First Read
Bits & Pieces
By John J. Lothian
Jim Kharouf is the new Waldo. Where is Jim? Where is Jim this week?
Last week he was in New York for the CTA Expo and to shoot some video for John Lothian Productions.
Jim left Saturday for Sao Paulo, Brazil for the World Federation of Exchanges/IOMA Derivatives & Clearing Conference with CCP12. This is the first time John Lothian News has been to Brazil. It was a long time coming.
Jim is moderating the second panel of the event, titled “Commodities: External Storms & Change From Within.” Panelists include Clive Furness, Managing Director, Contango Markets Ltd, Jônatas Couri, Head of Financial Solutions Brazil, Syngenta Crop Protection, K. Sree Kumar, Senior Executive Vice President, Business Development & Marketing, Bursa Malaysia Derivatives Berhad and Gaurang Desai, Interim CEO, Dubai Gold & Commodity Exchange. Chicago Fed superstar John McPartland gives the keynote address after lunch today at the event.
Assuming I can overcome a bad cold, I will be in Miami, Florida during the second part of this week for the Options Industry Conference, where I will moderate the exchange leader panel. If you have questions that I should be asking the panelists, please send them along. If you have a cure for a cold, also send that along.
With Sarah Rudolph also attending OIC, and with Jim in Brazil, Doug Ashburn is in charge at the home office in the CBOT Building. We are not the least bit worried. Really.
Yesterday my son Robby was confirmed as a member of St. Peters’ United Church of Christ in Elmhurst. Saturday he turned 14. I now know who to hit up for a loan if I need one.
Have a great week!
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Big Picture: Sandor Says Look Beyond US For Air And Water Markets
JohnLothianNews.com
Richard Sandor is one of the pioneers in financial derivatives and the environmental markets world as founder of the Chicago Climate Exchange. Now with his second book, Sustainable Investing And Environmental Markets, Sandor says this asset class has come a long way over the past 12 years but has a long way to go from here.
“I think we’ve made enormous progress,” he says. “You wouldn’t necessarily believe it was true because of the lack of federal action in the the United States. But I think that would be naive. In fact, you have proposals pending by the EPA that suggest there may be cap-and-trade.”
Watch the video »
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INTL FCStone Unit to Pay $140,000 to Settle CFTC Charges; Regulator says firm lacked adequate policies governing position transfers between accounts
By CHELSEY DULANEY
INTL FCStone Inc.’s futures brokerage has been ordered to pay $140,000 to settle charges that it failed to adequately supervise employees, the U.S. Commodity Futures Trading Commission said Friday.
jlne.ws/1E8YdcB
***** Policy, what policy? Though, to be fair, the charge stemmed from what looks like a minor technicality.
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GFI Launches Electronic Trading Platform for Odd Lot Corporate Bonds in the U.S.
GFI
GFI’s new offering, available via CreditMatch, serves the dealer-to-dealer market for corporate bonds with a notional value of less than $1 million
GFI Group, a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets, announced today the launch of an electronic trading platform for Odd Lot Corporate Bonds in the U.S.
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***** Two odd lots don’t make an even lot. They may not even make a round lot. They may still just be odd. And that’s saying a lot.
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Lead Stories
Exchanges need to balance policing and profitability
Brooke Masters, FT
Ordinarily, market abuse and manipulation cases take forever.
More than five years after UK watchdogs dramatically raided Moore Capital, Deutsche Bank and a series of other London companies, most of the people who were charged following the insider dealing probe have yet to stand trial. Similarly, global investigations of the Libor scandal are still ticking on more than six years after the first information requests were sent out.
jlne.ws/1GKG1Yu
Nasdaq tempts energy traders with extended fee holiday
Gregory Meyer in New York, FT
Nasdaq is planning an extended fee holiday to tempt traders to its new energy market, mounting an aggressive challenge to the two reigning oil and gas futures exchanges.
jlne.ws/1I9QSAM
The precarious prospects of London finance
Philip Augar, FT
UK’s next government needs a clear vision for the financial services industry, writes Philip Augar
It was 2006, and the City of London was enjoying an extraordinary surge, capturing market share and kudos from its global competitors. If you worked in financial services, London was the place to be. US investment banks, upset by the strict regulations imposed on their industry by the Sarbanes-Oxley Act, were moving senior staff to London and some briefed they might move their head offices, too.
jlne.ws/1JkvlT7
China widens foreign access to domestic bond market
Gabriel Wildau in Shanghai, FT
China has approved HSBC, Morgan Stanley and 30 other foreign institutions to invest in its $5.9tn domestic bond market, a big step towards opening its capital markets to foreign investment.
jlne.ws/1GKFZzB
Memory of ‘Flash Crash’ Weighs on Markets and Regulators
By E.S. BROWNING, WSJ
Nearly five years after the “flash crash” rocked financial markets, people who have studied it warn that some form of repeat event can’t be ruled out. An important reason, they say, is that regulators still have trouble supervising the high-frequency trading firms that, according to Tabb Group, account for almost half of trading volume.
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The Philosophy of Warren E. Buffett
By LAWRENCE A. CUNNINGHAM, NY Times
Lawrence A. Cunningham, a professor at George Washington University and former corporate lawyer at Cravath, Swaine & Moore, has written numerous books including, most recently, “Berkshire Beyond Buffett: The Enduring Value of Values.”
jlne.ws/1GCDyix
NY jury finds ex-Goldman programer Aleynikov guilty of code theft
BY TOM BROWN, Reuters
A jury on Friday convicted a former Goldman Sachs Group Inc (GS.N) programer of stealing the investment bank’s high-frequency trading code.
The jury said it had reached a split decision, finding Sergey Aleynikov guilty on only one count of stealing “secret scientific material” from Goldman. They were unabhttp://jlne.ws/1EVS2iC
Regulatory
U.S. Seeks to Compensate Victims of BNP Paribas Violations
By SAMUEL RUBENFELD, WSJ
BNP Paribas SA was sentenced Friday to five years of probation and ordered to pay a $140 million fine. Along with the sentencing, the U.S. announced it would try to compensate victims of the bank’s violations.
jlne.ws/1QerUkV
Experts see trouble ahead from MiFID II
Pensions & Investments
European market regulators’ efforts to apply equity templates to trading in other asset classes will be felt by U.S. money managers and asset owners through higher trading costs, reduced investment performance and a potential move to more in-house management by asset owners, industry analysts said.
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EU lawmakers brace for fight over financial-whistleblower protection
MLex
A push to give financial whistleblowers greater legal protection appears to be heading for a showdown between the European Parliament and national governments. Safeguards for whistleblowers are being considered by European Commission officials drafting rules to implement the market-abuse legislation approved last year.
jlne.ws/1OTuLT3
ASIC repeals select market integrity rules
ASIC
ASIC has repealed a number of obligations under the ASIC market integrity rules to reduce the compliance burden on market participants. The repeals, which follow consultation launched in August 2014 (refer: 14-208MR), are reflected in four regulatory guides which have been updated.
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Outcome in Ronald Baldwin committal hearing
ASIC
Magistrate Thacker on 30 April 2015 ruled there was insufficient evidence to commit Ronald Baldwin to stand trial on charges of market manipulation.
The charges against Mr Baldwin were dismissed and he was discharged accordingly.
jlne.ws/1QeoWwN
Update on Australian dollar movement investigation
ASIC
ASIC today provided an update on its investigation into the movements in the Australian dollar shortly before the Reserve Bank’s monetary policy decisions for February, March and April 2015. The enquiry is investigating trading in the dollar in the minute prior to the RBA’s interest rate decision statement at 2.30pm.
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Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
SEC
MIAX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Its Fee Schedule (Release No. 34-74857; File No. SR-MIAX-2015-32; May 1, 2015); see also Exhibit 5
MIAX: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Its Fee Schedule (Release No. 34-74856; File No. SR-MIAX-2015-31; May 1, 2015); see also Exhibit 5
MSRB: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Consisting of the Specifications for the Selection of Examination Questions and Content Outline for the Municipal Advisor Representative Qualification Examination (Release No. 34-74858; File No. SR-MSRB-2015-04; May 1, 2015); see also Exhibit 3a and Exhibit 3b
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Exchanges & Trading Facilities
CBOE Profit Slides on Declines in Trading Volumes, Fees; Revenue and profit results still beat Wall Street expectations
By LISA BEILFUSS, WSJ
CBOE Holdings Inc. said Friday its first-quarter profit slid 13% as trading volume and transaction fees declined from a year earlier.
jlne.ws/1QZfEWK
CBOE Holdings to List VIX “Weeklys” Futures and Options
CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) today announced that it plans to list futures and options with weekly expirations on the CBOE Volatility Index® (VIX® Index), the leading market barometer of U.S. equity market volatility.
jlne.ws/1OMcOG6
CBOE Holdings, Inc. Reports Results for First-Quarter 2015
CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) today reported net income allocated to common stockholders of $42.1 million, or $0.50 per diluted share, for the first quarter of 2015, compared with $48.5 million, or $0.56 per diluted share, in the first quarter of 2014. On an adjusted basis, net income allocated to common stockholders was $42.3 million, or $0.50 per diluted share, compared with $50 million, or $0.58 per diluted share, in the same period last year. Operating revenue for the quarter was $142.8 million, down 10 percent compared with $157.9 million in the first quarter of 2014.
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NYSE AMEX OPTIONS: UPDATE: POST TRADE ALLOCATION MESSAGES AVAILABLE FOR CUBE
NYSE AMEX OPTIONS
The previously announced enhancement to support electronic post trade allocation messages via existing FIX sessions on NYSE Amex Options has been delayed. Further information regarding the release of this enhancement will be announced in an additional trader notice.
jlne.ws/1vJQIpD
ICE BENCHMARK ADMINISTRATION PUBLISHES FEEDBACK STATEMENT ON LIBOR EVOLUTION POSITION PAPER
ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, has published a feedback statement on the responses received to the ICE Benchmark Administration (IBA) position paper on the evolution and enhancement of ICE LIBOR.
jlne.ws/1OMhg7Q
THE SPANISH STOCK EXCHANGE TRADED EUR88.7 BILLION IN APRIL, UP 13% YEAR ON YEAR
BME
The equity trading volume to April was up 30%, at EUR349.1 billion
The ETF trading volume grew 44% in April
The trading volume in the Warrants and Certificates market to April was up 59% year-on-year
The trading volume in the Derivatives market in April was 2.9 million contracts
Corporate Debt trading in April was EUR65.5 billion and EUR224.7 billion in the first four months
(No Link)
Hedge Funds & Managed Futures
Three Citadel Hong Kong Employees Leave Amid Macro Desk Cuts
by Bei Hu, Bloomberg
Three Hong Kong employees recently left Citadel as the hedge-fund firm run by billionaire Ken Griffin cut jobs on its macro trading desk.
jlne.ws/1ER2So7
Bogle vs. Grant in the Great Fund Debate
Jason Zweig, WSJ
Have index funds, the autopilot portfolios that dispense with stock-picking entirely, made fund managers obsolete? That question was the subject of a debate that I watched in New York last month between two respected investing experts: John Bogle, founder of Vanguard Group and father of the retail index fund, and James Grant, editor of Grant’s Interest Rate Observer, a twice-a-month publication widely read by professional portfolio managers.
jlne.ws/1I7Ww4Q
Catastrophe bonds pioneer hits back at book
Alistair Gray in LondonA, FT
A pioneer of catastrophe bonds has hit back at claims that the instruments could jeopardise the stability of the global insurance industry, accusing the academics behind the highly critical research of “stoking unfounded fears”. John Seo — who co-founded Fermat Capital, among the most influential catastrophe bond fund managers — argues the business school analysis that warns of dangers in the market reaches “completely false” conclusions.
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Barrick names BlackRock exec as head of business performance
BY EUAN ROCHA, Reuters
Barrick Gold Corp on Friday named Catherine Raw, a BlackRock executive and co-manager of one of its flagship mining funds, as head of business performance.
jlne.ws/1QUfZtM
Banks & Brokers
Barclays in talks to sell £2bn package of risky loans
Emma Dunkley, FT
Barclays is preparing to sell £2bn of risky second-charge mortgages and loans made through its Firstplus brand, more than 10 years after the bank had originally planned to offload the subsidiary.
jlne.ws/1GKGbiw
UBS and Credit Suisse could combine investment banks -investor
Reuters
Swiss bank UBS could combine its investment banking arm with that of Credit Suisse to create a top player, Eric Knight, head of activist investor Knight Vinke, was quoted as saying in an interview with a Swiss paper on Sunday.
jlne.ws/1zrSItB
Chase Website Issue Said to Be Caused by Heavy Customer Use
By NATHANIEL POPPER, NY Times
Customers of JPMorgan Chase’s consumer bank were unable to log into their accounts online for several hours on Friday.
jlne.ws/1I2i5nq
Schwab Opts Not to Adopt Liquidity Fees, Redemption Gates for Government Funds; SEC has expanded regulation in response to 2008 crisis
By LISA BEILFUSS, WSJ
Charles Schwab Corp. on Friday said it doesn’t plan to charge liquidity fees or adopt redemption gates for its government funds, following expanded regulation that allows fund managers to do so during times of market turmoil.
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Clearing & Settlement
Four HKEx Clearing Houses Receive Third-country CCP Recognition from ESMA
HKEx
The Board of Supervisors of the European Securities and Markets Authority (ESMA) on 27 April 2015 adopted a decision to recognise all of Hong Kong Exchanges and Clearing Limited’s (HKEx) clearing houses (CCPs) for securities, stock options, futures and stock index options, and over-the-counter derivatives* as third-country CCPs under Chapter 4 of Title III of the European Market Infrastructure Regulations, or EMIR.
jlne.ws/1PhDrh5
Interview: Cross margining, an optional service for real benefits
Eurex
Alexander Rose, Vice President at Eurex Clearing and Nick Chaudhry, Head of OTC Client Clearing,Commerzbank met to exchange thoughts on how the ETD and OTC derivatives markets are shifting and to discuss two of the current industry buzzwords: cross margining and capital efficiencies.
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CME Clearing Notice: Week of Monday, April 27 , 2015
CME Group
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Launch of ASX Equity FlexClear
The Financial
ASX on May 4 announced the launch of ASX Equity FlexClear, a service allowing institutional investors to centrally clear over-the-counter (OTC) equity options transactions at ASX.
jlne.ws/1AzvGfE
Indexes & Products
5 things about ETFs that scare investors
By Victor Reklaitis, MarketWatch
Liquidity worries have bubbled up lately in the world of exchange-traded funds, meaning heebie-jeebies about the tradability of certain ETFs.
jlne.ws/1FKibQr
MSCI sees flexibility in adding A shares to benchmark indexes
EJ Insight
The openness of China’s stock markets is the most important factor that will determine the inclusion of A shares in the MSCI indexes, according to a senior official of the equity index provider. Chia Chin-ping, Hong Kong-based managing director and head of research for Asia Pacific at MSCI Inc., said even if mainland-listed A shares are not included in the company’s emerging markets index soon, they still could be added later on condition that there is material progress in the opening of China’s stock markets, the Hong Kong Economic Journal reported.
jlne.ws/1AzvWLz
The Russell Is Vital to the Big Picture
The Street
Perhaps we should forget that it was the Russell 2000 that I thought would enjoy an oversold rally on Friday, since clearly the rally was all about the big-caps and not the small-caps. Did you see that pathetic little rally the Russell had?
jlne.ws/1Azw5ie
Tools for Managing Home Price Risk Are Emerging
S&P Dow Jones Indices – Indexology Blog
S&P Dow Jones Indices offers information for hundreds of indices on our website, but two in particular drive a large portion of our traffic: the S&P 500 and the S&P/Case-Shiller Home Price Indices.
jlne.ws/1I7WFVY
Technology
Facebook launches open Internet.org platform amid net neutrality debate in India
BY AMAN SHAH AND NIVEDITA BHATTACHARJEE, Reuters
Facebook Inc is launching an open platform for online content and application developers to join its Internet.org service, in a move the social media giant said would boost efforts to get people online in low-income and rural areas in emerging markets.
jlne.ws/1JLl6dO
Twitter chief’s six common crimes against the dictionary
Lucy Kellaway, FT
It was not only the social media platform’s financial results that were lowering
Twitter’s first-quarter earnings were a washout. It is not just that the numbers were poor or that they were leaked — there was another thing wrong with them that no one appears to have noticed.
jlne.ws/1I9QHp4
Dave Goldberg, technology entrepreneur, 1967-2015
Henry Mance in London and Tim Bradshaw in San Francisco, FT
Best known as the husband of Facebook’s chief operating officer Sheryl Sandberg, Dave Goldberg — who died on Friday aged 47 — was Silicon Valley royalty in his own right.
jlne.ws/1FKgthM
Finance through a fintech is fast, but ask these questions first
Financial Review
There has been considerable recent discussion about fintechs injecting much needed competition into the SME lending market. Notwithstanding these encouraging developments it is still early days and small business owners would be wise to resist the lure of quick and easy money from fintechs until they really understand how they work.
jlne.ws/1AzwiSo
Enforcement
CFTC Sanctions FCStone, LLC for Supervision Violations
CFTC
Firm Ordered to Pay $140,000 Civil Penalty
The U.S. Commodity Futures Trading Commission (CFTC) entered an Order filing and simultaneously settling charges against FCStone, LLC, a CFTC-registered Futures Commission Merchant (FCM) headquartered in New York, New York, for failing to provide and maintain an adequate program of supervision and for failing to diligently supervise its employees on one occasion in violation of CFTC Regulation 166.3.
jlne.ws/1PhzmcI
BNP Paribas sentenced in $8.9 billion U.S. sanctions accord
BY NATE RAYMOND, Reuters
BNP Paribas SA was sentenced to five years probation by a U.S. judge on Friday in connection with a record $8.9 billion settlement resolving claims that it violated sanctions against Sudan, Cuba and Iran.
jlne.ws/1dBtsaC
Environmental & Energy
Goldman Sachs in Talks to Sell Its Coal Mines; Selling Colombia operation would end firm’s involvement in raw-materials production
By IANTHE JEANNE DUGAN, WSJ
Goldman Sachs Group Inc. got a disconcerting update a year after buying its second coal mine in Colombia: “Certain operational issues have arisen,” commodities executives reported.
jlne.ws/1DZs346
Cargill, Tesla, PG&E collaborate at Fresno beef plant to ease California peak energy use
Cargill
Tesla battery installation marks Earth Day at Cargill’s Fresno facility; continues use of technologies to reduce environmental footprint, benefit community
Cargill has collaborated with Tesla and Pacific Gas & Electric (PG&E), to install Tesla’s Energy Storage product at the company’s Fresno beef processing facility. Tesla’s batteries help to reduce energy costs by storing electricity at off-peak use times, then using it during peak periods. In total, the Tesla batteries have a 1 megawatt capacity that will be charged daily from the existing PG&E electricity grid system during off-peak hours, when electricity rates are lowest. The electricity stored in the batteries will then be used when rates are the highest each day during peak use times. By doing so, Cargill is reducing its contribution to the daily state power peak, when less environmentally friendly electricity generation might otherwise be required to meet demand.
jlne.ws/1DSBKkW
U.S. FAA considers beyond-line-of-sight drone initiatives-sources
BY DAVID MORGAN, Reuters
U.S. aviation regulators are talking to drone makers and service providers about testing commercial drones that can fly beyond an operator’s visual line of sight, currently banned for safety reasons, according to people with knowledge of the discussions.
jlne.ws/1OPBI7E
Iowa Declares Emergency as Bird Flu Spreads
By THE ASSOCIATED PRESS, NY Times
Gov. Terry Branstad of Iowa declared a state of emergency as bird flu continued to spread around the state, including possible cases at four poultry farms announced on Friday. Nearly 17 million chickens and turkeys in the state are dead, dying or scheduled to be killed because of the disease.
jlne.ws/1QZfU8e
Asia-Pacific
Dalian Commodity Exchange Launches New Trainings On Agri-product Options
MondoVisione
Under the backdrop of the acceleration of the preparatory work of all the agri-product options’ listing, Dalian Commodity Exchange (DCE) has launched a new round of trainings on agri-product options since March on the basis of further improving option contract rules, testing technological systems in an all-round way and market makers smoothly carrying out the collaborative testing. The preparatory work of all the agri-product options’ listing has seen a solid progress.
jlne.ws/1K6XywK
Shenzhen Stock Exchange Strengthens Institutional Construction Of Membership Self-discipline Rules
MondoVisione
Recently approved by China Securities Regulatory Commission and released by Shenzhen Stock Exchange, the Membership Management Rule (Revised in 2015) will come into force from the date of release. As an important move for SZSE to deepen self-discipline management over members, strengthen investor protection and promote the standardization and development of the markets, this revision has positive significance on strengthening members’ compliance and risk management, safeguarding trading security and maintaining the order of the securities markets.
jlne.ws/1DOJ5k6
Chinese manufacturing slumps
MacroBusiness
The HSBC Manufacturing PMI for April shows the lowest rating in a year, contracting to 48.9 points, well below expectations. This is also below the flash result posted a week or so ago (at 49.2 points) and Friday’s official print (which is more about the bigger firms).
jlne.ws/1AzvBZp
NZX To Acquire iFarm Agri Data Business
Mondovisione
NZX is pleased to announce the acquisition of iFarm, a leading livestock market information business. The acquisition strengthens NZX Agri’s position as a leading provider of information and data products to a growing number of farmer and corporate subscribers, across New Zealand and globally.
jlne.ws/1AzuMQv
Frontier Markets
Trading in Greek Government Bonds Slows to a Trickle; Greece’s standoff with creditors has slashed trading in its government debt, with prices swinging wildly
By CHRISTOPHER WHITTALL And TOMMY STUBBINGTON, WSJ
Greece’s standoff with creditors has investors speculating once again about the impact of a default on its debt or the country’s exit from the euro. What it hasn’t done is spark much trading in Greek government bonds.
jlne.ws/1JkzaaS
CSE to finalise Central Counterparty model by end May
The Sunday Times Sri Lanka
The Colombo Stock Exchange (CSE) will finalise its financial transaction facilitator mechanism, the Central Counterparty’s (CCP) model and the final structure by month end, officials said. Rajeeva Bandaranayake, CSE CEO told the Business Times that once this is done, they intend to consult all stakeholders and obtain their consensus and implement it. “This is the first time this has progressed this far,” he said. “The new CDS will have better features enabling us to give better service to its customers,” he said.
jlne.ws/1AzvxsD
Rapid development of finance sector should be government priority: ADB
Myanmar Times
The government urgently needs to prepare a finance sector development strategy focusing on three main objectives – increasing financial sector efficiency, stability and inclusion, according to a recent working paper published by the Asian Development Bank.
jlne.ws/1Azvw82
Miscellaneous
READ MORE: John Lothian Newsletter: Exchanges need to balance policing and profitability; Nasdaq tempts energy traders with extended fee holiday; The precarious prospects of London finance.