Breaking News

John Lothian Newsletter: LSE CSD to get final green light by Christmas; LCH.Clearnet interest rate swaps fall in value; Deutsche Bank Shutters Precious Metal Trading Amid Cuts

First Read

…and thanks for all the fish!
Jon Matte
“I think I’ll do a final essay filled with incoherent mystical nonsense and then make some vague, sweeping market observations,” I told John.

He swerved in traffic and narrowly missed a Kia sputtering along in the middle lane. “The hell you will.”

“But it works for Bill Gross,” I argued.

“When you manage eighty million, billion, trillion dollars, you can do what Bill Gross does,” he said flatly. “Look, just put in a short, respectful note, say thank you for everything, and maybe put in your email address in case anybody wants to get in touch with you after you leave.”

“Well… ok. As a favor to you,” I sighed. “But if you ever ask me to come back as a guest editor someday, I’m going to do that.”

He wasn’t sure if that was a threat. His eyes narrowed briefly as he drove along. “AND NO STUPID CAT PICTURES,” he snapped, and switched off the Skype connection.

Ok, ok, I made that up. John would never have to swerve while talking to me on Skype during his morning commute.

Anyway, it’s been a fun and interesting several years; lots of good things accomplished. But now it’s time to move on. I’ll be working with a small tour agency here in Alta, doing everything from document translations and writing web sites to guiding tours (why yes, I do get to ride dogsleds as part of the job), working with cruise ships and even some business development. I’ll probably end up using a paint brush, too, at some point.

So if you’d like to keep in touch, please do – you can find me either through LinkedIn, or just reach out at a personal level (I don’t bite) to jon@sunlightcreative.com. And if you ever want to come see one of the most startlingly beautiful places on Earth… well, you know where to find me.

Thanks, John, Jim, Doug, Jeff, Sarah, RJ, Patrick, and the folks I worked with that moved on before me. You all are great, and I wish you all the best.

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Stefani Sandow, product manager, Trading Technologies – What Vitruvius Can Teach Us About Software Development
JohnLothianNews.com

“If you’re interested in getting into financial software, you should remember Vitruvius. You should create software that is solid, that is useful, that is delightful.”

Stefani Sandow, product manager at Trading Technologies, shows the relationship between the Roman architect Vitruvius and software development. She discusses three key concepts of Vitruvius’s teachings, Firmitas, Utilitas and Venustas, which translates to Solid, Useful and Delightful. Sandow stresses the importance of the user experience and how developers should be paying close attention to the design and interface of the software as well as its functionality. Finally, Sandow concludes by discussing the future of trading software design and function.

Watch the video »

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Euronext Launches Dairy Complex
Euronext today announced that it will launch a dairy derivatives complex in spring 2015. The full suite of futures and options will cover the three key dairy products currently traded in Europe and internationally: butter; skimmed milk powder; and whey powder, allowing the European dairy community to hedge its exposure to price fluctuations in this volatile market, just as the milk quotas expire in the European market. This launch is subject to relevant regulatory review.
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***JM: They have a dairy complex… so, fear of cows? Seriously, though, we have the crack and crush spreads; is there a churn spread, with milk vs. butter and whey? I guess butter by itself is sort of the churn spread. Ok, I’m done.

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CME’s Euro swap future yet to trade
Futures & Options World
CME Group’s Euro interest rate swaps contract has yet to attract a single trade in the US more than six months after launch, raising doubts over a product that many exchanges are preparing to launch in Europe. According to FOW data, CME’s two, five, ten and 30 year Euro interest rate swap futures contracts that were released in April have yet to attract any volume.
jlne.ws/1xZucwW

***JM: Six months is a bit of a wait, yeah. But then, how long have people been waiting for “gold to $2000″…

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We just clicked: John Rizzo brings photography skills globally
JohnLothianNews.com

Photography is the art of capturing a moment.

John Rizzo has been doing just that for years as the photographer for the FIA Expo events in Chicago. He spoke with John Lothian at Expo about how he learned photography as well as about his photo tours to Africa and Asia. Rizzo has taken photographers of all skill levels to exotic locales such as Tanzania, Ethiopia, Myanmar, Laos and Cambodia to teach individuals about culture and skill of taking a great photo.

A photojournalist who has worked with Newsweek, LA Times, Washington Post and the FIA Magazine and its conferences for years, Rizzo says he’s learned the art of photography. Rizzo said cameras today are better than ever, and take great shots. The problem, he says, is that most people don’t know how to do that.

Watch the video »

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Poor performance catching up with active stock fund managers
Ross Kerber – Reuters
With bad bets on financial shares, missed opportunities in technology stocks and too much cash on the sidelines, roughly 85 percent of active large-cap stock funds have lagged their benchmark indexes through Nov. 25 this year, according to an analysis by Lipper, a Thomson Reuters research unit.
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***JM: An exercise in apple-orange-what-ifs; I can’t understand why people value these comparisons. Active fund managers aren’t doing the same thing as an index, so why compare them as if they are?

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Managers and platforms back ‘active share’ disclosure
Judith Evans – Financial Times
Disclosure of funds’ “active share” figure should become the norm to prevent investors being misled into buying overpriced funds whose performance closely mirrors that of a benchmark index, according to major UK asset managers and platforms.
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***JM: Ok, point taken. Having thought about it for 30 whole seconds, I like this idea. If you’re going to claim to be “active” and mostly just follow an index, you deserve to have your financial couch-potato ways published.

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Ex-FDIC Chief Follows Path From Washington to Law Firm
Sophia Pearson – Bloomberg
Sheila Bair, the Federal Deposit Insurance Corp.’s former chairman, has joined DLA Piper as a senior policy adviser in Washington as the fourth high-level former federal official to come to the law firm this year.
jlne.ws/1FrBawL

***JM: Provides a nice, completely-opposite counterbalance to their recent hiring of a certain regulatory commissioner.

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Donnie Roberts, Thinkorswim – Traversing Seismic Shifts
JohnLothianNews.com

“The biggest shift in this world is to a knowledge-based environment. You guys can fuel that.”

Donnie Roberts of Thinkorswim discusses how we all go through event shifts during our careers. Beginning with his start at Thinkorswim Group Inc., a small Chicago-based options brokerage firm, Roberts discusses how the firm was acquired by TD Ameritrade and his transition of working in a small office environment to the expectations of a larger firm. Roberts also acknowledges the importance of education and how it is an essential factor to the future participants of the financial industry. Roberts explains how he keeps himself educated to understand new regulation and learn about key members in the financial industry. He says that all new entrants into the industry have a chance to shape its future, but keeping yourself educated is the biggest advantage you can have.

Watch the video »

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Lead Stories

LSE CSD to get final green light by Christmas
Chris Hall – Financial News
The London Stock Exchange Group expects to receive final regulatory approval for its Luxembourg-based central securities depository by Christmas, ahead of new European regulations promoting the use of the post-trade facilities.
jlne.ws/1pv54wf

LCH.Clearnet interest rate swaps fall in value
Philip Stafford in London – Financial Times
LCH.Clearnet will this year report the first ever fall in the value of the interest rate swaps it clears for the world’s big investment banks as new global capital rules designed to reduce the leverage in markets begin to bite.
jlne.ws/1xZqUJX

Deutsche Bank Shutters Precious Metal Trading Amid Cuts
Elisa Martinuzzi and Nicholas Comfort – Bloomberg
Deutsche Bank AG (DBK), Europe’s biggest investment bank, is exiting physical trading of precious metals as it scales back its securities unit to improve returns.
jlne.ws/1xZvQyr

Three-Hour Foul-Up Halts France’s CAC 40, Holland’s AEX
Will Hadfield – Bloomberg
The CAC 40 Index (CAC) of France’s largest companies failed to calculate for more than three hours this morning after Euronext NV (ENX) suffered a technical incident.
jlne.ws/1xZx7pd

Deutsche Börse plots expansion into emerging market FX
Solomon Teague – Euromoney Magazine
Deutsche Börse’s acquisition of a minority stake in R5FX, the London-based electronic trading venue specializing in emerging markets (EM) FX, is the latest in a series of strategic moves by the exchange to break into the FX market. Up to 20 banks have signed up for the March launch of a bank-to-bank liquidity pool for EM FX.
jlne.ws/1FzuydV

Luxembourg Fund Gets First Approval for Shanghai Stock Link
Eduard Gismatullin and Stephanie Bodoni – Bloomberg
Luxembourg, home to equity funds with about $1.2 trillion of assets, gave its first approval to trade through the Shanghai-Hong Kong exchange link as international investors seek greater access to Chinese shares.
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Barclays says its Swiss private bank drops out of U.S. tax deal
Reuters
Barclays’ private bank in Switzerland has dropped out of a U.S. program aimed at cracking down on wealthy Americans evading taxes through hidden offshore accounts, the British bank’s market head for Switzerland said on Thursday.
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Regulatory

SEC Names Kevin Kelcourse as Associate Director for Exam Program in Boston
The Securities and Exchange Commission today announced that it has named Kevin M. Kelcourse as the associate director for the Office of Compliance Inspections and Examinations (OCIE) in Boston. In that role, he will oversee the SEC’s exam program in six New England states with a staff of approximately 65 examiners, accountants and attorneys.
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CFTC Staff Provides No-Action Relief from the Clearing Requirement for Swaps Entered into by Eligible Treasury Affiliates
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Canadian Securities Regulators propose harmonized approach to clearing agency requirements
The Canadian Securities Administrators (CSA) today published for comment Proposed National Instrument 24-102 Clearing Agency Requirements, which adopts international standards for Canadian financial market infrastructures (FMIs). The comment period closes on February 10, 2015.
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FCA to probe possible conflicts in barrier options
Risk.net
UK regulators are to examine potential market manipulation in relation to foreign exchange digital and barrier options – a risk some buy-side firms try to avoid by only trading barriers on liquid, abuse-proof underlyings.
jlne.ws/1FztruE

SEC Examinations: What to Expect When the SEC Is on It’s Way
Becca Lipman – Wall Street & Technology
Theodore Eichenlaub highlights trends in SEC expectations and how to approach a risk assessment of your compliance program.
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ESMA Submits Advice On Delegated Acts Required By The UCITS V Directive
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Steven Maijoor, Chair European Securities And Markets Authority, Delivers Speech At Henri Sijthoff Prijs 2014
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New Zealand’s Financial Markets Authority: Phase Two Of Financial Markets Law Completes Long-Term Overhaul
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Exchanges & Trading Facilities

Emerging Europe: Warsaw will go organic, says new CEO
Lucy Fitzgeorge-Parker – Euromoney Magazine
The Warsaw Stock Exchange (WSE) is hoping to attract listings from companies across emerging Europe after abandoning plans for merger talks with Vienna’s CEE Stock Exchange Group (CEESEG), according to its new chief executive.
jlne.ws/1FzuJG0

NZ stock exchange to provide analyst coverage
Philip Stafford – Financial Times
The New Zealand Stock Exchange plans to overcome a dearth of corporate research for smaller companies by including independent coverage as part of the services provided to users of its new junior market.
jlne.ws/1xZr3ND

MGEX: Tuesday Closes With Multiple Records Set
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports three separate top 25 records following Tuesday’s activity. Total electronic volume finished the day at 13,816 contracts, the 18th-best total in daily electronic volume history.
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ASX Completes Investment In Yieldbroker
ASX and Yieldbroker today announced that ASX’s investment in Yieldbroker has successfully completed.
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Warsaw Stock Exchange: Polish Company Awarded By European Commission And FESE
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BATS One Feed Update
As previously announced, the production release of the BATS One Feed has been delayed pending SEC approval. While BATS is prepared for a production release once final approval has been received, it has been decided that BATS One will be released in the NY5 data center in Secaucus, NJ as opposed to the NJ2 data center in Weehawken.
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Hedge Funds & Managed Futures

Currency hedge funds continue to disappoint
Solomon Teague – Euromoney Magazine
It has been a chastising few years for currency hedge funds. Several high-profile currency managers have closed down due to poor performance while many that have survived have struggled with redemptions. But some hedge fund allocators are predicting an imminent return to form for FX strategies.
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Hedge Funds Seek to Tie Up Money for Longer
Rob Copeland – WSJ
Hedge-fund managers are increasingly persuading investors to lock up their money for longer—in many cases more than double the typical one-year period—and dangling lower fees to close the deal.
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Majedie co-founder to retire in June
Anna Fedorova – Investment Week
Adam Parker, one of the co-founders of Majedie Asset Management, is retiring after 27 years in the fund management industry.
jlne.ws/1Fzufj9

Caledonia’s Mitchell joins Jupiter as global equity strategy head
Laura Dew – Investment Week
Jupiter has appointed Caledonia Investments’ Stephen Mitchell to the newly-created role of head of strategy for global equities.
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OMGI launches European small-cap fund for Ormiston
Julia Rampen – Investment Week
Old Mutual Global Investors has launched a European smaller companies fund for recent hire Ian Ormiston.
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Buy-side boardroom: The liquidity challenge
John Bakie – The Trade
Explaining complex trading concepts, such as dark pools and high-frequency trading, to senior managers and clients can prove equally as challenging as accessing liquidity, according to buy-siders at the Leaders in Trading event in London last week.
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British Firm Starts Hedge Fund for Social Services
Jenny Anderson – Dealbook – NY Times
When a potential hedge fund investor recently visited a mental health charity, he asked what the organization would need to help more people. “Property” was the answer.
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‘Vulture’ hedge funds set to target unprotected government debt
Elaine Moore – Financial Times
“Vulture” hedge funds, which typically target distressed sovereign bonds, are set to turn their attention to other forms of public borrowing, in an attempt to keep forcing payouts from indebted governments.
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Banks & Brokers

Wells Fargo Is the First Big Bank Simple Enough to Fail
Daniel Indiviglio – Dealbook – NY Times
Wells Fargo is the first big bank to get its affairs in order. The $1.6 trillion lender secured a conditional stamp of approval from regulators for its living will. Less credible plans from 11 other titans suggest size isn’t the main issue. The real problems are complexity and interconnectedness.
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Credit Suisse names ex-Goldman banker head of consumer in Europe
Nick Kostov – Financial News
Credit Suisse has named an ex-Goldman Sachs banker as head of its consumer team in Europe, the Middle East and Africa, according to an internal memo seen by Financial News.
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Deutsche Bank shuts down physical precious metals trading
Reuters
Deutsche Bank is closing down its physical precious metals trading business, the bank said on Thursday, as it moves to further scale back its exposure to commodities.
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Argentina Accuses HSBC of Aiding People in Tax Evasion
AP
Argentina’s tax agency accused the HSBC bank on Thursday of helping more than 4,000 Argentines evade taxes by placing their money in secret Swiss accounts.
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Clearing & Settlement

Liffe contracts make transition to ICE Futures Europe
The Trade
Intercontinental Exchange (ICE) has completed the transition of Liffe’s futures and options contracts to its own European exchange, almost two years after the deal was first announced.
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Clearing looks ahead to new dawn
Luke Jeffs – Futures & Options World
Clearing has emerged in the post-crisis financial market as the key battleground for modern exchanges and a clearing house is now seen by many markets as a crucial strategic asset. The LME became in September the latest exchange to take control of the clearing of its own trades, when it moved all of its open metals positions from LCH.Clearnet to LME Clear.
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Indexes & Products

New PIMCO Source Active ETF Launched On Xetra – Actively Managed Bond ETF Tradable On Corporate Bonds
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Socially Responsible Index (SRI) Celebrates 10 Years With Record Number Of Constituents – Johannesburg Stock Exchange SRI Annual Review Results 2014
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BM&FBOVESPA announces 10th Portfolio Of The Corporate Sustainability Index – More Transparency: Number Of Companies Authorizing Publication Of Their Answers To The Questionnaire Rises From 22 To 34, Growing From 55% To 85% Of The Portfolio – More Diversification: A New Sector And Four New Companies Are Now Included In ISE
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Technology

FIX for Post-Trade Gains Traction: How Far Will It Go?
Ivy Schmerken – Wall Street & Technology
A group of heavyweight asset managers has collaborated on a solution for non-US trade confirmations and affirmations that is fueling interest in FIX for post-trade use as an alternative to Omgeo’s Central Trade Manager.
jlne.ws/1Fzu2N1

FIX Trading Community Awarded Buy-Side Project Of The Year Award 2014 By The Trade
jlne.ws/1uR84yP

The Value of Predictive Analytics in Financial Services
Ingo Mierswa – Wall Street & Technology
Risk management and customer data are two key areas where data analytics is being applied in financial services.
jlne.ws/1Fzu1bM

Boris takes fintech start-ups on an Asian roadshow
Anna Irrera – Financial News
The Mayor of London, Boris Johnson, has been banging the drum for the capital’s financial technology sector all the way to Singapore this week, taking a delegation of fintech start-ups on his trade mission to the region.
jlne.ws/1pv51Am

Asia’s Aging Tech Leaders Struggle to Find Successors
Eva Dou And Aries Poon – WSJ
After building one of the world’s biggest semiconductor makers, the founder of Taiwan Semiconductor Manufacturing Co., Morris Chang, retired in 2005. Just four years later, when TSMC’s business was floundering during the financial crisis, he returned.
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Enforcement

CFTC Orders Fine and Revokes Registration of Former COMEX Floor Broker Dominick Anthony Cognata Based on His Failure to Produce Required Records and His Pattern of Conduct Demonstrating an Inability to Comply with the Commodity Laws
The U.S. Commodity Futures Trading Commission (CFTC) announced that it has ordered Dominick Anthony Cognata, who was a registered COMEX floor broker, to pay a $140,000 civil monetary penalty for failing to comply with a CFTC subpoena and to cease and desist from further violations of CFTC recordkeeping requirements.
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Bank of New York Mellon Fires Currency Trader After Internal Review
Chad Bray – Dealbook – NY Times
Bank of New York Mellon terminated a currency trader in London earlier this year for violating its code of conduct after an internal review of its foreign exchange operations, according to a person briefed on the matter.
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Environmental & Energy

New Carbon Market Most Important in Climate Deal, U.K. Says
By Mathew Carr – Bloomberg
A new carbon market that will spur emerging nations to cut emissions is the key element of next year’s planned global climate accord, a U.K. official said.
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**JK – Global emissions market? What a novel idea.

56 nations put price on carbon capture
Deccan Chronicle
The UNECE recommendation says that commercial development of carbon capture and storage taking carbon dioxide out of the atmosphere to reduce the build-up of greenhouse gases — does not have enough political support, and should have at least as much as other low carbon technologies.
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**JK – Pricing carbon and CCS is worthwhile. Pricing all of these elements today is critical.

Renewables to benefit from EU’s new GBP250bn investment plan
Businessgreen.com
European Commission President Jean-Claude Juncker has today unveiled details of an investment plan that aims to drive EUR315bn (GBP250bn) into new infrastructure projects across Europe, including renewable energy and power network upgrades.
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Asia-Pacific

Korea plans improvements to trading systems
Simon Osborne – The Trade
Korea’s securities regulator, the Financial Services Commission (FSA), has produced a set of measures which it says will enhance the efficiency of the market’s infrastructure and trading system.
jlne.ws/1FzvHlO

TOCOM Night Session Volume Accounted 48.8% In November – Record High Proportion
The Tokyo Commodity Exchange announced today that the trading volume from the night sessions during the month of November 2014 accounted for 48.8% (with 1,166,630 contracts) of the total monthly volume renewing the largest proportion since the launch of the night session in May 2009.
jlne.ws/1uR5PeI

China rate cut creates corporate hedging opportunity
Risk.net
Banks have been fielding calls from clients looking to shore up their renminbi hedging positions, following the decision by the People’s Bank of China (PBoC) to cut interest rates on November 21 – the first such move since 2012.
jlne.ws/1Fzt7fy

Vietnam faces barriers in drive to set up derivatives market
Risk.net
Banks push for deeper derivatives market in Vietnam, but without a transparent benchmark they can only go so far
jlne.ws/1FztyXe

SGX to launch bond trading platform
Simon Osborne – The Trade
Singapore Exchange (SGX) has said it will launch a bond trading platform before the middle of 2015.
jlne.ws/1Fzvxe9

S.Korea fails to sell controlling stake in Woori Bank again
Joyce Lee – ReutersSouth Korea’s fourth attempt to sell a controlling stake in Woori Bank valued at $2.7 billion collapsed after a combination of stringent regulations and weak business prospects turned off an already small pool of potential investors.
jlne.ws/1pv69nF

HKEx: Report On Initial Public Offering Applications, Delisting And Suspensions (As At 28 November 2014)
jlne.ws/1xZr7wA

First Shanghai 180 China A-Share Leveraged & Inversed ETF Debut On Taiwan Stock Exchange
jlne.ws/1uR63CA

Shanghai Stock Exchange: Remarks On Drawing Up “Notice Of Standardizing Trading Suspension And Resumption Caused By Listed Companies Planning Non-public Shares Issuance And Relevant Issues”
jlne.ws/1uR6zAt

Frontier Markets

Borsa Istanbul to offer options revenue sharing
Futures & Options World
Borsa Istanbul Derivatives Market, the Turkish futures exchange, has said it will offer market-makers a proportion of exchange commission in an effort to boost liquidity in options contracts.
jlne.ws/1xZvEzd

Bob Diamond pounces as global banks retreat from Africa
Martin Arnold and Patrick Jenkins – Financial Times
Bob Diamond, the former Barclays boss who is investing in African lenders, said big global banks have moved “off the stage” in the competition to buy financial assets, creating an opportunity for entrepreneurial new businesses like his.
jlne.ws/1xZpHlM

LatAm: Rising rates will limit IPO activity
Rob Dwyer – Euromoney Magazine
Slowing growth in Latin America will create big challenges for equity capital markets in the region, say bankers.
jlne.ws/1FzuF9i

Malawi Stock Exchange Weekly Trading Report For Week Ending 28 November, 2014
jlne.ws/1xZr9Vg

Oakbay Resources And Energy Lists On The JSE
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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.