Nasdaq OMX announces a plan to open a derivatives trading facility in London. Online and discount brokers look at sharply increasing collateral requirements and wonder how they are supposed to stay in business. Liquidnet discloses that the SEC is investigating them for improperly talking about their customers as they sought to increase business. In First Read today, you’ll find analysis of the eurozone; senior-level promotions; and the world says farewell to a financial giant.
Quick View: Nasdaq’s second chance in London
By Philip Stafford in Istanbul – Financial Times
Nasdaq OMX is back in London. The group officially announced it would begin derivatives trading in the UK capital, confirming what was becoming one of London’s most open secrets. The Financial Times first reported on Nasdaq OMX’s plans in October last year and spoke with many people who knew at least someone who had been working on the project or interviewed for it. Nasdaq OMX’s preparations are well advanced and operations are likely to commence from the start of next year.
**** This commentary includes several references and quotes from my “Recession” commentary from last week.
Anna Schwartz, Economist Who Collaborated With Friedman, Dies at 96
By ROBERT D. HERSHEY Jr. – NY Times
Anna J. Schwartz, a research economist who wrote monumental works on American financial history in collaboration with the Nobel laureate Milton Friedman while remaining largely in his shadow, died on Thursday at her home in Manhattan. She was 96.
**** The flip side of this announcement is that Bill Sexton has left Newedge, replaced by Mr. Babule.
Getco appoints new division heads
By Arash Massoudi in New York
Getco, the global electronic trading and market-making firm, has appointed two new heads to its European and Asian divisions. Robert Smith, its Asia head, will run Getco’s London office starting in September, the company said in a statement. He will be replaced in Singapore by Farid Moslehi, currently chief risk officer.
**** Another casualty of Getco’s cutback reportedly was the young and talented public relations professional Dave Carlson.
Exchange Council approves introduction of new trading architecture
The Eurex Exchange Council unanimously approved the planned introduction of a completely new trading architecture at its regular meeting. This approval meets a major legal requirement. The introduction of the new trading system will, among other things, also require an amendment to the Exchange Rules to also be approved by the Exchange Council. The migration is scheduled to begin in December 2012, with products transferred from the current to the new system in four stages.
London Stung by U.S. Attack on Bank Regulation Record
Calling London a haven of regulatory loopholes that spawns financial trading disasters could make it harder to align new transatlantic rules, figures in London’s financial and legal circles said on Wednesday. Responding to attacks in Congress on London’s regulatory record, European policymakers, analysts and industry officials called the American comments ill-advised and politically driven.
**** No politics here, please move along.
The US must not override EU regulators
By Michel Barnier – Financial Times
The US regulatory authorities held a public meeting on Thursday on how they intend to interpret the rules on cross-border trades in derivatives. We are now at a watershed in deciding if we want our combined regulatory efforts in the US and the EU to deliver what we set out to do together three years ago or if we will fail at the last hurdle. The biggest danger to success is that of excessive attempts by regulators to exercise authority beyond their normal boundaries.
Hedge fund stars ponder “moment of truth” in Monaco
Reuters via Yahoo! Finance
Tucked into corners of Monaco’s plush Meridien hotel and on lonely tables in sun-kissed bars overlooking the Mediterranean, anxious hedge fund managers contemplate the next six months that could make or break their careers.
The End of the Euro Is Not About Austerity
By SIMON JOHNSON – NY Times
Most current policy discussion concerning the euro area is about austerity. Some people, particularly in German government circles, are pushing for tighter fiscal policies in troubled countries (i.e., higher taxes and lower government spending). Others, including in the new French government, are more inclined to push for a more expansive fiscal policy where possible and to resist fiscal contraction elsewhere.
Corporate Culture is Key Element in Fighting Rogue Trading
Every financial institution is acutely aware that rogue traders can cause tremendous damage to the balance sheets and reputations of the firms for whom they work. Detecting and preventing rogue trading activity, however, is not easy.
Phil Flynn of The Price Futures Group Discusses the Outlook for Natural Gas & Carbon Markets
Phil Flynn has followed the energy markets for more than two decades and recently joined The Price Futures Group as a senior market analyst. He spoke with JLN Environmental/Energy editor Jim Kharouf about the outlook for natural gas, shale gas and Canada’s oil sands. Flynn also gave his thoughts on the future of the carbon market and the US energy mix.
James Gellert of Rapid Ratings International Discusses MF Global & Credit Ratings Regulation
James Gellert is Chairman and CEO of Rapid Ratings International, a financial services company that uses a proprietary quantitative system to rate the financial health of corporations and financial institutions. The company’s user-based compensation model offers an alternative to the “company pays” model used by NRSROs such as Standard & Poor’s, Moody’s and Fitch. Gellert spoke with John Lothian News Editor-at-Large Doug Ashburn about Rapid Ratings’ “user-pays” model, its early warning on MF Global, and credit ratings regulation under Dodd-Frank.
JLN Interest Rates
MSRB PUBLISHES REPORT ON MUNICIPAL VARIABLE RATE SECURITIES INTEREST RATE AND TRADING DATA
The Municipal Securities Rulemaking Board (MSRB) today published its third annual report summarizing interest rate, trading and other data on municipal variable rate securities reported to the MSRB between early 2009 and April 2012.
Included in the report is information on the size of the market for auction rate securities (ARS) and variable rate demand obligations (VRDO), liquidity facilities associated with VRDOs, trading volume, interest rates and number of rate resets. The report reflects a continued contraction in the size of the ARS and VRDO markets as well as a continued decline in new issuance and trading of municipal variable rate securities.
Data aggregated in the MSRB’s report is available for individual municipal securities on its Electronic Municipal Market Access (EMMA) website.
See the full report here: http://jlne.ws/KBojPl
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Nasdaq to trade derivatives in London
By Philip Stafford in Istanbul – Financial Times
Nasdaq OMX, the transatlantic exchanges operator, is set to launch a London-based derivatives platform to trade interest rate products in a move that puts it in direct competition with Deutsche Börse and NYSE Euronext.
Online Brokers Decry Cash Crunch in Clearing Firm Deal
By Jacob Bunge – Dow Jones
Some U.S. discount brokerages face a dramatic jump in the cash they have to post to back stock and options trades, forcing a standoff between one of the sector’s largest clearers and firms that warn the move could hamstring clients’ investing.
**** Great story by Jacob Bunge of Dow Jones. I am shocked by the low amount of collateral that these firms were asked to put up – more than the higher capital call now. I understand it is a lot of money to some people, but when you get a margin call you meet it, or you get out. You don’t bring legal action. That might be a good legal strategy, but it is a stupid business strategy. What we have seen and continue to see is evidence of people with too little capital behind their activities, from banks to homeowners, and in this case, retail securities firms.
Liquidnet Discloses SEC Probe
BY TELIS DEMOS AND JENNY STRASBURG – WSJ
Liquidnet Holdings Inc. told members of its trading network that it is under investigation by the Securities and Exchange Commission over whether the firm improperly shared information about some customers as it sought to expand its capital-markets business.
**** Former FT reporter and FT Trading Room editor Telis Demos has landed at The Wall Street Journal.
Bank Investors Dismiss Moody’s Cuts as Years Too Late
By Dakin Campbell and Michael J. Moore – Bloomberg
Downgrades of Morgan Stanley, Credit Suisse Group AG and 13 other global banks, announced by Moody’s Investors Service after months of speculation about dire fallout, were met instead by rallies in stocks and bonds.
Pressure Mounts on Merkel as I.M.F. Urges Action on Crisis
By STEPHEN CASTLE – NY Times
As she headed to a meeting Friday with her Italian, Spanish and French counterparts, Chancellor Angela Merkel of Germany faced mounting pressure to escalate efforts to save the euro following a blunt statement Thursday night from the International Monetary Fund.
Euro Ministers Informally Agree to Use EFSF for Spain Banks
Spain may initially seek aid from the euro zone’s temporary rescue fund to bail its banks out, with a plan for the loan to be taken over later by the permanent fund, Reuters reported Thursday, citing euro zone officials.
Spanish Aid Plan Is Flawed, Says IMF
By JONATHAN HOUSE and GABRIELE STEINHAUSER – WSJ
Spain said its crisis-hit banks will need as much as E62 billion ($78.75 billion) in new capital to absorb losses from a real-estate meltdown, as the International Monetary Fund warned that the euro-zone plan to aid the country may not work.
The bank that broke Spain
By Victor Mallet and Miles Johnson – Financial Times
“A very solid group with more than 10m customers.” That was how a senior Bankia executive described the big Spanish bank on the last Friday of April.
Pilot Program for Wider Stock Increments Backed at House Hearing
Exchange operator NYSE Euronext and brokers Cowen Group Inc. and Knight Capital Group Inc. told a congressional panel they support a pilot program to increase the minimum-price increment for smaller, less-active stocks as a way of spurring trading.
FundWatch: Schapiro money-fund proposal hit on Hill
Securities and Exchange Commission chief Mary Schapiro on Thursday received a mostly tepid and sometimes hostile reception from lawmakers on Capitol Hill for her proposals to reform the $2.7 trillion money-market fund industry.
Swaps Guidance Plan for U.S. Banks Abroad Delayed by CFTC
By Silla Brush – Bloomberg
The U.S. Commodity Futures Trading Commission postponed a meeting today to propose guidance extending the reach of Dodd-Frank Act swaps rules to overseas offices of JPMorgan Chase & Co., Goldman Sachs Group Inc. and other banks as commissioners debated details of the document.
Testimony On “Perspectives On Money Market Mutual Fund Reforms” By SEC Chairman Mary L. Schapiro Before The Committee On Banking, Housing, And Urban Affairs Of The United States Senate
Joint Statement from the U.S. and Japan Regarding a Framework to Facilitate FATCA Implementation
ESMA Publishes An Update To The MiFID Q&A In The Area Of Investor Protection And Intermediaries
FMA report on Q1 2012 performance of the Austrian insurance sector
Canadian Securities Regulators seek comments on the potential regulation of proxy advisory firms [CSA]
Canadian Securities Regulators propose disclosure enhancements to Fund Facts
Exchanges & Trading Facilities
Newedge Says LME Sale Must Preserve Market Structure – Senior Executive
Any buyer of the London Metal Exchange must preserve the exchange’s existing market structure, a senior Newedge executive said, as the financial services group works to grow its metals business despite recent senior staff defections.
BM&FBovespa May Lose 30% Share to Competitors: Corporate Brazil
BM&FBovespa SA , Brazil ’s stock exchange, is facing a loss in market share estimated at as much as 30 percent by HSBC Holdings Plc and Banco Itau BBA SA as the nation considers boosting competition among trading platforms.
Bulgaria To Sell Majority Stake In Local Bourse By Year-End
By Vladimir Guevarra – Dow Jones
The Bulgarian government is set to sell its majority stake in the Bulgarian Stock Exchange by the end of this year, BSE Chief Executive Ivan Takev said Thursday.
ICAP completes PLUS Stock Exchange plc acquisition
ICAP confirms that all the conditions relating to its acquisition of PLUS Stock Exchange plc have been satisfied and that the transaction has now completed.
EEX: Peter Heydecker chairs newly elected Exchange Council – Election of two further Managing Directors Exchange – Concept for the introduction of ”Green Certificates” – Discussion of the EWI power market design study
[CBOE] GeoEye, Inc. (GEOY)
[CBOE] Russell Reconstitution on Friday, June 22, 2012
[CBOE] Allocation Algorithm Change for SPXW Opening Trades at the Minimum Price Increment
[CBOE] Restrictions on Transactions in China North East Petroleum Holdings Ltd.
IPO in the Entry Standard by the Chinese company Vange Software Group AG
[ASX] Unsponsored Depositary Receipts will not be eligible for S&P/ASX indices
CBOE, C2, CFE, and CBSX Trading Schedule for Independence Day Holiday
Program Trading Averaged 39.3 Percent Of NYSE Volume During June 11-15
Hedge Funds & Managed Futures
Brevan Howard Seeks $20 Million Investments for Debt Fund
Brevan Howard Asset Management LLP, Europe’s second-biggest hedge-fund manager, is seeking capital for a new pool that buys securities tied to mortgages and other debt.
Hedge fund relocating HQ from Hanover to New York City
New Hampshire Union Leader
Along with Parishs hiring, the firm is changing its name to Oakum Bay Capital and is moving its current headquarters from Hanover, New Hampshire to New York City. The firm has around 60 million in assets under management.
JPMorgan creates new asset management unit, reshuffles leadership
Reuters via Yahoo! News
JPMorgan Chase & Co’s asset management business has created a new unit, which will oversee $100 billion in assets under management and incorporate teams from the company’s investment management and wealth management divisions.
Morningstar Canada Names Paul D. Kaplan Director of Research
Morningstar, Inc., a leading provider of independent investment research, today announced that Paul D. Kaplan, Ph.D., CFA, has been named director of research for Morningstar Canada, reporting to Scott Mackenzie, president and CEO of Morningstar Canada.
‘Operation Twist’ threat to bond trading
By Michael Mackenzie in New York – Financial Times
The US Federal Reserve’s decision to extend Operation Twist will reduce liquidity in the short-term funding market that helps facilitate smooth trading of US government bonds, traders have warned.
High-Net-Worth Investors Share Thoughts on Income-Generating Strategies
Fidelity Investments today announced the results of a poll of customers with at least $250,000 in investable assets on a range of income generation strategies. The poll found they are actively looking for dividend-producing stocks and corporate bonds for higher yields in this low interest rate environment.
Morningstar Introduces Morningstar Analyst Rating and Global Fund Reports for Alternative Mutual Funds
Morningstar, Inc., a leading provider of independent investment research, today introduced the Morningstar Analyst Rating and Global Fund Reports for approximately 40 alternative U.S. mutual funds, representing about 75% of the alternative fund universe by assets.
Banks & Brokers
Credit Suisse Cut 3 Levels as Moody’s Downgrades Biggest Banks
Dakin Campbell and Michael J. Moore – Bloomberg
Credit Suisse Group AG’s credit rating was cut three levels and Morgan Stanley’s was reduced two grades as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms.
Citigroup Says Moody’s Analysis Is Arbitrary And Completely Unwarranted
U.S. Banks to Pay $125,000 to Many Hurt in Foreclosures
U.S. banks including JPMorgan Chase & Co. and Citigroup Inc. will pay as much as $125,000 plus equity to individual customers most harmed by mishandled foreclosures in 2009 and 2010, according to a remediation plan released by bank regulators.
Morgan Stanley Rallies as Bank Avoids Three-Level Downgrade
Morgan Stanley , owner of the world’s largest brokerage, rallied in extended trading as the bank was downgraded two levels by Moody’s Investors Service rather than the three-grade cut that the ratings firm said was possible.
Deutsche Bank mulls more cost cuts: paper
Reuters via Yahoo! News
Deutsche Bank is considering additional cost cutting measures, co-chief executives Anshu Jain and Juergen Fitschen told Frankfurter Allgemeine Zeitung in a joint interview published on Friday.
RBS May Get Less Than Expected in Branches Deal: Sources -FT
Royal Bank of Scotland Group PLC could get up to 300 million pounds less than expected for the sale of 318 branches to Santander UK after the business failed to meet targets outlined in the deal, the Financial Times reported on its website Thursday, citing two people close to the deal.
New head of commodities at Musi
Jay Maroo – Risk Magazine
Mitsubishi UFJ Securities International (Musi) has appointed Robert Forgrave in New York as head of commodities. Forgrave joins from Canadian Imperial Bank of Commerce (CIBC) where he has spent 20 years, most recently as global head of commodities.
JP Morgan combines FX and rates management
Robert Mackenzie Smith – Risk magazine
JP Morgan has expanded the role of Troy Rohrbaugh, global head of foreign exchange at JP Morgan, to include both foreign exchange and rates, a spokesperson for the US bank has confirmed.
Latest U.S.-Swiss Deal Makes Clear: No Hiding Cash In Big Swiss Banks
The U.S. Treasury said today that it has reached deals with both Switzerland and Japan that will allow the U.S.—with just a few extra steps—to get the comprehensive reporting of foreign bank accounts held by U.S. citizens required by the Foreign Account Tax Compliance Act. The agreements are just frameworks, so more details must still be worked out before they take effect.
Gorman Joins List of Goldman Sachs Departures
Wall Street Journal Blogs
Goldman Sachs managing director and co-head of fixed income currencies and commodities, or FICC, Charles Gorman, has resigned from the Wall Street bank in Australia, a spokeswoman said Friday.
Citigroup Will Resolve CEO Pay by End of Year, Pandit Says
Citigroup Inc., whose shareholders rejected Chief Executive Officer Vikram Pandit ’s compensation plan in April, is committed to resolving the pay dispute and the board will make a decision by the end of the year, he said.
BGC Partners Prices Senior Notes
BGC Partners, Inc., a leading global brokerage company primarily servicing the wholesale financial and property markets, today announced that it has priced an underwritten public offering of $100 million of 8.125 percent Senior Notes (“Notes”) due June 15, 2042.
Clearing & Settlement
Fidelity Investments appoints Todd Roadman to lead its Canadian clearing business
Fidelity Clearing CanadaULCi, a provider of clearing, custody and back-office support services to Canada-based brokerage firms and a part of Fidelity’s U.S.-based clearing business, National Financial, today announced that Todd Roadman has been appointed chief executive officer.
Euroclear Finland To Join TARGET2-Securities
Indexes & Products
Blackstone’s GSO Preps Leveraged-Loan ETF With State Street
Blackstone Group unit GSO Capital Partners has filed paperwork to launch the first actively managed exchange-traded fund dedicated to high-yield corporate loans, apparently sensing demand for floating-rate loans secured on company assets amid exaggerated price swings in fixed-rate “junk” bonds.
iShares DJ Emerging Markets Select Dividend launched on Xetra
Global X Funds Announces Changes to Its S&P/TSX Venture 30 Canada ETF
Semi-Annual Review Of The OMX Iceland 6 Index
Savvis to double data centre capacity
By Philip Stafford – Financial Times
Savvis, the US data centre operator, is to double its global capacity as its struggles to meet soaring demand from banks and investors wanting to outsource more trading infrastructure.
Federal Court in Texas Orders Linda Harris, Chance Harris, CDH Forex Investments, LLC, and CDH Global Holdings, LLC, to Pay over $5.4 Million in Restitution and a Monetary Sanction for Forex Fraud
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order imposing more than $5.4 million in restitution and a civil monetary penalty on defendants Linda Harris, Chance Harris and their companies, CDH Forex Investments, LLC (CDH Forex) and CDH Global Holdings, LLC (CDH Global), all of Flower Mound, Texas, for fraud in connection with the operation of a commodity pool and managed accounts trading off-exchange foreign currency (forex) contracts.
FINRA Fines Merrill Lynch $2.8 Million for Overcharging Customers; $32 Million in Remediation Paid to Affected Customers
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Merrill Lynch, Pierce, Fenner & Smith, Inc. $2.8 million for supervisory failures that resulted in overcharging customers $32 million in unwarranted fees, and for failing to provide certain required trade notices. Merrill Lynch has provided $32 million in remediation, plus interest, to the affected customers.
Former Silicon Valley hedge fund operator convicted of fraud
A former Silicon Valley hedge fund operator has been convicted in federal court in San Jose of wire fraud in connection with a scheme that according to prosecutors bilked investors of millions of dollars. Albert Ke-Jeng Hu, 50, was found guilty Wednesday by a jury in the court of U.S. District Ronald Whyte of seven counts of wire fraud in connection with fund transfers made in 2005 and 2007.
The SEC Hauls SAC’s Steve Cohen In For Testimony In Insider Trading Case!
Cohen is one of the most successful traders in history, and the SEC has been looking into the conduct of him and his firm for years. A couple of SAC Capital employees were busted for insider trading a couple of years ago in the “expert networks” scandal, but Cohen remained unscathed.
NFA permanently bars Boulder, Colorado futures firms, Arjent Capital Advisors LLC and Chicago Trading Managers LLC; bars Spencer K. Montgomery, the firms’ principal, for three years
SEC Charges Florida Broker in Astrology-Based Ponzi Scheme
The Securities and Exchange Commission today charged that a former broker in Orlando, Fla., defrauded investors in an astrology-based Ponzi scheme.
SEC Charges Two New Jersey-Based Firms and Owner in Stock-Lending Scheme
The Securities and Exchange Commission today charged a New Jersey businessman with running a stock-lending scheme that defrauded public company officials and brought restricted stock to the market.
Environmental & Energy
Dreaming Up Whole New Carbon Markets
The New York Times
Normally, when supporters of renewable energy talk about carbon markets, they’re referring to a system of traded credits that industries buy to compensate for their emissions of greenhouse gases, like the ones already sold in Europe and under development in California and Canada. But at the Renewable Energy Finance Forum-Wall Street, an annual conference organized by the American Council on Renewable Energy, the talk on Wednesday was of developing a different kind of carbon market where the gas would be bought and sold like a commodity to encourage carbon capture.
An Earth Summit Draws on Oil, Mining and Utility Largess
The New York Times
The cups at the water coolers here at Rio+20, the global sustainability conference taking place Wednesday through Friday, are made of rough biodegradable corn fiber rather than plastic. Vans running on second-generation ethanol made from sugar cane bagasse take conference members, free of charge, from the hotels on the Copacabana beach to the conference center an hour away.
United States, Canada Announce Next Phase of U.S.-Canada Clean Energy Dialogue
Press Release – Energy.gov
Today, the U.S. Department of Energy (DOE) and Environment Canada released the U.S.-Canada Clean Energy Dialogue (CED) Action Plan II, outlining the next phase of activities the two countries will undertake to jointly advance clean energy technologies.
Ministry Of Finance And HKEx Sign MOU
The Ministry of Finance of the People’s Republic of China and Hong Kong Exchanges and Clearing Limited signed a Memorandum of Understanding today on the listing and trading of RMB-denominated sovereign bonds in Hong Kong.
Tokyo Stock Exchange Select Corvil to Manage Latency on the Arrowhead and Tdex+ Trading Systems
Corvil opens Tokyo Office to support expanding footprint in Japan Corvil, a provider of latency management systems for global financial markets, today announced that Tokyo Stock Exchange, Inc. has selected CorvilNet, Corvil’s latency management system, to monitor its trading systems arrowhead and Tdex+ and its network arrownet.
Monetary Authority Of Singapore Response To “Singapore Accused Of ‘Regulatory Arbitrage” – BT, 16 June 2012
Equinix Launches US$28.5M Expansion Of Singapore 2 Data Center – SG2 Phase 4 To Increase Capacity To Support Growing Demand From Cloud And Financial Services Providers
Osaka Securities Exchange Notice On Resolutions At The 11th Ordinary General Meeting Of Shareholders
Shanghai Stock Exchange Innovates For Developing Bond Market
Shanghai Stock Exchange Endeavors To Guide Rational Investment
SEBI notifies norms for ownership, listing of stock exchanges
Capital markets regulator Securities and Exchange Board of India or SEBI has notified new rules for ownership and governance of stock exchanges, which is expected to encourage the setting up of new bourses and enable exchanges to get listed.
New norms to aid MCX-SX begin equity trading
After a long wait and an intense legal battle, the Multi Commodity Stock Exchange may soon be allowed to launch equities trading on its platform. Currently, MCX-SX trades only currency derivatives.
Blankfein Sees 80% of Goldman Sachs’s Growth Coming From BRICs
Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd Blankfein said the firm will rely on the biggest emerging markets for most of its growth even amid increasing concern economic expansion in Brazil, Russia, India and China may be slowing.
MCX Weekly Market Report – June 15, 2012 – June 21, 2012
NASDAQ Dubai Monthly Trading Report: May 2012