Breaking News

John Lothian Newsletter: Global regulators signal leeway on new bank liquidity rules; Mexico’s BMV to be among fastest bourses by May; Wall Street Prepares to Take Sharp Pay Cut

An international regulatory group, while making tough plans for bank liquidity requirements, are also finding time to plan out exceptions to those new rules. Exchange operator BMV proceeds apace with infrastructure upgrades that will make the Mexican exchange one of the fastest in the world. As Q4 earnings, or lack thereof, are tallied for financial firms, a number of those firms are signaling that bonuses may be paid out closer to earth than the stratosphere this year. In Europe, David Cameron continues to declare his opposition to (and willingness to sabotage) a new financial transaction tax. And under pressure from all sides, this newsletter not least of all, the SEC changes its settlement language from “neither admit nor deny” when the defendant company has already admitted to wrongdoing in another venue.

Observations – Statistics – Commentary

One Year and One Week; 10 Million Page Views
MarketsWiki ended 2010 with a cumulative life to date page views of 7.9 million.  Over the weekend, MarketsWiki went over the 17.9 million page view mark, meaning in the last year and 1 week the site has seen 10 million page views.

MarketsReformWiki recently crossed the 700K page view mark, which represented 10 months of traffic.


CBOE Futures Exchange to Launch Security Futures Trading in Emerging Markets Volatility Index
CBOE Futures Exchange, LLC (CFE) announced today that it will launch trading in security futures on the CBOE Emerging Markets ETF Volatility Index (Index ticker: VXEEM; futures symbol: VXEM) on Monday, January 9, pending regulatory approval.

**** Now that is a derivatives’ derivative.


SEC changes settlement language for some cases
Reuters via Yahoo! News
WASHINGTON (Reuters) – U.S. securities regulators said on Friday that defendants can no longer settle civil cases using “neither admit nor deny” language if they have already admitted to wrongdoing in parallel criminal cases.

**** We call this the “Jon Matte” rule.


Encouraging Right Kind of Greed Among Banks: Dylan Ratigan
The financial markets need regulation the way a nuclear-power plant needs a cooling agent for its radioactive fuel rods. If safety rules are enforced and the heat of the rods is properly controlled, the result can be clean, abundant energy. But if that cooling process is neglected, there could be a meltdown.

**** Dylan Ratigan, Nuclear Scientist.  Never thought I would put those words together like that.


Cohan: How Wall Street Turned a Crisis Into a Cartel
Almost 65 years ago, in 1947, the U.S. government sued 17 leading Wall Street investment banks, charging them with effectively colluding in violation of antitrust laws. The government was spot on: The investment-banking business was then a cartel where the biggest and most powerful firms controlled the market and then set the prices for their services, leaving customers with few viable choices for much needed capital, advice or trading counterparties. The same argument can be made today.


Capitalism in crisis: The code that forms a bar to harmony
By John Plender – Financial Times
Greedy bankers, overpaid executives, anaemic growth, stubbornly high unemployment – these are just a few of the things that have lately driven protesters on to the streets and caused the wider public in the developed world to become disgruntled about capitalism. The system, in all its different varieties, is widely perceived to be failing to deliver.


Current woes call for smart reinvention not destruction
By Lawrence Summers – Financial Times
It would have been almost unimaginable five years ago that the Financial Times would convene a series of articles on “Capitalism in Crisis”. That it has done so is a reflection both of sour public opinion and distressing results on the ground in much of the industrial world.


New York January 9, 2012 – GFI Group Inc., a leading provider of wholesale brokerage, electronic execution and trading support products for global financial markets, today announced the appointment of Neil Standen as Head of its recently opened Nyon office.


January 2012 InBOX
This is the January issue of InBOX, your news source from inside the BOX Options Exchange. This monthly publication will provide convenient summaries of recent developments at BOX.


Lewis: Silly politics beg for market discipline
Denver Post
Yossi Beinart, chief executive of the North American Derivatives Exchange, wanted to be up and running with a new set of options this week that would have allowed investors to bet on the 2012


Mr. Corzine Is Seeking Some Space
Jon S. Corzine, who resigned as chief executive of MF Global Holdings Ltd. shortly after the securities firm collapsed in October, recently has been looking for office space in Manhattan, according to people familiar with the situation.

**** Don’t sign a long lease.


And the winners of 2011’s guff awards are…
By Lucy Kellaway – Financial Times
There is an economic law that says all markets are cyclical save one: the bullshit market, which knows only the bull phase. In 2011 everything else was in retreat but there were so many entries for my annual jargon awards that sifting through them all has been a long and painful process.


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Lead Stories

Global regulators signal leeway on new bank liquidity rules
Huw Jones – Reuters
LONDON (Reuters) – Global regulators vowed on Sunday to press ahead with tough new liquidity rules for banks from 2015, but in a move to head off opposition from industry, also said lenders can tap into safety buffers in times of stress.

Mexico’s BMV to be among fastest bourses by May
By Adam Thomson – Financial Times
Bolsa Mexicana de Valores (BMV), the Mexican exchange operator, is completing work on a new trading platform that will process orders 200 times quicker than the current system, making it one of the fastest in the world. In an interview with the FT, Luis Téllez, BMV president, said that the project was in “the final stages” of implementation and would be up and running as early as May. “It is going to place us firmly in the vanguard,” he said.

Wall Street Prepares to Take Sharp Pay Cut
A dismal year means Wall Street is about to take a big hit to its wallet. As banks prepare to report fourth-quarter results and make final bonus decisions for 2011, total compensation is likely to be the lowest since 2008, when the financial crisis destroyed some firms and left many survivors on government life support.

A Quiet Fed Voice Emerges as Force Inside the Temple
Five years ago, a brainy San Francisco researcher named John Williams co-wrote an academic paper called “Revealing the Secrets of the Temple,” in which he argued that the Federal Reserve should be more open about its plans for interest rates. Mr. Williams, now president of the Federal Reserve Bank of San Francisco, will get what he asked for when Fed officials gather this month.

Merkel, Sarkozy to Move Forward on Euro Rescue Master Plan 
By Patrick Donahue – Bloomberg
Jan. 9 (Bloomberg) — German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for the first time in 2012 as they seek to craft a master plan for rescuing the euro over the next three months.

Cameron: I’ll Veto Europewide Tax on Transactions
International Business Times
British Prime Minister David Cameron said Sunday he would veto a European-wide financial transaction tax unless it was adopted globally, deepening a confrontation with European Union heavyweights France and Germany.

Draghi May Copy Bernanke on Path to Record-Low Interest Rates
European Central Bank President Mario Draghi may act more like Ben S. Bernanke than Jean-Claude Trichet in 2012.

Fitch Downgrades Hungary to ‘BB+’ – Negative Outlook
Press Release

Forex Industry Quietly Prepares for Euro Break-Up
Before the euro’s launch in January 1999, the Bank of England issued a 110-page plan – everything from settlement timetables to roadworks on the big day – to ensure a smooth introduction of the common currency in the world’s largest financial center.

Undermining the case for capitalism
Financial Times
One does not have to be a protester in a tent outside St Paul’s Cathedral to feel there is something wrong about the amounts paid by companies to their top executives.

US regulators eye new futures rules
By Gregory Meyer in New York – Financial Times
US financial regulators have raised the idea of extending investor safeguards proposed for certain derivatives to the futures markets as they probe missing customer funds at bankrupt broker MF Global.

Environmental Trading News

Delisting of the March 2012 expiration month for four Cross-State Air Pollution Rule (CSAPR) Futures
Press Release
Due to the U.S. Court of Appeals, District of Columbia Circuit’s Order on December 30, 2011 to stay the U.S. Environmental Protection Agency’s CSAPR program until further notice, GreenX will delist the March 2012 expiration months for two CSAPR Sulfur Dioxide (SO2) and two Nitrogen Oxide (NOx) contracts effective close of business January 6, 2012.

GreenX Monthly Report – December 2011
Press Release

Europe Tries to Stem a Plunge in Carbon Prices
New York Times
The European Union’s emissions trading program is seeking a solution to a 10-year glut in supply of carbon dioxide permits, which has left prices near record lows.

For more environmental trading news, subscribe to the Environmental Markets version of the John Lothian Newsletter edited by Jim Kharouf. 
Visit to subscribe.

Exchange & ECN News

Bats Goes Live With Milestone Clearing Service
By Michelle Price Of FINANCIAL NEWS
Bats Europe, the pan-European trading platform which completed its acquisition of Chi-X Europe in December, has today gone live offering a choice of four clearers on both Bats and Chi-X Europe, according to a trading statement issued by the company, in the first time any platform has offered such a service.

BATS Chi-X Europe First To Launch Four-Way Interoperable Clearing
Press Release

NYSE, Deutsche Boerse Prepare Lobbying Push To Save Merger
NYSE Euronext and Deutsche Boerse are going back to the basics of their deal as executives plan a final push to overcome regulatory opposition to their planned merger by touting its merits directly to European Union commissioners.

NYSE sees more clarity soon on tie-up with Boerse
Market Watch
AMSTERDAM (MarketWatch) — Exchange operators Deutsche Boerse AG and NYSE Euronext will soon detail how they aim to soothe competition concerns about their planned merger, an Amsterdam-based NYSE Euronext executive said Friday.

NASDAQ Wins Transfers Battle in 2011
Press Release
NEW YORK, Jan. 6, 2012 (GLOBE NEWSWIRE) — The NASDAQ OMX Group, Inc. captured more than $80 billion in market capitalization from companies that transferred their listings to The NASDAQ Stock Market in 2011, compared to $30 billion for its U.S.-based competitors.

Press Release
Joint venture with Nord Pool Spot and upcoming market coupling services pave the way for the single European power market – Trading volumes hit 314 TWh

CME Group Clearing Advisory
Product Modification Summary – Extension of Listings of Heating Oil-Related Products

CME Group Clearing Advisory
FECPlus FIXML 5.0 Testing and Production Deployment Schedule

[CBOE] Trader E-News

[CBOE] Extension of the Date for Prepayment Elections Under the 2012 Liquidity Provider Sliding Scale

[CBOE] Restrictions on Transactions in Biotech HOLDRs Trust Deposit Receipts (BBHH)

[CBOE] Restrictions on Transactions in Retail HOLDRs Trust (RTHH)

[CBOE] Relocation of ETF Option Classes from Post 6, Station 4 to Post 6, Station 6

TMX Group Equity Financing Statistics – December 2011: Toronto Stock Exchange, TSX Venture Exchange
Press Release

TOM MTF Statistics Week 1 – 2012
Press Release

SIFMA Market Close Recommendations For The US Martin Luther King Day And Japanese Adults Day Holidays In The US, The UK And Japan

Banks, Brokers & Dark Pools

EU stress test couldn’t have been worse: economist
Market Watch
CHICAGO (MarketWatch) – The European stress test last summer “couldn’t have been worse,” according to Bengt Holmstrom, a professor of economics at the Massachusetts Institute of Technology.

Hildebrand Stung by Wife’s Transactions Hurt Guardian Status
Philipp Hildebrand is under pressure to explain how he can act as guardian of the Swiss franc and allow his wife to trade the currency at the same time.

SNB chief to face grilling over currency scandal
Reuters via Yahoo! News
ZURICH (Reuters) – Embattled Swiss National Bank Chief Philipp Hildebrand faces a grilling by a parliamentary committee on Monday about a controversial currency trade made by his wife three weeks before he imposed a cap on the soaring Swiss franc.

U.S. moves toward legal action against Swiss bank: sources
Reuters via Yahoo! Finance
US authorities are moving toward taking legal action against Wegelin & Co , which could lead to an indictment of one of Switzerland’s last pure private banks, on charges that it enabled wealthy Americans to evade taxes, according to two persons with knowledge of the case.

RBS Said to Unveil Plans to Sell or Close Equities Business
Royal Bank of Scotland Group Plc (RBS) , Britain’s biggest government-owned bank, will this week announce plans to sell or close its global cash equities business, a person with knowledge of the matter said.

Santander of Spain Bolsters Capital Cushion
Banco Santander, the Spanish banking giant and the largest bank in the euro zone by market value, said on Monday that its core capital ratio now stands at 9 percent, six months ahead of the deadline set by Europe’s main bank regulator.

Bank Of America Asia M&A Co-Head Michael Cho Leaves Bank – Source
By Nisha Gopalan and Isabella Steger, Dow Jones Newswires
HONG KONG (Dow Jones)–Bank of America Merrill Lynch Asia co-head of mergers & acquisitions Michael Cho has been laid off from the Wall Street bank in one of the most high profile departures in recent months from investment banks in Asia.

Headhunters Target Merrill Advisers as Incentives Wane
Recruiters for rivals often woo Merrill Lynch’s army of financial advisers, with mixed results. This year they are more hopeful they can poach top revenue producers – and even entire teams of wealth managers.

Regulatory News

The SEC News Digest
The SEC News Digest provides daily information on recent Commission actions, including enforcement proceedings, rule filings, policy statements, and upcoming Commission meetings.

CFTC Chairman Names Vincente Martinez as Director of Recently Opened Whistleblower Office
Press Release
ashington, DC – Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler today announced that Vincente Martinez has been hired as the first director of the CFTC’s recently opened Whistleblower Office.

Citi and SEC: Peas in the same pod?
CNN Money
Both the SEC and Citi now stand accused of failing to disclose relevant information, whether it’s to customers in Citi’s case or, as with the SEC, to the public.

‘Watt’ a puny fine
New York Post
Investment giant Morgan Stanley raked in $21.6 million for an illegal electricity price-fixing scheme that cost consumers almost $160 million – but could get away paying only a puny $4.8 million fine, state utility regulators charge.”Why would such a penalty deter similar violations of the antitrust law in…

British PM backs shareholder curbs on big bonuses
Associated Press via Yahoo! News
Britain’s government is looking to introduce laws that grant company shareholders the power to veto executive pay packages, Prime Minister David Cameron said Sunday, in a bid to address public anger at many bosses’ lavish salaries and bonuses.

ESMA Updates The List Of Registered And Certified CRA’s
Press Release

ESMA Extends The Deadline For The Post Of Head Of Unit Economic Research (AD10)
Press Release

[ASIC] Personal Property Securities Register: The new national register will commence on Monday 30 January 2012.

[ASIC] Get a MoneySmart start to 2012
Our MoneySmart website has a new budget planner to help people start 2012 with a fresh financial outlook.

Investments – Indexes – Managed Futures – Managed Funds

Penta to return outside money in Asia hedge fund: report
Reuters via Yahoo! News
HONG KONG (Reuters) – Penta Investment Advisers Ltd, the Asia-focused hedge fund set up by former Soros Fund Management LLC trader John Zwaanstra, plans to return outside capital, Bloomberg reported on Monday citing two unnamed sources.

John Paulson’s Terrible, Horrible, No Good, Very Bad Year
The pain of 2011 has finally ended for John A. Paulson, the billionaire founder of the hedge fund Paulson & Company. The results are not pretty.

Paulson After Worst Year Takes Cue From Griffin Climbing Back
John Paulson, the billionaire money manager who’s vowed to restore his hedge fund to profitability after the worst year of his career, may have to take a cue from rival Ken Griffin.

Darker ethical screen pays
By Nyree Stewart – Financial Times
The adoption of a strict ethical screen, while ruling out almost two-thirds of the corporate bond universe, has helped boost the performance of the £208.19m Kames Ethical Corporate Bond fund. Iain Buckle, who co-manages the fund with Euan McNeil, says the biggest effect it has is on financial stocks.

The Dow Jones Credit Suisse Core Hedge Fund Index Down 0.41% in December
PR Newswire via Yahoo! Finance

Twelve Titans Join Forces To Boost Swaps Clearing
NEW YORK (Dow Jones)–Twelve industry-leading companies in the $708 trillion privately traded derivatives market are banding together to iron out kinks in the way some contracts are cleared and to increase the volume of trades cleared overall, according to a derivatives trade association. Leaders of the 20 largest industrialized economies agreed in September 2009 to see all standardized OTC derivatives, or “swaps,” cleared through central counterparties by the end of this year.

Speculators Increase Bullish Wagers Most Since ’10: Commodities
Hedge funds raised their wagers on higher commodity prices by the most since July 2010 after signs of accelerating U.S. growth bolstered optimism that demand for raw materials will strengthen.

Hancock: T. Rowe Price fears high-frequency computer trading
Baltimore Sun
Along with Europe’s financial crisis, Middle East unrest and sluggish U.S. growth, mutual-fund seller T. Rowe Price has identified a 2012 economic risk you probably haven’t thought about.

Gold holdings at a record level in 2011
Press Release
Xetra-Gold reserve with a value of around E2.1 billion in central vault

IndexIQ Announces December 2011 Performance of Its IQ Hedge Family of Investable Benchmark Hedge Fund Replication …
Business Wire via Yahoo! Finance

Market Vectors Changing Index of Its Russia ETF (RSX)
Business Wire via Yahoo! Finance

Technology News

Fidessa Adds FX Trading To Its Buy-Side Execution Platform – Extends Multi-Asset Capabilities With FX Support
Press Release
Fidessa group plc, provider of high-performance trading, investment management and information solutions for the world’s financial community, has extended its multi-asset capabilities with the addition of FX trading to its Buy-side Workstation.

Traiana first to be certified by CME Group for OTC FX Client Clearing
Press Release
New York/London, 9 January 2012 – Traiana, leading provider of post-trade solutions, announces today that Traiana Harmony has been certified by CME Group for the submission of OTC FX Derivatives for clearing. As the first to complete the CME Group certification process, Traiana customers can now clear OTC FX derivatives using the Harmony CCP Connect solution.

Robert Engle Selected as the Recipient of the 2011 IAFE/SunGard Financial Engineer of the Year Award
Press Release
New York, January 6, 2012 — The International Association of Financial Engineers ( and SunGard ( today announced that Robert F. Engle, the Michael Armellino Professor of Finance at New York University and 2003 Nobel Laureate for Economics, has been named the 2011 IAFE/SunGard Financial Engineer of the Year (FEOY).

Media News

Crying Foul: Supreme Court to Hear Challenge to FCC Cussing Crackdown
Should broadcasters be able to air whatever the &#%@ they want? Nine years after Cher used a swear word during a live awards show, the U.S. Supreme Court is finally addressing the constitutional issues behind that question. On Tuesday, the court will consider whether the Federal Communications Commission’s efforts to police the U.S. airwaves for dirty words and images violate broadcasters’ right to free speech and due process.

Reports Economic Calendar

USDA Today

CBOE Events Calendar

Economic Release Calendar
The Economic Release Calendar (PDF) is a schedule of government, academic and industry economic releases, provided as a service to CME customers.

Asia-Pacific News

Stanley Kwan, Creator of Hang Seng Stock Index, Dies at 86
Stanley Kwan, the banker whose 1969 creation, the Hang Seng Index, became a widely used gauge for the Hong Kong Stock Exchange, has died. He was 86.

Shrinking China Trade Surplus May Help Wen Rebuff on Yuan
China’s trade surplus may narrow to an eight-year low in 2012 as slowing external demand undermines exports, a shift that may help the nation rebuff overseas criticism for maintaining an undervalued exchange rate.

South Korean Pension Fund Says Wins China’s QFII Approval
South Korea’s National Pension Service (NPS), the world’s fourth largest pension fund, said on Sunday it has obtained landmark approval from China’s securities regulator allowing it to invest in the Chinese securities market.

World Bank to recommend China financial reforms
Reuters via Yahoo! News
CHICAGO (Reuters) – The World Bank will recommend reforms to China’s domestic financial system as part of broader proposals to help wean the country from a dependence on exports to sustain economic growth, World Bank President Robert Zoellick said on Saturday.

China’s central bank promises to support ‘real economy’ but says policy will stay prudent
Washington Post
BEIJING – China’s central bank is promising pro-growth conditions this year to support struggling entrepreneurs but says it will stay prudent amid complex global conditions and inflation pressures.

TOCOM December Average Daily Volume Down 7.7% from November, Up 8% Year-on-Year While 2011 Annual Volume Up 14.6 …
Business Wire via Yahoo! Finance

Frontier Markets

Khartoum bourse launches electronic trade
Reuters via Yahoo! News
KHARTOUM (Reuters) – The Khartoum stock exchange on Sunday launched a long-awaited computer trading system that will bring to an end an era of scribbling stock prices on white boards and also marks Sudan’s efforts to attract more investment.

Israel arrests traders for illegal banking
TEL AVIV, Israel, Jan. 8 (UPI) — Israeli police say they’ve arrested a number of suspects accused of operating an illegal “shadow bank” based at the Ramat Gan Diamond Exchange in Tel Aviv.

Iran bans unofficial money trades after rial slip
Reuters via Yahoo! News
TEHRAN (Reuters) – Iran’s parliament cracked down on unofficial money traders Sunday after new U.S. sanctions helped trigger a currency crash as Iranians rushed to buy dollars.

Iran’s Central Bank Chief Not Resigning: Report
The Governor of the Central Bank of Iran (CBI) has not stepped down despite rumors to the contrary, according to comments carried by the semi-official Fars news agency.

Platinum Options Traded On JSE For First Time – Trades Take Place On Safex Commodity Derivative’s Global Market
Press Release
The Johannesburg Stock Exchange (JSE) saw 800 platinum option contracts traded on the Safex Commodity Derivative’s Global Market late last week, the first time that the JSE has seen this trading strategy used by market participants.

For The Second Consecutive Year Qatar Exchange Best Performing Market In The Region
Press Release

The Palestine Exchange Modifies The Al-Quds Index Sample For The Year 2012
Press Release

Palestine Exchange Investor Monthly Newsletter Issue #21, December 2011
Press Release

Arab Global Commodities DMCC Launches New Commodities Research Service For Clients In UAE – Service Will Provide Institutional And Retail Investors Insights Into Market Moves And Trading Strategies
Press Release

Tehran Stock Exchange Monthly Bulletin December 2011
Press Release

Dubai Gold & Commodities Exchange Weekly Market Commentary – January 8, 2012
Press Release

BSX Releases 2011 Year End Review Report
Press Release

Bahamas International Securities Exchange Q3, 2011 Statistical Report
Press Release

Miscellaneous News

Free Market Doesn’t Mean “Pro-Business”
Is a “free market” agenda the same thing as a “pro-business” agenda? Economists of a libertarian persuasion find this frustrating because our enthusiasm for free markets is often mistaken as enthusiasm for specific businesses or corporate interests. But just because something is good for General Motors does not mean it is necessarily good for America.

On Trading Central Tendency
Zero Hedge
It’s been about a week since the Federal Reserve announced its new policy of providing information to the public regarding the direction of US interest rates. The new policy is not, generally, a surprise. The Wall Street Journal’s Jon Hilsenrath told us something was coming weeks ago. I’ve been pondering whether this is a positive or a negative development.

Deutsche Börse opens the exhibition “Anja Niedringhaus. At War.” 
Press Release

Occupy 2012: Firmly disorganized, driven by dreams
Chicago Tribune
Oakland, Calif./New York (Reuters) – It’s been a long, cold winter already for Occupy Wall Street, the protest movement that burst onto the scene in September to focus national attention on income inequality and the perceived greed of the rich and powerful.

Battle-scarred Italian town now defeated by debt
Washington Post
World War II’s Battle for Cassino leveled the Italian town and its hilltop abbey. Now, the 33,000 residents are digging out from the rubble left by Wall Street. Six decades after U.S.-led forces ousted the Nazis from Cassino, a new generation is grappling with the fallout from the debts of postwar rebuilding – borrowings that grew because of a derivative that backfired.

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About Author

Matte is chief operating officer of John J. Lothian & Co. He edits the John Lothian Newsletter, JLN Forex and MarketsWiki.