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John Lothian Newsletter: SEC May Not Flex Dodd-Frank Muscle on Brokers; Esma narrows focus on high-speed trading; UBS Attempted to Rig Interest Rate, Hong Kong Regulator Finds

First Read

Boca Bits and Pieces
By John J. Lothian
Thursday was the last day of the program of the Futures Industry Association’s International Conference in Boca Raton, Fla. that did not involve chasing a little white ball around. The conference program has come and gone and proved to be one of the better ones than previous years.

We worked on an exchange CEO interview series while we dodged in and out of the program. We came away with all the interviews we wanted except two, Charles Li of the HKEx and Andreas Preuss of Eurex. You can view our promo for the series at jlne.ws/1fXpKan

I did not attend the Monday Morning Quarterbacking session featuring ex-CFTC’s commissioners, but was told it was good. Think of the movie Red from 2010 with Bruce Willis, but with a regulatory theme.

The big winner from the conference from my perspective was SGX. They were well represented at the conference, as were other exchanges, but they seemed the most engaged. Besides a press lunch with a brief update on their successes, they also held a bust out late night party in a suite overlooking the resort. And they seemed to be everywhere.

Also, John Lothian Productions was contracted by SGX to conduct 15 interviews with industry participants who were around for the Simex days. SGX will be celebrating Simex’s 30th anniversary this year, most likely unveiling an anniversary video for FIA Asia in the fall. This was a really nice strategy to create some buzz at the conference about SGX and their Simex history.

The success of a conference like this is the meetings that you schedule to meet customers, partners and potential partners and customers. But it’s also in those unscheduled meetings where you have impromptu conversations about potential collaborations. On that basis, we found the conference a big success. If I could suggest a theme for the conference, it was business is back.

There was an absence of big news at the conference, though there was the CME getting approved in London and some nice rebrandings from Trading Technologies and the FIA. I believe the CME Group missed a great opportunity to expound on their London exchange plans, but that was somewhat overshadowed by the recently departed Bob Ray. Bryan Durkin provided a moving speech at the beginning of the exchange leaders panel about Bob, which unfortunately I missed.

Speaking of Bob, here are the arrangements for his wake and funeral if you missed it:

Wake Service, today, Friday, March 14 from 4:00 p.m. to 9:00 p.m., Donnellan Funeral Home
10045 Skokie Blvd. | Skokie, Illinois 60077-1026 | 847-675-1990

Memorial Service,Saturday, March 15 at 11:30 a.m., Our Lady of Perpetual Help
1775 Grove Street | Glenview, Illinois 60025

The IFM had some changes at the top of its board. Mike Dawley is the new chairman replacing Peter Borish who renames on the board.

The John Lothian News team stayed off-site from the Boca Resort in a rented house, which proved a thrifty and comfortable way to live for a week with four other co-workers.

I am staying in Florida and off to Naples to visit my step-mother-in-law and then Sarasota to see my mother. Then next week I will be in Bonita Springs, Fla. for the CBOE’s Risk Management Conference.

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Boca Bits: Day 2 at FIA Boca 2014
Chuck Mackie – Maven Wave
Wednesday is always the big day at Boca, as the number of attendees hits it peak and conversations switch in to high gear. From the familiar (Exchange Leaders Panel) to the new (SEF Showcase), the broadest range of industry topics came to the fore.
jlne.ws/1ezsaXp

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Fidessa’s Friedman on why vendor-supplied algorithms are gaining acceptance
Eurex speaks with Dorothy Friedman, Head of Marketing for Fidessa in the Americas, about the new research paper, “Algos in Futures Markets: Shifting into High Gear.” In this interview, Friedman briefly recaps the research and discusses why firms are increasingly opting for vendor-supplied algorithms. She also stresses the importance of continued educational efforts to help the marketplace understand important trends in technology, and understand how traders and investors with different profiles can harness them to enhance their businesses.
jlne.ws/1ezsbdL

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FX-ibor Market Manipulation Scrutiny is Wake-Up Call for Capital Markets Firms to Apply More Effective Surveillance Forensics
As the regulatory focus on FX intensifies publicly across Europe, it has led to the firings of a number of senior traders but as TABB Group says, firing senior staff is no substitute for rigorous surveillance.
jlne.ws/1ezsc1y

***JM: Surveillance is an activity to prevent problems; firing your managers is what you do after surveillance didn’t work. Or something like that.

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Exchange CEOs say they are on high alert over cyber security
Reuters
Cyber security is emerging as one of the biggest threats for exchange operators as hackers become more sophisticated in their efforts to disrupt the global financial system, a group of exchange leaders told an industry conference.
jlne.ws/1ezschO

***JM: Good. To have said the opposite would have been interesting… kind of like hearing the sports coach say that winning isn’t all that important.

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CME Group Announces Winners of 11th Annual Trading Challenge
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the winners of its 11th annual CME Group Trading Challenge. The four-week electronic trading competition provides teams of graduate and undergraduate students the chance to trade a variety of CME Group products across multiple asset classes.
jlne.ws/1ezschP

***JM: In a competition to make the most amount of money during an ultra-short timeframe, it seems to me in my backwards way of thinking that those who win may very well have learned the least about risk management.

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Bob Ray: Funeral home online remembrance book is now available
Follow the link below if you’d like to view, or leave your own, notes and photos.
jlne.ws/1ezsbdZ

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JLN Video Reminders
If you didn’t get a chance yesterday, take a look at JLN’s recent video products; we made a video to kick off RJ O’Brien’s centennial celebration (at jlne.ws/1klSUzu ) and another one for Trading Technologies to help introduce their new trading platform (at jlne.ws/O64Hqj ).

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MarketsWiki

MarketsWiki Page of the Day
R.J. O’Brien & Associates
jlne.ws/1cCRUXm

MarketsWiki Recent Updates

People

Tammy Botsford; Johannah Ladd; Peter Reitz; Steffen Köhler

Companies, Organizations and Groups

R.J. O’Brien & Associates; OCC; Barchart.com, Inc.; CBOE Futures Exchange

Statistics

47,614,714 pages viewed, 7,849 articles, 180,529 edits
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Lead Stories

SEC May Not Flex Dodd-Frank Muscle on Brokers
Sarah Krouse – MoneyBeat – WSJ
The SEC may not tighten the vise on brokers after all. Under the 2010 Dodd-Frank financial regulation, the U.S. Securities and Exchange Commission has the option–but not a mandate–to require broker dealers to meet the same fiduciary standards as investment advisers when dealing with retail clients. But comments from SEC Commissioner Daniel Gallagher show the SEC isn’t necessarily keen on enforcing these standards for brokers.
jlne.ws/1ezschY

Esma narrows focus on high-speed trading
Tim Cave – Financial News
Europe’s top securities watchdog has called for further studies into the impact of high-frequency trading following its publication of a rare piece of research into the practice.
jlne.ws/1ezseq9

UBS Attempted to Rig Interest Rate, Hong Kong Regulator Finds
NEIL GOUGH – NYTimes.com
Hong Kong’s main banking regulator on Friday released the results of an investigation that found that traders at the Swiss bank UBS attempted to rig a local benchmark interest rate over a four-year period.
jlne.ws/1ezsci2

HK Benchmark-Rate Probe Finds No Manipulation
Enda Curran – WSJ.com
Hong Kong’s de facto central bank has notified banks in the city that a more than year-long investigation found no successful manipulation of the local benchmark interest rate, according to people familiar with the matter.
jlne.ws/1ezsbun

From Our Man At The 39th Annual International Futures Industry Conference. Tom Groenfeldt: Hong Kong Exchange Is Eager To Prove Kipling Wrong And Link East And West
Mondo Visione
“We look Chinese to Westerners, but to the Chinese we are not so Chinese,” said Charles Li, chief executive of Hong Kong Exchange and Clearing, in describing its role between China and the West. “We want to bring Chinese investors into Hong Kong and push other investors into China over large bridges and highways with exchanges on each side able to control the flow. We are trying to figure out how Hong Kong can add value to China’s coming out to meet the world.”
jlne.ws/1ezsc1r

From Our Man At The 39th Annual International Futures Industry Conference. Tom Groenfeldt: Where Will You Be In Five Years?
Mondo Visione
Gillian Tett, the assistant editor and columnist at the Financial Times had a question for the CEOs of the world’s major exchanges at the Futures industry Association conference in Boca Raton, Florida: who will be on this platform in five years? Will there be more exchanges or fewer?
jlne.ws/1ezsc1n

***JM: I used to get that question a lot in my first career. Looking back, not one of my 5-year predictions was ever close to the mark. I’ve learned to chuckle cheerfully whenever people ask me nowadays.

At Hearing, Fed Board Nominees Endorse Current Path
NYTimes.com
Three nominees to the Federal Reserve’s board sailed through a brief confirmation hearing on Thursday, assuring senators of their commitment to strengthen financial regulation and stimulate the economy.
jlne.ws/1ezsci3

HFT lobby appoints first full-time secretary general
Tim Cave – Financial News
The three-year-old lobby group for Europe’s high-frequency trading community has finally appointed its first full-time secretary general, as scrutiny of the sector intensifies on both sides of the Atlantic.
jlne.ws/1ezsbuu

Singapore to Regulate Bitcoin Operators for Laundering Risk
Sanat Vallikappen – Bloomberg
Singapore plans to regulate virtual-currency intermediaries including operators of Bitcoin exchanges and vending machines to address potential money-laundering and terrorist-financing risks.
jlne.ws/1ezsbuv

Jeffrey Corzine, youngest son of former New Jersey Gov. Jon Corzine, dead at 31
NY Daily News
The youngest son of former New Jersey Gov. Jon Corzine – described as a “lost” soul who battled addiction – was found dead in a Mexico City hotel through a search initiated by his family, a well-placed source told the Daily News.
jlne.ws/1ezsci7

***JM: A bitter tragedy; the delicate words in the article mask a lot of pain and distress for everyone in the family.

Thomson Reuters Annual Cost Of Compliance Survey Shows More Than Half Of Compliance Officers Expect Personal Liability To Increase In 2014
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the findings of its annual Cost of Compliance survey which revealed that 53 percent of compliance officers now feel that their personal liability has increased; a reflection of increased focus on senior individuals at the supranational level.
jlne.ws/1ezsbdQ

Regulatory

Over half of UK alternative funds lack AIFMD authorisation
Jennifer Bollen – Financial News
More than half of UK alternative fund managers that fall within the scope of the Europe-wide Alternative Investment Fund Managers Directive have yet to apply for the necessary authorisation, leading to fears that many firms will not be ready for the July deadline.
jlne.ws/1ezscyk

Commissioners attack CFTC’s no-action letters
Peter Madigan – Risk.net
On 36 Dodd-Frank Act rules, the CFTC has issued more than 200 no-action letters or other pieces of guidance, according to Scott O’Malia. One of his former colleagues claims commissioners only saw many of these documents “the night before they were issued”
jlne.ws/1ezseqb

CFTC-EC swaps accord not working, says MEP Swinburne
Peter Madigan – Risk.net
Trading platforms claim allowing US persons to trade on MTFs could subject non-US clients to US rules
jlne.ws/1ezseGs

Sef rules expected to catch swap packages from mid-May
Peter Madigan – Risk.net
Curve trades and swap spreads will have CFTC protection lifted from mid-May if they contain a leg that is subject to Sef requirements, platform operators expect. More complex packages may see relief extended
jlne.ws/1ezscyC

Japan banks to sidestep Volcker private equity restrictions
Viren Vaghela – Risk.net
US regulators have rolled back one of the extraterritorial impacts of the Dodd-Frank Act by giving a green light to a parallel fund structure that will allow Asian banks caught by the Volcker rule to legitimately sidestep the investment restrictions placed on banks allocating cash to private equity funds.
jlne.ws/1ezseGt

July deadline for Fatca compliance looms
Luke Clancy – Risk.net
The Foreign Account Tax Compliance Act imposes registration and reporting and obligations on hedge funds, due to come into effect in just over three months
jlne.ws/1ezscOR

New Vice-Chair appointed to the British Columbia Securities Commission
Brenda Leong, Chair and Chief Executive Officer of the British Columbia Securities Commission (BCSC), is pleased to announce the appointment of Nigel Cave as a new Vice-Chair for the BCSC.
jlne.ws/1ezscOU

Remarks On The Volcker Rule’s Market Making Exemption, John Ramsay, Acting Director, SEC Division Of Trading And Markets, New York City Bar Association, New York, NY, Feb. 4, 2014
jlne.ws/1ezseGC

New Zealand’s Financial Markets Authority: Changes To Financial Reporting Requirements
jlne.ws/1ezseGH

Canadian Securities Regulators adopt new exemption for distributions to existing security holders
jlne.ws/1ezseGL

Exchanges & Trading Facilities

HKEx named as co-defendant in LME aluminium lawsuits
Reuters
Hong Kong Exchanges and Clearing Ltd said on Friday it had been named a co-defendant in class action lawsuits involving the price fixing of aluminium on the London Metal Exchange (LME).
jlne.ws/1ezscP5

Moscow Exchange Announces Results For The Full Year 2013
jlne.ws/1ezscP7

NASDAQ OMX Nordic Welcomes Matas to its Main Market in Copenhagen
jlne.ws/1ezsd5p

Hedge Funds & Managed Futures

Carlyle, Louis Bacon to Buy Commodities Firm Traxys
MoneyBeat – WSJ
Carlyle Group and star trader Louis Bacon have agreed to acquire a controlling stake in commodities trading firm Traxys Group in a move that highlights the growing allure of commodities middlemen as banks exit the business.
jlne.ws/1ezsd5v

Fidelity institutional chief steps down after five months
Mike Foster – Financial News
Colin Fitzgerald is stepping down as head of Fidelity Worldwide Investment’s institutional business, five months after taking over from his predecessor Chris McNickle.
jlne.ws/1ezseX9

New Peak promotes Edouard Baldini to partner
Vivek Ahuja – Financial News
New Peak Capital Partners, whose co-founder and chief investment officer Massimo Bertoli was named one of Financial News’s Rising Stars of Hedge Funds last year, has added to its partnership roster for the first time since gaining regulatory approval in 2012.
jlne.ws/1ezseXd

Thomson Reuters, Cambridge Associates Aggregate Private Fund Benchmarks
Timothy Bourgaize Murray – WatersTechnology
The financial information provider and global investment firm have collaborated on a jointly-developed online platform to provide benchmark pricing on a range of alternative funds.
jlne.ws/1ezseXh

Cotton Traders Wonder: How High Is Too High?
WSJ.com
Cotton futures hit a nearly one-year high Thursday, juiced by a government report showing continued exports for the fiber even as costs rise. But some investors say the latest gains pushed prices into a range that could cool demand.
jlne.ws/1ezsd5E

Cargill inaugurates newly expanded European Research and Development Centre in Vilvoorde
jlne.ws/1ezsfdw

Banks & Brokers

Citi Finds ‘Concerns’ in Three More Portfolios After Fraud at Mexico Unit
Saabira Chaudhuri – MoneyBeat – WSJ
In the wake of revelations about fraudulent billings at its Mexico unit, Citigroup Inc.has found “concerns of some nature” in three other supplier-finance receivables portfolios, according to an analyst.
jlne.ws/1ezsfdz

Gleacher & Co. Plans to Liquidate
WILLIAM ALDEN – NYTimes.com
Gleacher & Company, the troubled investment bank that had tried unsuccessfully to sell itself, announced on Thursday that it planned to liquidate its assets, closing up shop after 24 years.
jlne.ws/1ezsfdA

Deutsche adds to fears for slow start to year at investment banks
Reuters
Deutsche Bank said on Thursday it has had a “slow” start to the year in its investment bank, due to market uncertainty related to the crisis in Ukraine and concerns about economic growth in China and Germany.
jlne.ws/1ezsdlX

Bad Bank on Lake Michigan
Aaron Back – MoneyBeat – WSJ
China Cinda Asset Management1359.HK -0.51% has always been opaque. Even after its $2.5 billion initial public offering last year, questions persist as to how exactly the “bad bank” makes money on distressed assets.
jlne.ws/1ezsfdD

J.P. Morgan Depositors Tweet Complaints About Anti-Money Laundering Policy
Rachel Louise Ensign – WSJ
Irritated would-be depositors are taking to TwitterTWTR -1.71% to complain about one of J.P. Morgan Chase & Co.’s new anti-money laundering controls.
jlne.ws/1ezsdm2

Six major banks sign up to Swift’s KYC exchange
Charlotte Sterland – Risk.net
The first major banks have signed up to Swift’s project to build an international database of KYC information
jlne.ws/1ezsdm4

Investment Bank Chief is UBS’s Top-Paid Executive
CHAD BRAY – NYTimes.com
The head of UBS’s investment bank was the company’s highest-paid executive in 2013, earning more than Sergio P. Ermotti, the Swiss lender’s chief executive, according to its annual report released on Friday.
jlne.ws/1ezsdm6

Barclays Plans Overhaul of Investment-Banking Unit
WSJ.com
Under fire from shareholders, Barclays PLC is preparing a fresh attack on its investment-banking arm to cut costs and boost returns, a person familiar with the matter said Thursday.
jlne.ws/1ezsfdL

Social Media Transform Bank-Customer Relations
WSJ.com
J.P. Morgan Chase & Co.’s pullback from certain cash deposits is sparking a flurry of protests from would-be depositors on social media.
jlne.ws/1ezschS

Clearing & Settlement

Profits at Ice’s EU clearing house surge
Anish Puaar – Financial News
Profits at IntercontinentalExchange’s European clearing house jumped by nearly 40% last year, as the group began to reap the rewards from a takeover of the region’s largest derivatives exchange.
jlne.ws/1ezsfu1

Indexes & Products

As Stock Picking Comes Back In, ETF Use Goes Out
Dan Strumpf – MoneyBeat – WSJ
Here’s the latest evidence that stock picking is back: Investors are buying and selling fewer exchange-traded funds. As big macroeconomic headlines recede, ETFs are falling out of favor.
jlne.ws/1ezsfu2

Latest DTCC Report Reveals Inflows Into Annuity Products Increased 11 Percent In 2013
Data From Annuity Market Activity Report Sets Comparisons To Prior Year And Gives New Insights Into The Market For Annuity Transactions
jlne.ws/1ezsdCx

Technology

Charles River to Enter the IBOR Fray
Anthony Malakian – WatersTechnology
Later this year Charles River is set to unveil a module that will allow its buy-side clients to manage their investment book of record (IBOR) activities. The IBOR functionality will be deployed along with version 9.2 of the Charles River Investment Management Solution (IMS).
jlne.ws/1ezsdCz

S&P Real-Time Debuts FPGA OPRA Feed
Max Bowie – WatersTechnology
The Real-Time Solutions division of S&P Capital IQ (formerly QuantHouse, prior to its acquisition by S&P in 2012) has unveiled QuantFeed FPGA for OPRA, a hardware-accelerated version of its consolidated datafeed that delivers additional processing power to handle current and anticipated traffic volumes over the Options Price Reporting Authority’s consolidated feed of US options quote and trade data.
jlne.ws/1ezsdCA

Ontario Municipal Employees Retirement System (OMERS) Successfully Implements ALM Modeling Capabilities With Ortec Finance
jlne.ws/1ezsfu3

Enforcement

SEC Charges Lions Gate With Disclosure Failures While Preventing Hostile Takeover
The Securities and Exchange Commission today charged motion picture company Lions Gate Entertainment Corp. with failing to fully and accurately disclose to investors a key aspect of its effort to thwart a hostile takeover bid.
jlne.ws/1ezsfu7

SEC Announces Charges Against Brokers, Adviser, and Others Involved in Variable Annuities Scheme to Profit From Terminally Ill
The Securities and Exchange Commission today announced enforcement actions against a pair of brokers, an investment advisory firm, and several others involved in a variable annuities scheme to profit from the imminent deaths of terminally ill patients in nursing homes and hospice care.
jlne.ws/1ezsfu8

S.E.C. Unveils Case Against 10th Former Employee of SAC Capital
NYTimes.com
Federal regulators on Thursday announced the latest case to stem from the decade-long insider trading investigation into SAC Capital Advisors, taking aim at a former employee for prompting a number of illegal trades.
jlne.ws/1ezsdCD

SEC Obtains Asset Freeze Against Promoter Behind Microcap Stock Scalping Scheme
The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against a promoter behind a platform of affiliated microcap stock promotion websites.
jlne.ws/1ezsfub

Bank of America back in court over $2.1 billion fraud penalties
Reuters
A U.S. judge wrestled on Thursday with a U.S. Justice Department request that Bank of America Corp pay $2.1 billion in penalties after being found liable for fraud over defective mortgages sold by its Countrywide unit.
jlne.ws/1ezsdCE

U.S. to Increase Penalties Being Sought from Former Countrywide Exec
WSJ.com
U.S. attorneys said in court Thursday that they plan to increase the civil penalties being sought from a former Countrywide Financial Corp. executive found liable for committing fraud for her role leading a loan-processing program.
jlne.ws/1ezsfuf

What Did Deceased IT Exec Know About Madoff Ponzi Scheme?
Ivy Schmerken – Wall Street & Technology
A defense attorney suggested that Liz Weintraub, Madoff’s deceased former head of IT, helped devise the deceptive code that enabled the Ponzi scheme, and not his clients, two ex-programmers.
jlne.ws/1ezsfuj

Environmental & Energy

EU Puts Brakes on Russia Natural Gas Pipelines
Vanessa Mock – The Wall Street Journal
The European Union has slammed the brakes on two big Russian pipeline projects to supply more natural gas to Europe, as part of its efforts to turn up the heat on Moscow over its incursion into Crimea.
jlne.ws/1cXBKTq

EU parliament backs law to curb “super” greenhouse gases
Michael Szabo and Barbara Lewis – Reuters
The European Parliament on Wednesday backed a law to curb the use of “super” greenhouse gases used in fridges and air conditioners, which have a global warming potential thousands of times greater than carbon dioxide.
jlne.ws/1cXDnka

European utilities E.ON, Enel to close power plants, cut dividends
Christoph Steitz and Stephen Jewkes – Reuters
E.ON and Enel, two of Europe’s largest power utilities, are to shut more plants and cut costs, they announced on Wednesday, joining rivals in warning that the industry crisis will weigh on profits for years to come.
jlne.ws/PxNnMa

Asia-Pacific

Daimler sells first renminbi bond in China
Tom Mitchell in Beijing – FT.com
Daimler has sold a Rmb500m “panda” bond to Chinese investors, the German company announced on Friday, making it the first non-financial overseas company to tap the market for funds.
jlne.ws/1ezsdSV

China’s Big Four Banks See $70 Billion Vanish From Stocks
Ye Xie and Weiyi Lim – Bloomberg
The world’s most-profitable banks have never been so unloved by stock investors.
jlne.ws/1ezsfKw

HKEx: The Exchange Publishes Amended Listing Rules Regarding New Headline Categories For Announcements
jlne.ws/1ezsdT5

HKEx: Arrangements For Adjustment Of New World Development Futures And Options
jlne.ws/1ezsdT9

HKFE Announces Revised Margins For Hutchison Whampoa Futures
jlne.ws/1ezsfKz

HKEx: Government Re-Appointments To The Board
jlne.ws/1ezsdTd

Frontier Markets

Mr. Thomas Mathew Appointed As Chairman Of MCX-SX
The MCX-SX board met today and elected Mr. Thomas Mathew T., Former Chairman LIC as the Chairman of the exchange & Ms. Ashima Goyal, Professor at Indira Gandhi Institute of Development Research (IGIDR) as the Vice Chairperson of the exchange. The board dismissed speculative reports claiming that several board members are likely to put in their resignations.
jlne.ws/1ezsfKI

Malawi Stock Exchange Weekly Trading Report -14th March, 2014
jlne.ws/1ezsfKK

Investors Rally To Finance New Ghana Commodity Exchange, Future West African Regional Hub
jlne.ws/1ezsfKO

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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.