CME Group and the Kansas City Board of Trade announce they have signed an agreement in which KCBT will be acquired by CME Group. IntercontinentalExchange licenses credit-default swap indexes from Markit so that it can develop new, related futures contracts. NYSE Euronext partner up to create renminbi-denominated financial products as that currency’s popularity grows. In First Read, be sure to take a look at the new MarketsWiki.tv interview with Evgeni Mitkov, CEO of SURFACExchange, who talks with JLN’s Jim Kharouf about the foreign exchange and option markets’ current and future state.
Markets: Rage against the machine
Michael Mackenzie, Arash Massoudi and Stephen Foley in New York – FT.com
It has been 25 years since Black Monday, when stock markets crashed around the globe and Wall Street woke up to the risks of computerised trading. Since then, computing power has grown exponentially and so have the risks. It may not take a full trading day for the markets to lose 25 per cent today – it could happen in moments. And while traders knew trouble was brewing when they arrived for work on October 19 1987, today firms can lose hundreds of millions of dollars out of nowhere, the consequence of a badly written piece of code or the unpredictable interaction of thousands of algorithms, or “algos”, flickering across America’s fragmented markets.
**** Nice work by the FT team.
SURFACExchange CEO Evgeni Mitkov Discusses the Potential for FX Options
Evgeni Mitkov, CEO of SURFACExchange, launched the FX options ECN in August 2011. Just over a year later, they’ve attracted almost 50 firms by offering the ECN to currency options traders through a no-install browser-based platform. Mitkov spoke with JLN Editor-in-Chief Jim Kharouf during the Profit & Loss Forex Network Chicago, about how the FX market is holding up, how the participation base is shifting away from banks, and where the FX options space is moving.
**** Nice work by the JLN team, including the multi-talented Jim Kharouf.
SunGard’s Valdi Solution and Global Network Win 2012 FOW Award for Asia
SunGard has won “Best New Product – Trading and Execution” in the 2012 FOW Awards for Asia for the extension of its Valdi solution and the SunGard Global Network (SGN) into China.
**** Is there a “Best in Show” award at FOW?
MGEX Announces Extension of Exchange Fee Incentives for AJC Contract
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), announced the extension of reduced exchange fees for the Apple Juice Concentrate (AJC) futures and options contract.
***** MGEX is juicing trading in their juice contract.
DealBook: Pioneering High-Speed Trading Executives Shut Firm
New York Times
Eladian Partners, a high-frequency trading firm founded less than two years ago by former Citigroup executives, is ending operations as the industry confronts a slowdown.
***** High-frequency firm comes to a sudden stop.
Canada’s ‘hot’ traders attract regulatory heat
Stephen Foley in New York – FT.com
In Canada, regulators are clamping down on the “hot” trading firms whose computers risk gumming up equity markets. That’s “hot” as in “high order-to-trade”. While the US wrestles with how to respond to a variety of trading glitches, its northern neighbour has lasered in on a small number of algorithm-driven trading firms that dominate market data traffic, piling stress on exchanges and regulators by constantly inputting and removing trading orders but rarely actually trading on them.
***** Oh, Canada, glorious and free, we (regulators) stand on guard for thee.
Nasdaq: Systems Review ‘Essentially’ Complete
ARIES POON – WSJ.com
Nasdaq OMX Group Inc. said that International Business Machines Corp. IBM has made a “top-to-bottom” assessment of its trading systems following Facebook Inc.’s glitch-ridden initial public offering earlier this year, and the stock market operator is following up on IBM’s recommendations. The review, which was implemented after huge orders and traffic for Facebook’s IPO in May paralyzed the Nasdaq Stock Market’s trading systems, has been “essentially completed,” the stock market operator said Tuesday.
**** No one ever got fired for hiring IBM. We will see if someone gets fired after IBM gives its report.
Despite Its Problems, Dodd-Frank Is Better Than the Alternatives
STEVEN M. DAVIDOFF – NYTimes.com
Repeal Dodd-Frank? It sounds so simple. But repealing the Dodd-Frank Act won’t end “too big to fail” banks, and it may even make things worse.
***** Can you ever actually end “too big to fail?” I have my doubts.
A Trip Down the Short, Sad Path of Old Lane
AZAM AHMED – NYTimes.com
Perhaps the best trade Vikram Pandit made as a hedge fund manager was selling his firm to Citigroup. His former hedge fund, Old Lane, was just a year old in 2007, and its performance was lackluster. But the purchase went ahead all the same, costing Citigroup $800 million and netting Mr. Pandit $165 million.
***** Amazing, absolutely stupidly amazing.
Analysis: Euro emigration: safety valve or debt drag?
Debt-laden euro zone countries are exporting again — only this time it’s their young workers, in an exodus some fear could intensify national debt problems longer term. As countries on the euro zone periphery endure deep and prolonged recessions, high unemployment, severe tax hikes and state spending cuts, young people appear to be taking to planes, trains and boats again in search of work.
**** Where have I seen this before?
Quelle Surprise! Sorkin Tells Remarkable Whoppers to Defend His Wall Street Sources
Andrew Ross Sorkin has a remarkable piece of hogwash masquerading as a story today. His new piece, ” Nowadays, Wall Street Saviors May Wish They Weren’t ,” blatantly rewrites crisis history claiming that buyers of failed firms were “pressured” by the government do transactions during the crisis and the Big Bad Government got the better of them.
**** Fear, greed, stupidity and regrets.
CFTC’s Chilton calls for fines by second on ‘cheetah’ traders
High-frequency traders should register with the government, do more testing of software and face penalties for every second that they break the law, a top U.S. regulator said Tuesday in proposing new rules for so-called “cheetah” traders.
***JM: “For all those times when bankrupting your company in 11 seconds just isn’t enough.”
The Options Industry Council Announces Newest ‘Road To Wall Street’ Event Comes Back To The Stuart School Of Business At IIT
The Options Industry Council (OIC) announced today that the next event in its university outreach program, The Road to Wall Street: Analyze Your Options, will be at the Stuart School of Business at the Illinois Institute of Technology (IIT) in Chicago for college students and faculty from IIT as well as the Chicagoland area on Friday, November 2.
**** I wish I was a student so I could take this program.
MarketsWiki Page of the Day
Vikram S. Pandit
**** Mr. Pandit’s big news knocked Andreas Preuss out as a potential Page of the Day. Mr. Preuss was named as chairman of the World Federation of Exchanges, something more positive and important than some banker losing his job. But alas, the JLN team went with Mr. Pandit.
MarketsWiki Recent Updates
Companies, Organizations and Groups
29,612,624 pages viewed, 7,160 articles, 148,806 edits
CME Group to Acquire Kansas City Board of Trade
CME Group, the world’s leading and most diverse derivatives marketplace, and the Kansas City Board of Trade, the leading futures market for hard red winter (HRW) wheat, today announced they have signed a definitive agreement under which CME Group will acquire the Kansas City Board of Trade (KCBT).
ICE Inks Markit Deal to Base Futures on Credit-Swap Indexes
Matthew Leising – Bloomberg
Intercontinental Exchange Inc. (ICE) obtained the right to link futures contracts to credit-default swap indexes owned by Markit Group Ltd., the largest creator of the derivative instruments in the $25 trillion market.
NYSE Euronext, Bank of China Link in Renminbi Financial Products
David Pearson – Dow Jones
Stock market operator NYSE Euronext (NYX) said Wednesday it intends to work with the Bank of China (3988.HK) to take advantage of the increasing importance of the renminbi in capital markets by jointly developing renminbi- denominated financial products.
CME Group to Offer Clients Margin Offsets on Rate Swaps, Futures
Matthew Leising – Bloomberg
CME Group Inc. (CME), the world’s largest futures exchange, received regulatory approval to reduce the amount of margin required of its customers to back interest-rate futures and over-the-counter derivatives that offset each other.
Hong Kong Monetary Authority and Clearstream to launch cross-border collateral management cooperation
The Hong Kong Monetary Authority (HKMA) and Clearstream jointly announced today their cooperation in providing cross-border collateral management and liquidity services in Hong Kong. The HKMA and Clearstream plan to launch the services in the first quarter of 2013.
Computer errors: Mishaps prompt greater scrutiny of high speed traders
Philip Stafford – FT.com
The Securities and Exchange Commission, the US equities regulator, last month, and for the first time, fined a stock exchange for breaking rules.
Spain Aid Faces Diplomatic Tangle
MARCUS WALKER IN BERLIN AND ILAN BRAT AND DAVID ROMÁN IN MADRID – WSJ.com
A potential Spanish request for financial aid is becoming caught up in tangled diplomacy between euro-zone capitals, despite Madrid’s new willingness to push ahead.
Crédit Agricole to Sell Greek Arm Emporiki to Alpha Bank
NOÉMIE BISSERBE AND DAVID PEARSON – WSJ.com
Crédit Agricole SA said Wednesday it has agreed to sell its Greek banking arm Emporiki to Alpha Bank AE, as it moves to close the door on a disastrous chapter for the century-old French bank, but at a hefty cost.
Chances of Going Over Fiscal Cliff May Be Higher Than Experts Think
Wall Street Journal Blogs
Economists put the probability at just 17% that Congress will trigger a package of spending cuts and tax hikes that will throw the U.S. into recession, but some analysts say that may be too low.
CFTC Issues Final Rule Amending Existing Commission Regulations to Incorporate Swaps
The Commodity Futures Trading Commission (CFTC) today approved a final rule that amends certain current regulations in order to implement aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
A Tax to Kill High Frequency Trading
The United States should adopt a financial transactions tax to kill high frequency trading by removing the juice from this pernicious practice. A tax would be a simpler, more direct approach than entrusting the SEC to make effective rules.
Krawcheck Steps Into Public Debate
A year after leaving Merrill, Lynch, Sallie Krawcheck, one of Wall Street’s leading women, is stepping into the public debate over financial reform
Iosco hunts world’s weakest regulators
Sarah Krouse – Financial News
The International Organization of Securities Commissions, which regulates the world’s securities and futures markets, is planning to identify weaknesses in regulatory regimes around the globe. Over the next year, it will study maximum civil and criminal sanctions for a variety of financial crimes. The association represents 32 securities regulators overseeing 115 jurisdictions.
Texas Hold ‘Em—Time to Fold ‘Em – Keynote Address Of CFTC Commissioner Bart Chilton Before The 2012 Allegro Customer Summit, Dallas, TX
[Japan] Administrative Actions against Société Générale Private Banking Japan Ltd.
ASIC welcomes consultation on continuous disclosure
Subscribe to the ASIC Self-managed Superannuation Fund (SMSF) Auditor Update
APRA guidelines for names relating to financial institutions
Canadian securities regulators release 2012 Investor Index [CSA]
Exchanges & Trading Facilities
London Stock Exchange Group Management Appointments
David Lester Appointed Group Director Of Corporate Strategy – Mark Makepeace Appointed Group Director Of Information Services
Deutsche Börse enhances its IT for Energy offering
Deutsche Börse IT announced today that it has significantly enhanced its IT for Energy product offering. The electronic trading service called ComXerv has been upgraded with two new functionalities in October 2012.
ICE Completes Transition of Energy Swaps to Futures
IntercontinentalExchange, a leading operator of global markets and clearing houses, today announced that it has completed its transition of cleared over-the-counter energy swaps to futures. This transition was initiated based upon feedback from customers seeking the regulatory certainty of futures markets amid the continued evolution of new swap rules.
ICE Licenses Markit CDS Indices to Develop CDS Index Futures
IntercontinentalExchange, Inc. (NYSE: ICE), a leading operator of global markets and clearing houses, today announced it has licensed Markit’s North American and European corporate credit default swap (CDS) indices, in order to develop futures and options contracts based on the Markit CDX and Markit iTraxx index families.
ADX Joins WFE As Full Member – The Youngest Exchange To Receive That Honor
The World Federation of Exchanges (WFE) has voted for Abu Dhabi Securities Exchange (ADX) to become a full member of the WFE. ADX was elected as a member during the 52nd General Assembly and Annual Meeting of the WFE held in the capital city of Taiwan, Taipei, on the 15th of October. Abu Dhabi Securities Exchange is the youngest stock market to be selected for a full membership status in the WFE organization.
IMBK Chairman & CEO Ibrahim M. Turhan Re-Elected As WFE Board Member
Mr. Ibrahim M. Turhan, Chairman and CEO of Istanbul Menkul Kiymetler Borsasi, was re-elected as Board member of the World Federation of Exchanges (WFE) yesterday.
TMX Group Limited to announce financial results for Q3 2012 on Friday, November 9, 2012
ASX releases consultation on draft Guidance Note on continuous disclosure
Investigation of Banque Profil de Gestion S.A.
SIX Exchange Regulation opens an investigation of Banque Profil de Gestion S.A. on the grounds of possible breaches of the rules governing ad hoc publicity.
Proposed Change To NZX Dairy Futures Final Settlement Price
Hedge Funds & Managed Futures
When Private Equity and Hedge Funds Collide
Wall Street Journal Blogs
Chinese private equity firm SAIF Partners, which traditionally focuses on growth capital deals across the mainland and India, is considering a move into hedge fund investing – a step that has industry experts questioning whether this is a wise decision.
Oak Brook-based McDonnell Investment Management acquired by international firm
Becky Yerak – Chicago Tribune
Oak Brook-based McDonnell Investment Management LLC, which has $13.5 billion in assets under management, has been bought by Natixis Global Asset Management.
Scaramucci to Raise Asia Hedge-Fund Bets as SALT Comes to Region
SkyBridge Capital LLC, the $6.7 billion fund of hedge funds that organizes the biggest industry event in the U.S., plans to increase investments in Asia as it kicks off its first conference in the region.
BlackRock Strikes Back with New Funds and Fee Cuts
The battle for ETF investors continues, this time with BlackRock introducing a revamped ETF lineup and fee reductions.
Vanguard Offers Low-Cost Inflation Hedge with Introduction of Short-Term TIPS Index Fund and ETF
Business Wire via Yahoo! Finance
Vanguard today launched the Vanguard Short-Term Inflation-Protected Securities Index Fund, which offers low-cost conventional shares and ETF Shares.
Hintze cautious after ‘too much of a good thing’
Harriet Agnew – Financial News
Michael Hintze, the founder of $11.7bn hedge fund manager CQS, has used his latest letter to investors to reverse the “constructive” view on markets he has held for the last three years.
BHP chief warns of end to record prices
Neil Hume in Sydney – FT.com
The chief executive of BHP Billiton has warned there will be no return to the record commodity prices enjoyed by the industry over the past decade.
Ex-Goldman Mortgage Trader Said to Post 30% Fund Gain
Josh Birnbaum, the former Goldman Sachs Group Inc. trader instrumental in the bank’s bet against the U.S subprime mortgage market in 2007, posted a 30 percent gain this year in his hedge fund, according to a person familiar with the matter.
AlphaClone Core Investment Strategies Outperform Top Decile Hedge Funds
Business Wire via Yahoo! Finance
AlphaClone LLC, a leading innovator in hedge fund position replication, reports 2012 performance through Q3 for its Momentum Select and AlphaClone Select portfolios of 33 and 18.7 percent, respectively.
Banks & Brokers
Citigroup Picks Spartacus-Trained Corbat to Cut Fat After Pandit
Citigroup Inc. paid a hedge-fund manager with a doctorate in finance more than $200 million over five years to save the bank from the brink of collapse. Now it’s turning to a former Harvard football lineman to run it better.
Citigroup CEO Vikram Pandit quits
The abrupt resignation of Citigroup chief executive Vikram Pandit on Tuesday ended a turbulent five-year tenure in which one of the nation’s biggest banks avoided collapse with the help of a $45 billion rescue package provided by regulators, taxpayers and Congress. Read full article >>
Interactive Brokers Group Announces 3Q2012 Results
Business Wire via Yahoo! Finance
Interactive Brokers Group, Inc. an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.30 for the quarter ended September 30, 2012, compared to diluted earnings per share on a comprehensive basis of $0.34 for the same period in 2011.
Icap launches credit information service
Michelle Price – Financial News
Interdealer broker Icap has launched a credit derivatives rating service as it continues its diversification away from the traditional voice-broking business. The world’s largest interdealer broker said this morning that it has teamed-up with US-headquartered alternative rating and analytics services firm Rapid Ratings to provide information on company names.
Citigroup’s Pandit Says He Wouldn’t Do Anything Different
Erik Schatzker – Bloomberg
Vikram Pandit, who stepped down today as Citigroup Inc. (C)’s chief executive officer, said he doesn’t regret any decisions from his tenure running the bank.
Meredith Whitney: No CEO Can Fix Citigroup
Steven Russolillo – WSJ
Meredith Whitney still doesn’t have anything nice to say about Citigroup. In the wake of CEO Vikram Pandit‘s surprise departure this morning, Whitney, founder and CEO of Meredith Whtney Advisory Group LLC, issued a note cautioning clients to be wary of Citigroup even under new leadership.
RBS to Exit U.K. Asset Protection Scheme After $4 Billion Fees
Royal Bank of Scotland Group Plc agreed to exit the U.K.’s Asset Protection Scheme after paying 2.5 billion pounds to the government to insure its most risky assets.
RBS considers suing Santander over failed branch deal, Telegraph reports
Theflyonthewall.com via Yahoo! Finance
Royal Bank of Scotland is considering suing Santander following the collapse of the failed deal for Santander to buy 316 RBS branches, the Telegraph reports. RBS believes the ditched deal could …
Goldman says commods revenue down significantly in third quarter
Reuters via Yahoo! News
Goldman Sachs Group Inc said significantly lower revenues from commodities dragged down its trading businesses in the third quarter, singling out weak performance by an unit that had once been a pride of Wall Street’s biggest investment bank.
Goldman Sachs Compensation Per Employee Climbs 15%
Wall Street Journal Blogs
Goldman Sachs has set aside 15% more in compensation per employee so far this year, even as it cuts staff, a move that suggests efforts to reward talent while the company retrenches in a tough environment.
Goldman Sachs Reports 2012 Third Quarter Earnings Per Common Share of $2.85 and Increases the Quarterly Dividend to $0.50 Per Common Share.
Morgan Stanley Names Machen Co-Head of North America Bank Group
Morgan Stanley named Travis Machen as co-head of its North American bank group, which advises depository institutions on mergers and acquisitions and helps them issue stocks and bonds.
Merrill ordered to pay couple $1.34 million over Fannie Mae shares
Reuters via Yahoo! News
Merrill Lynch must pay $1.34 million to a Florida couple who alleged the brokerage misrepresented the risks of Fannie Mae preferred shares in 2008, when the housing finance company was on the brink of collapse, an arbitration panel ruled on Tuesday.
David Weidner’s Writing on the Wall: Jamie Dimon is Wall Street’s Chuck Norris
The only time Jamie Dimon was wrong was when he thought he made a mistake, writes David Weidner.
State Street Reports Third-Quarter 2012 GAAP EPS of $1.36 on Revenue of $2.36 Billion
Clearing & Settlement
CME Group Extends Portfolio Margining for OTC Interest Rate Swaps and Futures to Customer Accounts
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it received regulatory approval to begin offering portfolio margining of over-the-counter interest rate swap positions and Eurodollar and Treasury Futures for customer accounts on November 19, 2012. CME Group will continue to work with clearing members on their readiness to deliver this efficiency to market participants.
SunGard’s AvantGard Receives Four Awards from Treasury Management International
SunGard’s AvantGard has been recognized by Treasury Management International (TMI) in the publication’s annual awards. In an online poll of TMI readers, SunGard’s AvantGard received awards in four categories: Cash & Working Capital, Customer Services, Receivables and Back Office & Accounting System.
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices – A Deletion From The S&P/TSX Venture Composite Index
SEC launches investigation into San Bernardino’s finances
Los Angeles Times
The federal agency says the action does not mean securities laws were broken in the bankrupt city. The city attorney vows cooperation with the probe. The U.S. Securities and Exchange Commission has opened an inquiry into the city of San Bernardino’s financial affairs as the city makes its way through a contentious bankruptcy process.
Ex-Banker Girlfriends Doubled Money on Insider Trading, FSA Says
Two girlfriends of former Mizuho International Plc investment banker Thomas Ammann had returns of more than 2 million pounds trading on illegal tips about Canon Inc.’s acquisition of OCE NV, prosecutors said.
Ex Hedge Fund CFO Pleads Guilty in $1M Fraud
The former chief financial officer of a Westport hedge fund pleaded guilty today to a wire fraud charge stemming from his embezzlement of more than $1 million over almost six years from the firm where he was employed, the U.S. Attorney’s Office said.
UBS checks flawed at time of alleged rogue trades, UK court told
Reuters via Yahoo! News
LONDON – There were flaws in control systems at UBS at the time accused fraudster Kweku Adoboli racked up losses of $2.3 billion through unauthorized trades, the head of global risk at the Swiss bank told a London court on Tuesday.
Environmental & Energy
CDP annual conference and presentation of CDP’s Annual Report 2012 “Business case climate protection – a myth”
15 October saw the presentation of the latest results of the Carbon Disclosure Project (CDP) at the headquarters of Deutsche Börse in Eschborn near Frankfurt/Main. The Annual Report 2012 analyses climate-relevant information from the 350 largest companies in Germany, Austria and Switzerland (DACH region). The aim is to establish emission management and climate change as important economic and success factors in companies.
California Asks Court to Reinstate Carbon Fuel Standard
California’s low-carbon fuel standard, which complements the state’s first-in-the-nation economy-wide cap and trade program, appears to favor in-state fuel producers over Midwest ethanol makers, two U.S. appeals court judges said.
UN emissions credits sink to record low as demand wilts
The Sydney Morning Herald
United Nations Certified Emission Reductions dropped to their lowest ever as German power for 2013 fell to a record amid Europe’s continued debt crisis.
BofA hires Margaret Ren as BofA Merrill Lynch China chairman: memo
Reuters via Yahoo! News
Bank of America Corp hired veteran China banker Margaret Ren as chairman of Bank Of America Merrill Lynch China, as it looks to expand its business and broaden client relationships in the world’s second-largest economy, according to a memo obtained by Reuters on Tuesday.
Mark Mobius: Debunking fears of a Chinese crash
The emerging-markets legend, who runs $45 billion at Franklin Templeton, is betting on China’s growth.
Dalian Commodity Exchange And NASDAQ OMX Sign MOU
Dalian Commodity Exchange (DCE) and The NASDAQ OMX Group, Inc. (Nasdaq OMX) signed a memorandum of understanding (MOU) on October 15 in Taipei, with an aim to seek new business opportunities on a global scale as well as substantial business exchanges and cooperation in more fields. DCE President & CEO Liu Xingqiang and NASDAQ OMX Vice Chairman Sandy Frucher were present at the signing ceremony.
Stock Exchange Of Thailand Connects On ASEAN Trading Link
JSE Statement – Trading On The JSE