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LME CEO Hits Back at “Opportunistic” CME Aluminum Move
Francesca Freeman and Laura Clarke – Dow Jones
The new head of the London Metal Exchange Thursday fired a shot across the bows of CME Group Inc., saying the Chicago-based exchange appears to be “talking up its book” regarding its “opportunistic” aluminum futures contract.
jlne.ws/1beKtkc

****** Garry Jones comes out swinging, like the true fighter he is.

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SunGard Clearing Panel: Redefining the Derivatives Back Office to Drive Competitive Advantage and Growth
New regulations, declining industry revenues and the widening of investment strategies are placing unprecedented pressure on the derivatives back-office. Firms are being forced to spend resources on complying with the myriad of regulatory initiatives being rolled out and providing their clients with access to new markets and products. Whereas the post-trade area was once regarded as a control step in the trade flow, financial institutions now have to exploit it to deliver superior value-added service.
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***** The always amusing Jim Kharouf will be moderating this year’s SunGard Clearing Panel.

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‘Financial Times’ moves to single global edition
Roger Yu, USA TODAY
The Financial Times, one of the few global newspapers that charge for online stories, will move further away from its print legacy by eliminating most editions and steering more resources to digital offerings.
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***** I like this move. It makes a lot of sense. They are a news organization, not a newspaper.

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Lead Stories

JPMorgan launches $3.3 billion physical commodity business sale
Reuters
JPMorgan Chase & Co has launched the sale of its physical commodities business, circulating offering documents to potential buyers and valuing the assets at $3.3 billion, according to a person familiar with the matter.
jlne.ws/1beKrJ3

LME set to push ahead with delivery shake-up
FT.com
The London Metal Exchange is likely to push ahead with the broad thrust of its original proposal to overhaul its under-fire delivery system but has not ruled out revising the plan, according to its new chief executive.
jlne.ws/1beKtkj

RBS sends forex trader’s records to regulator
Patrick Jenkins in London – FT.com
Royal Bank of Scotland has handed over to regulators records of instant message strings sent by and to a former currency trader, amid a deepening sector-wide probe into the suspected manipulation of foreign exchange rates.
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Imagine the Fed bought defaulted Treasuries
Joseph Cotterill | FT Alphaville
Every Federal reserve bank shall have power…To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.
Now, reading that carefully… Does that mean the Fed can’t buy defaulted US government debt?
jlne.ws/1beKtAB

HK exchange prepares for US bond default
Jeremy Grant in Singapore and Ben McLannahan in Tokyo – FT.com
Hong Kong’s exchange has decided that some short-term US Treasury bonds are more risky to hold as collateral, and has implemented extra financial buffers to protect against the possibility of a US default. The move is the first sign in Asia that the possibility of the US government defaulting on its debt is prompting key financial institutions to act to protect themselves and markets with little sign of an end to Washington’s debt gridlock.
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Statement By Federal Reserve Board Vice Chair Yellen On Her Nomination By President Obama
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Statement By Federal Reserve Board Chairman Bernanke On The Nomination of Vice Chair Yellen By President Obama
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Regulatory

SEC on the prowl for rule breakers big and small, White says
Reuters
The top U.S. securities regulator on Wednesday placed everyone from auditors to fund board members on notice, saying her agency plans to look for violations in all corners of the market, from major Wall Street investment firms to boiler room operations.
jlne.ws/1beKrJf

Daniel M. Hawke to Step Down as Director of Philadelphia Office
The Securities and Exchange Commission today announced that Daniel M. Hawke, the chief of the Enforcement Division’s Market Abuse Unit, will step down as director of the Philadelphia Regional Office to concentrate his efforts on leading the nationwide unit.
jlne.ws/1beKtAH

Top U.S. SEC lawyer on ‘Fabulous Fab’ trial to join WilmerHale
Reuters
Matthew Martens, the top trial lawyer at the U.S. Securities and Exchange Commission who led the agency to victory in its blockbuster civil fraud case against Goldman Sachs Vice President Fabrice Tourre, is joining the law firm Wilmer Cutler Pickering Hale and Dorr.
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Remarks At The Securities Enforcement Forum, SEC Chair, Mary Jo White, Washington D.C.
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NFA Notice to Members I-13-30: Reporting Requirements for Columbus Day
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Britain’s financial watchdog backs LME’s warehousing consultation
Reuters
Britain’s financial watchdog homed in on the London Metal Exchange’s (LME) warehousing crisis, stressing the importance of its global storage network to maintain the integrity of the market.
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Resources For CFTC Employees During Shutdown
The U.S. Commodity Futures Trading Commission’s (CFTC), Office of the Executive Director today released a list of resources available to CFTC employees due to the lapse in appropriations.
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National Center for Victims of Crime, FINRA Foundation Release Taking Action: An Advocate’s Guide to Assisting Victims of Financial Fraud
The National Center for Victims of Crime and the FINRA Investor Education Foundation have released Taking Action: An Advocate’s Guide to Assisting Victims of Financial Fraud to provide those who serve the more than 30 million Americans who are victims of financial fraud every year with an important new tool to aid their clients. This groundbreaking new guide is designed for consumer advocates, lawyers, counselors and other victim service providers.
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ISDA/JAC response to HMT & BIS consultation on Banking Reform: draft secondary legislation
On October 9, ISDA submitted two responses to the consultation issued by HM Treasury & Department for Business Innovation and Skills on Banking reform: draft secondary legislation (issued in July).
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Sebi moots measures to deal with erroneous trades
Business Standard
To tackle instances of erroneous trading activities in the securities market, Sebi today proposed a slew of measures for the stock exchanges including well-defined parameters and time-bound approach for deciding on annulment of such trades.
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[Canada] Latest issue of the Activity Report for the Continuous Disclosure Review Program.
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Exchanges & Trading Facilities

Abbott the moderniser exits on a high
Anna Irrera – Financial News
Martin Abbott, the former chief executive of the London Metal Exchange, collected the personal contribution of the year accolade at Financial News’ Awards for Excellence in Trading & Technology, Europe 2013.
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LME changes hurt aluminum premiums -Alcoa executives
Reuters
Global aluminum premiums have fallen due to “confusion” over the London Metal Exchange’s proposal announced on July 1 to overhaul its warehousing policy, Alcoa Inc Chief Financial Officer and Executive Vice President William Oplinger said on Tuesday.
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ICE sugar, coffee and cocoa trading to open late Oct. 28-Nov. 1
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NYSE Group Inc. Issues Short Interest Report
jlne.ws/1beKtRm

NYSE MKT Issues Short Interest Report
jlne.ws/1beKtRo

NASDAQ Announces End-Of-Month Open Short Interest Positions In NASDAQ Stocks As Of Settlement Date September 30, 2013
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September 2013: trading activity remains stable
Compared to the previous month, and recorded a minimal increase in the number of trades of 0.5% to 2’732’910 in September 2013. This corresponds to a significant increase of 10.8% over September 2012. After three quarters in 2013, the number of trades reached 26’153’088, growing by 7.1% over the same prior-year period. This growth was driven by the segments Equities (including Sponsored Funds and ETPs) with +7.5% and ETFs with +18.6%.
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SIX Swiss Exchange: Regulation of short selling as part of self-regulation
In Switzerland, there are no provisions to regulate short selling in terms of laws or stock exchange regulations. In 2008, an announcement was made by the then Swiss Federal Banking Commission (SFBC) and SIX Swiss Exchange imposing certain restrictions on short selling. In consultation with FINMA, SIX Swiss Exchange and Scoach Switzerland will now supplement their regulations regarding short selling.
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BTG Pactual Lists On NYSE Euronext Amsterdam
jlne.ws/1beKu7K

Oslo Stock Exchange Appeals Committee: IGE Resources AB
jlne.ws/1beKsg3

Hellenic Exchanges S.A.: Lapse Of The Right To The Dividend For Fiscal Year 2007
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Hedge Funds & Managed Futures

Energy Risk Europe: Commodity trading demands big data, says Trafigura CRO
Mark Pengelly – Risk.net
Commodity trading firms stand to benefit from a crucial strategic advantage by grasping the opportunity presented by big data, according to Lawrence Austen, chief risk officer of Netherlands-based commodity trader Trafigura.
jlne.ws/1beKu7Q

Securitised credit tops profitability league for hedge funds
Risk.net
Performance and asset flows of securitised credit products have combined to make this group one of the most profitable for investors and hedge fund managers. But there are now signs of waning interest
jlne.ws/1beKu7R

Hedge funds score big win bankrolling tax refund case
Tom Hals | Reuters
A group of hedge funds looks set to win an eyewatering return after bankrolling the winning party in a court fight over a $373.8 million tax refund in the bankruptcy of Downey Financial Corp.
jlne.ws/1beKsg9

Cargill profits slump, grain sector hit by 2012 drought
Reuters
U.S. agribusiness giant Cargill Inc on Wednesday reported a 41 percent drop in quarterly profits as the lingering effects of the 2012 severe drought in the United States reduced grain-handling opportunities.
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Minutes Of The Federal Open Market Committee, September 17-18, 2013
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Banks & Brokers

Barclays Taps John Miller for New Senior Banking Role
Dana Cimilluca – MoneyBeat – WSJ
Change is afoot in the investment bank at Barclays PLC. Barclays has made a number of changes in its senior ranks, chief among them naming firm veteran John Miller to the newly created role of head of banking for the Americas, according to an internal memo.
jlne.ws/1beKuoc

Meredith Whitney Appears to Be Trading Brokerage Firm for Investment Fund
MICHAEL J. DE LA MERCED and ALEXANDRA STEVENSON – NYTimes.com
Meredith A. Whitney appears poised to leave the industry that lifted her to fame. The brokerage arm of the Meredith Whitney Advisory Group deregistered from Finra, the securities industry’s self-regulatory body, on Aug. 28, according to a filing.
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U.S. regulators urge banks to work with borrowers during shutdown
Reuters
U.S. regulators on Wednesday urged banks to go easy on borrowers who are having trouble making payments on mortgages, student loans and other debt because of the federal government shutdown.
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Lazard sends new leader to Chicago to expand company
Lynne Marek – Crain’s Chicago Business
A new lead Lazard Ltd. investment banker has landed in Chicago with plans to reinvigorate the company’s office here, again.
jlne.ws/1beKuof

O’Brien relishes a challenge at JP Morgan
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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Citigroup unit pares electronic-trading services outside US
The Wall Street Journal
Automated Trading Desk, a Citigroup-owned provider of electronic trading services, is paring back its non-US business, closing operations in Canada—as well as Japan and Australia—according to people familiar with the matter.
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Newedge enhances Metals Trading platform for China
Newedge, a global leader in multi-asset brokerage and clearing, has unveiled an enhanced version of its industry-leading Metals and Commodities trading platform, CN Pulse.
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Clearing & Settlement

Clearing houses are the biggest risk, says Tucker
Telegraph
The clearing houses which act as the processing centres for trillions of dollars of global trading could pose the biggest risk to the world’s financial system in a future crisis, according to the outgoing Deputy Governor of the Bank of England.
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CME Clearing: olumbus Day Holiday Clearing Schedule-Monday, October 14, 2013
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CME Group New Product Advisory: Soybean Spread Options
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CME Group New Product Advisory: Wheat Calendar Spread Options
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CME Group New Product Advisory: Corn Calendar Spread Options
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Indexes & Products

MSCI Names ex-UBS’ Corrado CIO
Max Bowie – WatersTechnology
Index provider MSCI has appointed Chris Corrado to the newly created position of chief information officer, responsible for ensuring the vendor provides “leading-edge products and services” that help clients achieve their business goals.
jlne.ws/1beKuEN

STOXX Launches New Global Infrastructure Index – New Index Has Been Licensed To Underlie An Exchange-Traded Fund In The U.S.
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Addition Of BATM Advanced Communications Ltd To The TASE Indices
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Technology

Scila Compliance is ready for the latest ORC connectivity interface
The Scila Compliance software, used by banks and brokers in the UK and Sweden, is now compatible with Orc Trade Access, a stand-alone market access solution which provides high functionality and low-latency connectivity to exchanges, brokers and market data sources, allowing an even smoother implementation of Scila Compliance for Orc users.
jlne.ws/1beKvIT

Ready, Set, Code
Trade Talk – Trading Technologies
All of finance is automated. It’s virtually impossible to do anything in finance without turning on a computer and using some form of automation—Excel, databases, charting packages, APIs, execution platforms. The most obvious example of this is automated trading, where the entire life cycle of a trade, from exchange data feed to trading strategy to order management, happens inside the computer. Trading automation is a complex endeavor. It involves programming, mathematics, and strategic thinking about markets and technology. It’s a lot to learn, but this is what markets are about today.
jlne.ws/1beKuVa

Hargreave Hale Selects Dion To Enhance Management And Control Of Corporate Actions
Dion Global Solutions, technology partner to the financial services industry, today announced that Hargreave Hale has gone live with its Corporate Action Workflow solution.
jlne.ws/1beKuVb

NASDAQ OMX and Thesys Introduce Trading Algorithm Test Facility
Operational Risk Management Tool for Complex U.S. Equity Markets to Improve Electronic Trading Ecosystem – First Exchange Group to Deploy Next-Generation Solution for Improved Testing Standards
jlne.ws/1beKvJ0

Enforcement

Madoff Trustee Asks Supreme Court to Let Him Sue Banks
PETER LATTMAN – NYTimes.com
The trustee seeking to recover money for the victims of Bernard L. Madoff’s Ponzi scheme asked the Supreme Court on Wednesday to review a ruling that prohibits him from suing several of the world’s largest banks that he contends aided the fraud.
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Environmental & Energy

Carbon Markets 94% Cheaper Than Renewable Support, OECD Says
Bloomberg
Carbon markets are about 94 percent cheaper at cutting greenhouse gases than renewable subsidies paid to power producers, according to the Organization for Economic Cooperation and Development.
jlne.ws/19lx9LD

OECD: ‘No bailout’ for climate threat
BBC
Governments forced to rescue the world’s banking system are being warned there will be no bailout if there is a crisis in the Earth’s climate system.
jlne.ws/19lDwyy

World must eliminate fossil fuel emissions, OECD chief says
Reuters
The world must eliminate emissions from burning fossil fuels in the second half of this century to lower the economic cost of climate change, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.
jlne.ws/GNYT1p

Asia-Pacific

Shanghai launches coal shipping futures contract
Seatrade Global
Shanghai Shipping Freight Exchange has launched on Thursday the world’s first derivatives for coal shipping contracts delivery in an effort to cater to growing demand for hedging tools.
jlne.ws/1beKvZe

World’s first bitumen futures make strong debut in Shanghai
Financial Post
The world’s first futures in road-paving material bitumen generated strong investor interest after launching on the Shanghai Futures Exchange on Wednesday, as China continues its drive to offer hedging in commodity markets.
jlne.ws/1beKuVi

ECB to Create Currency Swap Line With China Central Bank
Brian Blackstone – WSJ.com
The European Central Bank said Thursday it will create currency swap lines with China’s central bank, a sign of China’s growing importance in Europe’s trade and financial transactions.
jlne.ws/1beKuVo

Li urged to do more as regulator
Enoch Yiu | South China Morning Post
Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia may have successfully diversified the local exchanges but brokers complain he has not done enough as a regulator.
jlne.ws/1beKvZm

Sinopec raises E550m from euro bond sale
Josh Noble in Hong Kong – FT.com
Sinopec has become the second Chinese state-owned company to raise money in the euro bond market, signalling a shift in funding sources as the country seeks to reduce its reliance on the US dollar.
jlne.ws/1beKuVt

CSRC Approves Listing Of Egg Futures Contracts On Dalian Commodity Exchange
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Thai Bourse Adds Construction Services Sector, Includes REIT In Property Fund Sector, Effective Jan 2, 2014
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Frontier Markets

Resurgent U.A.E. Ponders Steps to Prevent Rerun of 2008’s Crash
Dana El Baltaji – Bloomberg
Five years after the United Arab Emirates began its steepest economic slump in two decades, a rebound has left policy makers pondering ways to avert a recurrence of the overheating that turned boom into bust.
jlne.ws/1beKvbO

Ex-VP is first to be held in NSEL scam
The Times of India
The Economic Offences Wing, probing the Rs 5,600-crore cheating case involving the National Spot Exchange Limited and other companies made its first arrest on Wednesday, detaining Amit Mukherjee, former VP, business development, at the commodity exchange.
jlne.ws/1beKvZx

NSEL crisis: Jignesh Shah, Joseph Massey step down from MCX-SX board
Indian Express
Jignesh Shah, the promoter of Financial Technologies India Ltd, today resigned from the board of MCX Stock Exchange, amid continuing Rs 5,600 crore payment crisis at group company NSEL.
jlne.ws/1beKvbT

Miscellaneous

Lionel Barber memo to staff on reshaping the newspaper for the digital age
FT.com
We are now ready to take the next steps in our successful “digital first” strategy. This is an exciting but also challenging opportunity for all journalists at the Financial Times. It means changes in work practices, a further shift of resources to ft.com and a significant reshaping of the newspaper.
jlne.ws/1beKtki