| October 27, 2016 | "Irreverent, but never irrelevant" | | | | John Lothian
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John Lothian News | |
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Bits & Pieces
JLN Staff
The CME reported third quarter earnings this morning and a couple of items were worth noting. CME is making progress in its ongoing efforts to attract Asian customers. CME CEO Phupinder Gill told analysts that the region has been a strong contributor to CME's metals and energy product groups. Volume in its natural gas options out of Asia rose 104 percent, and in metals, volumes from the region were up 44 percent.
The other item worth mentioning is that the daily options volumes on CME's Globex platform hit an all-time high in the third quarter, and is above that in the fourth quarter. It plays nicely with our recent story on options on futures and worth a look if you haven't seen it, A Tangled Web: Exploring The Explosive U.S. Growth Of Options On Futures
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Impact: Navigating Regulation and What Comes Next, Part 1
JohnLothianNews.com
At FIA Expo 2016, JLN spoke with a variety of participants in today's markets about the ongoing effects of regulation and what those mean for the future of their businesses.
In Part 1 of our three-part series, Phupinder Gill, CEO of CME Group; Drew Shields, CTO of Trading Technologies; Dave Snowdon, co-founder, director and CTO of Metamako; and Hazem Dawani, president and CEO of OptionsCity, provide their thoughts on subjects ranging from issues with MiFID II clock synchronization to the shifting clearing landscape.
Watch the video »
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There is Nothing Like a WILD Event
By John J. Lothian
There is nothing like a WILD event. They have been very successful with their symposiums, with this year being their 5th Annual. The good news about this is that Chicago might get even wilder after the WILD event. Game 6 of the World series will start an hour after the WILD event ends.
On November 1 at the UBS Building in Chicago, Women in Listed Derivatives (WILD) is offering a symposium on the ever-changing nature of the derivatives industry and the role of women within it. The event begins at 3:30 p.m. with OCC CEO Craig Donohue holding a fireside chat with syndicated financial columnist and author Terry Savage, followed by a panel that will cover diversity on boards and executive committees. Lynn Marek of Crain's will moderate, something I have not seen before. Maureen Downs, Dorri McWhorter, Cynthia Zellanger and Bridget Gainer will be on the panel.
You can get all the details and sign up here.
Also on the wild side, but more tame in a Swiss kind of way, the ICDA's Burgenstock Conference will be something to watch. You can find details here
The list of speakers is now nicely alphabetized, starting with Cinnober's Veronica Augustsson
If you want to attend, email me and I will give you a discount code that can save you 15%.
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Scotland to Start Own Stock Exchange Using Blockchain Technology
John Detrixhe - Bloomberg
Scotex market plans to raise as much as 15 million pounds
Exchange will use distributed ledger technology for clearing
Scotland may get its own stock exchange using the latest, if unproven, technology to underpin the syste
/goo.gl/XH2t6A
**JK: It's coming, an exchange without a clearinghouse.
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The World Is Out of Weapons
By Satyajit Das - Bloomberg
No one likes to admit defeat. But global policymakers, who continue to insist that there's more they can do to revive growth and inflation, are starting to sound like Monty Python's Black Knight, the limbless and mortally wounded warrior who threatens to bleed on his victorious opponent. The truth is that governments and central banks have very few weapons left -- and have probably lost any chance they once had of averting a prolonged stagnation.
/goo.gl/kbUxtn
***** This discounts the greatest weapon of them all, the power of persuasion.
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OCC's Craig Donohue To Speak at SIFMA Listed Options Conference
OCC
OCC Executive Chairman and CEO Craig Donohue will be the featured speaker at the November 3 SIFMA Annual Listed Options Conference in New York. In a conversation with Tom Wittman, EVP and Head of Global Securities for Nasdaq, Mr. Donohue will discuss the role of centralized clearing in today's marketplace and the impact of clearing equivalency and other regulation on the listed options market.
/goo.gl/DzDU9y
***** This is an all Craig Donohue day, I guess.
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Twitter's 'Firehose' of Tweets Is Incredibly ValuableÂand Just as Dangerous
Benjamin Elgin and Peter Robison - Bloomberg Businessweek
If you ignore all the self-promotion, ranting, and frog memes, it's possible to see the Twitter that Jack Dorsey likes to talk about. It's a "people's news network," he wrote in a memo earlier this yearÂa digital town square that connects voices from around the world. Taken together, the hundreds of billions of tweets that have been created over the past 10 years represent a constantly updating corpus of human conversation.
/goo.gl/uLuTK0
***** And the firehouse is just the @johnlothian tweets.
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Sunny spells, scattered clouds and a typhoon of data
Patrick Thornton-Smith - Chief Marketing Officer-Duco
The 32nd annual FIA Expo in Chicago was, as ever, full of commentary and observation as the industry looked back on the last year and forward to the next.
/goo.gl/G3SppS
**JK: Patrick Thornton-Smith opines on data.
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Wednesday's Top Three
Yesterday's top three stories ranged from the future of commodities businesses to Goldman layoffs to HFT contributions to our markets. The Reuters piece Commodity traders must go digital or face extinction: report took the top spot by quite a margin. Second went to Bloomberg's story, Here's How Goldman Sachs Lays People Off. The answer is, a little bit at a time. Bloomberg's Wall Street's Speed Demons Are Heroes took third.
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| Lead Stories | DRW makes last-ditch attempt to avoid market manipulation trial; Don Wilson trading company argues its case rather than settling with CFTC
by: Gregory Meyer in New York
A leading derivatives trader accused of market manipulation by a US regulator is making a last-ditch bid to avoid a trial. DRW, the Chicago-based proprietary trading company, and its boss Don Wilson have filed a motion asking a newly appointed judge to dismiss the case before it goes before a jury on December 1.
/goo.gl/xuBbhq
Wall Street leaders too insulated, says watchdog for U.S. rescue fund
Patrick Rucker - Reuters
Wall Street executives are too shielded from prosecution and should answer for misdeeds committed by underlings, the watchdog for a multibillion-dollar bailout said on Wednesday. Senior banking officials should attest each year that their companies are free of criminal fraud and civil abuse, said Christy Goldsmith Romero, special inspector general of the Troubled Asset Relief Program.
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U.K. FCA Reviews Agency 'Mission' as It Embarks on New Era
Bloomberg
The U.K. Financial Conduct Authority opened a review of its regulatory "mission" as the agency looks to redefine itself under a new chief executive officer following a turbulent year.
The regulator said Wednesday that it's looking to create a "guiding set of principles around the strategic choices the FCA makes" to better inform its day-to-day work and help the industry understand its priorities. Key areas under review include the FCA's role in consumer compensation, how the agency identifies harm and addresses it, and the scope of its powers.
bloom.bg/2faAUiH
Harvard Called 'Lazy, Fat, Stupid' in Endowment Report Last Year
Michael McDonald - Bloomberg
Consultants hear complaints about 'easy-to-beat' bonus targets; Top 11 managers collected $242 million in pay over five years
Harvard University's money managers collected tens of millions in bonuses by exceeding "easy-to-beat" investment goals even as the college's endowment languished, employees complained in an internal review.
/goo.gl/zrrIxL
ICAP-Tullett Deal Said to Face Regulator Query on Licensing
Will Hadfield, Suzi Ring, Manuel Baigorri - Bloomberg
The FCA is said to scrutinise ICAP's licensing framework; The combined TP ICAP will be the world's largest voice broker
U.K. regulators are examining the licenses needed for the $1.5 billion tie-up between ICAP Plc and Tullett Prebon Plc, raising the possibility that the deal may be delayed beyond the firms' end-of-year target, according to people with knowledge of the situation.
/goo.gl/YSLwtg
Nasdaq profit hit by deal costs, but tops expectations
By John McCrank and Richa Naidu - Reuters
Transatlantic exchange operator Nasdaq Inc (NDAQ.O) said on Wednesday its quarterly profit fell on acquisition costs following a string of deals, but the results still topped expectations, helped by higher data and technology revenues.
/goo.gl/qkf4to
Randall's blockchain to power post-trade FX platform
eFinanical News
SETL's blockchain-powered software, called OpenCSD, will be used within an FX post-trade platform set to be launched by the peer-to-peer network Cobalt DL in 2017.
SETL, led by chief executive Peter Randall, was established in July 2015 and announced OpenCSD as its first for-sale blockchain product in June. It is designed to record and settle the ownership of securities across asset classes.
bit.ly/2eFGk3L
Bank safety and the blockchain revolution
Distributed ledgers might offer savings but caution is in order
FT View
The financial world has spent the past few years trying to decide what to make of blockchain  the automated ledger that supports the bitcoin cryptocurrency. Could it be a gold mine for banks looking to make their back-office systems more efficient, driving costs from the business? Or is it just another techno dead-end, a clever idea but one that lacks sufficient profitable uses to be worth deploying on a large scale?
/goo.gl/1UCGsz
Goldman's Multifactor Robots: A Post-Human Guide to Investing
Dani Burger - Bloomberg
ETFs combining multiple investment themes are next big thing; Billed as a core holding, will investors buy and hold?
For its next act, the $3.5 trillion ETF industry wants to sell you the steady income of a dividend, the upside of a small cap and the good night's sleep of a low-volatility stock. All at once.
/goo.gl/6H1Vjr
Deutsche Bank swings into profit for third quarter; German lender beats forecasts of a loss and raises litigation provisions to EUR5.9bn
by: James Shotter in Frankfurt - FT
Deutsche Bank earned itself some breathing space after a turbulent few weeks by reporting a small profit for the third quarter, beating analysts' expectations that it would make a loss.
/goo.gl/JKVjuI
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| Brexit | | Financials stories regarding the recent decision of the United Kingdom to leave the European Union | Did Brexit Kill the British IPO Market?
Ruth David - Bloomberg
U.K. listings are at less than half their year-ago volume; European firms have postponed $5.7 billion in IPOs since vote
Companies attempting to go public in the U.K. post Brexit face an uphill battle.
/goo.gl/Iu5Q4Q
Banks Likely to Lose Passporting With Brexit, Official Says
Timothy Ross - Bloomberg
Mark Garnier: U.K. weighs 'new model' for single market access; Inflation is 'inevitable' side effect of depreciation, he says
Global banks will probably lose their current legal rights to provide services in the European Union after Brexit, the U.K.'s trade minister said in the most detailed outline yet of the government's thinking.
/goo.gl/mzWb5I
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| Exchanges, OTC & Clearing | | Top news from exchanges, clearing, settlement and trade execution facilities | CME Group Inc. Reports Strong Third-Quarter 2016 Financial Results
CME Group
CME Group Inc. (NASDAQ: CME) today reported revenue of $842 million and operating income of $525 million for the third quarter of 2016. Net income was $473 million and diluted earnings per share were $1.39. On an adjusted basis, net income was $357 million and diluted earnings per share were $1.05. Financial results presented on an adjusted basis for the third quarter of 2016 and 2015 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1
/goo.gl/Cw3BMK
CME Group Announces First Trades of Alumina FOB Australia (Platts) Futures
CME Group
CME Group, the world's leading and most diverse derivatives marketplace, today announced that the first Alumina FOB Australia (Platts) Futures contracts were traded on Tuesday, Oct. 25, 2016. A total of 60 futures contracts, equivalent to 6,000 metric tons, were traded across the January through June 2017 contract months.
/goo.gl/cmKctq
Nasdaq Rolls Out SIP Feed Resiliency, Latency Improvements
Max Bowie - WatersTechnology
The moves are designed to make the SIP's infrastructure more robust and lessen the chance of any market-wide impact from technical issues.
/goo.gl/ZSR2vq
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| Politics | | An overview of politics during an election year as it relates to the financial markets | The Black Hole of Trumponomics
Ramesh Ponnuru - Bloomberg
Wilbur Ross and Peter Navarro, two advisers to Donald Trump, argue in the Wall Street Journal that the federal government would have just as much revenue with Trump's big tax cuts as it would have without them (and so those tax cuts will neither increase the deficit nor require large spending cuts). They claim that even organizations which tend to find that tax cuts on investment boost economic growth, such as the Tax Foundation, are underestimating the benefits of Trump's plan because they are not taking into account the pro-growth effects of his trade, energy and regulatory policies.
bloom.bg/2eGXqhU
Mike Bloomberg defends Wall Street banks, says Trump supporters are not educated enough to understand the issues
Portia Crowe - Business Insider
Billionaire Michael Bloomberg spoke candidly about Wall Street and the US presidential election at his company's 2017 Year Ahead conference on Tuesday.
/goo.gl/5a8rX0
Trump calls for '21st century' Glass-Steagall banking law
Reuters
U.S. Republican presidential candidate Donald Trump on Wednesday called for a "21st century" version of the 1933 Glass-Steagall law that required the separation of commercial and investment banking, a change the Republican Party also supported in its 2016 policy platform.
/goo.gl/xxkSg9
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| Investing & Trading | | Today's top stories from fixed income, currencies and commodities (FICC) | Large exodus from stock funds attributed to product switch: ICI
Trevor Hunnicutt - Reuters
U.S.-based stock mutual funds reported the largest outflows in five years, Investment Company Institute data showed on Wednesday, adding to a poor year of sales for the funds. Some $16.9 billion moved from stock mutual funds in the seven days through Oct. 19, more than in any other week since August 2011, the trade group's data showed.
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The Co-Founder of Long-Term Capital Management Wants You to Learn Your Financial Formulas; What coin-tossing can teach us about investment.
Tracy Alloway - Bloomberg
"You're invited to a talk by a hedge fund manager who was a partner at a fund that famously flopped about 20 years ago. You turn up, hoping to hear some valuable insights, or at least some entertaining tales, but instead you are offered a stake of $25 to take out your laptop to bet on the flip of a coin for thirty minutes. You're told the coin is biased to come up heads with a 60 percent probability, and you can bet as much as you like on heads or tails on each flip. You will be given a check for however much is in your account at the end of the half hour."
/goo.gl/4CBuPo
Bitcoin as a Chinese capital outflow proxy
Izabella Kaminska - Financial Times
The price of bitcoin has been rising in recent weeks  with the cryptocoin currently trading about $671. All sorts of theories have landed in our inbox regarding what's fuelling the spike.
on.ft.com/2eGRPYG
Curse of Asia Witching Hour Haunts Traders After Pound Crash
Netty Idayu Ismail - Bloomberg
Traders grow wary of leaving automatic stop-losses in place; Banks pulling back from dealing expose market's frailties
In the global currency market, the darkest hour comes just as dawn is breaking in Asia.
/goo.gl/8szUSy
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| Banks, Brokers & Managed Funds | | The latest from banks, brokers, hedge funds and managed futures | Pimco's Idea for Deutsche Bank Bonuses: Pay in Risky Bonds
Tom Beardsworth and Alastair Marsh - Bloomberg
As Deutsche Bank AG Chief Executive Officer John Cryan explores alternatives to paying its staff bonuses in cash, two of the lender's creditors have an idea: pay them with a risky type of bond that would be first to take losses if the bank runs into trouble.
bloom.bg/2eH0jiz
Barclays Posts 35% Jump in Profit on Bond-Trading Revenue
Stephen Morris - Bloomberg
Fixed-income unit reports highest revenue in more than 2 years; Bank books $1.3 billion pension deficit, $734 million PPI cost
Barclays Plc said profit rose 35 percent in the third quarter as revenue from fixed-income trading surged to the highest in more than two years.
/goo.gl/qmThzq
Morgan Stanley to keep commission-based IRAs for wealth management customers
By Olivia Oran and Nikhil Subba - Reuters
Morgan Stanley (MS.N) said on Wednesday it would allow its wealth management clients to choose the way they pay the firm for retirement accounts covered by a new fiduciary rule.
/goo.gl/xQWgw7
BoE seeks details of large UK lenders' exposure to Deutsche, Italian banks
Reuters
The Bank of England (BoE) has asked major lenders in Britain to detail their exposure to Deutsche Bank and the biggest Italian banks, including Monte dei Paschi, the Financial Times reported on Wednesday.
reut.rs/2eGV4j6
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| Fintech | | A roundup of today's market tech news and a look at tomorrow's disruptors | Misys Cancels Planned IPO in U.K., Citing Market Conditions
Ruth David - Bloomberg
U.K. financial software maker Misys canceled a planned initial public offering after receiving low demand for the shares.
/goo.gl/GJ5Zpp
Wall Street Horizon Welcomes Jeff Parker, Former Thomson Financial Chairman and CEO, as an Investor and Advisory Board Member
Wall Street Horizon
Wall Street Horizon, a provider of accurate and timely corporate event dates and information for institutional investors and traders, today announced that Jeff Parker has joined the firm as an investor and Advisory Board member.
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| Regulation & Enforcement | | For more regulatory, visit MarketsReformWiki, our website focused on current market reform efforts. | SEC Approves Amendments to Rules Governing Communications With the Public
FINRA
The SEC has approved amendments to FINRA rules governing communications with the public. The amendments revise the filing requirements in FINRA Rule 2210 (Communications with the Public) and FINRA Rule 2214 (Requirements for the Use of Investment Analysis Tools) and the content and disclosure requirements in FINRA Rule 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings).
/goo.gl/JVb1IX
FCA says it is watching algorithmic traders linked to pound's flash crash
Jill Treanor - The Guardian
The City regulator has said it is keeping a close watch on algorithmic traders of the type that may have been connected with the flash crash in the pound earlier this month. Sterling plunged in a few minutes of early trading in Asia on 7 October, prompting the Bank of England to say it was looking into possible causes of the sudden movement.
/goo.gl/CUNINs
JPMorgan-Hack-Linked Bitcoin Operator's Dad to Plead Guilty
Christian Berthelsen - Bloomberg
Michael Murgio scheduled to enter plea Thursday in probe; Bitcoin exchange allegedly used by stock-scam hackers
A Florida man with ties to an illegal Bitcoin exchange that was allegedly used by hackers who targeted companies including JPMorgan Chase & Co. is scheduled to plead guilty to undisclosed charges Thursday.
/goo.gl/oTNC8b
Stand-off traps EU's 'too big to fail' bank reform in limbo
Huw Jones - Reuters
European Union lawmakers have failed in their latest attempt to revive a draft law giving regulators powers to split up risky banks in order to prevent a repeat of the costly taxpayer bail-outs during the financial crisis.
reut.rs/2eGW7PX
Exclusive: EU proposes a phasing in of some bank capital rules - document
Huw Jones - Reuters
Banks in the European Union will get more time to adjust to new rules aimed at making sure that banks hold enough of a capital cushion against risky lending on their trading books, an EU document showed on Wednesday.
reut.rs/2eGXD4t
Andrew Bailey looks to reboot UK conduct regulator's 'mission'
Daniel Hinge - Risk.net
Four months into the job, the UK's chief conduct regulator has sought to clarify the organisation's "mission", after a series of mistakes dogged the early years of the Financial Conduct Authority (FCA). Andrew Bailey, who became FCA chief executive in July, said the watchdog has limited resources and so has to be clear on its priorities. He also noted the global study of the "principles and theory" of conduct regulation is at an early stage, leaving authorities to figure out their own approach.
/goo.gl/iO4Gyd
Barclays, UBS settle with bondholders over Libor manipulation
Jonathan Stempel - Reuters
Barclays Plc (BARC.L) and UBS AG (UBSG.S) have agreed to settle U.S. litigation by bondholders who accused the banks of conspiring with rivals to rig the Libor benchmark interest rate, lawyers for the plaintiffs said in court filings on Wednesday. Terms were not disclosed, and both accords require the approval of U.S. District Judge Naomi Reice Buchwald in Manhattan.
reut.rs/2eGXOwQ
Brokers to raise concerns on compliance costs
Business Standard News
Brokers have raised concerns over the heavy penalty being levied by the Securities and Exchange Board of India (Sebi) in the past few years, and plan to approach the government on the matter as well as on the increased costs of compliance.
/goo.gl/Xy7TQ6
SEC Adopts Final Rules to Facilitate Intrastate and Regional Securities Offerings
SEC
The Securities and Exchange Commission today adopted final rules that modernize how companies can raise money to fund their businesses through intrastate and small offerings while maintaining investor protections. "These final rules, while continuing to provide investor protections, update and expand the capital raising avenues for smaller companies, allowing them to more fully take advantage of changes in technology and business practices," said SEC Chair Mary Jo White.
/goo.gl/8nPnhz
SEC Proposes Amendments to Require Use of Universal Proxy Cards
SEC
The Securities and Exchange Commission today voted to propose amendments to the proxy rules to require parties in a contested election to use universal proxy cards that would include the names of all board of director nominees. The proposal gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.
/goo.gl/eTNrZV
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| Regions | | Stories of local interest from the Americas, EMEA and Asia-Pacific regions | Singapore takes more steps to become LNG trading hub
By Mark Tay - Reuters
SINGAPORE, Oct 26 Singapore is boosting efforts to establish itself as Asia's liquefied natural gas (LNG) trading hub, looking at third party spot imports and a second LNG terminal, while LNG bunkering services will start next year.
/goo.gl/s0trwB
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| Miscellaneous | | Stories that don't quite fit under the other sections | The muddled economics behind curbs on Airbnb
Diane Coyle - Financial Times
It is an extraordinary move. In New York, Andrew Cuomo, state governor, last week signed into law a bill imposing large fines on homeowners who advertise through Airbnb, the accommodation platform. This in effect bans 40,000 people in the city from certain uses of their own property and restricts competition that has benefited thousands more travellers.
on.ft.com/2eGYceJ
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