Monday, July 26, 2010

News 100723: Vampire Squid, fines, reporting, DMA, flash, Aussie election, physical commodities, Buffett.


Last week I was having a rant about regulatory fines. At the time I had not read about the GS fine.
Anyway, one reader said:
" I think the reason why you are so surprised with the FSA’s “disproportionate” behaviour is that they did nothing in the past, which meant that compared to almost zero fines everything is disproportionate but the reality is the financial services arena is rife with market abuse and non compliance. Is the Goldman’s fine disproportionate – I think not, it is disproportionately low. They should be forced to refund all losses to third parties otherwise market abuse / misleading documentation is used to transfer wealth from one set of shareholders (taxpayers in this case – as RBS suffered through this) to other shareholders / bankers / partners of Goldman Sachs. Is that right?"

In my view, STG 7myn for transaction reports that no-one depends on is disproportionate. Sure the data could be better, should be better and will be better.

Now, transaction reports are totally different from knowingly selling your customers [expletive]. Transaction reports (e.g. not taking the rubbish out) are totally different from lying about ‘my word is my bond’ (e.g. stealing from mum’s purse). The GS fine, in the context of willful withholding of information to profit, as the BBC points out, is chicken feed. Disproportionate. So, what we have is a series of disproportionate fines going on. And disproportion happens when we act in haste / panic or out of context. Yes, I agree with the reader. GS got off way too lightly…but then 5 banks got hammered for some trade reports. What annoys me is the proportionality / randomness / consistency of these fines.
Self reporting should be encouraged, not bludgeoned.

STEPHEN BARTHOLOMEUSZ Goldman Sachs' $US550 million settlement with the SEC won't break the bank, and it certainly won't discourage the firm's habit of blurring its clients' interests with its own. Jul 16 read more

The Round Up.
Consolidated tape is right. Should be driven by standards (demanded by regulators). Vendors should then sell their ‘versions’ of consolidated tape. (Commercial forces can re-aggregate. i.e. market commercial model – not regulators).
Good to see LSE coming out with some realistic pricing.
Also note that in what, who and how we report we’ve been through all this before…SDRT for example.
LSE tariff reductions just evidence the need yet again for sustained competition.
Now, LSE woos clients with DMA? Hang on, I thought DMA was evil and every platform had to have pre-trade validation and handbrakes…but now it’s OK? I guess this means there is ‘good’ DMA and ‘bad’ DMA? Ridiculous, all participants should have direct access.

Do not route orders?...can someone explain the difference between this and a flash order?

Australia goes to the polls….and it is dull, dull, dull. Aussie politicians wouldn’t know what a policy was, even if it might catch them a vote or two. Remarkably hopeless.

As a former cocoa grader I likes the physical market shenanigans. Stealing from the warehouse, cornering cocoa and even my brother has a view on Baltic freight.

Last week end I had to rush out as Daniel was pushing me out the door so we could see Predators….(which he thought was a very good movie!) Amazing, at 11yrs I was scared of Dr Who’s adversaries…Daniel thinks little more of Predator carnage (MA15) than Toy Story 3’s evil Mr Pork Chop. Aliens by the way are an apparently better and more resilient species…I’m only about one box set behind the times.

Scott, Kiwis to beat Austrailia twice in the coming weeks............ (I agree).

I also think we’ll lose to the Sth Effricans tomorrow…for the first time since 1971.
(woohoo - I was wrong...we won!)

Another Irishman, George Clancy, will control Saturday night's clash with the Wallabies in Brisbane, where the Springboks haven't won since 1971.

Contodor should not have attacked Schleck.

If you speak fluent fashion, then the term ‘clog’ has recently had a slight change in translation. It’s gone from roughly meaning kitsch Dutch tourist trash to runway-ready must-have faster than you can say ‘Where’s the nearest windmill?’
Even better, if you want to take your soon to be band-aid covered feet one-step further, you can even customise your own pair. Choosing from one of four shapes, oodles of colours and even different soles, a pair of perfectly-you clogs will set you back around US$130 (depending on which options you choose), and shipping is just US$13 per pair, head to now to check it out.

The Buffet quote at the end is great.

Have a great w/end all,


THE TRADE NEWS: Is Europe Edging Toward Post-Trade Reporting Standards?

Post-MiFID, European trades are still reported on the exchanges on which they were made. But they may take place in many other locations. Brokers might report OTC trades on exchange or they might report them to Markit BOAT. They might report both the buy and sell of a trade to Markit BOAT, thus double counting them. They might not. The data will not necessarily have identifiers that are needed for TCA purposes, for example whether it was crossed on a broker network.
*** Lessons learnt from SDRT.

From October 1, professional terminal subscribers will be able to obtain separated real time London Stock Exchange post-trade content for £15 per month with Borsa Italiana available at €4.
The Exchange today further underlined its commitment to more cost effective availability of real time data by also announcing that it is to introduce a new volume discount pricing scheme for licensed distributors of Level 1 content to retail investors, whereby content may be available for as little as 20p per month.

By Ben Dyson

In Q2 2010, Credit Suisse’s dark pool traded €19.63 billion, over €3 billion more than its Q1 total of €16.31 billion. Citi Match, the internal crossing engine operated by Citi, traded €16.3 billion, a 36% increase over Q1’s total of €12 billion. Both Citi and Credit Suisse single count their figures. By comparison, Chi-X Europe’s Chi Delta, the largest MTF operated dark pool in Q2, traded €14.62 billion

The London Stock Exchange (LSE) has extended the duration of a price promotion introduced to attract high-volume traders by four months. It will now finish at the end of November 2010.


19/07/2010 11:52:00
LSE CTO PAINE QUITS Robin Paine has resigned as chief technology officer (CTO) at the London Stock Exchange (LSE) and will leave next month. More on this story:
Paine was heavily involved in the initial roll out of TradElect, which cost around £40 million but suffered several glitches and soon fell behind upstart rival platforms in the speed stakes, offering trading at a sluggish 3.7 milliseconds.


Bank-backed Canadian alternative trading System Alpha Group is to launch a dark liquidity pool for dealers to match best bid and offer prices anonymously in the autumn. Full story:

Headquartered in Jersey City, Direct Edge is owned by a consortium that includes Goldman Sachs, J.P. Morgan, Citadel Derivatives Group, Knight Capital Group, and ISE.

Exchange news as ISE introduced Do Not Route Orders for increased control over order execution and NYSE Technologies launched an Order Routing Direct connectivity service.
*** Isn’t a “do not route order” a “flash order”?

Nice Aussie wrap up:
• Committee News
• Multi-Markets Issues – ‘May 6’ Meeting & ASIC Priorities

• Market Supervision Changes
• The Future of Financial Advice

• ASX Further Consultation on Cash Equities Margining
• Expert Witnesses

• ASIC, Ready for Market Supervision



Battlelines drawn for August 21 poll ***
this election is sooo droll. Labour, that ran the country into deficit and beyond saying they can fix up all the muddles they’ve made (from nation building schools to loft insulation) and an opposition that leads its claims with “it is ready to govern”. I mean what a stupid thing to say, what do you expect if you’re an opposition politician? No debate on policy and pathetic personal attacks that lack convincing malice and viper.



Roger Liddell has informed the Board of his intention to retire from his role as chief executive of LCH.Clearnet Group Limited and its subsidiary company LCH.Clearnet Ltd in July 2011

BME/CLEARSTREAM OTC REPOSITORY ENTERS PILOT PHASE WITH BBVA AND BANCO SABADELL Spanish bourse Bolsas y Mercados EspaƱoles (BME) and Clearstream have begun testing their planned European OTC trade repository with the support of local banks BBVA and Banco Sabadell. Full story:

Senate approves sweeping legislation to revamp financial regulation

Congress sent legislation to overhaul financial regulation to President Barack Obama to sign after the Senate approved the bill 60-39. The bill delves into nearly every corner of the financial industry. Supporters said the measures would help prevent a repeat of the financial crisis, while critics said it would limit credit and hinder economic growth. The legislation would give a range of regulatory agencies power to write rules related to issues including consumer protection and proprietary trading. Obama is expected to sign the bill into law next week. On Thursday, SIFMA held its Regulatory Reform Summit, which brought together government policymakers and industry experts to discuss the sweeping changes. Forbes/StreetTalk blog (7/15) , The Wall Street Journal (7/16) , The Washington Post (7/16) , Los Angeles Times (7/16) , The New York Times (free registration) (7/15)

Bankers remain one step ahead of regulatory reform
Congress approved the regulatory-reform bill this week, but bankers have been gearing up for many of the proposed changes for some time. The legislation likely would hinder banks' profit, but savvy bankers plan to adapt to the measures and even capitalize on them, according to The New York Times. The New York Times (free registration) (7/15)

JPMorgan reportedly might move back-office units from the UK
JPMorgan Chase reportedly is looking into relocating back-office operations out of Britain as it perceives that the UK no longer supports financial services as it once did. The US bank has been clear that it sees its future in Asia, as the UK government proposed a levy on banks' balance sheets to raise revenues. Telegraph (London) (18 Jul.)

Thieves Strike U.K. Metals Warehouse by ANDREA HOTTER
LONDON-Thieves swiped several hundred metric tons of nickel and copper from a warehouse in the U.K.'s northwest in May. Now two of the six metals brokers that owned the metal could face a huge bill to replace it because they weren't insured for it, people familiar with the matter told Dow Jones Newswires. Liability for insurance lies with the owner of the warrant-a document of possession-for the material.
*** for some reason I find this funny.
*** I didn’t realise JPM owned Henry Bath…now that’s vertical integration.

Hedge fund cornering the cocoa market
Monday, 19 July 2010 6:47 AM

Baltic dries up
My brother informs me….
In the industry this flow of new vessel construction has been known and factored into plans for a couple of years. What happens in the areas with highest standards get the newest vessels as they compete for an edge on competitors. The older vessels then get shuffled into other theatres such as Australia. This way over time the dodgy vessels in Asia get sent to a beach in Pakistan or India for breaking up and recycling of steel (I have been to these sites in Pakistan however photos are now buried somewhere but what an incredible site to see a half stripped ship - process is strip inside and then cut the bow off and then winch boat forward and get to the next bulwark and so on) The key for me is demand has picked up to pre crisis level and will continue to grow. Some will be hurting but the bulk will be ok

Icap appoints duo to board
Tim Cave - Financial News
Diane Schueneman - a former head of global infrastructure solutions at Merrill Lynch - has been appointed as one of two new non-executive directors at Icap, coming on the same day as the interdealer broker reported an uptick in revenues during the first quarter of its financial year.


BNP Paribas Securities Services Completes Strategic Relationship with ITG
By Staff 7/22/10
BNP Paribas Securities Services is now live as the single clearing and settlement agent for Investment Technology Group’s Europe Middle East and Africa (EMEA) brokerage business.
BNP Paribas Securities Services is a wholly owned subsidiary of BNP Paribas Group and provides post-trade administration solutions to buy-side and sell-side financial institutions and issuers. It has $5,793 billion of assets under custody, $1,049 billion assets under administration and administers over 6,000 funds (at December 31, 2009).

IBM unveiled a new mainframe computer called "zEnterprise," which it said was the most powerful mainframe ever and more cost-efficient than previous-generation products.;jsessionid=DHBADOIAZHYU5QE1GHOSKH4ATMY32JVN?articleID=226200011&_requestid=16816



No, the kid's probably not color blind. A trick for teaching children colors at a younger age--and why it is otherwise so hard for them *** Ahhh, the old postnominal training. No wonder those Europeans are so often smarter than us. (alright, smarter than me then).

Tours and Triomphe

Is the Tour de France getting easier?
Sue Halina wrote: Jul 19th 2010 10:49 GMT
The story about the Tour during WW2 is not quite complete. Have a look at this photo (

I think we consider too much the luck of the early bird and not enough the bad luck of the early worm. - Franklin D Roosevelt.

A decline in our character results in a decline in quality of work and loss of customers."
--Gladys Edmunds, American consultant and columnist

An understanding that wealth does not attach itself necessarily to hard work nor roles that more benefit society. Warren Buffett best describes this concept when he says: “My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well... I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.”

Scott Riley

Business Development

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