I am pleased that CFTC staff has granted important no-action relief to Shanghai Clearing House. As of today, Shanghai Clearing House will be allowed to temporarily clear certain swaps that are subject to mandatory clearing in China. This relief is intended as an interim measure, as Shanghai Clearing House intends to seek a permanent order exempting it from registration with respect to such swap clearing. It follows months of work between our respective staffs as well as the staff of the People’s Bank of China (PBOC). We welcome this new relationship and look forward to continued collaboration.
read more...Statement Of CFTC Chairman Timothy Massad On No-Action Letter Shanghai Clearing House
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SEC Halts Ponzi Scheme Aimed At Middle Class
The Securities and Exchange Commission has charged two California men and their investment firm with operating a Ponzi scheme as they purported to specialize in serving middle-class investors and securing exorbitant returns by investing in hot pre-IPO stocks. The agency also obtained a court-ordered asset freeze against them.
The SEC alleges that instead of using the firm’s purported proprietary trading models and investing in pre-IPO shares of well-known tech companies like Uber, Alibaba, and Airbnb as promised to investors, Jaswant “Jason” Gill and Javier Rios personally pocketed at least $2.8 million in investor funds, using some of that money to pay for excursions to high-end restaurants and luxury retail stores as well as jaunts to Las Vegas casinos, gentlemen’s clubs, and professional sporting events. They never actually invested in any pre-IPO shares, and have been using money from new investors to pay supposed returns to earlier investors. They have raised approximately $10 million through their firm, JSG Capital Investments, and related entities, by catering to average retail investors and promising them exclusive investment opportunities “previously only available to the one-percenters,” with guaranteed annual returns of up to 60 percent.
According to the SEC’s complaint filed in federal court in San Francisco, Gill in particular has brandished phony credentials, telling investors he founded his firm after serving as a managing director at Morgan Stanley. He also boasted partnerships with several Silicon Valley venture capital firms. Gill, Rios, and JSG Capital Investments are not registered with the SEC or any state regulator. Rios’s background is in food service.
Investors can quickly and easily check the credentials of people selling investments and determine whether they are registered by using the SEC’s investor.gov website.
“We allege that Gill and Rios enticed middle-class investors by promising access to highly coveted investment opportunities they claimed were typically reserved for the rich,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office. “Exclusivity, exorbitant returns, and exaggerated credentials are all classic hallmarks of a Ponzi scheme, and investors can protect themselves by heeding these red flags and checking whether the person pitching the investments is properly registered to sell them.”
In a parallel action, the U.S. Attorney’s Office for the Northern District of California today announced criminal charges against Gill and Rios.
The SEC’s complaint seeks permanent injunctions plus disgorgement and monetary penalties from Gill, Rios, JSG Capital Investments and related entities. The SEC has obtained a court order to freeze the assets of Gill, Rios, and the JSG entities and preliminarily enjoin them from violating the antifraud provisions of the federal securities laws and raising money from investors.
The SEC’s investigation was conducted by Ruth Hawley and John Roscigno and supervised by Jeremy Pendrey of the San Francisco office. The SEC’s litigation will be led by Jason Habermeyer, Andrew Hefty, and Ms. Hawley. The SEC appreciates the assistance of the Federal Bureau of Investigation, U.S. Attorney’s Office for the Northern District of California, Financial Industry Regulatory Authority, and California Department of Business Oversight.
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More Information
SEC Investor Alert: Beware of False or Exaggerated Credentials
SEC Investor Publication: Risky Business - Pre-IPO Investing
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Dalian Commodity Exchange: Plastics Futures To Contribute To Structural Reform On Supply Side
On May 26, Dalian Commodity Exchange (DCE) joined hands with China Petroleum and Chemical Industry Federation (CPCIF) and China National Light Industry Council (CNLIC) to host the “China Plastics Industry Conference (CPIC) 2016” in Shenzhen. DCE vice president Wang Fenghai said in his speech that under the New Normal involving in current transformation and upgrading of the economy and deepening the industrial restructuring at present, the supply-side structural reform has posed new requirements for the development of the plastics industry, the plastics enterprises have shown stronger demand for risk management than ever before, and the futures market will play a more significant and positive role in advancement of the supply-side structural reform and business operation.
In his speech, Wang firstly described the development and operation of the plastics futures on DCE. He said that since the first plastic futures product was listed on DCE in 2007, the Exchange has now formed plastics futures offering covered LLDPE, PP and PVC, laying a solid foundation for better serving the real economy. In terms of the market operation, four features have been highlighted: firstly, the market operates safe and steadily. Compared with the huge volatility of the spot market, the corresponding futures market have maintained safe and smooth, laying the foundation for giving play to the functions and serving the industry. Secondly, the market liquidity has been improved remarkably. In 2015 the three plastic futures products on DCE recorded a total trading volume of 230 million contracts (unilateral, the same below), with a turnover of RMB 9.2 trillion and an average daily open interest of 607,000 contracts, growing by 133%, 86% and 44% year-on-year respectively and accounting for 21%, 22% and 12% of DCE’s totals respectively. The plastics futures products have become the backbone of the futures market in Dalian. Thirdly, the structure of the investors have been constantly improved. In 2015 the number of the corporate clients participating in the trading of the plastics futures on DCE reached 5,249, up by 44% year on year. The trading volume of the corporate clients accounted for 32% of the total, covering the upstream, midstream and downstream clients on the entire plastics industry chain and a large number of investment organizations and forming a diversified investor structure. Fourthly, the market functions have been brought into relatively full play. The correlation of the futures and spot prices of the plastics products has been comparatively high. In 2015, the correlation of the futures and spot prices for LLDPE and PP reached 0.78 and 0.81 respectively. The spreads between the futures and spot prices have been relatively stable and reasonable. The major producing and trade enterprises in the plastics industry are gradually adopting the internationally mainstream modes such as basis pricing in risk management.
On the conference Wang also briefed the recent efforts in curbing the tendency of related futures products toward over-speculation and safeguarding the stability in the market. He said that this year the domestic spot prices of relevant commodities have fluctuated fiercely and the trading of commodity futures has been unusually active. Especially since early April, the ferrous futures products have seen their transactions hit new highs repeatedly and the volume to open interest ratios climb continuously, showing the tendency of over-speculation. In light of the situation, DCE has vigorously taken measures, conducted all-weather tracking of the dynamics in the spot and futures markets, intensified market monitoring and supervision, and timely made research, decisions and arrangements. DCE has resolutely reined in the over-speculation and maintained the market order by taking the risk control measures for the futures products with overheated trading such as increasing the minimum trading margin, expanding the price limits of the contracts and significantly adjusting up the intra-day trading fees; in addition, while focusing on suppressing the momentum of short-swing speculation on relevant products, DCE has adopted differentiated measures to effectively protect the interests of the clients of the entity industries without increasing their costs. He further said that next, DCE will continue to pay close attention to the market dynamics, strictly monitor the market operation, resolutely crack down on the behaviors violating laws and rugulations, and effectively safeguard the good market order featuring “openness, fairness and justness”. At the same time, DCE will further improve the risk control mechanism and strengthen the capacity for risk control.
He also stressed that in terms of serving the real economy, DCE has always attached great importance to market cultivation and development for the plastics industry. Through constant exploration and innovation, DCE has successively launched the systems such as the bonded delivery of the PP, the registered brands of PVC futures delivery and the switch of futures and spot warehouse receipts for PVC. On the basis of extensive research and survey, DCE has timely adjusted the delivery areas and the setting of premiums and discounts for the plastics futures products, further optimized the distribution of the delivery warehouses, continued to improved the market efficiency and reduced the enterprises’ costs in participation, so as to solidly implement the fundamental purpose of the futures market serving the real economy. With regard to the research and development of new products, he said that DCE is energetically advancing the development and listing of the ethylene glycol and other chemical futures products, so as to further expand the scope of serving the real economy.
It was the ninth session of the plastics industry conference jointly organized by DCE, CPCIF and CNLIC. The conference attracted the participation of the representatives of more than 300 enterprises and organizations such as related industry associations, spot enterprises, futures companies and investment organizations.
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CalPERS Comments On Federal Sentencing Of Former CEO Fred Buenrostro
The California Public Employees' Retirement System (CalPERS) today issued the following statements on the sentencing of its former Chief Executive Officer (CEO), Fred Buenrostro, in federal court in San Francisco on bribery charges. Mr. Buenrostro served as CEO of CalPERS from 2002 to 2008.
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CalPERS Comments On Federal Sentencing Of Former CEO Fred Buenrostro
The California Public Employees' Retirement System (CalPERS) today issued the following statements on the sentencing of its former Chief Executive Officer (CEO), Fred Buenrostro, in federal court in San Francisco on bribery charges. Mr. Buenrostro served as CEO of CalPERS from 2002 to 2008.
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Key Figures SIX Swiss Exchange And SIX Structured Products Exchange: May 2016
A total of 21,045,833 transactions have been conducted on SIX Swiss Exchange and SIX Structured Products Exchange since the start of 2016. This marks a year-on-year decrease of 4.8%. There have been 20,165,056 trades in the Equities including Funds + ETPs segment, equating to a decline of 3.9%. There have been 168,730 (-24.8%) trades in the Bonds CHF segment.
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S&P Dow Jones Indices Market Attributes: Correlation & Dispersion Index Dashboard â New Features
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MIAX Options Exchange: Professional Interest And Priority Customer Order Counting Methodology
Pursuant to an industry–wide initiative to harmonize the methodology for counting of orders in listed options for designation as “Professional Interest” order or order for the account of a “Priority Customer,” the Exchange has filed and received approval for SR-MIAX-2016-11.
The standards shall become operative as of July 1, 2016 and shall be implemented commencing for Q2 2016. Any changes to Priority Customer designations should be made within five days after the review period, but no later than July 8, 2016.
Please refer to MIAX Regulatory Circular 2016-17 for further information on order counting methodology and order designation.
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CFTC Swaps Report Update
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OneChicago Announces Trading Volume For May 2016 - May Volume Up 4% Year-Over-Year
OneChicago, LLC (OCX), a securities finance exchange, today announced its May 2016 volume of 1,043,097, an increase of 4% year-over-year. OneChicago is a CFTC and SEC regulated exchange offering Single Stock Futures (SSF), a Delta One product, on approximately 1,800 equities, including ADRs and ETFs.
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OCC Cleared Contract Volume Up Four Percent In May - Securities Lending Activity Up 52 Percent In May And 46 Percent Year-To-Date
OCC, the world's largest equity derivatives clearing organization, announced that cleared contract volume in May reached 319,533,636 contracts, a four percent increase from the May 2015 volume of 308,639,215 contracts. OCC's year-to-date average daily cleared contract volume is also up four percent from 2015 with 16,734,689 contracts.
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Thomson Reuters Unveils Electrical-Energy Outlook Through 2045 And Related Business Insights - Disruption In Fossil-Fuel-Based Sources Of Power Will Lead To More Open Markets, Stranded Assets And Carbon Taxes
Thomson Reuters today released its outlook on the electrical-energy landscape for the next three decades confirming a disruptive shift toward alternative energy in its report titled Powering the Planet 2045 (#poweringtheplanet). The most viable and scalable methods for generating electricity in the next 10 – 30 years will be Hydro-Wave, Nuclear Fusion and Solar Photovoltaics, the latter of which increased 160 percent in innovation activity since 2010, according to the report’s findings.
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CFTC Staff To Hold Roundtable On Certain Elements Of Regulation AT
The Commodity Futures Trading Commission’s (CFTC or Commission) Division of Market Oversight announced that staff will hold a public roundtable meeting, to discuss certain elements of the Commission’s notice of proposed rulemaking (NPRM) regarding Regulation Automated Trading (Regulation AT). The Regulation AT NPRM was published in the Federal Register (80 FR 78824) on December 17, 2015.
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SEC Adopts Amendment To Form 10-K Implementing FAST Act Provision
The Securities and Exchange Commission today announced it has approved an interim final rule that allows Form 10-K filers to provide a summary of business and financial information contained in the annual report. The rule implements a provision of the Fixing America’s Surface Transportation (FAST) Act.
read more...The interim final rule provides filers with flexibility in preparing the summary and those opting to provide it must include hyperlinks to the related, more detailed disclosure in the Form 10-K. It also requests comment on whether the rule should include specific requirements or guidance for the form and content of the summary and whether the rules should be expanded to include other annual reporting forms.
The Commission recently adopted rules to revise Forms S-1 and F-1 to permit emerging growth companies to omit certain historical financial information from registration statements provided that all required financial information is included at the time of the offering. The Commission also adopted rules to reflect statutory changes to the 12(g) thresholds for registration, termination of registration and suspension of reporting for savings and loan holding companies.
The FAST Act, enacted in December 2015, includes several provisions related to the federal securities laws. Some of the provisions are self-executing and others require Commission rulemaking or study.
The rule will become effective when published in the Federal Register and the public comment period will remain open for 30 days.
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Professor John Colley, Warwick Business School Professor of Practice in the Strategy & International Group, Comments On The LSEG Saying Its Merger With Deutsche Boerse Could Lead To 1,250 Job Losses
Commenting on the LSE saying its merger with Deutsche Boerse could lead to 1,250 job losses Professor John Colley, Warwick Business School Professor of Practice in the Strategy & International Group, said: "The announcement does not indicate where the job losses will fall, suggesting they will be spread between the businesses. There is concern that the bulk may fall in London as redundancies will be cheaper there than in Germany. Secondly there is some scepticism as to whether this is truly a 'merger of equals' or a German takeover. No doubt this will become clearer with time.
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Canadian Securities Regulators Announce Contractual Agreement To Renew CSA National System
The Canadian Securities Administrators (CSA) today announced that it has entered into an agreement with CGI Information Systems and Management Consultants Inc. (CGI) to renew the CSA National Systems.
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SEC: Brokerage Firm Charged With Anti-Money Laundering Failures
The Securities and Exchange Commission today charged a Wall Street-based brokerage firm with failing to sufficiently evaluate or monitor customers’ trading for suspicious activity as required under the federal securities laws.
An SEC investigation found that Albert Fried & Company failed to file Suspicious Activity Reports (SARs) with bank regulators for more than five years despite red flags tied to its customers’ high-volume liquidations of low-priced securities. On more than one occasion, an AF&Co customer’s trading in a security on a given day exceeded 80 percent of the overall market volume. In other instances, customers were trading in stocks issued by companies that were delinquent in their regulatory filings or involved in questionable penny stock promotional campaigns. Certain customers also were the subject of grand jury subpoenas received by AF&Co.
AF&Co agreed to pay a $300,000 penalty to settle the charges.
“Albert Fried & Company ignored numerous instances when customer trading activity should have triggered the firm to file SARs. Brokerage firms must take their anti-money laundering responsibilities seriously so they can serve as a line of defense against misconduct and market risks,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.
The SEC’s order finds that AF&Co violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8. AF&Co agreed to be censured and pay the $300,000 penalty without admitting or denying the findings in the order, which credits the firm for its cooperation and the remedial measures already undertaken.
While the SEC has charged other firms with anti-money laundering failures under the federal securities laws, this is the first case against a firm solely for failing to file SARs when appropriate.
The case stemmed from the work of the Enforcement Division’s Broker-Dealer Task Force, led by Associate Director Antonia Chion and New York Regional Office Director Andrew M. Calamari. The task force focuses on current issues and practices within the broker-dealer community and develops national initiatives for potential investigations.
The SEC’s investigation was conducted by Matt Reilly and supervised by Melissa Hodgman with assistance from Eric Kringel, Daniel Goldberg, Damon Reed, and Andrae Eccles of the Enforcement Division’s Bank Secrecy Act Review Group.
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Performance Appraisals: Are "A" Players Always "A" Players?
Peter Cappelli and Martin Conyon have conducted some interesting research regarding performance appraisals. The topic has received much attention lately, with a great deal of criticism leveled at this common management practice for evaluating and rewarding employees. However, limited empirical research has been done in the field, according to these scholars. Cappelli and Conyon studied a number of issues related to performance appraisals. Perhaps most interestingly, they examined whether people scored consistently on their appraisals year after year. In other words, managers often about having A players, B players, and C players in your organization. Capelli and Conyon asked: Are "A" players always "A" players? Are results consistent year after year? Surprisingly, perhaps, they found that results were highly inconsistent. Cappelli explains in this interview with Knowledge@Wharton:
Cappelli: As far as we can tell, no one has ever looked at this before or at least published it. Are the people who do well always doing well, or not? If we know your scores this year for everybody in the company, how much of next yearâs score could we predict or explain? If the good people are always good and the bad people are always bad, we can explain 100% of your scores because next yearâs score will be identical to this yearâs score. If itâs random, which would be kind of astonishing, then it would be zero. Thereâd be no relationship between how people on average perform this year and how they perform next year. The good people could be good, the bad people could be good or bad.
Knowledge@Wharton: But you would think that they would follow a pattern. If youâre good in 2014, unless something has drastically changed, youâre going to be pretty good in 2015 as well.
Cappelli: Right. Itâs between zero and 100%. If you think this A-player, B-player, C-player model is right, itâs going to be closer to 100. If you think itâs all just random or itâs kind of noise or people vary a lot, youâre closer to zero. So, thatâs the question.
Knowledge@Wharton: Iâm going to say that it would probably be closer to 70 or 75.
Cappelli: Thatâs a very common answer. People in human resources guess 80%. The correct answer is 27%, so itâs way closer to zero than it is to 100%.
Knowledge@Wharton: Why so much lower? I would think that it would be almost an automatic that it would be on the higher end.
Cappelli: Many people seem to believe that, especially people in human resources. But when I ask them if they have ever actually looked at it, the answer is no. They just assume itâs that way. Maybe they assume itâs that way because thatâs what you hear from the A-player, B-player, C-player kind of story, and you could see some of this is a cognitive bias. Thereâs something in psychology known as the fundamental attribution error. It means that when you see somebody behave in a particular way, we are inclined to assume it is because of who they are rather than the circumstances. The classic example is somebody racing by you on the expressway going home. Theyâre driving on the shoulder and whipping past. Your inclination is to say, âThat guyâs a jerk,â rather than to even entertain the idea that maybe itâs an emergency. We seem to be wired to think everything is due to the person. If you believe that, then you would be inclined to think the A-player, B-player, C-player model is right and good players this year are going to be good players next year, etc.C
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CBOE Holdings Reports May 2016 Trading Volume - Total Index Options ADV Up 8% From May 2015 - VIX Futures ADV Up 31% From May 2015 - SPX Options ADV Up 13% From May 2015
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today that May average daily volume (ADV) for options contracts traded on Chicago Board Options Exchange® (CBOE®) and C2 Options Exchange (C2), and futures contracts traded on CBOE Futures Exchange (CFE®) was 4.3 million contracts, an increase of 2 percent from April 2016 and relatively unchanged from May 2015.
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FERC Accepts Measures Addressing Gas-Electric Reliability In Southern California
The Federal Energy Regulatory Commission (FERC) today accepted interim measures to address the limited operability of the Aliso Canyon natural gas storage facility that could affect reliability and market operations in the California Independent System Operator (CAISO) grid this summer.
Today’s order also directs FERC staff to convene a technical conference following implementation of the measures approved in today’s order to discuss the effectiveness of those tariff revisions and the need for additional and/or longer-term measures.
Southern California Gas Co.’s Aliso Canyon facility experienced a large natural gas leak last fall that significantly depleted the storage field. The leaking well was capped in February and the state of California prohibited injections of natural gas into the facility until completion of a comprehensive safety review.
The facility serves gas-fired generators in the Los Angeles Basin and San Diego. Its limited operations are likely to stress the region’s gas system this summer when Southern California needs those generators to serve both peak loads and changes in load due to the variable nature of renewable generation.
“Substantial efforts have been made by CAISO, California regulators and the energy companies to enhance planning and preparation, communication and coordination, and situational awareness,” FERC Chairman Norman C. Bay said. “That being said, the situation remains a serious one, and we will continue to monitor Aliso Canyon very carefully. While Aliso Canyon is a non-jurisdictional facility, we are ready to provide whatever assistance we can, as needed or appropriate.”
The situation “highlights the connection between the gas and electric industries and how their operations affect consumers,” Chairman Bay said. “It also points out the need for infrastructure as gas becomes the marginal fuel for power generation in many markets. We need to ensure the gas is there in order to maintain reliability.”
Today’s tariff revisions expire November 30, 2016, unless CAISO files to retain or revise them. They are intended to mitigate operational risks that could lead to power outages due to restrictions of gas deliveries to electric generators. They would work by promoting generator bids that reflect gas system limitations, reducing the chance that CAISO will dispatch generators in a way that harms gas system reliability, and permitting CAISO to reserve sufficient internal transmission transfer capability to react to changes in the gas system. The revisions also will improve the ability of generators to recover fuel costs during this interim period of potential volatility.
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