Breaking News

John Lothian Newsletter: Swift CEO Expects More Hacking Surprises as Fix Is Years Away; Data Terminal anxiety as big banks cut costs; ICAP Lands Deal for Mainland China’s Yuan-Trading Platform

First Read

Off to London and IDX
By John Lothian

Doug Ashburn, Jim Kharouf and I and two interns are headed to IDX next week in London. We will be conducting video interviews from The Brewery and attending the conference there. Our schedules are filling quickly, but if you will be in London next week and would like to meet, please drop a line.

My daughter Katherine and one of my Eagle Scouts, Tony Buscaglia, are the two interns. They are experienced travelers as both attended the World Scout Jamboree in Japan last summer. If you get a chance to say hello to them, please do. And feel free to share any personal Scouting stories with them.

I hope to spend more time in London at this year’s conference. Last year I had to rush home when my wife had an emergency surgery. Somehow I returned home in time to see her in the post-op recovery room.

This will also be my first trip abroad since my second back surgery earlier this spring. While my back is much better, I am still in recovery mode.

Jeff Bergstrom, Spencer Doar and Sarah Rudolph will be handling things back at home in Chicago for JLN. If you have any news, please send it to one of them.

I hope to see you in London at IDX.

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John Munro of ION Trading is Retiring
By Bob Sylverne

John Munro is retiring after serving the futures industry since 1973, when he left IBM to join Geldermann and Co. to develop a back office processing solution. John was co-founder of Brokerage Systems, Inc. in 1980, which developed TRACS, arguably the first in-house back office package to be offered in the U.S. John has remained with the firm through two acquisitions (Rolfe & Nolan and ION Trading) and has been instrumental in product design for supporting Clearing House, Exchange and Regulatory initiatives as well as their FX middle and back office products. John has been an active member of the Futures Industry Association throughout his career serving as Chairman of the Y2K subcommittee which coordinated industry testing for the millennium turnover as well as the FIXML standards subcommittee which has become the industry standard for messaging between Exchanges, Clearinghouses with Middle and Back Office processing solutions.

***** I had the pleasure of getting to know John Munro when I was a customer of Rolfe & Nolan for RAN Order. Congratulations to John on his retirement.

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Divento adds industry veteran Templer as advisor
Alice Attwood – Futures & Options World
Bill Templer left the LSE’s CurveGlobal project in November last year
Former head of futures at Morgan Stanley and UBS Bill Templer has joined Divento Financials as an advisory consultant in the latest high-profile appointment at the proprietary trading and training firm.
The industry veteran has joined the team to oversee the expansion of its accredited education programme, and also the company’s CSR (Corporate Social Responsibility) agenda.
jlne.ws/1t4ybd2

**We missed this last week. A great hire for Divento.

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David Martin appointed chair of FIA Asia Regional Advisory Board
FIA
FIA announced that David Martin of J.P. Morgan has been appointed chairman of the Asia Regional Advisory Board for a two year term. He replaced Paul Davies, who stepped down after retiring from Goldman Sachs.
/goo.gl/xvRQwQ

***** Congratulations to David Martin on the new role and Paul Davies for retiring. Both are accomplishments.

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Trevor Paglen wins the Deutsche Börse Photography Foundation Prize 2016
Deutsche Börse
Trevor Paglen has been awarded the Deutsche Börse Photography Foundation Prize 2016 in London on Thursday night at a special ceremony in the Photographers’ Gallery. The annual award comes with a prize money of 30,000 GBP and recognizes a photographer who has made an important contribution to contemporary photography in Europe in the previous twelve months.
goo.gl/Uhw1zE

***** Some year I will take a picture that will remind me of a much better picture in the Deutsche Börse Photography collection.

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The New Treasury Market Paradigm
CME Group
Changes in banking regulations have contributed to bank balance sheet pressures, as evidenced by persistently negative swap spreads. This has led to increased demand for off-balance sheet Treasury exposure and continued growth of futures markets relative to cash Treasury securities. This paper applies external sources to examine the evolution of liquidity in both cash and futures markets as well as other important factors such as settlement fails in cash Treasuries.
jlne.ws/1U05hEB

***DA: Great read. Also from CME Group’s Treasury team is the latest look at their FedWatch tool, as implied by CME’s Fed Funds futures contract. Current prices imply an 18.8 percent chance of a 25 basis point hike on June 15. Visit the tool’s portal page to see how the market is pricing all rate scenarios out to February 2017.

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Wall Street’s Desperate, Shameless Lawsuit to Protect Profits Over Its Clients’ Best Interests
Better Markets
Dennis Kelleher, President and CEO of Better Markets, issued this statement on a lawsuit filed by Wall Street’s biggest trade groups and allies (including the Securities Industry and Financial Markets Association, the Financial Services Roundtable, and the U.S. Chamber of Commerce) challenging the Department of Labor’s (DOL’s) best interest fiduciary duty rule:
goo.gl/ulcF17

***** Is this a story from the NY Post?

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As Koch Brothers Cling to Madoff Cash, a New Legal Battle Arises
Erik Larson – Bloomberg
Koch Industries was sued in 2012 for the return of fake profit; More than $2 billion at stake in similar lawsuits by trustee
Billionaire brothers Charles and David Koch have made plenty of good business decisions over the years. Placing millions of dollars with Ponzi-scheme mastermind Bernard Madoff may have been one of them.
goo.gl/HQq69t

***** I wonder if the $21.5 million is worth the amount of bad press they will get for this story.

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No Room in U.S. Grain Silos Means Dumping Wheat in Parking Lots
Jeff Wilson, Megan Durisin – Bloomberg
Global glut sends exports to 34-year low as output set to rise; Before harvest, bins hold more leftovers and price is falling
Some American wheat farmers are not only going to lose money on every bushel they harvest this month, many won’t have a proper place to store it.
goo.gl/XEakuu

***** Long bin building companies, short wheat.

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Thursday’s Top Three
We had a shootout for top spot in yesterday’s click count between Karen the Supertrader’s Winning Strategy Relied on Fraud, SEC Alleges from The Street and Inside Vitol: How the World’s Largest Oil Trader Makes Billions from Bloomberg. Third place was a win for the home team – Doug Ashburn’s column on retail forex – How Now and What’s Next for Retail Forex? The commonality? Cool headlines, if I do say so myself.

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Lead Stories

Today’s SWIFT News

Swift CEO Expects More Hacking Surprises as Fix Is Years Away
John Detrixhe, Gavin Finch, John Follain – Bloomberg
CEO speaks directly to the media about attacks for first time; Fully upgrading defenses with 11,000 members could take years
The chief executive officer of Swift, the interbank messaging system embroiled in a global bank-hacking controversy, says to expect more information about breaches to emerge as fully armoring the network’s defenses is likely to take years.
goo.gl/rIQjKx

Crooks Are Using an International Messaging System to Rob Banks; Is Swift safe?
Katherine Burton, Alan Katz – Bloomberg
The central bank of Bangladesh was the victim of one of the biggest bank heists of all time in February, when thieves made off with $81 million. The perps are still at large—and may have the combinations to many more vaults.
goo.gl/hSlmkd

Swift threat to suspend vulnerable members; Bank payments system looks to enforce higher standards of cyber security among its member banks
by: Martin Arnold, Banking Editor – FT
Banks with the weakest cyber defences could be kicked off the Swift global bank payments system, its chief executive has warned as the organisation scrambles to restore faith in its security after several raids by hackers.
/goo.gl/GtLBbm

Maybe Wall Street Has the Solution to Stopping Cyber Attacks
Wired
THE NEXT AMERICAN president will be tasked with deterring foreign government-sponsored cyber attacks against US citizens and companies. And under the current system, that task will be next to impossible. Cyber war is on the rise, from Russian cyber soldiers knocking out the power grid in Ukraine to Iranian hackers compromising American dams to Chinese agents stealing trade secrets from U.S. defense, technology, and pharmaceutical companies (to say nothing of the theft of millions of records from the Office of Personnel Management).
/goo.gl/JYO4iu

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Data Terminal anxiety as big banks cut costs; Bloomberg and Thomson Reuters look vulnerable as Wall Street focuses on the bottom line
Ben McLannahan in New York
Call it terminal anxiety. Big banks are cutting traders and analysts; hedge funds are struggling. And providers of financial information — the raw material of these firms — are nervously adjusting their collars.
/goo.gl/bdiQq0

Thomson Reuters deemed ‘biggest winner’ of market data growth; Steady increase in spending on consolidated market data feeds sees Thomson Reuters come out on top with 50% of market share.
By Hayley McDowell – The Trade
Industry spending on consolidated market data feeds has steadily increased over the past five years with Thomson Reuters securing a 50% share of the growth.
goo.gl/9zNsRM

ICAP Lands Deal for Mainland China’s Yuan-Trading Platform
John Detrixhe – Bloomberg
Contract for yuan trading technology is worth $65 million; ICAP plans to rename itself NEX Group after Tullett sale
ICAP Plc has landed a contract to provide technology for China’s official inter-bank trading platform, giving Michael Spencer’s company a new cash generator in one of the world’s fastest-growing economies.
goo.gl/DIsQJ8

Fed’s Tarullo Says Stress Tests to Get Tougher for Big Banks
Jesse Hamilton, Jennifer Surane, Yalman Onaran – Bloomberg
Wall Street faces ‘significant increase’ on capital, he says; Fed sees compliance costs falling for regional lenders
The Federal Reserve plans to make changes to its annual stress tests that will penalize Wall Street banks for being large and complex, while making the exams less burdensome on smaller competitors, said Fed Governor Daniel Tarullo.
goo.gl/ZcoKD7

Former Morgan Stanley Deal Makers Reunite on Exchange Merger
By ANITA RAGHAVAN – NY Times
The main investment bankers involved in the merger between Deutsche Börse and the London Stock Exchange worked at one of Wall Street’s biggest companies, Morgan Stanley, the last time the two exchanges flirted with the idea of getting married.
goo.gl/ugcb4y

Federal Reserve to toughen stress tests for big US banks; Daniel Tarullo says capital surcharges will be incorporated into annual examinations
Ben McLannahan in New York
Federal Reserve officials have confirmed plans to toughen the annual round of stress tests for the biggest, most complex banks, while extending relief to smaller lenders with less than $250bn in assets.
/goo.gl/YRlxk7

German regulator asks for more information on Deutsche Boerse-London Stock Exchange tie-up
William Turvill – City AM
The German politician responsible for approving Deutsche Boerse’s merger with the London Stock Exchange has said he requires “further information” on the deal.
goo.gl/7az3QN

Pound Trader Keeps His Head When All About Him Are Losing Theirs
Anchalee Worrachate – Bloomberg
Currency manager Adrian Lee is staying calm amid Brexit risks; Yet sterling’s drop this week shows currency’s vulnerability
Adrian Lee is a man in demand. His phone is abuzz with questions on Britain’s European Union vote. Can he brief the board on the referendum, asks a U.S. client. How about later today?
goo.gl/3cklZM

Who Needs The Nasdaq? China’s Jason Jiang Reaps Billions From Relisting At Home
Russell Flannery – Forbes
Since it hit turbulence in 2001, Jason Jiang’s Focus Media has seen many changes but through it all kept a basic business model: targeting captive audiences for Chinese advertising with proprietary screens where they live, work, shop or play. Focus Media was among the first Chinese firms from the industry to list in the U.S. on Nasdaq. Its shares as much as doubled after its $173 million IPO in 2005. Jiang’s stake, worth several hundred million dollars, made him a repeat member of the Forbes China Rich List. He was often photographed with international celebrities.
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London’s exclusive hedge fund club driven by who you know
Paul Clarke – eFinancialCareers.com
Hedge fund managers are not beautiful and unique snowflakes. They are not masters of the universe consistently beating the market propelled only by their individual expertise. No. They look a lot like an exclusive club where performance is directly correlated to who they know and who they’ve worked with previously.
goo.gl/acvBWo

Regulatory

SEC Enforcement Action Highlights Need for Private Equity Firms to Consider Broker-Dealer Registration
Katten Muchin Rosenman LLP
A recent SEC enforcement action against a private equity firm highlights issues identified in a recent speech by the Director of the Securities and Exchange Commission’s (SEC) Division of Enforcement[1] as well as an issue dormant in recent years—the potential need for private equity firms to register as broker-dealers.
jlne.ws/1t58yZL

CFTC nixes industry appeals to merely match global margin standards
Neil Roland, MLex
The US Commodity Futures Trading Commission’s final cross-border rule on uncleared derivatives margin rebuffs widespread industry requests for consistency with less stringent international standards, the newly published measure shows.
goo.gl/chwhix

SEC Names Christopher Hetner as Senior Advisor to the Chair for Cybersecurity Policy
SEC.gov
In his new role, Mr. Hetner will be responsible for coordinating efforts across the agency to address cybersecurity policy, engaging with external stakeholders, and further enhancing the SEC’s mechanisms for assessing broad-based market risk.
jlne.ws/25Df2A2

EU’s market watchdog to take deeper look at blockchain
The Economic Times
The European Union’s markets watchdog will study blockchain in more depth after an initial analysis showed it was too early to say whether the technology poses any threat to financial markets.
jlne.ws/1r5emAn

Response to the CMA’s provisional decision on remedies from its retail banking market investigation
UK FCA
We welcome the Competition and Markets Authority’s (CMA’s) efforts to increase competition in retail banking and are supportive of its provisional decision to make recommendations to the FCA to take forward a range of remedies, namely on service quality information, prompts and overdraft measures. The treatment of existing customers is a key priority for the FCA, including within our work on competition in retail banking.
goo.gl/kCgH4V

Fed Governors Signal Bigger Bank Capital Requirements Looming; Daniel Tarullo and Jerome Powell say action would affect eight systemically important banks
By RYAN TRACY and DAVID REILLY – WSJ
The biggest American banks will likely have to bulk up their balance sheets further to protect against possible financial shocks, Federal Reserve officials said Thursday.
goo.gl/1fUfA9

Exchanges & Trading Facilities

LSE, Deutsche Börse Outline Role of Data, Indexes in Merger Deal
Waters Technology
Information services and indexes are expected to contribute 25 percent of the merged exchange group’s revenues, five years after the merger is complete.
goo.gl/pC2KOk

ADDITIONAL ICE U.S. TREASURY BOND INDICES SELECTED BY BLACKROCK; DIREXION AND YUANTA SITC ALSO SELECT INDICES AS BENCHMARKS FOR A RANGE OF U.S. TREASURY ETFS
ICE
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges, clearing houses and data services, announced today that the ICE U.S. Treasury Bond indices have been selected as the new benchmarks for a range of Exchange Traded Funds (ETFs) offered by BlackRock iShares®, Direxion, and Yuanta Securities Investment Trust Company (Yuanta SITC).
goo.gl/LppfYv

EEX and Powernext confirm launch date of additional trading venues in response to MiFID II
Hedgeweek
EEX and Powernext have confirmed the launch date of the additional trading venues (non-MTFs) for German and French power derivatives as well as gas derivatives for all hubs and maturities available today through the regulated platform, in response to on-going MiFID II legislation.
jlne.ws/1TSEhZw

EURONEXT ANNOUNCES VOLUMES FOR MAY 2016
Euronext
Euronext, the leading exchange in the Eurozone, today announced trading volumes for May 2016.
/goo.gl/jwkZ49

TOCOM May Volume Averaged 109,860 Contracts per Day, Down 6.2%
Total Monthly Volume Gained 23.0% Y-o-Y
TOCOM
The Tokyo Commodity Exchange announced today that average daily volume for May 2016 was 109,860 contracts, down 6.2%. TOCOM’s largest contracts saw lower volume; Gold Standard dropped 2.8% to 34,636 contracts, Dubai Crude Oil fell 11.4% to 24,425 contracts and Rubber was down 8.3% to 10,505 contracts. Total monthly volume was up 23.0% to 2,087,332 contracts year-on-year.
goo.gl/IWAOH8

NYSE-ARCA Exchange Time Experiences Excessive Latency In May
Garrett Cook – Bending
Exchange time-syncing is something the SEC has admitted they’re unable to police due to the inherent issues involved in technology and the dynamics of the physical world (aka Great Circle Path).
goo.gl/m2708Z

Hong Kong exchange set to introduce volatility controls on August 22
Reuters
The Hong Kong stock exchange has tentatively scheduled the introduction of a new volatility control mechanism for August 22, the company said in a presentation published on Thursday.
goo.gl/Or9Syb

NSE to launch 2-factor validation in negotiated trade platform
Business Standard
Last year, the exchange introduced a web-based negotiated trade platform for reporting all the deals in the debt segment
goo.gl/Tgc80i

SGX reports market statistics for May 2016
SGX
Securities – Total Securities market turnover value rose 3% month on month and was down 6% year on year to S$21.6 billion, during 21 trading days compared to 21 in April 2016 and 20 in May 2015.
Derivatives – Total Derivatives volume was 13.6 million, down 9% month on month and down 12% year on year.
goo.gl/hyI0Le

Boerse Stuttgart Generates Turnover In The Region Of EUR 5.6 Billion In May – Increase In Equity Trading Volume Compared With May 2015
Mondovisone
According to its order book statistics, Boerse Stuttgart generated turnover of around EUR 5.6 billion in May 2016.
goo.gl/2lgQlF

Moscow Exchange Trading Volumes in May 2016
MOEX
Moscow Exchange (ticker: MOEX) announces trading volumes for May 2016. Total trading volumes increased by 33.5% YoY to RUB 58.1 trln.
goo.gl/bAwOX9

Moscow Exchange Supervisory Board appoints new members to committees
MOEX
On 2 June 2016 Moscow Exchange (ticker MOEX) Supervisory Board named new members to its six committees.
goo.gl/OqoF1A

Wiener Borse Monthly Statistic For May 2016
Mondovisione
The monthly statistic includes turnover data broken down by market segments and markets, as well as index values.
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Exchange Publishes Guidance Letter on IPO Vetting and Suitability for Listing
HKEx
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) issued a guidance letter (GL) on initial public offering (IPO) vetting and suitability for listing.
goo.gl/Y8JfKp

Nasdaq, Inc. Prices $500,000,000 Senior Notes Offering
By GlobeNewswire
Nasdaq, Inc. (the “Company”) (Nasdaq:NDAQ) today announced that it priced a public offering of $500,000,000 aggregate principal amount of U.S. dollar-denominated 3.850% senior notes due 2026 (the “Offering”). The Company expects to use the net proceeds from the Offering, together with cash on hand and/or borrowings under the Company’s senior credit facility, to fund the cash consideration payable by the Company for its acquisition of 100% of the equity interests in U.S. Exchange Holdings, Inc. (the indirect owner of three electronic options exchanges: International Securities Exchange, ISE Gemini and ISE Mercury) (the “ISE Transaction”) and related expenses and for general corporate purposes, which may include, without limitation, the repayment of indebtedness or the funding of other future acquisitions.
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ASX COMPLIANCE MONTHLY ACTIVITY REPORT – MAY 2016
ASX
Attached is a copy of the ASX Compliance Monthly Activity Report for May 2016
goo.gl/cqy4yI

ASX GROUP MONTHLY ACTIVITY REPORT – MAY 2016
ASX
Attached is a copy of the ASX Group Monthly Activity Report for May 2016.
goo.gl/8iHhX3

Politics

JPMorgan chief says Brexit could mean ‘fewer’ UK jobs with the bank
BY ANJULI DAVIES – Reuters
The head of U.S. bank JPMorgan Chase told British staff on Friday a decision by Britain to leave the European Union could mean “fewer” jobs with the bank there and more jobs in Europe.
goo.gl/j3kblC

Hedge Funds & Managed Futures

Ex-AIG chief Greenberg ordered to face civil fraud charges; Decision will allow New York attorney-general to try to recover bonuses earned by head of insurer
by: David J Lynch in Washington – FT
Maurice “Hank” Greenberg, the former chairman of insurer AIG, must stand trial on civil fraud charges in New York, the state’s highest court ruled on Thursday.
/goo.gl/O4IJli

HC2 Holdings broadens offer for U.S. grain handler Andersons
Reuters
HC2 Holdings Inc broadened its offer to buy parts of The Andersons Inc on Thursday, days after the loss-making U.S. grain handler said an earlier proposal to break up its business units was dead on arrival.
goo.gl/WZnRRH

Amid SEC probe, Jack Ma says hard for U.S. to understand Alibaba: media
Reuters
Alibaba Group Holding Ltd, whose accounting practices are under investigation by U.S. regulators, is a difficult company for the United States to understand, Executive Chairman Jack Ma said in an interview to Chinese media on Friday.
goo.gl/kqdXMb

Investors flock to Treasury futures for off-balance sheet exposures; Demand for exposure in US Treasuries is shifting from the cash market to futures, following stricter banking regulations.
By Joe Parsons and Ginger Szala – The Trade
Growth in US Treasury futures is outpacing cash Treasury trading as investors look to increase their off-balance sheet exposure to US fixed income markets.
goo.gl/2UgxML

Corporate bonds join negative yield club; Prospect of ECB buying eurozone paper this month pushes company debt prices higher
by: Eric Platt in New York and Gavin Jackson in London – FT
More than $36bn of corporate bonds with a short-term maturity currently trade with a sub-zero yield as the European Central Bank starts buying debt sold by companies next week.
/goo.gl/t0PNCY

Negative-yield debt breaks $10tn level for first time; Sovereign paper with sub-zero yield up 5% month on month, buoyed by rising prices
by: Eric Platt and Mamta Badkar in New York – FT
Negative-yielding government debt has risen above $10tn for the first time, enveloping an increasingly large part of the financial markets after being fuelled by central bank stimulus and a voracious investor appetite for sovereign paper.
/goo.gl/3FG4pv

Banks & Brokers

Banks fear early rollout of EU margin rules for forex forwards; Industry calls on EC to clarify when foreign exchange forwards will be subject to variation margining
Robert Mackenzie Smith – Risk.net
A quirk in the drafting of the European Union’s forthcoming bilateral margin framework for uncleared derivatives has left industry participants fretting that foreign exchange forwards could be subject to variation margining (VM) much sooner than expected – possibly even before the rules’ official implementation date of September 1. The wording of Article 39(6) of the European Supervisory Authorities’ (ESAs) final draft Regulatory Technical Standards (RTSs) for the EU’s non-cleared margin rules,…
goo.gl/eiMZMY

Morgan Stanley to Rate Employees With Adjectives, Not Numbers
By MICHAEL J. de la MERCED – NY Times
For years, Morgan Stanley employees were graded in part on a numerical scale that rated them from 1 to 5.
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Morgan Stanley to offer paid sabbaticals to retain VPs; Wall Street bank looks for ways to discourage talented staff from defecting to the tech and hedge fund sectors
by: Laura Noonan – FT
Morgan Stanley is wooing its investment bankers by introducing paid sabbaticals for newly-promoted vice-presidents and making earlier job offers to those at the start of their careers.
/goo.gl/qd5CQb

In Case of a Brexit, London Would Lose Business as a Global Financial Center
Nicolas Véron (PIIE)
There are multiple sub-scenarios in the aftermath of a No vote on June 23. In almost all of them, however, London would lose business as a global financial center. Part of its unmatched position as a hub for international financial services is linked to its membership of the European Union and corresponding access to the EU internal market.
/goo.gl/Dg7kX1

Clearing & Settlement

Clearing Members Analyze the Resolution of Central Counterparties
Markets Media
As central counterparties (CCPs) continue to play an increasingly important role in the global financial system, The Clearing House and the International Swaps and Derivatives Association (ISDA) issued a white paper identifying key issues that regulators should consider as they develop a comprehensive resolution framework for systemically important CCPs.
jlne.ws/1TSE0FV

LSE carries out study to explore use of blockchain technology for making securities transactions secure
EconoTimes
The London School of Economics has released a new report that analyses the current system of holding and transferring securities and argues that blockchain technology would make it possible to create a system that has the same level of transactional safety as the current system, while also eliminating custody risk at the same time.
jlne.ws/1TSEkoa

Commentary: Cybercrime isn’t the only reason cash remains king
Reuters
Despite the invention of electronic currency, cash in circulation has still been growing at exceptional rates in markets covered by this research; Australia, Canada, the euro zone, Japan and the United States.
In 2015, eight of every 10 transactions used cash as the payment method of choice, even 50 years after the invention of plastic cards. Certainly, within the recent digital revolution, cash is still a required and necessary commodity, as was witnessed during the recent financial crisis in Greece, where cash remained one of the few ways to successfully completing transactions.
jlne.ws/1TSEPys

Indexes & Products

ICAP U.S. rate benchmark to continue until September
Reuters
The planned discontinuation of a U.S. interest rate benchmark this summer will be postponed for another two months after two financial industry groups asked for more time for Wall Street to adjust to its replacement.
goo.gl/qEciMD

LSE, Deutsche Börse Outline Role of Data, Indexes in Merger Deal
Waters Technology
The London Stock Exchange Group and Deutsche Börse have unveiled more details of their planned $30 billion merger, including projections of EUR250 million ($279 million) in annual “revenue synergies” from the fifth year after the merger, with 25 percent coming from their combined information services and index businesses.
jlne.ws/1O7sLaA

The Newest Way to Beat the Market
MONEY
Investing actively in mutual funds doesn’t just mean picking a fund manager. Nowadays there’s another option: So-called smart-beta index funds and ETFs can tilt your portfolio toward investing traits or “factors” that academic research has determined can do well over time. These factors include a focus on small-company stocks or shares trading at low valuations.
jlne.ws/1r5dknV

Divining Brexit
Tim Edwards, Senior Director, Index Investment Strategy, S&P Dow Jones Indices
When macroeconomic risk is dominant, as a select few narratives come to preoccupy investors, correlations increase. For example, in August and September 2015, markets worldwide were roiled in concert: on the changing winds of a collapsing oil price, and a loud “pop” in Chinese equity prices, correlations achieved multi-year highs. The chart below shows the average monthly correlation among the constituents of the S&P United Kingdom index:
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Best & Worst Performing ETFs So Far In 2016
ETF.com
It’s been a good year for financial markets so far in 2016. After a bumpy start to the year, most major asset classes are up through the end of May, including stocks, bonds and commodities. Even international stocks are hanging in there, with a slight gain for the year. As of this writing, the Vanguard Total International Stock ETF was up by 1.1% year-to-date.
jlne.ws/1r5eyj2

Technology

Jamie Dimon on the fintech hype
Business Insider
Jamie Dimon is not wild about fintech. While most of Wall Street is abuzz about financial technologies like blockchain and online lending, the JPMorgan CEO has adopted a more sober tone.
jlne.ws/1r5eVKo

Analytics Solution introduced for calculating SA-CCR, its KVA as well as the Standardized Approach for CVA Basel III Capital
Numerix
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management today announces the availability of its solution to help banks comply with the Basel Committee’s regulatory requirement for Counterparty Credit Risk (SA-CCR) Capital ahead of the January 2017 implementation deadline. Future capital requirements for SA-CCR can be calculated, as well as KVA (Capital Valuation Adjustment) for standard CCR capital. The standardized approach for CVA Basel III Capital has also been addressed and its future capital requirements.
goo.gl/3RtCGB

Enforcement

Las Vegas sports gambler’s jet use restricted in insider trading case
By Nate Raymond – Reuters
A wealthy Las Vegas gambler pleaded not guilty on Wednesday to charges that he engaged in an insider trading scheme that generated more than $40 million and included a tip that benefited star golfer Phil Mickelson.
goo.gl/qCu4xb

SEC Halts EB-5 Scheme Stealing Investments in Cancer Center
SEC.gov
According to the SEC’s complaint unsealed today in federal court in Los Angeles, Charles C. Liu and Xin “Lisa” Wang raised $27 million for the proton therapy cancer treatment center from 50 investors in China through the EB-5 immigrant investor program. They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency. But presently there is no construction at the proposed site after more than 18 months of collecting investments. Liu meanwhile has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.
jlne.ws/25Dh0jK

CFTC Orders Bitcoin Exchange Bitfinex to Pay $75,000 for Offering Illegal Off-Exchange Financed Retail Commodity Transactions and Failing to Register as a Futures Commission Merchant
CFTC
Bitfinex operates an online platform for exchanging and trading cryptocurrencies, mainly bitcoins. The Order finds that from April 2013 to at least February 2016, Bitfinex permitted users to borrow funds from other users on the platform in order to trade bitcoins on a leveraged, margined, or financed basis. The Order also finds that Bitfinex did not actually deliver those bitcoins to the traders who purchased them. Instead, Bitfinex held the bitcoins in deposit wallets that it owned and controlled, the Order states.
jlne.ws/25Dg8vK

SEC: Adviser Steered Investor Money to His Own Companies
SEC.gov
The SEC alleges that Richard W. Davis Jr. breached his fiduciary duty and took no steps to disclose or ameliorate the conflicts of interest involved with using investor money to enter into transactions with entities he beneficially owned or controlled. The SEC further alleges that Davis made false or misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from bank accounts commingling investor funds when he was only entitled to less than $150,000 in management fees.
jlne.ws/25DgItn

SEC: Forex Trader Misrepresented Track Record and Hid Massive Losses
SEC.gov
The SEC alleges that Haena Park touted her supposedly profitable futures and foreign currency (forex) trading strategy when soliciting friends, family, former Harvard classmates, and individuals with connections to them. She proceeded to pool investor funds and incur heavy trading losses month after month in the futures and forex markets, yet repeatedly told investors that their investments were profitable and sent them monthly account statements showing fictitious profits. At times, Park used new investor funds to make Ponzi-like payments to earlier investors. She raised at least $14 million from more than 30 investors since 2012, and has suffered more than $16 million in trading losses during that time period.
jlne.ws/1U0wxD9

Former Deutsche Bank Traders Charged in Libor Case
By BEN PROTESS – NY Times
The Justice Department announced criminal charges on Thursday against two former Deutsche Bank traders accused of manipulating interest rates, the latest Wall Street employees to be ensnared in the government’s wide-ranging crackdown.
goo.gl/Zj05Jp

FINRA Fines E*Trade Securities LLC $900,000 for Supervisory; Violations Related to Best Execution and Protection of Customer Order Information
FINRA
The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined E*Trade Securities LLC $900,000 for failing to conduct an adequate review of the quality of execution of its customers’ orders and for supervisory deficiencies concerning the protection of customer order information.
goo.gl/GHmIAC

NFA takes emergency enforcement action against commodity trading advisor Apercu International and its principal Alvin Guy Wilkinson
NFA
NFA announced today that it has taken an emergency enforcement action against Apercu International PR LLC (Apercu), an NFA Member commodity trading advisor located in San Juan, Puerto Rico, and Alvin Guy Wilkinson, a principal and associated person of Apercu.
goo.gl/YtwUhP

Environmental & Energy

Chile Has So Much Solar Energy It’s Giving It Away for Free
Vanessa Dezem, Javiera Quiroga – Bloomberg
Spot prices reached zero for 113 days this year through April; Solar power on Chile’s central grid quadrupled since 2013
Chile’s solar industry has expanded so quickly that it’s giving electricity away for free.
goo.gl/XoacCl

Asia-Pacific

ICAP lands $65 million deal with CFETS amid Chinese expansion; China Foreign Exchange Trading System has chosen ICAP’s EBS BrokerTec platform for FX, bonds and derivatives trading.
By Hayley McDowell – The Trade
China’s interbank trading platform and infrastructure provider, China Foreign Exchange Trading System (CFETS) has chosen ICAP’s EBS BrokerTec for fixed income, derivatives and FX electronic trading.
goo.gl/STFpPM

Implications of China’s MSCI Index: China’s Entry into MSCI EM Index to Lead Huge Money Flowing Out from Seoul Bourse
BusinessKorea
According to Nomura Securities, Chinese domestic-listed A shares are expected to attract global funds amounting to US$17.6 billion for a year to come once they are included in the MSCI EM Index. It added that the South Korean stock market is likely to lose US$2.561 billion in that case.
jlne.ws/1O7t9FZ

Korean government reveals plans to support blockchain and fintech startups
EconoTimes
According to latest reports, the Korean government plans to provide its full support to venture capital to finance fintech start-ups, as digital innovation will play a pivotal role in the fourth industrial revolution, the country’s top financial regulator said recently, Korea Herald reported. Speaking at the Korea Capital Market Conference 2016 in Seoul, Yim Jong-yong, Financial Services Commission chairman said that the government will help foster a giant investment bank to invest in venture capitals.
jlne.ws/1r5ecJh

Frontier Markets

Sebi pitches country to Silicon Valley investors; To protect minority shareholders rights and encourage more investment in the start-ups sector
Business Standard
The head of India’s financial markets regulator visited Silicon Valley this week to promote rule changes in his country protecting minority shareholders and encourage more investment in his country’s thriving technology start-ups.
goo.gl/I04I9e

Pakistan Stock Exchange: ‘Relatively exceptional’ performance of KSE-100 Index
The Express Tribune
A year-on-year increase of less than 0.2% in the market capitalisation of a bourse over 11 months can be called anything but exceptional. Yet the spin masters at the Ministry of Finance dubbed the 5.4% rise in the KSE 100-Share Index between July 1 and May 11 “relatively exceptional performance”.
jlne.ws/1r5eCPW

Miscellaneous

Bank of England Unveils First Plastic Note Featuring Churchill
Jill Ward, Scott Hamilton – Bloomberg
Governor Mark Carney promoted new fiver at Blenheim Palace; Central bank is in a self-imposed purdah before EU referendum
The Bank of England unveiled the full design of its first plastic banknote Thursday, featuring U.K. wartime leader Winston Churchill.
goo.gl/XMdQSd

Snapchat Passes Twitter in Daily Usage; The four-year-old messaging app is said to have 150 million people using it each day.
Sarah Frier – Bloomberg
Snapchat Inc. has 150 million people using the service each day, said people familiar with the matter. That makes the four-year-old messaging app more popular than Twitter Inc. by daily active users.
goo.gl/rKPZlG

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About Author

Doug Ashburn is a former editor-at-large of John Lothian News. He left in late 2016 and is now the managing editor of T3 Custom.

John Lothian Newsletter: Swift CEO Expects More Hacking Surprises as Fix Is Years Away; Data Terminal anxiety as big banks cut costs; ICAP Lands Deal for Mainland China’s Yuan-Trading Platform

First Read

Off to London and IDX
By John Lothian

Doug Ashburn, Jim Kharouf and I and two interns are headed to IDX next week in London. We will be conducting video interviews from The Brewery and attending the conference there. Our schedules are filling quickly, but if you will be in London next week and would like to meet, please drop a line.

My daughter Katherine and one of my Eagle Scouts, Tony Buscaglia, are the two interns. They are experienced travelers as both attended the World Scout Jamboree in Japan last summer. If you get a chance to say hello to them, please do. And feel free to share any personal Scouting stories with them.

I hope to spend more time in London at this year’s conference. Last year I had to rush home when my wife had an emergency surgery. Somehow I returned home in time to see her in the post-op recovery room.

This will also be my first trip abroad since my second back surgery earlier this spring. While my back is much better, I am still in recovery mode.

Jeff Bergstrom, Spencer Doar and Sarah Rudolph will be handling things back at home in Chicago for JLN. If you have any news, please send it to one of them.

I hope to see you in London at IDX.

++++

John Munro of ION Trading is Retiring
By Bob Sylverne

John Munro is retiring after serving the futures industry since 1973, when he left IBM to join Geldermann and Co. to develop a back office processing solution. John was co-founder of Brokerage Systems, Inc. in 1980, which developed TRACS, arguably the first in-house back office package to be offered in the U.S. John has remained with the firm through two acquisitions (Rolfe & Nolan and ION Trading) and has been instrumental in product design for supporting Clearing House, Exchange and Regulatory initiatives as well as their FX middle and back office products. John has been an active member of the Futures Industry Association throughout his career serving as Chairman of the Y2K subcommittee which coordinated industry testing for the millennium turnover as well as the FIXML standards subcommittee which has become the industry standard for messaging between Exchanges, Clearinghouses with Middle and Back Office processing solutions.

***** I had the pleasure of getting to know John Munro when I was a customer of Rolfe & Nolan for RAN Order. Congratulations to John on his retirement.

++++

Divento adds industry veteran Templer as advisor
Alice Attwood – Futures & Options World
Bill Templer left the LSE’s CurveGlobal project in November last year
Former head of futures at Morgan Stanley and UBS Bill Templer has joined Divento Financials as an advisory consultant in the latest high-profile appointment at the proprietary trading and training firm.
The industry veteran has joined the team to oversee the expansion of its accredited education programme, and also the company’s CSR (Corporate Social Responsibility) agenda.
jlne.ws/1t4ybd2

**We missed this last week. A great hire for Divento.

++++

David Martin appointed chair of FIA Asia Regional Advisory Board
FIA
FIA announced that David Martin of J.P. Morgan has been appointed chairman of the Asia Regional Advisory Board for a two year term. He replaced Paul Davies, who stepped down after retiring from Goldman Sachs.
/goo.gl/xvRQwQ

***** Congratulations to David Martin on the new role and Paul Davies for retiring. Both are accomplishments.

++++

Trevor Paglen wins the Deutsche Börse Photography Foundation Prize 2016
Deutsche Börse
Trevor Paglen has been awarded the Deutsche Börse Photography Foundation Prize 2016 in London on Thursday night at a special ceremony in the Photographers’ Gallery. The annual award comes with a prize money of 30,000 GBP and recognizes a photographer who has made an important contribution to contemporary photography in Europe in the previous twelve months.
goo.gl/Uhw1zE

***** Some year I will take a picture that will remind me of a much better picture in the Deutsche Börse Photography collection.

++++

The New Treasury Market Paradigm
CME Group
Changes in banking regulations have contributed to bank balance sheet pressures, as evidenced by persistently negative swap spreads. This has led to increased demand for off-balance sheet Treasury exposure and continued growth of futures markets relative to cash Treasury securities. This paper applies external sources to examine the evolution of liquidity in both cash and futures markets as well as other important factors such as settlement fails in cash Treasuries.
jlne.ws/1U05hEB

***DA: Great read. Also from CME Group’s Treasury team is the latest look at their FedWatch tool, as implied by CME’s Fed Funds futures contract. Current prices imply an 18.8 percent chance of a 25 basis point hike on June 15. Visit the tool’s portal page to see how the market is pricing all rate scenarios out to February 2017.

++++

Wall Street’s Desperate, Shameless Lawsuit to Protect Profits Over Its Clients’ Best Interests
Better Markets
Dennis Kelleher, President and CEO of Better Markets, issued this statement on a lawsuit filed by Wall Street’s biggest trade groups and allies (including the Securities Industry and Financial Markets Association, the Financial Services Roundtable, and the U.S. Chamber of Commerce) challenging the Department of Labor’s (DOL’s) best interest fiduciary duty rule:
goo.gl/ulcF17

***** Is this a story from the NY Post?

++++

As Koch Brothers Cling to Madoff Cash, a New Legal Battle Arises
Erik Larson – Bloomberg
Koch Industries was sued in 2012 for the return of fake profit; More than $2 billion at stake in similar lawsuits by trustee
Billionaire brothers Charles and David Koch have made plenty of good business decisions over the years. Placing millions of dollars with Ponzi-scheme mastermind Bernard Madoff may have been one of them.
goo.gl/HQq69t

***** I wonder if the $21.5 million is worth the amount of bad press they will get for this story.

++++

No Room in U.S. Grain Silos Means Dumping Wheat in Parking Lots
Jeff Wilson, Megan Durisin – Bloomberg
Global glut sends exports to 34-year low as output set to rise; Before harvest, bins hold more leftovers and price is falling
Some American wheat farmers are not only going to lose money on every bushel they harvest this month, many won’t have a proper place to store it.
goo.gl/XEakuu

***** Long bin building companies, short wheat.

++++

Thursday’s Top Three
We had a shootout for top spot in yesterday’s click count between Karen the Supertrader’s Winning Strategy Relied on Fraud, SEC Alleges from The Street and Inside Vitol: How the World’s Largest Oil Trader Makes Billions from Bloomberg. Third place was a win for the home team – Doug Ashburn’s column on retail forex – How Now and What’s Next for Retail Forex? The commonality? Cool headlines, if I do say so myself.

++++

Lead Stories

Today’s SWIFT News

Swift CEO Expects More Hacking Surprises as Fix Is Years Away
John Detrixhe, Gavin Finch, John Follain – Bloomberg
CEO speaks directly to the media about attacks for first time; Fully upgrading defenses with 11,000 members could take years
The chief executive officer of Swift, the interbank messaging system embroiled in a global bank-hacking controversy, says to expect more information about breaches to emerge as fully armoring the network’s defenses is likely to take years.
goo.gl/rIQjKx

Crooks Are Using an International Messaging System to Rob Banks; Is Swift safe?
Katherine Burton, Alan Katz – Bloomberg
The central bank of Bangladesh was the victim of one of the biggest bank heists of all time in February, when thieves made off with $81 million. The perps are still at large—and may have the combinations to many more vaults.
goo.gl/hSlmkd

Swift threat to suspend vulnerable members; Bank payments system looks to enforce higher standards of cyber security among its member banks
by: Martin Arnold, Banking Editor – FT
Banks with the weakest cyber defences could be kicked off the Swift global bank payments system, its chief executive has warned as the organisation scrambles to restore faith in its security after several raids by hackers.
/goo.gl/GtLBbm

Maybe Wall Street Has the Solution to Stopping Cyber Attacks
Wired
THE NEXT AMERICAN president will be tasked with deterring foreign government-sponsored cyber attacks against US citizens and companies. And under the current system, that task will be next to impossible. Cyber war is on the rise, from Russian cyber soldiers knocking out the power grid in Ukraine to Iranian hackers compromising American dams to Chinese agents stealing trade secrets from U.S. defense, technology, and pharmaceutical companies (to say nothing of the theft of millions of records from the Office of Personnel Management).
/goo.gl/JYO4iu

++++++++++++++++++++++++++++

Data Terminal anxiety as big banks cut costs; Bloomberg and Thomson Reuters look vulnerable as Wall Street focuses on the bottom line
Ben McLannahan in New York
Call it terminal anxiety. Big banks are cutting traders and analysts; hedge funds are struggling. And providers of financial information — the raw material of these firms — are nervously adjusting their collars.
/goo.gl/bdiQq0

Thomson Reuters deemed ‘biggest winner’ of market data growth; Steady increase in spending on consolidated market data feeds sees Thomson Reuters come out on top with 50% of market share.
By Hayley McDowell – The Trade
Industry spending on consolidated market data feeds has steadily increased over the past five years with Thomson Reuters securing a 50% share of the growth.
goo.gl/9zNsRM

ICAP Lands Deal for Mainland China’s Yuan-Trading Platform
John Detrixhe – Bloomberg
Contract for yuan trading technology is worth $65 million; ICAP plans to rename itself NEX Group after Tullett sale
ICAP Plc has landed a contract to provide technology for China’s official inter-bank trading platform, giving Michael Spencer’s company a new cash generator in one of the world’s fastest-growing economies.
goo.gl/DIsQJ8

Fed’s Tarullo Says Stress Tests to Get Tougher for Big Banks
Jesse Hamilton, Jennifer Surane, Yalman Onaran – Bloomberg
Wall Street faces ‘significant increase’ on capital, he says; Fed sees compliance costs falling for regional lenders
The Federal Reserve plans to make changes to its annual stress tests that will penalize Wall Street banks for being large and complex, while making the exams less burdensome on smaller competitors, said Fed Governor Daniel Tarullo.
goo.gl/ZcoKD7

Former Morgan Stanley Deal Makers Reunite on Exchange Merger
By ANITA RAGHAVAN – NY Times
The main investment bankers involved in the merger between Deutsche Börse and the London Stock Exchange worked at one of Wall Street’s biggest companies, Morgan Stanley, the last time the two exchanges flirted with the idea of getting married.
goo.gl/ugcb4y

Federal Reserve to toughen stress tests for big US banks; Daniel Tarullo says capital surcharges will be incorporated into annual examinations
Ben McLannahan in New York
Federal Reserve officials have confirmed plans to toughen the annual round of stress tests for the biggest, most complex banks, while extending relief to smaller lenders with less than $250bn in assets.
/goo.gl/YRlxk7

German regulator asks for more information on Deutsche Boerse-London Stock Exchange tie-up
William Turvill – City AM
The German politician responsible for approving Deutsche Boerse’s merger with the London Stock Exchange has said he requires “further information” on the deal.
goo.gl/7az3QN

Pound Trader Keeps His Head When All About Him Are Losing Theirs
Anchalee Worrachate – Bloomberg
Currency manager Adrian Lee is staying calm amid Brexit risks; Yet sterling’s drop this week shows currency’s vulnerability
Adrian Lee is a man in demand. His phone is abuzz with questions on Britain’s European Union vote. Can he brief the board on the referendum, asks a U.S. client. How about later today?
goo.gl/3cklZM

Who Needs The Nasdaq? China’s Jason Jiang Reaps Billions From Relisting At Home
Russell Flannery – Forbes
Since it hit turbulence in 2001, Jason Jiang’s Focus Media has seen many changes but through it all kept a basic business model: targeting captive audiences for Chinese advertising with proprietary screens where they live, work, shop or play. Focus Media was among the first Chinese firms from the industry to list in the U.S. on Nasdaq. Its shares as much as doubled after its $173 million IPO in 2005. Jiang’s stake, worth several hundred million dollars, made him a repeat member of the Forbes China Rich List. He was often photographed with international celebrities.
goo.gl/15Wf3V

London’s exclusive hedge fund club driven by who you know
Paul Clarke – eFinancialCareers.com
Hedge fund managers are not beautiful and unique snowflakes. They are not masters of the universe consistently beating the market propelled only by their individual expertise. No. They look a lot like an exclusive club where performance is directly correlated to who they know and who they’ve worked with previously.
goo.gl/acvBWo

Regulatory

SEC Enforcement Action Highlights Need for Private Equity Firms to Consider Broker-Dealer Registration
Katten Muchin Rosenman LLP
A recent SEC enforcement action against a private equity firm highlights issues identified in a recent speech by the Director of the Securities and Exchange Commission’s (SEC) Division of Enforcement[1] as well as an issue dormant in recent years—the potential need for private equity firms to register as broker-dealers.
jlne.ws/1t58yZL

CFTC nixes industry appeals to merely match global margin standards
Neil Roland, MLex
The US Commodity Futures Trading Commission’s final cross-border rule on uncleared derivatives margin rebuffs widespread industry requests for consistency with less stringent international standards, the newly published measure shows.
goo.gl/chwhix

SEC Names Christopher Hetner as Senior Advisor to the Chair for Cybersecurity Policy
SEC.gov
In his new role, Mr. Hetner will be responsible for coordinating efforts across the agency to address cybersecurity policy, engaging with external stakeholders, and further enhancing the SEC’s mechanisms for assessing broad-based market risk.
jlne.ws/25Df2A2

EU’s market watchdog to take deeper look at blockchain
The Economic Times
The European Union’s markets watchdog will study blockchain in more depth after an initial analysis showed it was too early to say whether the technology poses any threat to financial markets.
jlne.ws/1r5emAn

Response to the CMA’s provisional decision on remedies from its retail banking market investigation
UK FCA
We welcome the Competition and Markets Authority’s (CMA’s) efforts to increase competition in retail banking and are supportive of its provisional decision to make recommendations to the FCA to take forward a range of remedies, namely on service quality information, prompts and overdraft measures. The treatment of existing customers is a key priority for the FCA, including within our work on competition in retail banking.
goo.gl/kCgH4V

Fed Governors Signal Bigger Bank Capital Requirements Looming; Daniel Tarullo and Jerome Powell say action would affect eight systemically important banks
By RYAN TRACY and DAVID REILLY – WSJ
The biggest American banks will likely have to bulk up their balance sheets further to protect against possible financial shocks, Federal Reserve officials said Thursday.
goo.gl/1fUfA9

Exchanges & Trading Facilities

LSE, Deutsche Börse Outline Role of Data, Indexes in Merger Deal
Waters Technology
Information services and indexes are expected to contribute 25 percent of the merged exchange group’s revenues, five years after the merger is complete.
goo.gl/pC2KOk

ADDITIONAL ICE U.S. TREASURY BOND INDICES SELECTED BY BLACKROCK; DIREXION AND YUANTA SITC ALSO SELECT INDICES AS BENCHMARKS FOR A RANGE OF U.S. TREASURY ETFS
ICE
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges, clearing houses and data services, announced today that the ICE U.S. Treasury Bond indices have been selected as the new benchmarks for a range of Exchange Traded Funds (ETFs) offered by BlackRock iShares®, Direxion, and Yuanta Securities Investment Trust Company (Yuanta SITC).
goo.gl/LppfYv

EEX and Powernext confirm launch date of additional trading venues in response to MiFID II
Hedgeweek
EEX and Powernext have confirmed the launch date of the additional trading venues (non-MTFs) for German and French power derivatives as well as gas derivatives for all hubs and maturities available today through the regulated platform, in response to on-going MiFID II legislation.
jlne.ws/1TSEhZw

EURONEXT ANNOUNCES VOLUMES FOR MAY 2016
Euronext
Euronext, the leading exchange in the Eurozone, today announced trading volumes for May 2016.
/goo.gl/jwkZ49

TOCOM May Volume Averaged 109,860 Contracts per Day, Down 6.2%
Total Monthly Volume Gained 23.0% Y-o-Y
TOCOM
The Tokyo Commodity Exchange announced today that average daily volume for May 2016 was 109,860 contracts, down 6.2%. TOCOM’s largest contracts saw lower volume; Gold Standard dropped 2.8% to 34,636 contracts, Dubai Crude Oil fell 11.4% to 24,425 contracts and Rubber was down 8.3% to 10,505 contracts. Total monthly volume was up 23.0% to 2,087,332 contracts year-on-year.
goo.gl/IWAOH8

NYSE-ARCA Exchange Time Experiences Excessive Latency In May
Garrett Cook – Bending
Exchange time-syncing is something the SEC has admitted they’re unable to police due to the inherent issues involved in technology and the dynamics of the physical world (aka Great Circle Path).
goo.gl/m2708Z

Hong Kong exchange set to introduce volatility controls on August 22
Reuters
The Hong Kong stock exchange has tentatively scheduled the introduction of a new volatility control mechanism for August 22, the company said in a presentation published on Thursday.
goo.gl/Or9Syb

NSE to launch 2-factor validation in negotiated trade platform
Business Standard
Last year, the exchange introduced a web-based negotiated trade platform for reporting all the deals in the debt segment
goo.gl/Tgc80i

SGX reports market statistics for May 2016
SGX
Securities – Total Securities market turnover value rose 3% month on month and was down 6% year on year to S$21.6 billion, during 21 trading days compared to 21 in April 2016 and 20 in May 2015.
Derivatives – Total Derivatives volume was 13.6 million, down 9% month on month and down 12% year on year.
goo.gl/hyI0Le

Boerse Stuttgart Generates Turnover In The Region Of EUR 5.6 Billion In May – Increase In Equity Trading Volume Compared With May 2015
Mondovisone
According to its order book statistics, Boerse Stuttgart generated turnover of around EUR 5.6 billion in May 2016.
goo.gl/2lgQlF

Moscow Exchange Trading Volumes in May 2016
MOEX
Moscow Exchange (ticker: MOEX) announces trading volumes for May 2016. Total trading volumes increased by 33.5% YoY to RUB 58.1 trln.
goo.gl/bAwOX9

Moscow Exchange Supervisory Board appoints new members to committees
MOEX
On 2 June 2016 Moscow Exchange (ticker MOEX) Supervisory Board named new members to its six committees.
goo.gl/OqoF1A

Wiener Borse Monthly Statistic For May 2016
Mondovisione
The monthly statistic includes turnover data broken down by market segments and markets, as well as index values.
goo.gl/6y2iss

Exchange Publishes Guidance Letter on IPO Vetting and Suitability for Listing
HKEx
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) issued a guidance letter (GL) on initial public offering (IPO) vetting and suitability for listing.
goo.gl/Y8JfKp

Nasdaq, Inc. Prices $500,000,000 Senior Notes Offering
By GlobeNewswire
Nasdaq, Inc. (the “Company”) (Nasdaq:NDAQ) today announced that it priced a public offering of $500,000,000 aggregate principal amount of U.S. dollar-denominated 3.850% senior notes due 2026 (the “Offering”). The Company expects to use the net proceeds from the Offering, together with cash on hand and/or borrowings under the Company’s senior credit facility, to fund the cash consideration payable by the Company for its acquisition of 100% of the equity interests in U.S. Exchange Holdings, Inc. (the indirect owner of three electronic options exchanges: International Securities Exchange, ISE Gemini and ISE Mercury) (the “ISE Transaction”) and related expenses and for general corporate purposes, which may include, without limitation, the repayment of indebtedness or the funding of other future acquisitions.
goo.gl/IwLI72

ASX COMPLIANCE MONTHLY ACTIVITY REPORT – MAY 2016
ASX
Attached is a copy of the ASX Compliance Monthly Activity Report for May 2016
goo.gl/cqy4yI

ASX GROUP MONTHLY ACTIVITY REPORT – MAY 2016
ASX
Attached is a copy of the ASX Group Monthly Activity Report for May 2016.
goo.gl/8iHhX3

Politics

JPMorgan chief says Brexit could mean ‘fewer’ UK jobs with the bank
BY ANJULI DAVIES – Reuters
The head of U.S. bank JPMorgan Chase told British staff on Friday a decision by Britain to leave the European Union could mean “fewer” jobs with the bank there and more jobs in Europe.
goo.gl/j3kblC

Hedge Funds & Managed Futures

Ex-AIG chief Greenberg ordered to face civil fraud charges; Decision will allow New York attorney-general to try to recover bonuses earned by head of insurer
by: David J Lynch in Washington – FT
Maurice “Hank” Greenberg, the former chairman of insurer AIG, must stand trial on civil fraud charges in New York, the state’s highest court ruled on Thursday.
/goo.gl/O4IJli

HC2 Holdings broadens offer for U.S. grain handler Andersons
Reuters
HC2 Holdings Inc broadened its offer to buy parts of The Andersons Inc on Thursday, days after the loss-making U.S. grain handler said an earlier proposal to break up its business units was dead on arrival.
goo.gl/WZnRRH

Amid SEC probe, Jack Ma says hard for U.S. to understand Alibaba: media
Reuters
Alibaba Group Holding Ltd, whose accounting practices are under investigation by U.S. regulators, is a difficult company for the United States to understand, Executive Chairman Jack Ma said in an interview to Chinese media on Friday.
goo.gl/kqdXMb

Investors flock to Treasury futures for off-balance sheet exposures; Demand for exposure in US Treasuries is shifting from the cash market to futures, following stricter banking regulations.
By Joe Parsons and Ginger Szala – The Trade
Growth in US Treasury futures is outpacing cash Treasury trading as investors look to increase their off-balance sheet exposure to US fixed income markets.
goo.gl/2UgxML

Corporate bonds join negative yield club; Prospect of ECB buying eurozone paper this month pushes company debt prices higher
by: Eric Platt in New York and Gavin Jackson in London – FT
More than $36bn of corporate bonds with a short-term maturity currently trade with a sub-zero yield as the European Central Bank starts buying debt sold by companies next week.
/goo.gl/t0PNCY

Negative-yield debt breaks $10tn level for first time; Sovereign paper with sub-zero yield up 5% month on month, buoyed by rising prices
by: Eric Platt and Mamta Badkar in New York – FT
Negative-yielding government debt has risen above $10tn for the first time, enveloping an increasingly large part of the financial markets after being fuelled by central bank stimulus and a voracious investor appetite for sovereign paper.
/goo.gl/3FG4pv

Banks & Brokers

Banks fear early rollout of EU margin rules for forex forwards; Industry calls on EC to clarify when foreign exchange forwards will be subject to variation margining
Robert Mackenzie Smith – Risk.net
A quirk in the drafting of the European Union’s forthcoming bilateral margin framework for uncleared derivatives has left industry participants fretting that foreign exchange forwards could be subject to variation margining (VM) much sooner than expected – possibly even before the rules’ official implementation date of September 1. The wording of Article 39(6) of the European Supervisory Authorities’ (ESAs) final draft Regulatory Technical Standards (RTSs) for the EU’s non-cleared margin rules,…
goo.gl/eiMZMY

Morgan Stanley to Rate Employees With Adjectives, Not Numbers
By MICHAEL J. de la MERCED – NY Times
For years, Morgan Stanley employees were graded in part on a numerical scale that rated them from 1 to 5.
goo.gl/vxQMnS

Morgan Stanley to offer paid sabbaticals to retain VPs; Wall Street bank looks for ways to discourage talented staff from defecting to the tech and hedge fund sectors
by: Laura Noonan – FT
Morgan Stanley is wooing its investment bankers by introducing paid sabbaticals for newly-promoted vice-presidents and making earlier job offers to those at the start of their careers.
/goo.gl/qd5CQb

In Case of a Brexit, London Would Lose Business as a Global Financial Center
Nicolas Véron (PIIE)
There are multiple sub-scenarios in the aftermath of a No vote on June 23. In almost all of them, however, London would lose business as a global financial center. Part of its unmatched position as a hub for international financial services is linked to its membership of the European Union and corresponding access to the EU internal market.
/goo.gl/Dg7kX1

Clearing & Settlement

Clearing Members Analyze the Resolution of Central Counterparties
Markets Media
As central counterparties (CCPs) continue to play an increasingly important role in the global financial system, The Clearing House and the International Swaps and Derivatives Association (ISDA) issued a white paper identifying key issues that regulators should consider as they develop a comprehensive resolution framework for systemically important CCPs.
jlne.ws/1TSE0FV

LSE carries out study to explore use of blockchain technology for making securities transactions secure
EconoTimes
The London School of Economics has released a new report that analyses the current system of holding and transferring securities and argues that blockchain technology would make it possible to create a system that has the same level of transactional safety as the current system, while also eliminating custody risk at the same time.
jlne.ws/1TSEkoa

Commentary: Cybercrime isn’t the only reason cash remains king
Reuters
Despite the invention of electronic currency, cash in circulation has still been growing at exceptional rates in markets covered by this research; Australia, Canada, the euro zone, Japan and the United States.
In 2015, eight of every 10 transactions used cash as the payment method of choice, even 50 years after the invention of plastic cards. Certainly, within the recent digital revolution, cash is still a required and necessary commodity, as was witnessed during the recent financial crisis in Greece, where cash remained one of the few ways to successfully completing transactions.
jlne.ws/1TSEPys

Indexes & Products

ICAP U.S. rate benchmark to continue until September
Reuters
The planned discontinuation of a U.S. interest rate benchmark this summer will be postponed for another two months after two financial industry groups asked for more time for Wall Street to adjust to its replacement.
goo.gl/qEciMD

LSE, Deutsche Börse Outline Role of Data, Indexes in Merger Deal
Waters Technology
The London Stock Exchange Group and Deutsche Börse have unveiled more details of their planned $30 billion merger, including projections of EUR250 million ($279 million) in annual “revenue synergies” from the fifth year after the merger, with 25 percent coming from their combined information services and index businesses.
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The Newest Way to Beat the Market
MONEY
Investing actively in mutual funds doesn’t just mean picking a fund manager. Nowadays there’s another option: So-called smart-beta index funds and ETFs can tilt your portfolio toward investing traits or “factors” that academic research has determined can do well over time. These factors include a focus on small-company stocks or shares trading at low valuations.
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Divining Brexit
Tim Edwards, Senior Director, Index Investment Strategy, S&P Dow Jones Indices
When macroeconomic risk is dominant, as a select few narratives come to preoccupy investors, correlations increase. For example, in August and September 2015, markets worldwide were roiled in concert: on the changing winds of a collapsing oil price, and a loud “pop” in Chinese equity prices, correlations achieved multi-year highs. The chart below shows the average monthly correlation among the constituents of the S&P United Kingdom index:
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Best & Worst Performing ETFs So Far In 2016
ETF.com
It’s been a good year for financial markets so far in 2016. After a bumpy start to the year, most major asset classes are up through the end of May, including stocks, bonds and commodities. Even international stocks are hanging in there, with a slight gain for the year. As of this writing, the Vanguard Total International Stock ETF was up by 1.1% year-to-date.
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Technology

Jamie Dimon on the fintech hype
Business Insider
Jamie Dimon is not wild about fintech. While most of Wall Street is abuzz about financial technologies like blockchain and online lending, the JPMorgan CEO has adopted a more sober tone.
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Analytics Solution introduced for calculating SA-CCR, its KVA as well as the Standardized Approach for CVA Basel III Capital
Numerix
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management today announces the availability of its solution to help banks comply with the Basel Committee’s regulatory requirement for Counterparty Credit Risk (SA-CCR) Capital ahead of the January 2017 implementation deadline. Future capital requirements for SA-CCR can be calculated, as well as KVA (Capital Valuation Adjustment) for standard CCR capital. The standardized approach for CVA Basel III Capital has also been addressed and its future capital requirements.
goo.gl/3RtCGB

Enforcement

Las Vegas sports gambler’s jet use restricted in insider trading case
By Nate Raymond – Reuters
A wealthy Las Vegas gambler pleaded not guilty on Wednesday to charges that he engaged in an insider trading scheme that generated more than $40 million and included a tip that benefited star golfer Phil Mickelson.
goo.gl/qCu4xb

SEC Halts EB-5 Scheme Stealing Investments in Cancer Center
SEC.gov
According to the SEC’s complaint unsealed today in federal court in Los Angeles, Charles C. Liu and Xin “Lisa” Wang raised $27 million for the proton therapy cancer treatment center from 50 investors in China through the EB-5 immigrant investor program. They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency. But presently there is no construction at the proposed site after more than 18 months of collecting investments. Liu meanwhile has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.
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CFTC Orders Bitcoin Exchange Bitfinex to Pay $75,000 for Offering Illegal Off-Exchange Financed Retail Commodity Transactions and Failing to Register as a Futures Commission Merchant
CFTC
Bitfinex operates an online platform for exchanging and trading cryptocurrencies, mainly bitcoins. The Order finds that from April 2013 to at least February 2016, Bitfinex permitted users to borrow funds from other users on the platform in order to trade bitcoins on a leveraged, margined, or financed basis. The Order also finds that Bitfinex did not actually deliver those bitcoins to the traders who purchased them. Instead, Bitfinex held the bitcoins in deposit wallets that it owned and controlled, the Order states.
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SEC: Adviser Steered Investor Money to His Own Companies
SEC.gov
The SEC alleges that Richard W. Davis Jr. breached his fiduciary duty and took no steps to disclose or ameliorate the conflicts of interest involved with using investor money to enter into transactions with entities he beneficially owned or controlled. The SEC further alleges that Davis made false or misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from bank accounts commingling investor funds when he was only entitled to less than $150,000 in management fees.
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SEC: Forex Trader Misrepresented Track Record and Hid Massive Losses
SEC.gov
The SEC alleges that Haena Park touted her supposedly profitable futures and foreign currency (forex) trading strategy when soliciting friends, family, former Harvard classmates, and individuals with connections to them. She proceeded to pool investor funds and incur heavy trading losses month after month in the futures and forex markets, yet repeatedly told investors that their investments were profitable and sent them monthly account statements showing fictitious profits. At times, Park used new investor funds to make Ponzi-like payments to earlier investors. She raised at least $14 million from more than 30 investors since 2012, and has suffered more than $16 million in trading losses during that time period.
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Former Deutsche Bank Traders Charged in Libor Case
By BEN PROTESS – NY Times
The Justice Department announced criminal charges on Thursday against two former Deutsche Bank traders accused of manipulating interest rates, the latest Wall Street employees to be ensnared in the government’s wide-ranging crackdown.
goo.gl/Zj05Jp

FINRA Fines E*Trade Securities LLC $900,000 for Supervisory; Violations Related to Best Execution and Protection of Customer Order Information
FINRA
The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined E*Trade Securities LLC $900,000 for failing to conduct an adequate review of the quality of execution of its customers’ orders and for supervisory deficiencies concerning the protection of customer order information.
goo.gl/GHmIAC

NFA takes emergency enforcement action against commodity trading advisor Apercu International and its principal Alvin Guy Wilkinson
NFA
NFA announced today that it has taken an emergency enforcement action against Apercu International PR LLC (Apercu), an NFA Member commodity trading advisor located in San Juan, Puerto Rico, and Alvin Guy Wilkinson, a principal and associated person of Apercu.
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Environmental & Energy

Chile Has So Much Solar Energy It’s Giving It Away for Free
Vanessa Dezem, Javiera Quiroga – Bloomberg
Spot prices reached zero for 113 days this year through April; Solar power on Chile’s central grid quadrupled since 2013
Chile’s solar industry has expanded so quickly that it’s giving electricity away for free.
goo.gl/XoacCl

Asia-Pacific

ICAP lands $65 million deal with CFETS amid Chinese expansion; China Foreign Exchange Trading System has chosen ICAP’s EBS BrokerTec platform for FX, bonds and derivatives trading.
By Hayley McDowell – The Trade
China’s interbank trading platform and infrastructure provider, China Foreign Exchange Trading System (CFETS) has chosen ICAP’s EBS BrokerTec for fixed income, derivatives and FX electronic trading.
goo.gl/STFpPM

Implications of China’s MSCI Index: China’s Entry into MSCI EM Index to Lead Huge Money Flowing Out from Seoul Bourse
BusinessKorea
According to Nomura Securities, Chinese domestic-listed A shares are expected to attract global funds amounting to US$17.6 billion for a year to come once they are included in the MSCI EM Index. It added that the South Korean stock market is likely to lose US$2.561 billion in that case.
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Korean government reveals plans to support blockchain and fintech startups
EconoTimes
According to latest reports, the Korean government plans to provide its full support to venture capital to finance fintech start-ups, as digital innovation will play a pivotal role in the fourth industrial revolution, the country’s top financial regulator said recently, Korea Herald reported. Speaking at the Korea Capital Market Conference 2016 in Seoul, Yim Jong-yong, Financial Services Commission chairman said that the government will help foster a giant investment bank to invest in venture capitals.
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Frontier Markets

Sebi pitches country to Silicon Valley investors; To protect minority shareholders rights and encourage more investment in the start-ups sector
Business Standard
The head of India’s financial markets regulator visited Silicon Valley this week to promote rule changes in his country protecting minority shareholders and encourage more investment in his country’s thriving technology start-ups.
goo.gl/I04I9e

Pakistan Stock Exchange: ‘Relatively exceptional’ performance of KSE-100 Index
The Express Tribune
A year-on-year increase of less than 0.2% in the market capitalisation of a bourse over 11 months can be called anything but exceptional. Yet the spin masters at the Ministry of Finance dubbed the 5.4% rise in the KSE 100-Share Index between July 1 and May 11 “relatively exceptional performance”.
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Miscellaneous

Bank of England Unveils First Plastic Note Featuring Churchill
Jill Ward, Scott Hamilton – Bloomberg
Governor Mark Carney promoted new fiver at Blenheim Palace; Central bank is in a self-imposed purdah before EU referendum
The Bank of England unveiled the full design of its first plastic banknote Thursday, featuring U.K. wartime leader Winston Churchill.
goo.gl/XMdQSd

Snapchat Passes Twitter in Daily Usage; The four-year-old messaging app is said to have 150 million people using it each day.
Sarah Frier – Bloomberg
Snapchat Inc. has 150 million people using the service each day, said people familiar with the matter. That makes the four-year-old messaging app more popular than Twitter Inc. by daily active users.
goo.gl/rKPZlG

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About Author

Doug Ashburn is a former editor-at-large of John Lothian News. He left in late 2016 and is now the managing editor of T3 Custom.