Breaking News

European watchdogs to clamp down on risky retail trading; China’s high-frequency traders in retreat after court verdict; Wealth Management Industry Hit by Lower Fees, Fewer New Clients

First Read

Living With Uncertainty Again
By Jim Kharouf, JLN

Yesterday’s Trading Chicago event, co-hosted by FOW and John Lothian News, brought together more than 30 speakers and about 210 participants who addressed pressing issues for our industry – ranging from US and EU regulations to technology to markets. As was outlined by keynote speaker Craig Pirrong from the University of Houston, the industry is dealing with the ripple-on effects of the Dodd-Frank Act, or as he likes to call it, “Franken-Dodd.” His relentless critique of the act and subsequent rulemaking by US regulators ended with some resignation that the industry will not see major changes to it, despite the rhetoric from the White House. But perhaps we may see some tweaks.

Our debate over whether Dodd-Frank should be repealed, between Katten’s Gary DeWaal (for repeal) and Leslie Sutphen (against repeal), was a hit. The audience voted about 60-40 for repeal before the debate and 60-40 for it to remain afterward, as the audience opted for revisions rather than a wholesale repeal. The MIFID II panel emphasized a couple of key points for US firms trading overseas. You must get registered by July 3 if you are a proprietary trading firm or a firm that is an HFT trading entity or acts like a market maker. And you’ll need an office – a real one, not a post box. Time to hit Zillow. Ultimately, traders trading on European markets will be affected by MIFID II dramatically.

The panels on technology highlighted a few key trends worth watching. The need for customizable technology is growing, whereby vendors are now working more closely with customers to continue to add new products and functionality to their systems. This may not seem new to anyone in the space, but the demand by customers for new features is pushing technology firms to be more flexible, open and creative in how their systems work with customer systems, as well as other vendor platforms. The panel on speed versus data highlighted a couple of key themes. Low latency is very expensive but it is now in everyone’s reach, meaning it doesn’t set a firm apart the way it used to, and the profitability from it is depleted. With the emergence of high quality and specific data sets from exchanges and cloud-based data sets, firms are increasingly looking for new ways to trade strategies that are not as latency sensitive but are still very profitable. (A TED-style talk from Brian Peterson of DV Trading about machine learning and another on ETFs from Chris Anderson of Itiviti will be coming soon in video form.)

There is much uncertainty in today’s markets but little volatility. The panel on derivatives in an age of populism was a lively discussion about everything from elections and referendums to bitcoin – a sort of quasi-market populism – and ETFs, the “one-dollar cheeseburger” of the markets.

What yesterday’s program added up to is that these markets continue to be constrained by regulatory issues and yet unbound by the growth of technologies, all in an odd era of political populism. How it will evolve and jell together or break apart is still anyone’s guess. That is the nature of markets – uncertainty. But somehow there seems to be more of it than ever. What appears to be changing in the industry is that more people are now seeking opportunity in this environment despite the headwinds. And those firms will become the next leaders and titans of the space.

**Editor’s note: A special thanks to FOW/Global Investor Group’s Will Mitting, Valerija Slavina, and Hanna De’Bank, for their work in putting together this event with John Lothian News. Also a thanks to our sponsors who helped make it happen: Fidessa, Itiviti, CQG, Eurex, Rival Systems, Dash Financial Technologies, Deltix, Nodal Exchange, OptionsCity, OCC and R.J. O’Brien


Amy McCormick Appointed First Vice President of Financial Risk Management
OCC, the world’s largest equity derivatives clearing organization, today announced the appointment of Amy McCormick, formerly with the National Futures Association, as First Vice President, Financial Risk Management, a new position for the organization. McCormick starts in her new role today, and will report to Dale Michaels, Executive Vice President, Financial Risk Management.

****** Being in risk management has a lot of upside and downside. Let’s hope for upside.


Regtech Players Launch Industry Association; Based in Switzerland, the non-profit association will represent and promote the interests of consumers and providers in the regtech field.
Max Bowie – Waterstechnology
The IRTA will represent the interests of providers and consumers; liaise with financial regulators, academics, and other industry associations; promote regtech as a profession via research, innovation initiatives and standards development; support regtech accelerators; and deliver professional education and certification.

***** Do we even have a FinTech industry organization?


NYSE President Calls Short Sellers ‘Icky’
Annie Massa – Bloomberg
NYSE President Farley joins Nasdaq in calling for transparency; Rules require investors to disclose long positions, not shorts
The head of the New York Stock Exchange said short sellers should be forced to reveal more about what they’re doing.

****** The are only icky when they sell by the gross.


3Points Earns Silver: An Eventful Year in Review
Medium – 3PTS
Like many boutique firms, nearly all of our focus and energy is directed toward helping our clients reach their business objectives, but in 2016 we started showing our firm the same care and attention to detail that we have shown to many others over the years. We realized that we are better advocates for our clients when we engage in those same PR tactics we advise them to adopt?ó?therefore, we are proud to share that we have received a silver medal in the PR World Awards as a single boutique office, based on our 2016 body of work submission.

***** Congratulations to Drew Mauck and his team for their achievement.


Robocalypse Now? Central Bankers Argue Whether Automation Will Kill Jobs
Jack Ewing – NY Times
The rise of robots has long been a topic for sci-fi best sellers and video games and, as of this week, a threat officially taken seriously by central bankers.

****** This story gets the “Headline of the Day” award for creativity.


Every New York City Subway Line Is Getting Worse. Here’s Why.
Emma G. Fitzsimmons, Ford Fessenden and K.K. Rebecca Lai – NY Times
Subway delays have become a frustrating fact of life in New York City. Every day brings a new set of alerts about painful disruptions across the system. Trains creep along or stop in the tunnels. Crowds thicken on the platforms.

***** Time to summer in Chicago? The state is nearly bankrupt, but the trains and subways run just fine.


Yes, Your Parents’ Status Does Influence Your Earning Power; Welcome to the lottery of birth
Michael Heath – Bloomberg
“If you’re born poor, you die poor,” a U.K. politician lamented six years ago. Sadly, little has changed. Britain is joined by the U.S., France and Italy in having a high correlation between parents’ earnings and those of their children, according to a report by Standard Life Investments. The relationship also exists in Scandinavian economies as well as Australia, Germany and Canada, but to a lesser extent.

***** I would like to thank my mom and dad.


Wednesday’s Top Three
The top story yesterday was a video from Bloomberg with Terry Duffy, CME CEO Says It’s Important to Have Smart Regulation. Second place went to ‘Enigma Network’ Rocks Hong Kong Markets With Sudden 90% Losses, a story about an interwoven network of equities lacking transparency. In third was a Business Insider story describing the newest buzzworthy cryptocurrency, Something called Ethereum is suddenly all over the news ó here’s what the bitcoin rival is all about


MarketsWiki Stats
103,494,313 pages viewed; 22,572 pages; 206,737 edits
MarketsWiki Statistics


Lead Stories

European watchdogs to clamp down on risky retail trading; Contracts-for-difference are among the products causing concerns for Esma and FCA
Philip Stafford and Katie Martin – FT
European markets authorities want to extend UK plans to toughen standards in the retail online trading market, with potential guaranteed limits to losses for customers, in a continent-wide industry clampdown.

China’s high-frequency traders in retreat after court verdict; Yishidun fined Rmb300m for market manipulation and ordered to disgorge Rmb389m in profits
Gabriel Wildau – FT
China’s nascent high-frequency traders (HFT) are in retreat following a regulatory crackdown on short selling and a broad legal interpretation of “market manipulation” that encompasses trading practices that are allowed in other markets.

Wealth Management Industry Hit by Lower Fees, Fewer New Clients
Ivan Levingston – Bloomberg
Advisers facing challenging trends, PriceMetrix report says; Firms also need to move beyond Baby Boomer customer base
Wealth management firms are struggling with a drop in fees, scarcity of new clients and little prospect for growth as young investors shun full-service retail firms.

This Fund Manager Trains Algos to Copy His Brain
Nishant Kumar – Bloomberg
Models scan data, read company releases to spot trading ideas; ‘All the big guys are doing it. They have huge teams.’
Since he left his job as hedge-fund manager last year, Muhammed Yesilhark has spent his days teaching computers to pick stocks like he did in his 12-year career.

20 Years After Handover, China Looms Ever Larger Over Hong Kong Markets; Two decades after the handover, Chinese influence over Hong Kong’s markets is far more striking than foreign investors’ clout in China
Steven Russolillo – WSJ
When China regained sovereignty over Hong Kong in 1997, the flourishing financial center seemed set to become a gateway for foreign investors to the then-largely closed mainland economy.

Majority of buy-side firms at risk of missing MiFID II deadline; Buy-side study found almost half of firms are attempting to implement MiFID II with a team of just five people and a budget of less than £2 million.
Hayley McDowell – The Trade
Despite the deadline being mere months away, a significant 90% of asset managers have stated they are either at high or medium risk of non-compliance with MiFID II.

Illinois Is in Deep Trouble: What Investors Need to Know; Here are answers to questions investors may be asking
Heather Gillers – WSJ
Illinois is locked in a political stalemate, and in danger of becoming the first U.S. state to have its debt downgraded to junk status. S&P Global Inc. threatened to take that action if Gov. Bruce Rauner and Democratic Speaker of the House Michael Madigan can’t agree on a package of spending and taxes by the start of the next fiscal year on Saturday. Below is a breakdown of what this unprecedented event would mean for everyone from individual investors to large Wall Street money managers.

The Financial Conduct Authority slogs on in a war worth fighting; Asset management is an inherently inefficient market
FT View
Past performance is not a reliable indicator of future results. This is not just a required disclosure. It is the deepest explanation of weak price competition in asset management.

Why the FCA’s verdict on the UK investment industry matters
Lucy Burton – Telegraph
The City regulator has delivered its final verdict on Britain’s investment landscape in a move that marks the end of an 18 month probe and the greatest shake-up to the UK’s institutional investment landscape in at least a generation.

The World’s First Modern Financial Crisis: 1997 Edition
A look back at the crisis and the economic and political changes it wrought.
Daniel Moss and Malcolm Scott – Bloomberg
Every week, hosts Dan Moss and Scott Lanman bring you a jargon-free dive into the stories that drive the global economy. Twenty years ago this week, a momentous event more than a century in the making finally occurred: Hong Kong’s handover to China. Turns out, that wasn’t even close to the biggest story that year. What really did transfix the world in 1997 was the financial crisis that exploded a day after the handover — in, of all places, Bangkok.

Investors Have Lost Sight of the Purpose of Indexes; Index providers are not in the business of arbitrating disputes about transparency in China, U.S. corporate governance or Venezuelan politics.
Aaron Brown – Bloomberg
The construction of financial market indexes has never been a very hot topic, but now:

The Short Life of the Oil Short Squeeze
Liam Denning – Bloomberg
Oil traders are warning that the oil market is so bad it might get good really quickly.

Debt-Trading Death by a Thousand Boring Days
Lisa Abramowicz – Bloomberg
Bonds are supposed to be boring to a certain degree, but this month has taken predictability and lack of excitement to a whole new level.

SEC Probes Barclays, Morgan Stanley Bankers on Puerto Rico Bonds
Martin Z Braun – Bloomberg
Firms underwrote island’s $3.5 billion sale in March 2014; Was last major issue by island before it declared bankruptcy
The U.S. Securities and Exchange Commission may take action against bankers from Barclays Plc and Morgan Stanley for their roles in Puerto Rico bond sales before a worsening fiscal crisis sent it hurtling toward bankruptcy.

Exchanges, OTC and Clearing

IEX CEO Sees Conflicts of Interest in Equity Markets
Bloomberg Video
Brad Katsuyama, IEX Group Inc.’s chief executive officer, discusses the conflicts of interest in equity markets with Bloomberg’s Erik Schatzker on “Bloomberg Markets.”

CBOE Holdings’ Exchanges Trading Schedule for Independence Day Holiday
CBOE Holdings, Inc. today announced the following trading schedules for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2), CBOE Futures Exchange (CFE) and Bats U.S. equities and options exchanges in observance of the Independence Day holiday on Tuesday, July 4.

Toronto Stock Exchange welcomes new participants, enhanced capabilities to TSX NAVex
TSX’s innovative mutual fund platform expands dealer network and introduces new information portal designed to provide fund manufacturers with unique insight into activity
Toronto Stock Exchange (TSX) today provided an update on the progress of TSX NAVexÆ, its unique centralized mutual fund solution.

HKEX and CGSE sign MOU
Hong Kong Exchanges and Clearing Limited (HKEX) and The Chinese Gold and Silver Exchange Society (CGSE) today (Thursday) signed a Memorandum of Understanding (MOU) to consider cooperation on matters ranging from product promotion to storage vaults.

Nasdaq Offers Dark Pool Workaround for Trades Forced Into Light
Frances Schwartzkopff – Bloomberg
Nasdaq seeing growing interest for auction on demand trading; Says dark pools going out of business for European stocks
New reporting rules intended to pull equity trading out of dark pools and restore transparency to the market are spawning workarounds.

Nasdaq’s Directors Desk And Boardvantage To Introduce Board Assessments And Compliance Questionnaires – A Unique Collaboration Between Nasdaq Corporate Solutions And The Center For Board Excellence
Nasdaq Corporate Solutions, a business of Nasdaq, Inc. (Nasdaq:NDAQ), announced today a new partnership with The Center for Board Excellence (CBE), a provider of board assessments and compliance questionnaires. In the first phase of the partnership, Nasdaq Corporate Solutions will facilitate introductions for users of Directors Desk and Boardvantage – Nasdaq’s board portal and meeting management solutions – to CBE’s cloud-based corporate governance solutions including: board and committee assessments; director peer assessments; CEO and management evaluations; and directors’ & officers’ questionnaires.

SGX welcomes Shinhan Investment and Cathay Futures as new Derivatives Trading Members
Singapore Exchange (SGX) today welcomed Shinhan Investment Corp. and Cathay Futures Corp. as new Trading Members of its derivatives market.

Nigeria’s first Diaspora Bond starts trading on London Stock Exchange
London Stock Exchange Group
London Stock Exchange today welcomes Nigeria’s first Diaspora Bond to start trading on the Main Market. Proceeds from the five-year, 5.625% bond will be used to fund infrastructure projects in the country. The bond is the first from an African country that is registered with both the UKLA and the U.S. SEC and targeted at retail investors. Interest in the bond was high from retail investors around the world and was 130% subscribed, raising a total of $300 million. The bond follows the successful raising of $1.5 billion through Nigeria’s Eurobond earlier this year.

OpenDoor Secures Another $10 Million in Funding; The funds will be used to expand OpenDoor’s client network and improve connectivity to current users.
Emilia David – Waterstechnology
Fixed-income trading platform OpenDoor Securities raised $10 million in funding to improve connectivity and make other enhancements.


Cinnober appoints Mattias Granlund as Deputy CTO
Cinnober is pleased to announce that it has appointed Mattias Granlund as Deputy Chief Technology Officer (CTO) with immediate effect. He will be working closely with Peter Lenti, co-founder and CTO of Cinnober, on the company’s long-term technical strategy in addition to driving product development.

Liquidnet adds algo ranking to MiFID II service in Europe; Algo ranking model supports best execution requirements under MiFID II.
Hayley McDowell – The Trade
Liquidnet has extended its algo ranking model in Europe as part of the Virtual High Touch MiFID II service.

TradingScreen integrates OTAS analytics; OTAS Technologies is the latest to join the TS Partner Program, designed to expand services for the buy-side.
Hayley McDowell – The Trade
TradingScreen (TS) has integrated OTAS Technologies’ analytics into its order and execution management system (OEMS) TradeSmart.


Steven Mnuchin cleared on fraud charge
Richard Morgan – NY Post
Mnuchin plays down fears of a currency war after Trump’s dollar remark
A New York judge has dismissed a claim in a civil suit that alleged Treasury Secretary Steven Mnuchin had committed fraud while serving on the board of Relativity Media, a Hollywood studio.

Trump Is China’s Chump
Thomas L. Friedman – NY Times
Having just traveled to New Zealand, Australia, South Korea, China, Taiwan and now Hong Kong, I can say without an ounce of exaggeration that more than a few Asia-Pacific business and political leaders have taken President Trump’s measure and concluded that ó far from being a savvy negotiator ó he’s a sucker who’s shrinking U.S. influence in this region and helping make China great again.

Senate Panel Digs Into 2,000 Financial Documents in Trump Probe
Steven T. Dennis and Billy House – Bloomberg
Intelligence Committee hunts for improprieties in records; Treasury’s financial crimes unit handing over data to panel
The Senate Intelligence Committee’s investigation of the Trump campaign’s possible links to Russia is now focused sharply on financial transactions involving the president’s associates — with the committee searching for improprieties in more than 2,000 documents it has received from the Treasury Department’s financial crimes unit.


FCA delays decision on CFD rules; Following update from ESMA
Jayna Rana – InvestmentWeek
The Financial Conduct Authority (FCA) has decided to delay making final conduct rules for firms providing contract for difference (CFD) products to UK retail clients as it awaits the outcome of the European Securities and Markets Authority (ESMA) decision.

FCA statement on contract for difference products and CP16/40
This statement provides an update on the Financial Conduct Authority’s (FCA) policy work on contract for difference products (CFDs) and CP16/40: Enhancing conduct of business rules for firms providing contract for difference products to retail clients.

FCA: Absolute return funds offer ‘high likelihood’ of negative performance; Funds can also have high volatility
Tom Ellis – Professional Advisor
The Financial Conduct Authority (FCA) has targeted the absolute return sector in its asset management study, suggesting there is a “relatively high likelihood” an absolute return fund would provide negative performance.

SFC says it will review the city’s short-selling rules and make changes ‘if necessary’
Celia Chen – South China Morning Post
The Securities and Futures Commission (SFC) said on Wednesday it will review the city’s short-selling regime and make changes “if necessary”, following sharp declines of a number of Hong Kong-listed companies suspected to be related to short-selling institutions.

Proposed Rule Change to Update Rule Cross-References and Make Non-Substantive Technical Changes to Certain FINRA Rules
Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a proposed rule change to update cross-references and make other non-substantive changes within FINRA rules.

Benchmark Transition Plans will be Critical
Last week saw the US Alternative Reference Rates Committee (ARRC) – a US public-private sector working group led by the Federal Reserve – select its choice for a risk-free rate that could be used as an alternative to US dollar LIBOR for certain derivatives and other contracts in the future. The next step is to think about how to encourage its use and to transition to the new rate – and that’s the really tricky part. Certainty will be critical: market participants will need a clear plan.

Andrew Bailey speech on retail banking in the UK – reflections from the FCA
Speech by Andrew Bailey, Chief Executive of the FCA, at the BBA Retail Banking Conference on retail banking in the UK – reflections from the FCA.

New OCC Bulletin on Third-Party Oversight Highlights Fintech Relationships
Pepper Hamilton LLP via Lexology
The OCC Bulletin sends a clear message that fintech-enabled services have become an integral part of the financial services ecosystem. On June 7, the Office of the Comptroller of the Currency (OCC) issued OCC Bulletin 2017-21 (Frequently Asked Questions to Supplement Bulletin 2013-29; Third-Party Relationships: Risk Management Guidance).

FCA’s Bailey warns lenders over provision of current accounts
Martin Arnold – FT
The head of the UK Financial Conduct Authority has fired a shot over the bows of the banking sector by warning that the watchdog was now focusing on how some lenders were withdrawing from the current account market.

Op risk managers not sold on SMA alternative; Proposed forward-looking approach would permit internal modelling, but penalise banks if losses exceed estimates
Steve Marlin –
The Basel Committee on Banking Supervision’s proposed standardised measurement approach (SMA) to calculating operational risk capital requirements has faced a storm of criticism from practitioners, who have decried it as a “messy compromise” that is “not fit for purpose”.

SEC Charges Oil and Gas Company and Top Finance Executives with Accounting Fraud
The Securities and Exchange Commission today charged a Canadian-based oil and gas company and three of its former top finance executives for their roles in an extensive, multi-year accounting fraud.

SEC Charges Obsidian Energy, Former Executives With Accounting Fraud; Regulator alleges executives reclassified expenses to make costs appear lower and boost net income
Dave Michaels – WSJ
U.S. securities regulators on Wednesday charged a Canadian oil-and-gas company and several former executives for their roles in an alleged accounting fraud.

Sebi’s proposals on investment advisors gets mixed response; Experts say big players can get away by simply creating separate divisions to sell and advise
Chandan Kishore Kant – Business Standard
The Securities and Exchange Board of India’s (Sebi)’s latest proposals on selling of investment products has drawn mixed responses.

UK financial regulator puts asset management industry on notice; FCA proposals would make UK one of the toughest regulatory climates for asset managers
FT reporters
In the end, the Financial Conduct Authority’s eagerly-awaited “final” report on the workings of the UK’s £7tn asset management sector was anything but definitive.

MiFID II and Trade Reporting: Get Ready for Big Changes
Kirston Winters, IHS Markit via Tabb Forum
MiFID II will shift the responsibility for trade reporting to the buy side for certain products and in certain situations. The trade reporting rules are complex and, as the implementation of MiFID II approaches, asset managers are justifiably confused and concerned – and if they’re not, they should be. MiFID II places a significant burden on buy-side firms to understand the systematic internaliser status of all their counterparties at a granular instrument level, and to be able to report trades to in a timely manner when ó and only when ó obligated to do so.

Investing and Trading

Quant giant Winton launches Ucits managed futures fund
David Campbell – City Wire
Quant manager Winton is to launch the Winton Absolute Return Futures fund next month, investing in forward derivatives across a range of fixed income, rate, currency and commodity markets.

Panel Urges Firms to Disclose Climate Risk Provisions
Neanda Salvaterra – WSJ
A group of global firms have launched a set of guidelines for companies to voluntarily disclose more about the impact of climate change on their operations – the proposal has been criticized by some oil firms, reports The Wall Street Journal.

Bitcoin Has Become So Volatile It Looks Like an ETF on Steroids
Dani Burger – Bloomberg
Historic volatility measure jumps amid ether flash crash; After bubble burst in 2014 bitcoin had begun to look more calm
There’s volatility. And then there’s bitcoin volatility. With virtual currency flash crashes and a recent string of ransomware attacks all but obliterating bitcoin’s incremental stability, it’s become hard to find a comparable asset. Indeed, the closest match is an exchange-traded fund on leverage steroids that’s supposed to be highly volatile.

IHS Markit launches RPA service ahead of unbundling; RPA Manager integrates other research management services by IHS Markit, including its broker vote and commission manager tools.
Hayley McDowell – The Trade
IHS Markit has launched its RPA Manager service aimed at helping the buy-side acquire investment research under MiFID II.

‘Pandemic bonds’ are latest idea to beat disease; World Bank raises debt whose payments can be diverted from investors in emergency
Kate Allen, Capital Markets Correspondent – FT
Investors are being offered the chance to save the world and earn a juicy return at the same time, with the launch of a new type of bond to tackle outbreaks of pandemics.

MSCI: ‘Passive investing will be good for society’; Chief executive of data provider defends inclusion of Chinese A-shares in EM index
Chris Flood – FT
Henry Fernandez found China “an extremely primitive country” during his first visit in 1979 as a university student after a Time magazine article sparked his interest.

Inside the Red-Hot Stock Fund That’s Turning Down New Money
Kana Nishizawa – Bloomberg
Asian small cap fund has beaten 97% of peers in past 5 years; Manager Elina Fung uses auditor’s eye to pick market winners
Whether she’s sipping tea with Indian dairy farmers or interrogating company executives in a Hong Kong skyscraper, Elina Fung brings the same techniques to finding stock market winners.

Binary Accused of Post-Resignation Harassment by Ex-Employee
Emily Chang – Bloomberg
Co-founder Justin Caldbeck left after reports of harassment; Ann Lai says Caldbeck pressured her after she left firm
A former employee is suing Binary Capital LLC for harassing and defaming her after she resigned from the venture capital firm, following recent revelations that co-founder Justin Caldbeck made unwelcome sexual advances toward female startup founders.

Neuberger Berman’s Dyal buys minority stake in hedge fund Atalaya
Dyal Capital Partners, the Neuberger Berman Group unit that buys minority stakes in hedge and private equity fund firms, has bought a piece of private credit and special opportunities investor Atalaya Capital Management, marking its third investment in three months.

Markit Hires Cerniglia to Lead CLO Pricing
Max Bowie – Waterstechnology
Cerniglia will bring her more than 20 years of experience in pricing structured products to head IHS Markit’s CLO pricing team.

How A Day Trader Is Finding Success In Today’s High Frequency Market
Dylan Wittenberg – Benzinga
In a world where high-frequency trading eats up the vast majority of intraday liquidity, Ross Cameron has managed to carve out a niche for himself.


Central Bankers Tell the World Borrowing Costs Are Going Up
James Hertling, Alessandro Speciale, and Piotr Skolimowski – Bloomberg
Markets fluctuate on hawkish notes from Europe to Americas; Weak prices still a challenge but policy direction seems set
Global central bankers are coalescing around the message that the cost of money is headed higher — and markets had better get used to it.

Big Banks Set to Pay Out Largest Dividends in a Decade
Michael Corkery – NY Times
All of the nation’s largest banks passed the latest stress test on Wednesday, the first time all aced the exam since the Federal Reserve began administering the exercise seven years ago.

Banks Unleash Surprisingly Big Payouts After Fed’s Stress Tests
Yalman Onaran, Dakin Campbell and Jennifer Surane – Bloomberg
Capital One is only bank ordered to resubmit its capital plan; But it can continue dividends, buybacks while fixing problems
The Federal Reserve told big banks they have more than enough capital, and they promptly announced a windfall for their shareholders.

BofA’s Dividend to Rise Above Buffett Target for Stock Swap
Noah Buhayar and Laura J Keller – Bloomberg
Bank boosting payout after passing Federal Reserve stress test; Berkshire holds warrants after $5 billion BofA investment
Bank of America Corp. plans to lift its dividend above a level that Warren Buffett said would compel him to convert preferred shares into the lender’s common stock.

Dreyfus appoints Citi to handle sale of stake in metals unit
Neil Hume, Emiko Terazono – FT
Louis Dreyfus Company, one of the world’s biggest commodity traders, has fired the starting gun on the sale of a stake in its fast-growing metals business.
Speaking at the FT Commodities Americas Summit in Buenos Aires on Wednesday, LDC’s chief executive Gonzalo Ramirez Martiarena said Citigroup had been appointed to handle the sale process.

Stress tests clear big US banks for $100bn payout; Fed gives green light to buybacks and dividends totalling almost 100% of earnings
Alistair Gray and Barney Jopson – FT
Regulators have given US banks the go-ahead to pay out almost all their earnings to shareholders this year in a signal of their confidence in the health of the financial system.

Fed gives big U.S. banks a green light for buyback, dividend plans
Pete Schroeder and David Henry – Reuters
The Federal Reserve has approved plans from the 34 largest U.S. banks to use extra capital for stock buybacks, dividends and other purposes beyond being a cushion against catastrophe.

Convicted Barclays Traders Target SFO Expert in Libor Appeal
Jeremy Hodges and Suzi Ring – Bloomberg
Witness testimony could undermine some Libor convictions; Lawyers for acquitted Ryan Reich wrote to U.K. crime agency
Former Barclays Plc traders convicted of rigging Libor are attacking the credibility of an expert witness for the prosecution who texted friends during breaks in his testimony for help to describe banking terms.

HSBC Surges After U.S. Stress-Test Pass Boosts Payout Prospects
Stephen Morris – Bloomberg
Bank may buy back $3.2 billion of stock, KBW analysts estimate; Shares trading near a four-year high in London after 4.9% jump
HSBC Holdings Plc surged to trade near a four-year high after the bank’s North American unit passed the Federal Reserve’s stress test, clearing the way for more than $3 billion of capital to be returned to shareholders, analysts estimate.


Will UK inflation-linked bonds be the choice of the wise?; Linkers are not the best way to build protection against rising inflation in Britain
Toby Nangle – FT
With rising UK inflation, questions are increasingly being asked around the best way to protect the real value of investments. Naturally, inflation-linked bonds sound interesting. However, I’m looking for other ways to build inflation-protection.

Three Ex-Billionaires See Fortunes Wiped Out in Hong Kong Stock Rout
Robert Olsen – Bloomberg
Tycoons’ fortunes plummet more than $3 billion in two days; Three ex-billionaire stakes had a peak value of $5 billion
Three former billionaires who made their fortunes by taking their companies public in Hong Kong shed more than 91 percent of their wealth amid the market rout that’s roiling small-cap stocks in the city.

OPEC, Oil Prices and Disruptive Innovation; Cost-cutting advances in shale are weakening the cartel’s grasp of energy market dynamics.
Mohamed A. El-Erian – Bloomberg
If you apply the insights of the literature on disruptive innovation, last week’s fall in oil prices could well place members of the Organization of Petroleum Exporting Countries in a tough spot, and not just in the short term. Cost-cutting innovations in shale are weakening their grasp of energy market dynamics. Their prospects increasingly depend less on what they can do on the supply side and more on what they can hope for on the demand side.

Japan outlaws restrictions on resale of LNG cargoes; Ruling is latest push to liberalise liquefied natural gas market as supplies increase
Robin Harding in Tokyo and David Sheppard in London – FT
Japan has outlawed restrictions stopping customers from reselling cargoes of liquefied natural gas, in its latest move to liberalise a market where Japanese utilities have long been the biggest buyers.


Frankfurt welcomes bankers fleeing Brexit ó and their cash; The city is flush with financial services but its infrastructure may struggle
Claire Jones in Frankfurt – FT
There was a time when the European Central Bank thought that it could leave its first home ó the 40-storey Eurotower ó behind it. But after the 2008 financial crisis, the ECB had to take on more than 1,000 extra staff, requiring it to occupy both its new headquarters, which sprang up in 2014, and a refurbished Eurotower.

Brexit threatens to clip the wings of UK butterfly exporter; EU departure will reach into little-known crevices of the British economy
Joshua Chaffin – FT
The flapping of a butterfly’s wings can unleash a typhoon halfway around the world, chaos theory says. But what if the typhoon of Brexit ends up crippling butterflies instead?


Market Liquidity after the Financial Crisis
Tobias Adrian, Michael Fleming, and Or Shachar – New York Fed
The possible adverse effects of regulation on market liquidity in the post-crisis period continue to garner significant attention. In a recent paper, we update and unify much of our earlier work on the subject, following up on three series of earlier Liberty Street Economics posts in August 2015, October 2015, and February 2016. We find that dealer balance sheets have continued to stagnate and that various measures point to less abundant funding liquidity. Nonetheless, we do not find clear evidence of a widespread deterioration in market liquidity.

Cyber attack hunt focuses on initial Ukraine infection; Politicians in Kiev blame Kremlin as several large companies struggle to fight virus
Mark Odell, Sam Jones and Roman Olearchyk – FT
The global cyber attack that hobbled some of Europe’s largest companies has been tracked by security experts to an initial infection in Ukraine, where politicians have accused Moscow of orchestrating the ransomware virus.

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Graduate of University of Minnesota School of Journalism and Mass Communication