First Read
London Update
By John J. Lothian
I am headed home from London early due to a medical emergency at home as my wife is in the hospital awaiting surgery for removal of her appendix. It is my time to be the supportive spouse, not the patient.
While I was here I enjoyed the conference and seeing my global friends and colleagues from around the industry. I received lots of great feedback and it gave me much to think about.
One thing I heard concerned my column about CME executive Kim Taylor and her battle with cancer. There was an initial reaction, I was told, among a handful of CME employees that I was invading Kim’s privacy by publishing the column I wrote. However, when told I had Kim’s blessing and permission to write the story, their response changed.
I rightly understand the power that comes with publishing this newsletter and the importance for using that power for good. When I heard about Kim’s health issues, I asked her assistant to see if Kim wanted me to write something. I would not have written something without her blessing.
It seemed to me that Kim’s friends and CME associates were taking a very public posture of support with the wristband campaign. Later they came up with the Laugh For Kim. I believe in the power of prayer to aid healing, and I readily recall “Laughter is the Best Medicine” with a hat tip to Reader’s Digest.
More importantly though, Kim is a friend, colleague and mentor to many in the industry. I asked about writing a story because I thought Kim would want to show the world her heart is as big as her laugh. I believed she would not stop being Kim and I was right.
It turns out, though, as I was told, that my story broke the news of Kim’s health issues to the CME employees. Because of the privacy issues, there was no internal memo. The JLN story was the memo.
I am pleased by the $23K raised for the Lisa Fund following the publication of my column, especially for all the support from around the industry in honor of Kim. One competitor of the CME’s donated $3K to the Lisa Fund. A greater good was created by Kim’s courage and leadership, and the support of her friends.
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Timezone: Exchange Leaders Look East For Growth
Jim Kharouf, JLN
Exchange leaders at the FIA International Derivatives Expo on Monday talked about the industry’s growth prospects and most eyes turned to Asia.
Garry Jones, CEO of the London Metal Exchange, which is owned by the Hong Kong Exchanges and Clearing, said that many exchanges are looking toward China. And while much is made of the HKFE’s cash equity linkage to Shanghai, he said the key to relationships and access to China is simple – make it a win-win.
“You have to have a mindset that it’s good for China as well,” Jones said.
And given that China is slowly opening up investing rules and access to outside markets, Jones said the potential growth is massive.
Eurex CEO Andreas Preuss noted his exchange’s own Shanghai partnerships as well, and added that China’s retail customer base will be a growth driver. He noted that the percentage of global futures volume from Asia continues to grow, but exchanges will have to do more to garner that business.
“In nurturing business on the derivatives side, we all have a lot of work to do,” Preuss said.
CME’s CEO Phupinder Gill noted that some traditional stock brokers have been successful in bringing more of its retail customers into futures and options trading. Firms such as TD Ameritrade have reported in the past several years that its fastest growth has been in the futures and options segments.
And as exchanges look to the East, the challenge will be whether they can independently or collectively drive more retail business in the coming years into futures.
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FIA Global Launches Interactive Reporting Tool on CCP Risk
FIA
Today, FIA Global, in cooperation with the law firms Linklaters and Milbank, Tweed, Hadley & McCloy, announced an interactive tool to compare and assess the rules of central counterparties (CCPs) within the CCP Risk Review.
jlne.ws/1Gajqab
***** Is there an XBOX version of this game?
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CME stopped the flash crash, says exchange rival
The Trade News
Intercontinental Exchange CEO, Jeffrey Sprecher, took a moment to herald rival exchange group CME on its stopping of the flash crash at the Futures Industry Association expo in London today.
jlne.ws/1KZB44G
***** Jeff Sprecher made an important point yesterday about how the industry is not serving the buy-side well. We are delivering fragmented, complicated markets, when the buy-side just wants deep liquid pools of liquidity. His comments were largely ignored in the exchange leader discussion. It is a touchy subject and one could argue a shot a Nasdaq for their upcoming lookalike energy contracts.
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Trading Technologies Will Connect to Nasdaq’s European Commodities Market
TT
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, and Nasdaq today announced TT will introduce connectivity to Nasdaq’s European commodities operations, including the exchange group’s Nordic benchmark power market and German power contracts, through its new TT platform. This next-generation trading platform with mobile capabilities will give traders across Europe access to several markets, from a single trading screen.
jlne.ws/1T8wIuw
***** I have not made up my mind about Nasdaq’s chances of success, but at least having TT connected is a positive step.
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Making Sense of Cleared Swaps: New Regulations and Compliance
The IFM
July 23 | 9:00 a.m.- 5:00 p.m. | NFA, Chicago
This one-day course is designed to cover key features of OTC swap contracts, new Dodd Frank regulations and compliance requirements for swaps markets participants. The educational program explores the world of swaps by taking a closer look at two of the most popular swaps— interest rate swaps (IRS) and credit default swaps (CDS) — and how financial institutions and corporates use swaps in their portfolio management strategies. In addition, the program looks at how swaps differ from listed derivatives and the changing landscape with a migration to the CCP model.
jlne.ws/1HmNFgh
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Spot Trading Named For Fifth Consecutive Year As One Of “Chicago’s Best And Brightest Companies To Work For”
Press Release
Spot Trading LLC, a leading proprietary trading firm, today announced that the National Association for Business Resources (NABR) is honoring the firm for the fifth consecutive year as one of “Chicago’s Best and Brightest Companies to Work For®”. Spot was once again the only trading firm to make the list of top companies recognized for implementing innovative strategies and delivering exceptional human resources practices.
jlne.ws/1MHZwWj
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MarketsWiki
MarketsWiki Page of the Day
Loh Boon Chye
MarketsWiki Recent Updates
People
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Companies, Organizations and Groups
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Lead Stories
View of Wall Street Still Suffering Despite Economy, Survey Says
By STEPHANIE YANG, WSJ
Several years into the economy’s post-crisis mend, Wall Street’s reputation is still lagging behind a full recovery. Financial institutions have grown increasingly concerned about public perception and trust, according a study by communications firm Makovsky. The results come as many continue to face costly legal battles and lingering backlash from the financial crisis.
jlne.ws/1FQxx10
China Shrugs at MSCI Exclusion
WSJ
As China awakes to find its stock markets still not ready to be included in the world’s major equity indexes, few within the country expressed surprise and most reacted with a quiet shrug.
jlne.ws/1e2eN94
Investors in switch from CME to LCH
Joe Rennison, FT
Investors are switching away from exchanges operator CME Group for clearing certain derivatives contracts because of a recent jump in costs compared with European rival LCH.Clearnet, driven by a change in pricing approach by banks.
jlne.ws/1QKxUQT
LME puts its foot on the high-speed pedal to attract volume
By Henry Sanderson, FT
In the global race among bourses to attract trading volume, metals exchanges are increasingly dealing with a counterparty that has become controversial in equity markets: the “black box”, or computer-driven, trading programme.
jlne.ws/1f1Ut87
Ex-NYSE head among trading veterans backing blockchain start-up
Nicole Bullock in New York, FT
The former head of the New York Stock Exchange is among veteran trading executives who are backing a start-up that aims to use the type of technology that underpins bitcoin for securities issuance and trading. Duncan Niederauer, the previous chief executive of NYSE, is part of a group that has produced $1.25m of seed money for Symbiont. The other members are Matt Andresen, trading head at Citadel who founded the Island ECN, and Getco founders Dan Tierney and Stephen Schuler.
jlne.ws/1FQrd9Y
Western stock exchanges look to China for market growth
Reuters
China offers better growth prospects for stock and derivatives exchanges as making money in mature western markets becomes tougher due to overcapacity, top bourse officials said on Tuesday.
“Clients are really trying to get access to Asia and China right now,” Jeff Sprecher, chairman and CEO of the Intercontinental Exchange, told the IDX derivatives conference in London.
jlne.ws/1e2J5IW
U.S. regulator plans to close swaps trading loophole
BY DOUWE MIEDEMA, Reuters
The top U.S. derivative markets regulator on Tuesday launched a plan to close a loophole Wall Street banks may have used to duck new trading rules by shifting business abroad. Under the plan, the Commodity Futures Trading Commission would make U.S. banks’ derivatives operations comply with its rules for uncleared swaps, even if the units are located abroad.
jlne.ws/1KUoDEj
CFTC’s Massad expects deal on EU-U.S. derivatives rules
By Huw Jones, Reuters
The United States and European Union have made good progress on ironing out differences between their respective derivatives rules that threaten to fragment global markets, a top U.S. regulator said on Tuesday.
jlne.ws/1QKw5U7
That’s No Spoof: A $125,000 Fine for ‘Detrimental’ Trading
By BRADLEY HOPE, WSJ
Igor Oystacher, the Chicago trader featured in a Page One story in February about alleged market manipulation, has been fined $125,000 by Intercontinental Exchange Inc.ICE +0.56% for disruptive trading, according to a new filing.
jlne.ws/1Qnrn3D
Big Banks Can’t Will This Risk Away; Regulators face pressure to tighten the screws on the living wills of big banks.
By JOHN CARNEY, WSJ
The biggest U.S. banks may soon face a test of willpower. Banks have until July 1 to submit “living wills” to regulators. These are plans describing how they could be resolved in the event of failure.
jlne.ws/1MHjaBJ
As Brokerage Preps for IPO, the Negatives Are Lacking; Sidoti & Co. doesn’t allow analysts to issue any ‘sell’ ratings on the stocks they follow
By JENNY STRASBURG and JULIE STEINBERG, WSJ
A small New York brokerage planning to sell shares to the public is pitching an unusual business model: It doesn’t allow analysts to issue any negative ratings on the hundreds of stocks they follow.
jlne.ws/1S3ht4N
Regulatory
SEC aide asked to give up any Goldman Sachs goodbye bonus
By FRANCINE MCKENNA, MarketWatch
The director of the AFL-CIO’s Office of Investment wrote to White Tuesday asking about a possible bonus for her new chief of staff, Andrew Donohue, from his former employer Goldman Sachs GS, -0.37% Donohue is due to start at the end of the month, replacing Lona Nallengara.
jlne.ws/1MHgrZ6
IDX: CFTC, ESMA eye summer CCP equivalence pact
By Helen Bartholomew, IFR
US and European regulators have reiterated their commitment to achieving equivalence between the two regimes for central counterparty clearing firms this summer, but signs of any compromise over the thorny issue of margin requirements for cleared futures remain few and far between.
jlne.ws/1JIP1SK
Former director banned from conducting regulated activity
UK FCA
The Financial Conduct Authority has today banned Kevin Allen from performing any function related to any regulated activity.
jlne.ws/1GxLBD8
Impairment of non-financial assets: The role of directors
ASIC
ASIC today released an information sheet to assist directors and audit committees in considering whether the value of non-financial assets shown in a company’s financial report continues to be supportable.
jlne.ws/1JEaX32
Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities
SEC
Federal agencies today issued a final interagency policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate.
jlne.ws/1F7lImx
Exchanges & Trading Facilities
LME faces formidable opposition to warehouses in China
* Shanghai Futures Exchange worried over loss of volumes-sources
* Chinese smelters drop objections to LME warehouses
* Officials fear more trade on LME may boost yuan outflows-source
By Polly Yam and Pratima Desai, Reuters
The London Metal Exchange’s ambition to approve warehouses in China, particularly in Shanghai, is running into powerful local resistance. The main challenger is the Shanghai Futures Exchange (SHFE), which metal industry sources say is worried about loss of volumes, as LME-registered warehouses in China would encourage locals to use the London exchange instead for trading. SHFE did not comment.
jlne.ws/1MI2z0T
Eris Exchange Sets New Daily Volume Record
Press Release via PR Newswire
At the FIA IDX conference, Eris Exchange (Eris), a U.S.-based futures exchange group, today announced that, on June 9, 2015, Eris USD Interest Rate Swap Futures achieved a daily volume record of 46,552 contracts, representing more than $4.6 billion in notional value. The record was more than double the previous Eris daily volume record of 21,014 contracts set on September 5, 2014.
jlne.ws/1e2IRkV
Van Eck Global Investments Ltd. lists the first two ETFs on SIX Swiss Exchange
SIX Swiss Exchange
SIX Swiss Exchange welcomes Van Eck Global Investments Ltd. as a new ETF issuer. Van Eck Global Investments Ltd. launches two products based on gold mine shares.
jlne.ws/1dvtIHQ
Igor Oystacher Gets a Second Spoofing Fine, This Time From ICE
By Matthew Leising, Bloomberg
Igor Oystacher has another spoofing enforcement action to his name. The co-founder of Chicago-based 3Red Group was fined $125,000 on Friday by Intercontinental Exchange Inc., according to a filing posted to the National Futures Association’s website. The document described a form of market manipulation known as spoofing — or placing fake orders that spook other traders into moving prices one way or another — involving futures contracts on the Russell 2000 Index.
jlne.ws/1GxPgB5
UPDATE Credit Event Advisory – CME Clearing Credit Event Processing for Sabine Oil & Gas Corporation (formerly known as Forest Oil Corporation)
CME Group
jlne.ws/1KZlTbR
Hedge Funds & Managed Futures
BlackRock Hires Columbia Finance Professor to Guide New Investment Strategy
By LANDON THOMAS Jr., NY Times
For the last four years, the asset-management giant BlackRock has dominated exchange-traded funds, the fastest-growing segment of the mutual fund industry.
jlne.ws/1BY2m3a
Gun maker Colt heads toward bankruptcy showdown with bondholders
BY TOM HALS, Reuters
Famed U.S. gun maker Colt appears to be headed into a bankruptcy duel in the coming week if its private equity backers and bondholders cannot overcome widely differing views on the best way to heal the company’s financial wounds.
jlne.ws/1FQyp5H
The Sector That Ate Financials (It’s Tech)
By MICHAEL DRISCOLL, WSJ
Where have all the bank-stock traders gone? Like everyone else, they got into tech.
jlne.ws/1GxNOyF
TrimTabs and BarclayHedge Report Hedge Funds Add $950 Million in April after Shedding $750 Million in March. Hedge Fund Industry Outperforms S&P 500 in April
BarclayHedge
BarclayHedge and TrimTabs Investment Research reported today that the hedge fund industry took in $950 million (0.04% of assets) in April, reversing March’s outflow of $750 million (0.03% of assets).
jlne.ws/1FGXHUP
Banks & Brokers
Job cuts overshadow HSBC’s push into Asia
Martin Arnold in London and Josh Noble in Hong Kong, FT
Headlines about HSBC’s latest strategy on Tuesday were dominated by its drastic plan to cut 50,000 jobs. But while Europe’s biggest bank is slashing in some areas, it is building up others just as much — particularly in Asia.
jlne.ws/1e2hTdl
Pimco cuts U.S. government holdings to 8.5 pct as firm braces for hikes
Reuters
Pimco slashed its holdings of U.S. government-related debt in its flagship Pimco Total Return Fund by almost two-thirds in May from the prior month, the firm reported on its website on Tuesday, as it braces for the Federal Reserve to hike interest rates.
jlne.ws/1QnqkRj
Deutsche Bank Headquarters in Frankfurt Are Searched by Prosecutors
By JACK EWING, NY Times
German authorities searched offices at Deutsche Bank headquarters in Frankfurt on Tuesday and seized documents, the bank said.
jlne.ws/1HpzuXD
Wall St. Courts Start-Ups It Once May Have Ignored
By NATHANIEL POPPER, NY Times
On the first day of a hackathon at the Manhattan headquarters of Goldman Sachs, participants from the Wall Street bank showed up in suits. The programmers from Kensho, a start-up that had recently gotten money from Goldman, were there in jeans and ripped shirts.
jlne.ws/1IEnMKv
Deutsche Official Played Down Rigging
WSJ
A Deutsche Bank AG executive whose employees have been accused of rigging interest rates told a British trade group in 2008 that such manipulation was nothing more than a “conspiracy theory,” a London court heard Tuesday.
jlne.ws/1I0Gjen
Clearing & Settlement
CME Group Clearing Advisories
CME Group
CME Group Deliveries Plus – SMART Click Migration – REMINDER
UPDATE Credit Event Advisory – CME Clearing Credit Event Processing for Sabine
Performance Bond Requirements: Equity Intra-Commodity Spread Charges – June 9, 2015
jlne.ws/1R9iqZG
Indexes & Products
Things to Know About MSCI Considering Inclusion of Chinese A-Shares in Its Benchmarks
By Gregory Stuart Hunter
Index provider MSCI will decide next week (after U.S. markets close Tuesday) whether to include Chinese domestic equities, known as A-shares, in its global benchmarks. Here are five things to know about what this means for global investors.
jlne.ws/1BXZP9a
China MSCI inclusion is inevitable but not imminent
Josh Noble in Hong Kong, FT
Mainland China’s grand entrance to the global equity club may have been delayed for now, but its membership papers are already being drawn up.
jlne.ws/1KUprJ3
S&P 500 at Smallest Price Range in 20 Years
by Joseph Ciolli, Bloomberg
A deer in headlights is stuck in place and too overwhelmed to act. So too are stock investors as they await action from the Federal Reserve.
jlne.ws/1QKFQ4H
Technology
Neonet Launches New Liquidity Seeking Algorithm
Press Release
Neonet, the independent agency broker and execution specialist, today announced the latest addition to its algorithmic trading suite with the launch of the new “Capture” algorithm. “Capture” is a liquidity seeking algorithm designed to leverage a number of underlying algorithmic models and methodologies across both dark and lit markets, depending on the client’s urgency to complete the order.
jlne.ws/1kFNIbz
The Bitcoin Startup That Lured Nike’s CIO Has Now Hired the Nike CISO Sued by MasterCard
By STEVEN NORTON AND KIM S. NASH, WSJ
The bitcoin startup that hired former Nike Inc.NKE -0.09% CIO Anthony Watson has now added the sportswear giant’s security chief, William Dennings, to its ranks. The move comes amid a lawsuit between Nike, Mr. Dennings and his former employer, MasterCard International Inc.MA +0.21%, that highlights the fierce battle for top cybersecurity talent.
jlne.ws/1B5ckEO
Uber and Airbnb urge watchdog to back off
Barney Jopson in Washington and Tim Bradshaw in San Francisco, FT
Uber and Airbnb have advised US regulators to back off from their businesses at a meeting in Washington where the ride-hailing company promoted “delegated regulation” as the right way for them to be left alone.
jlne.ws/1MHdIyY
SIFMA Urges Swift Passage of Senate Cybersecurity Legislation
SIFMA
SIFMA today released the following statement from president and CEO Kenneth E. Bentsen, Jr., after Senator Richard Burr offered the Cybersecurity Information Sharing Act (CISA) as an amendment to the National Defense Authorization Act (NDAA):
jlne.ws/1BXYora
Interactive Data to Provide Evaluated Pricing Data to Liquidnet’s Fixed Income Dark Pool to Better Support Best Execution Objectives
Interactive Data
Continuous Fixed Income Evaluated Pricing Will Provide Liquidnet’s Platform Participants with Pre-Trade Transparency and More Efficient Best Execution Analysis
Interactive Data, a trusted, leading provider of fixed-income evaluated pricing, announced that it will provide Liquidnet, the global institutional trading network, with continuous evaluated pricing to help its fixed income trading platform participants meet their price discovery and best execution objectives. Liquidnet will soon launch the first dark pool for corporate bonds which is centralizing a critical mass of corporate bond liquidity from its network of more than 780 asset managers and providing enhanced data and proven technology that will make corporate bond trading more efficient.
jlne.ws/1F6oMPN
Enforcement
Trader to Pay $1 Million for Short Selling Violations
SEC.gov
An SEC investigation found that Andrew L. Evans through his firm Maritime Asset Management violated an anti-manipulation provision of the federal securities laws known as Rule 105 on nearly a dozen occasions. Rule 105 prohibits short selling an equity security during a restricted period (generally five business days before a public offering) and then purchasing that same security through the offering. By purchasing lower-priced shares in the follow-on offerings that he could use to cover his short sales, Evans reaped $582,175 in illegal profits.
jlne.ws/1FPsttU
SEC Charges Biotech Employee, Two Stockbrokers With Insider Trading on Nonpublic Information About Pharmaceutical Trials and Merger
SEC.gov
The SEC alleges that Michael J. Fefferman learned material nonpublic information as senior director of information technology at Ardea Biosciences Inc. He tipped his brother-in-law Chad E. Wiegand in advance of major public announcements related to two pharmaceutical trials, a licensing agreement for a cancer drug, and eventually the acquisition of the company by AstraZeneca PLC. Wiegand, a stockbroker, purchased Ardea stock in various customer accounts based on the confidential information he received from Fefferman, and he tipped his friend and fellow stockbroker Akis C. Eracleous so he could similarly buy stock on behalf of his customers. The alleged insider trading resulted in illegal profits of approximately $530,000.
jlne.ws/1QmqeJI
U.S. SEC says two stock brokers face criminal insider-trading charges
BY SARAH N. LYNCH, Reuters
Two California-based stock brokers have been criminally charged with using material non-public information to trade in Ardea Biosciences Inc, a biotechnology firm later acquired by AstraZeneca, the U.S. Securities and Exchange Commission said on Tuesday.
jlne.ws/1BY32Wa
Rhinomed Ltd pays penalty for alleged continuous disclosure breach
ASIC
Following an ASIC investigation, Rhinomed Limited (Rhinomed) has paid a penalty of $33,000 for allegedly failing to comply with its continuous disclosure obligations. Rhinomed, a respiratory technology company, made an announcement to the Australian Securities Exchange (ASX) on 9 July 2014 that it will partner with the Fitness First health clubs to promote its Turbine® technology throughout July. The deal was described in the announcement as an “outstanding commercial opportunity” and “a real coup” for the company.
jlne.ws/1F7lRGy
Environmental & Energy
Obama Administration Readies Big Push on Climate Change; Proposals to curb emissions from trucks, airplanes, oil and natural-gas operations, and power plants
By AMY HARDER, WSJ
The Obama administration is planning a series of actions this summer to rein in greenhouse-gas emissions from wide swaths of the economy, including trucks, airplanes and power plants, kicking into high gear an ambitious climate agenda that the president sees as key to his legacy.
jlne.ws/1GqK9k4
Global Glut Crops Up in Cotton; Prospect of unexpectedly large crops and of declining imports from China weigh on cotton prices
By JULIE WERNAU, WSJ
Cotton traders are bracing for a global glut of the fiber, as supplies from the world’s biggest growing regions are set to rise amid waning demand from China.
jlne.ws/1TamCcN
After the oil rout, energy deals are set to focus on US shale
Christopher Adams in London and Ed Crooks in New York, FT
“When something on this scale happens, every board asks: ‘What do we do?’ And they call in their M&A advisers and ask them the same question.”
jlne.ws/1L0GU5O
Asia-Pacific
Success Of Shanghai-Hong Kong Stock Connect Hinges On Removing Barriers To Participation – According To Study
MondoVisione
Launched in November, this path-breaking initiative provides international investors with direct access to China’s A shares market for the first time
Continued participation among investors, brokers and custodians is a key focus area to ensure program achieves its goals
Market participants need to ensure their post-trade systems and operations can scale up to meet increased volumes and that best practice is employed to minimize operational risk
A comprehensive whitepaper published by Celent and commissioned by The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, reveals that the long-term success of the Shanghai-Hong Kong Stock Connect (SHSC) hinges on removing the many barriers to participation, including features of the program that restrict trading strategies, introduce risk and create operational complexity.
jlne.ws/1f1XdC9
China stocks’ inclusion in global index put on hold
Josh Noble in Hong Kong and Nicole Bullock in New York, FT
China will have to wait to join MSCI’s global benchmarks due to lingering investor concerns about international access to one of the world’s largest equity markets.
jlne.ws/1QnkBLd
Miscellaneous
Murdoch groups pick Danish architect for World Trade Center HQ
Matthew Garrahan and Anna Nicolaou in New York, FT
Rupert Murdoch’s 21st Century Fox and News Corp have chosen a Danish architect to build their US headquarters at the World Trade Center site in Manhattan.
jlne.ws/1IEkreu
READ MORE: John Lothian: View of Wall Street Still Suffering Despite Economy, Survey Says; China Shrugs at MSCI Exclusion; Investors in switch from CME to LCH.