Hits & Takes
NEX Group yesterday led a session of Trading Tech 300, the merit badge workshop program created to help young people connect with the financial industry in Chicago. They took a group of Scouts around the financial district in a Geocaching exercise. Thank you to Tom Scanlan and the NEX crew for their service.~JJL
Michael Kraines of Trading Technologies is our video subject today from the Chicago sessions of MarketsWiki Education World of Opportunity.
Yesterday’s Asia Pacific financial markets news is available HERE
From Education to Inspiration
Leo Murphy – Trading Technologies Blog
There comes a point in a young person’s life when they discover their place in the world. This usually occurs in college where, through a series of experiences, everything comes together and their future becomes clear. Those experiences inspire a student to pursue a calling instead of simply look for a job. Through our campus outreach program, TT CampusConnect, we often meet students who are in that place where education becomes inspiration and leads them to their calling.
Why You Should Bet Your Career on Chicago FinTech – Michael Kraines
“Twenty years ago it was about consolidation. It was about exchanges being smashed together and brokerages being smashed together. Now it’s going to be about technology being added to these traditional, old school businesses.”
In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Michael Kraines, chief financial officer and chief commercial officer of Trading Technologies, discusses the growing Chicago fintech landscape and why the field can be a solid career choice.
Kraines points out investment in Chicago fintech in the first half of 2017 has nearly matched the total from all of 2016. In 2016, venture capitalists shelled out almost $1 billion in 90 deals. In the first half of 2017, that number is $952 million in 55 deals. Helping matters is Chicago’s existing trading infrastructure of exchanges and traders. To Kraines, the future of Chicago markets looks bright.
The NFL’s Mindfulness Movement Is Spreading
The way Russ Rausch remembers it, the discontent took hold about 11 years ago. It was a clear spring day in 2006, and Rausch was sitting in his office at Trading Technologies International on the 11th floor of a building that overlooks the Chicago River.
The Global Wheat Market is Changing. Can Australia Keep up?
Nelson Low – CME Group’s OpenMarkets
The 2016/17 record wheat harvest in Australia comes at a time when the market is already awash with grain, and wheat producers the world over are grappling with depressed prices. However, a combination of recent serious weather incidents, a dramatic cut in wheat acreage in the United States and challenging growing conditions in Western Australia are eating away at global inventories and can erode the oversupply glut that has gripped wheat markets for years.
***** Don’t bet against the Aussies.~JJL
Bitcoin market cap is within touching distance of major stocks like Netflix
Arjun Kharpal – CNBC
Bitcoin hit another record high on Tuesday, with the continuing rally bringing its market capitalization within touching distance of major stocks like Netflix.
****** Tulips anyone?~JJL
Wells Fargo Elevates Former Fed Governor Elizabeth Duke to Chairman Role
Duke to succeed Stephen Sanger, become first female chairman among largest U.S. banks
Emily Glazer, The Wall Street Journal
Wells Fargo & Co. said Elizabeth Duke would replace its chairman, Stephen Sanger, on Jan. 1, making the former Federal Reserve governor the first woman to hold a top board role at one of the nation’s largest banks.
****** After so many wrong moves, Wells Fargo gets one right.~JJL
No news is bad news: why we need journalism to survive
Steve Coll – FT
In 2003, the Southern Metropolitan Daily in Guangzhou, China, published a daring investigation into the death of Sun Zhigang, a migrant worker picked up by police for lacking proper documents and then dumped into a detention centre. The Daily’s revelations triggered popular outrage that resulted in significant systemic reform. These days, as John Lloyd writes in The Power and the Story, Chinese reporters have learnt that they can occasionally “swat flies” with their investigative work, but not “beat tigers” such as security services or leaders of the Communist party.
***** Free markets need free press. John Lothian says so.~JJL
Tuesday’s Top Three
Fintech developments in the world of distributed ledger and cryptocurrencies got the most love yesterday as ‘Father of Financial Futures’ Seeks Cryptocurrency Hardware Patent nabbed the top spot and our guest blog from Jim Falvey, Alphabet Soup: The DAO, ETH, ICOs and the SEC, came in second. We then had a tie for third – Deutsche Börse CEO Looks to Cut Deal and
City worker dies after falling from seventh floor of London Stock Exchange.
106,135,188 page views; 22,675 pages; 207,817 edits
Hedge funds start to face up to extreme gender imbalance; Questions mount over diversity in an industry dominated by male fund managers
Lindsay Fortado, Hedge Fund Correspondent – FT
Women control less than 1 per cent of the $3tn in assets managed in the hedge fund industry. Male portfolio managers outnumber women by 20 to one. These stark figures underscore the severe gender imbalance among hedge funds executives, even as other parts of the financial services industry have brought in more equal opportunities.
Massachusetts launches probe into ‘maker taker’ rebate system; State looking at whether payments by exchanges creates a conflict that hurts investors
Nicole Bullock in New York – FT
Massachusetts on Tuesday entered the debate over sales practices in the US stock market as it launched an investigation into whether paying rebates on bids and offers hurts investors.
****SD: Reuters with the story here.
The Next Quant Meltdown
Michelle Celarier – Institutional Investor
Ten years ago, during the second week of a sultry New York August, Michael Mendelson was getting a sandwich at the Subway shop near the Greenwich, Connecticut, office of AQR Capital Management when all hell broke loose. As Mendelson glanced at his BlackBerry, out of nowhere, it seemed, AQR’s funds were in the red.
ETFs are hot everywhere but workplace retirement plans
Beth Pinsker – Reuters
Low-cost exchange-traded funds are a favorite of individual investors. ETF assets reached $2.9 trillion in 2017, up 32 percent in the last year, according to Investment Company Institute, a trade group.
Here’s why you can’t call bitcoin a ‘bubble’
John McAfee via Business Insider
There are innovations peppered throughout history that have changed human culture beyond recognition. One such innovation was the adoption of agriculture.
Prior to this adoption, the great thinkers within society struggled with how to determine when to break camp and move to more fruitful lands, how to limit the size of a village so that sheer numbers did not quickly deplete the available food in a new area, and how to design lodging so that could be quickly dismantled for a sudden move.
Political ‘Angst’ Turns Fund Managers Against U.K., U.S. Stocks
Cecile Gutscher – Bloomberg
Investors cut allocations to 2008 low: Bank of America survey; Risks cited include central banks, bond crash, North Korea
“Anglo-Saxon political angst” is spurring a shift in investment from U.S. and British equities to Europe, according to the latest survey of fund managers by Bank of America Merrill Lynch.
Junk Bonds of the Financial Crisis Were the Decade’s Biggest Winners
Natasha Doff – Bloomberg
‘Great irony’ is strong performance of major assets: Deutsche; Still, most commodities except gold disappointed with 50% loss
If you’d bought European high-yield bonds the day the global financial crisis erupted, closed your eyes and held onto them through the unprecedented events of the following decade, you would now be sitting on a 100 percent return.
Exchanges, OTC and Clearing
Does CME Group Inc (CME) Pay Its CEO Based On Company Performance?
Simply Wall St News
Terry Duffy took the helm as CME Group Inc’s (NASDAQ:CME) CEO in 2016 and has earned $9,748,332 in total compensation over the past 12 months. It is believed that a strong indicator of alignment between executive management and shareholders occurs when the majority of the CEO’s compensation is stock-based.
Reduction of strike price intervals for the first expiration month of various equity options
The Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG took the decision to reduce the strike price intervals for the first expiration month of equity options with group IDs:
Fee reports “CB169 MM Fee Refund” and “CB179 Monthly Rebate Report”: Supplement to the Eurex XML Report Reference Manual
In Eurex circular 056/17, Eurex Deutschland and Eurex Zürich (collectively: the Eurex Exchanges) announced extensions to the monthly fee reports “CB169 MM Fee Refund” and “CB179 Monthly Rebate Report”. The report extensions are related to the Market-Making and Pricing Roadmap 2017. The detailed documentation of the extensions was announced to be published in the August 2017 version of Eurex XML Report Reference Manual.
AgriClear and United Producers Inc. Announce Strategic Alliance
AgriClear, North America’s premier online cattle transaction and payment platform, together with United Producers Inc. (UPI), one of North America’s largest farmer owned and operated livestock marketing cooperative, today announced a collaborative agreement to benefit livestock farmers across the Midwest. UPI will now utilize AgriClear as its digital marketing solution for online cattle transactions, which will bring innovative livestock marketing technology to current and future UPI members.
Record Bitcoin Gains Indicate High Times Ahead for Cannabis Cryptocurrency
PR Newswire – Markets Insider
Within America’s explosive legal cannabis market-projected to potentially reach a staggering $50 billion valuation by 2026-legal uncertainties and blockades continue to pose challenges. One of these challenges is a lack of banking options for marijuana merchants, who are largely forced to conduct cash transactions, as cannabis businesses currently do not have the backing of the FDIC and, consequently, do not have access to traditional banking options. Necessity is the mother of invention, and enterprising companies are endeavoring to skirt federal restrictions and provide cannabis companies with innovative financial transaction options to meet their growing needs.
Bitcoin’s Next Civil War Battle May Already Be Looming
Yuji Nakamura – Bloomberg
Hi everyone, it’s Yuji from Tokyo. I’ve been writing about the trials and tribulations of bitcoin for more than a year.
Symphony Strengthens Platform with Addition of Dow Jones News App
Jeff Patterson – Finance Magnates
Symphony Communication Services (SCS) has strengthened its platform with the addition of a new app from Dow Jones. The freshly deployed Dow Jones News App will help broadcast over 8,000 sovereign news items per day, providing users with some of the most comprehensive news coverage available across markets.
CloudMargin Unveils “FlightPlan”: Interactive Microsite to Help Financial Institutions Navigate Uncleared Margin Regulations through 2020
CloudMargin, the multi-award winning creator of the world’s first web-based collateral and margin management solution, today announced the release of a comprehensive interactive “FlightPlan” microsite designed to help financial institutions globally navigate the uncleared margin rules and other regulations impacting their collateral management function. The site enables visitors to identify and tailor information most pertinent to their business and plan for the continued roll-out through 2020 of regulations and mandates, including those coming into effect in September.
***SR: Apologies – yesterday we had the wrong link for this press release. The link now goes directly to the release from CloudMargin.
Nafta exit will be ‘destructive’ for US, warns Cargill boss
Shawn Donnan in Washington – FT
The head of Cargill has warned Donald Trump that he risks making a “destructive” mistake for the US economy if he walks away from the North American Free Trade Agreement.
Standing Up to Trump Is Good for Business; Companies want stability and virtue-by-association. This president provides neither.
Michael R. Strain – Bloomberg
Merck chief executive Kenneth Frazier deserves congratulations for resigning from a White House business council to protest President Donald Trump’s shameful response to last weekend’s white supremacist riot in Charlottesville, Virginia. So do two other CEOs who followed his example.
It’s the Economy, Democrats, but Inequality Is Not the Issue
Eduardo Porter – NY Times
Is income inequality the defining challenge of our time? Bernie Sanders thinks so. He ran for president as inequality’s most ardent foe. So does Elizabeth Warren, the other champion of the Democratic Party’s left.
Brian Quintenz Sworn In as a Commissioner of the U.S. Commodity Futures Trading CFTC
Brian Quintenz was officially sworn in today, after being unanimously confirmed by the U.S. Senate on August 3, to serve as a Commissioner of the U.S. Commodity Futures Trading Commission (CFTC), the federal agency that oversees the commodity futures, options and swaps industry. His term expires in April 2020.
CFTC Orders Aruba-based Copersucar Trading A.V.V. to Pay a $300,000 Penalty for Executing Wash Trades on ICE
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Copersucar Trading A.V.V. (Copersucar), an Aruban corporation and a subsidiary of Copersucar S.A., the world’s largest sugar and ethanol company, based in São Paolo, Brazil, for executing prearranged, noncompetitive wash trades involving Sugar No. 11 futures Trade at Settlement (TAS) contracts traded on ICE Futures U.S., Inc. (ICE), a designated contract market. The Order requires that Copersucar pay a $300,000 civil monetary penalty.
FFAJ Reports Drop in Japanese Retail FX Trading Volumes in July; The FFAJ’s July FX trading volume report shows a 10.3% decline in trading volume growth.
The Financial Futures Association of Japan today released its monthly FX margin trading report for July 2017. Data from 54 licensed retail FX brokers in Japan reveals an overall decline in forex volumes on a month-on-month basis. The decline in volume in the market can be attributed to widespread volatility, indecisiveness among traders and geopolitical tension.
Fired UBS Adviser Reignites Palm Beach Scandal Over Rich Widow
Neil Weinberg – Bloomberg
Ex-adviser claims he was fired for alleging trust-fund abuse; UBS, trust manager say accuser Craig Price just wants payout
“Holy crap!” That’s how Craig Price, a UBS AG senior vice president, told securities regulators he reacted when he saw the $2,600 tab for a client-development dinner he attended at an upscale Palm Beach, Florida, restaurant. It wasn’t the size of the bill that stunned him. It was who paid for it — an ailing, 90-year-old UBS client.
Fed’s Fischer attacks moves to unwind regulations; Top policymaker criticises Republican reforms as ‘extremely short-sighted’
Sam Fleming in Washington – FT
One of the Federal Reserve’s top policymakers has attacked attempts to reverse the post-crisis drive for tougher regulation, calling efforts to loosen constraints on banks “dangerous and extremely short-sighted”.
SwapsInfo Second Quarter 2017 Review
How to Talk to Aging Parents About Money
When you were a kid, your parents probably talked to you about money, perhaps about the value of a buck or how you might spend your allowance. As time marches on, you may find the situation reversed—and that you have to have the “money talk” with your parents.
Monthly Disciplinary Actions August 2017
FINRA has taken disciplinary actions against the following firms and individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board (MSRB).
SEC Charges KPMG with Audit Failures
The Securities and Exchange Commission today announced that KPMG has agreed to pay more than $6.2 million to settle charges that it failed to properly audit the financial statements of an oil and gas company, resulting in investors being misinformed about the energy company’s value. KPMG’s engagement partner in charge of the audit also agreed to settle charges against him.
PwC Fined $6.6 Million in Largest-Ever Penalty From Watchdog
Suzi Ring – Bloomberg
Auditor fined by U.K. accounting regulator over RSM Tenon; PwC was fined another $6.4 million in separate case in May
PricewaterhouseCoopers LLP was fined 5.1 million pounds ($6.6 million) for misconduct over its audit of RSM Tenon Group Plc in the largest-ever sanction issued by the U.K. accounting regulator.
Investing and Trading
There’s a Reason People Are Worried About Low Volatility
Colin Simpson – Bloomberg
Subdued volatility is ‘lull before the storm’ in most cases; Investors sometimes turned ‘deaf, dumb and blind,’ study says
Investors and policy makers who have worried about the historic slide in stock volatility the past year might have had good reason to do so: most market crashes are preceded by exactly that pattern.
Seeking the Next Safe Haven
Justin Lahart – WSJ
When the world looks stormy, investors first reaction is to flock to the safety of American assets. But what will they do when the U.S. is where the tempest is brewing?
Maybe just flee to America, nonetheless.
China Reclaims Spot as World’s Biggest Holder of Treasuries
Andrew Mayeda and Katherine Greifeld – Bloomberg
Japan had held top position since October before China rebound; China holds $1.15 trillion in June, up $44.3 billion from May
China reclaimed its position as the top foreign owner of U.S. Treasuries after increasing its holdings for the fifth straight month.
‘Black Swan’ Writer Taleb Downplays North Korean Nuclear Threat
John Gittelsohn and Erik Schatzker – Bloomberg
Biological agents, water-supply poisoning called bigger risks; ‘We’re horrible’ at fighting terrorists such as ISIS, he says
Nassim Taleb says people are concerned with the wrong geopolitical risks. Rather than North Korea and the possibility that it may fire a nuclear missile at Guam or the continental U.S., the author of “The Black Swan” argues that terrorism and pandemics pose greater risks to the U.S.
A $16 billion hedge fund CIO gives an easy explanation of quantitative trading
Nathaniel Lee and Rachael Levy – Business Insider
Ryan Tolkin, the CIO of a $16 billion hedge fund Schonfeld Strategic Advisors, helped us understand what quantitative trading actually is. Following is a transcript of the video.
Massive quant hedge funds run by AQR and Two Sigma are losing to humans
Big computer-driven hedge funds such as AQR Capital Management, Aspect Capital and Two Sigma lost money in the first seven months of 2017, with human stock-pickers making better returns.
The Quant Quake, 10 Years On
Vinesh Jha, ExtractAlpha via TABB Forum
Ten years after the ‘Quant Quake’ it appears most quant investors today either didn’t hear the wakeup call or have forgotten, and there’s more risk of another quake today than there was 10 years ago. What’s changed in the past 10 years, and what hasn’t, and what have we learned? ExtractAlpha’s Vinesh Jha offers eight ideas on how to change your research process to insulate yourself from the next quake.
How Low Can You Go? Economists Game Out U.S. Unemployment Bounds
Jeanna Smialek – Bloomberg
Move over, r-star. There’s a new natural rate coming into focus.
Economists love to talk about natural rates. Put simply, they’re the level economic indicators should be at when growth has reached its potential and inflation is stable, given factors including demographics.
The Fed’s idiosyncratic excuses for inflation’s ‘anomalies’ are wearing thin
Caroline Baum – MarketWatch
It wasn’t long ago that the Federal Reserve resorted to the word “conundrum” to explain the inexplicable.
For example, as the Fed raised its benchmark rate from 1% in 2004 to 5.25% in 2006, long-term interest rates barely budged. Former Fed Chairman Alan Greenspan decided it was a conundrum, given that the short-term rate, current and expected, is a key determinant of the long-term rate.
Deutsche promotes head of equities to Americas chief; Tom Patrick joined Deutsche Bank in 2012 and previously worked at Bank of America Merrill Lynch for 18 years.
Hayley McDowell – The Trade
Deutsche Bank has appointed its current head of equities and co-head of the corporate and investment bank business in the US as CEO of the Americas region.
Goldman expands algorithmic corporate bond trading; Focus on automating smaller-size trades to cut costs and free up dealers for bigger transactions
Robin Wigglesworth and Joe Rennison in New York – FT
Goldman Sachs has expanded its algorithmic corporate bond trading programme, more than trebling the number of securities it quotes since last summer to more than 7,000 — and is now eyeing an expansion into areas such as junk bonds later this year.
Emerging market investors moving to the frontiers
Stephen Pope – TradingFloor.com
It seems that week after week, investors are allocating increasing amounts of investment capital into emerging market funds in both equities and bonds.
EPFR Global, a leading provider of fund flows and asset allocation data to financial institutions around the world, reported that emerging market equity funds had received an inflow of $2.2 billion for the week to August 2. In the same period, emerging market bond funds received $1.9 trillion.
China’s Panda Bond Market Boom Threatens Dim Sum Debt Survival
Panda bonds are on track to outpace Dim Sum issuance in 2017; Foreign issuance of yuan debt may depend on exchange rate
The market for foreign issuers of bonds in Chinese yuan is shifting away from Hong Kong towards the mainland, in a sign that the city-state’s once vibrant market for such debt may never reach its past heights.
Mizuho Targets Foreign Student Boom With Japan Dormitory Fund
Gareth Allan, Katsuyo Kuwako and Kathleen Chu – Bloomberg
Bank to provide about 15% of fund’s $91 million in equity; Fund has approached about 50 universities to build housing
Mizuho Financial Group Inc. is raising a fund to build dormitories to profit from the shortage of accommodation for the surging number of international students at Japan’s universities.
India Bans Gold Exports Above 22 Carats to Plug Trade LoopholesSwansy Afonso – Bloomberg
Move may be designed to curb ’round-tripping’ of gold items; Gold imports are said to have more than doubled last month
India has banned the export of gold products with purity above 22 carats with immediate effect, a move that the industry sees as a way of curbing irregularities in the trade.
Now Norway’s Domestic Wealth Fund Is Getting Worried
Jonas Cho Walsgard – Bloomberg
Fund is lowering credit risk by buying shorter maturity debt; Says pricing makes it ‘natural’ to ‘realize some profits’
After a market rally that lasted years, big active bets have lost their luster for Norway’s domestic wealth fund.
Frankfurters Aren’t Rolling Out the Welcome Mat for Brexit Bankers; Longtime residents faced with rising property prices and many construction projects aren’t happy and are saying “nein”
William Wilkes and Patricia Kowsmann – WSJ
A bigger tax base, greater clout and a boost for the local economy: The city that hosts the European Central Bank has several reasons to welcome London bankers looking for a new post-Brexit home.
The Real Prize in Brexit Trade Talks
Elaine He, James Boxell – Bloomberg
There’s been much ballyhoo this week about Britain’s desire for some kind of temporary customs union post-Brexit. We may have to wait until Brussels gets back from its August holidays for a full sense of what European Union officials make of that.
London Maintains Lead in Private Data Plumbing Ahead of Brexit
Jeremy Kahn – Bloomberg
Despite Brexit, network capacity cements firms to U.K.; Private data traffic will exceed public internet by 2020
London is set to retain its position as the city with the greatest capacity in private data links, a lead that may help stem any erosion in the city’s position as Europe’s premier financial center, even after the U.K. leaves the European Union.