First Read

Post Thanksgiving Bit(e)s and Pieces
By John J. Lothian

Welcome to Black Friday, or what used to be the day when we celebrated market illiquidity back in the days of open outcry. The day after the Thanksgiving holiday in the U.S. was always one of the worst days for volumes and market liquidity in the era of open outcry trading.

The one benefit to the few floor traders who would traipse back into the exchange the day after overeating on Thanksgiving is that the illiquid markets meant prices would move far and wide with little volume, giving traders lots of opportunities.

I remember seeing this for the first time as a newbie reporter with Knight Ridder’s Commodity News Service back in 1984. Oh, how the times have changed.

The question I have is whether the skeleton team of traders at their desks are running all of the algos today as they would normally, or do they cut back? Or do some prop traders just log in from home and control the algos from there?

We should have more liquidity in today’s markets than in the open outcry past. Volume? That is another question.

For those of you celebrating Black Friday today, don’t forget about Giving Tuesday next week. It might be your last chance to give to your hairy friends participating in Movember.

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Women Rising To The Top: Chitra Ramkrishna, Adena Friedman Take Top Roles In The Exchange Space
Jim Kharouf – John Lothian News (JLN)
There was another historic election this month, this one at the World Federation of Exchanges’ annual meeting in Cartagena, Colombia. The WFE elected the first female chair in its 56-year history.
Chitra Ramkrishna, managing director and CEO of the National Stock Exchange of India, will serve as WFE chairperson for the next two years. She succeeds Juan Pablo Cordoba, CEO of the Bolsa de Valores de Colombia. She is also the first woman to head up an exchange in India, beginning in 2013, and has been a pioneer in helping develop India’s capital markets. Neither is a small feat.
bit.ly/2f8zq8c

***** The globe-trotting and overworked editor-in-chief of John Lothian News has a backlog of stories he is writing after his trip to the World Federation of Exchanges conference in Colombia.

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SGX Titan

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Larry Tabb hands over the reins of Wall St research firm
Tim Cave – Financial News
Larry Tabb is to take a step back from running his eponymous capital markets research and consultancy house – which has received outside capital for the first time from an investment group committed to aggressively growing the business.
/goo.gl/buxN0R

***** “Tabb will assume the role of research chairman, with Anthony Perrotta, previously the firm’s global head of research and consulting, stepping up to become chief executive.”

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Finalists for the Deutsche Börse Photography Foundation Prize 2017
Deutsche Börse
The four finalists of the Deutsche Börse Photography Foundation Prize 2017 are Sophie Calle, Dana Lixenberg, Awoiska van der Molen and Taiyo Onorato and Nico Krebs. This year’s selection not only recognizes established photographic narratives, but also experimental and conceptual approaches in documentary, landscape and portrait photography. All four finalists deal with questions such as truth and fiction, which is certain or uncertain, which distinguishes the real from the ideal, as well as the relationship between observation and observation.
/goo.gl/cBk59g

***** On my bucket list is to become a better photographer.

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Code-Breaking Site That Helped Beat the Nazis to Host Cybersecurity School
Giles Turner – Bloomberg
U.K.’s famous WWII code-breaking facility to become new campus; National College of Cyber Security set to open in 2018
Bletchley Park is once again set to host some of the U.K.’s brightest minds — but this time they will be trying to protect codes, rather than break them.
/goo.gl/Omig5f

****** Is the school ring a decoder ring?

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Climbing Mount Everest, in the comfort of your living room; A new virtual reality experience lets anyone explore the mountain, but how does it compare to the real thing?
by: Simon Usborne – FT
In 1989, Paul Rose tried to climb the north-east ridge of Everest. The route, on the Tibetan side of the mountain, had always thwarted British mountaineers. In 1924, George Mallory disappeared there; his body would not be found for 75 years. And as Rose prepared for his attempt, climbers were still mourning the loss of Peter Boardman and Joe Tasker on the ridge in 1982. Reaching the summit would be part triumph, part tribute.
/goo.gl/9yatx9

***** It includes putting your VR headset on and then holding your feet in a bucket of ice water.

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Wednesday’s Top Three
Since yesterday was a holiday in the US we are reaching back to Wednesday for our top three. Leading off is a commodities story from Galvanize, The Commodities Disruptor. Next up is a Financial Times story, High-frequency traders discredit Japanese stock market narratives. High-frequency traders are ever popular in the news. In third is a Telegraph story, Ice cream for breakfast makes you smarter, Japanese scientist claims. How that was not #1 is beyond me. It is a childhood dream come true.

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Lead Stories

Clearinghouses Park Billions in New Fed Accounts
WSJ
Financial firms are lining up for the hottest new account on Wall Street: checking with interest at the Federal Reserve
CME Group Inc. and the Options Clearing Corp. are among large companies that have parked billions of dollars in new accounts at the Fed, reflecting a recent rule change that made the accounts more widely available and the attractive rates paid by the central bank on deposits.
on.wsj.com/2gL2mV7

Shenzhen-Hong Kong stock trading link to launch Dec. 5
By Michelle Price – Reuters
A long-awaited stock trading link between the Hong Kong and Shenzhen exchanges will go live on Dec. 5, regulators said on Friday, further opening up China’s capital markets to global investors and giving them access to some of its fastest-growing companies.
/goo.gl/lYJtyU

Nasdaq seeks speed bump in attempt to prioritise retail orders
Nicole Bullock – Financial Times
Nasdaq is asking regulators to approve a new order type in the latest example of how the dynamics of speed are changing in the world’s largest equity market. In a letter to the Securities and Exchange Commission, the US exchanges operator proposed a so-called extended life priority order attribute, which would give priority to retail orders seen by the whole market when traders agree not to cancel them for at least one second.
/goo.gl/kIytWe

Winton Capital’s David Harding on making millions through maths; The founder of the $32bn hedge fund talks about physics, philanthropy and why he believes in tax
by: Clive Cookson – FT
In 1994 the Philosophical Transactions of the Royal Society, a leading scientific journal, published an unusual paper. Entitled “Making money from mathematical models”, it was authored by a young financial trader in London. His name was David Harding, he was a Cambridge physics graduate and he used the paper to lay out what he saw as the “intellectual front line” of investment research. Harding’s idea was that finance could use science to identify and exploit inefficiencies in the markets.
/goo.gl/LSqXNQ

Couple charged in Singapore exchange ‘penny stock crash’ case; Crash wiped out S$8bn in value and triggered a loss of confidence in the country’s markets
by: Jeevan Vasagar in Singapore – FT
A Malaysian businessman and his partner have been charged with orchestrating the single biggest fraud in the history of Singapore’s stock exchange, which wiped out S$8bn in value and triggered a lasting loss of investor confidence.
/goo.gl/eqCBEn

Fund That Beat 91% of Peers Puts Next Big Bet on World’s Poorest
Jonas Cho Walsgard – Bloomberg
Holberg fund buys consumer companies in frontier markets; Fund posts 30% gain over past five years, beating benchmark
Here’s some good news: The world’s poorest consumers will get richer. It’s a bet that is already enriching a top performing emerging markets fund in Norway.
/goo.gl/eQ8uuP

Disconnect: Traders Wait, and Wait, for Shenzhen Trading Link; Exactly when the Shenzhen-Hong Kong Stock Connect will open remains a guessing game
By CHAO DENG – WSJ
China promised global investors a portal to its tech-heavy Shenzhen stock market. Exactly when remains a guessing game.
/goo.gl/CvcsLv

Jailed Barclays Libor Traders Lose Bid to Appeal Convictions
Suzi Ring, Jeremy Hodges – Bloomberg
Jonathan Mathew, Alex Pabon and Jay Merchant denied appeal; All three were convicted in London in July over Libor-rigging
Three former Barclays Plc traders sent to prison for Libor manipulation were denied permission to appeal their convictions by a U.K. judge, narrowing the possibility that their guilty verdicts will be overturned.
/goo.gl/gD4jLT

ECB Says It Can Shield Euro Area From Global Finance Instability
Alessandro Speciale, Piotr Skolimowski, Catherine Bosley – Bloomberg
Central bank publishes twice-yearly Financial Stability Review; Populism could re-ignite sovereign debt concerns in euro area
The European Central Bank is confident it will be able to continue shielding the euro area from the risk of a sudden correction in asset prices, after political events such as the election of Donald Trump threaten to increase volatility in coming months.
/goo.gl/8o5xUN

The rich have gotten so rich that they are ‘destabilizing societies’
By Shawn Langlois, Marketwatch
Despite the best efforts of those raging against income inequality, the chasm between the world’s haves and have-nots doesn’t appear to be getting any narrower. According to the Credit Suisse Global Wealth Report, a mere 0.7% of the global population owns nearly half the world’s wealth. At the other end, 73% of the popular have less than $10,000 each.
/goo.gl/1r4sFQ

ECB sees rising risks to euro zone financial stability, watching for Italian vote fallout
Francesco Canepa and Balazs Koranyi – Reuters
The European Central Bank sees rising risks to euro zone financial stability and is watching for any fallout from Italy’s constitutional referendum next month, ECB Vice President Vitor Constancio said on Thursday. In an unusually downbeat Financial Stability Review, the ECB as a whole also warned that political shifts on both sides of the Atlantic, including a potentially protectionist U.S. administration under Donald Trump, may trigger a surge in government borrowing costs and raise concerns about indebted countries.
/goo.gl/EuV0Qw

Undersea cables span the globe to send more data than satellites; Technology that once captured Jules Verne’s imagination is more relevant than ever
by: Geof Wheelwright – FT
It was in the mid-1800s that communications pioneers first laid cables on the seabed to create the world’s telegraph — and later telephonic — infrastructure.
/goo.gl/tvqDO3

These Devices Will Eat the Smog Trump Stokes With His Coal Boom
Anna Hirtenstein – Bloomberg
Small firms debut smog-eating bacteria, machines, facades; Giant tower in Beijing cleans area size of football stadium
An innocuous metal cylinder in a garden at the foot of the Italian Alps, quietly snacking on air pollution, may be part of the answer to President-elect Donald Trump’s ambition to stimulate coal burning.
/goo.gl/eNa8O6

World’s Biggest Pension Fund Gains $21 Billion as Stocks Rally
Anna Kitanaka, Shigeki Nozawa – Bloomberg
Domestic and foreign stocks both deliver positive returns; GPIF posts losses on bond holdings after yields rise
The world’s biggest pension fund posted its first profit in four quarters as stocks rebounded, providing some respite for the Japanese state money manager after critics lambasted it for taking on too much risk.
/goo.gl/KADxoe

Brexit May Take Decade So Give the Pound a Rest, Investors Say
Lukanyo Mnyanda – Bloomberg
Pound already reflects changing economy, Standard Life says; Kames Capital now ‘slightly more optimistic’ on currency
Two of Scotland’s biggest fund management firms have a message for the currency market: it’s time to give the pound a break.
/goo.gl/if4kFG

Exchanges, OTC and Clearing

Deutsche Boerse CFO warns of U.S. dominance if LSE deal fails
Reuters
The finance chief of Deutsche Boerse (DB1Gn.DE) warned on Wednesday rivals in the United States and China would become dominant if the German group’s planned merger with the London Stock Exchange (LSE.L) was blocked by European regulators.
/goo.gl/j476ZH

TheTrade – Eurex wins award; The Trade – Awards 2016
Eurex
Each year the publication THE TRADE honours sell-side and buy-side for their outstanding performances. This year TheTrade welcomed more than 300 representatives from buy and sellside for the “2016 Leaders in Trading Awards and Rising Stars Gala Dinner’. Deutsche Börse Group is honored to be awarded “Outstanding Global Exchange”. At the same time, Eurex was recognized as “Outstanding derivatives trading venue” in 2016. The ceremony took place on Nov 16th at the Savoy Hotel in London. Michael Peters, Deputy Chief Executive Officer (CEO) of Eurex Frankfurt AG accepted the awards. With the recent awards, Deutsche Börse and Eurex, have been recognized as leaders and innovators by key publications.
/goo.gl/IATP77

Fixed Income Market Briefing; November Edition
Eurex
The fixed income markets proved to be resilient over the course of the month with the surprise election of Donald Trump providing the catalyst the market needed to support strong client activity. Eurex volumes across the board were well supported with significant increases Oct 16 vs Oct 15.
/goo.gl/xoAhcU

Launch Of Shenzhen-Hong Kong Stock Connect
Mondovisione
The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) have approved the launch of Shenzhen-Hong Kong Stock Connect after finalising all necessary regulatory approvals and arrangements required for its commencement (Note 1).
/goo.gl/KcEshF

Product innovation key theme in commodity exchange space: MCX
Business Standard
The commodity market may see product innovations and has huge untapped opportunities in options, indices and derivatives like weather and freight, going forward, a senior industry official said today. “Product innovations in the commodity markets will be the leading differentiator in the commodity exchange space, going forward. From options to indices to exotic derivatives like weather and freight, this market has huge opportunities still lying untapped,” Multi Commodity Exchange of India (MCX) Managing Director and Chief Executive Mrugank Paranjape said.
/goo.gl/djgSEl

HKEX Welcomes Market Regulators’ Announcement of Shenzhen Connect’s Start Date
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) welcomes today’s announcement by the China Securities Regulatory Commission and the Hong Kong Securities and Futures Commission of the start date for Shenzhen-Hong Kong Stock Connect (Shenzhen Connect), a mutual market access programme of the Hong Kong and Shenzhen stock markets.
/goo.gl/JGUoHZ

Irish Stock Exchange chief hails First Derivatives of Newry as ‘exceptional firm’
Belfast Telegraph
The success of one of our top software firms – First Derivatives – is a “clear example of the kind of dynamism that Northern Ireland can deliver”, the chief executive of the Irish Stock Exchange (ISE) has said. Deirdre Somers told the Belfast Telegraph: “What’s happening in Ireland and overall in Europe is a reflection of what’s happening in the Western world, is that we are struggling to get a good value and pipeline of IPOs (initial public offerings).
/goo.gl/5dOyBc

Dalian Commodity Exchange Rolls Out Measures To Control Market Risks Of Ferrous Products
Mondovisione
On 9th November Dalian Commodity Exchange (DCE) issued two notices, announcing to adjust the trading margins of the metallurgical coke and coking coal futures and the non-intraday trading fee for the iron ore futures, and implement the trading limit system for the metallurgical coke and coking coal futures, which stipulates that the positions of a single futures product taken by a non-futures-company member or client in a single day should not exceed 1,000 contracts, but the positions taken for the hedging trading are not subject to this limit.
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Politics

Donald Trump has inspired an “America First” stock market rally
Eshe Nelson – Quartz
What’s good for the world’s largest economy is usually good for the rest of the world. Usually. Investors are betting that president-elect Donald Trump will fulfill key promises made during the campaign, namely an ambitious plan to rebuild infrastructure and an aggressive rollback of regulation. He says these actions will boost economic growth; traders have responded by pushing the S&P 500, Dow, and Nasdaq stock indexes to new record highs.
/goo.gl/aWjqLp

Investing and Trading

The Trump Effect: Is this a Nixon-goes-to-China moment?
Tom Goodwin – FTSE Russell Blog
On November 8, Donald Trump was elected president of the United States. As the election returns came in, US equity futures plummeted, pointing to the possibility of a sharp decline in equities when the market opened the next day. But when the market actually opened on November 9, something very different occurred: US stocks soared. In this post I offer some thoughts on why that might have happened.
/goo.gl/53IAYu

Mind the Gap What’s the difference between five and 50 years?
Richard Barley – WSJ
Age differences need not be a barrier to a happy relationship. But the massive repricing of global bonds after Donald Trump’s election victory is throwing up some odd pairings. There was a good deal of focus a couple of years ago when 10-year Spanish yields fell in line with and then below the yield on 10-year U.S. Treasurys, helped by a European Central Bank that was on its way toward looser monetary policy and ultimately quantitative easing.
/goo.gl/y66mR1

How Small Traders Win in the Era of Algos
Kevin Cook, Zacks via Yahoo
Long-time followers of mine in this bull market know that every quarter I go over the holdings of hedge fund Renaissance Technologies because they were one of the early quant houses that made algo trading so successful and popular. The founder, Jim Simons, was a mathematics professor in the 1970s who never thought about the markets much. He sort of stumbled into testing some theories on stocks, and the rest is history as he was pulled headlong into the markets and created a powerhouse with over $50 billion AUM (assets under management).
/goo.gl/17I1d5

Investors pull most money from U.S.-based bond funds of any week in 2016-ICI
Reuters
Investors pulled $9.7 billion from U.S.-based bond funds during the latest week in the stiffest blow of the year for those funds, Investment Company Institute data showed on Wednesday.
/goo.gl/a85wDV

Gold bugs face steamroller from fund outflows; Precious metal has fallen below $1,200 a troy ounce for the first time since February
by: Henry Sanderson – FT
A declining gold market faces a major challenge as a $3.8bn outflow from exchange traded funds over the past 10 days is seen intensifying the liquidation of holdings by investors.
/goo.gl/S0VXkH

Top hedge fund managers make $6M more on average: study
By Carleton English – NY Post
Buddy Fletcher pays up so mom can stay in the Dakota
For hedge fund portfolio managers, the difference between working at a top-performing fund and one that is a bottom-dweller is a cool $6 million, recently released data reveals.
/goo.gl/jONym0

China Issuing ‘Strict Controls’ on Overseas Investment
Government to announce new measures intended to curb capital flight
By Lingling Wei
BEIJING—China plans to clamp tighter controls on Chinese companies seeking to invest overseas, in an effort to slow a surge in capital fleeing offshore, according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal.
/goo.gl/5P4KrK

Institutions

Italy’s banking system needs intensive care
Financial Times
When a crisis has passed, the survivors should be wiser for it. How much Europe learnt from the global financial crisis may be tested soon, in Italy, where the banks are in a perilous state. Italy and the EU will have to work together to prevent a systemic shock. As a first step, the EU should not insist on a rigid interpretation of its bank bail-in rules — allowing Italy the space it needs to prevent bank collapses and limit the risk of financial and political contagion.
/goo.gl/upkIj4

Credit Suisse Said Raising $2 Billion for Hedge Fund Stakes
Nishant Kumar, Donal Griffin – Bloomberg
Anteil Capital unit targeting minority stakes in 10-12 firms; Barclays’s Bhardwaj joins ex-Stanford manager Powers at Anteil
Credit Suisse Group AG is courting investors to raise as much as $2 billion for a fund that will buy stakes in hedge-fund firms, according to two people with knowledge of the matter.
/goo.gl/zKsPnt

Goldman’s Rally on Trump May Give Partners $800 Million Windfall
Dakin Campbell – Bloomberg
Firm discloses how much stock top executives held on Nov. 9; Some partners misssed out on full profit after reducing stake
Goldman Sachs Group Inc. partners held enough stock in the firm Nov. 9 to reap a more-than $800 million gain in the days since, as investors bet Donald Trump’s surprise win would fuel Wall Street profits.
/goo.gl/Usgva4

Wells Fargo asks U.S. court to dismiss account scandal lawsuit
By Suzanne Barlyn | NEW YORK – Reuters
Wells Fargo & Co (WFC.N) has asked a U.S. court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court, according to legal documents.
The motion, filed in the U.S. District Court in Utah on Wednesday, is in response to the first class action lawsuit filed against Wells since it agreed to pay $185 million in penalties and $5 million to customers for opening up to 2 million deposit and credit-card accounts in their names without their permission.
/goo.gl/EaK12Y

Fintech

Economists are prone to fads, and the latest is machine learning
The Economist
What is the collective noun for a group of economists? Options include a gloom, a regression or even an assumption. In January, when PhD students jostle for jobs at the annual meeting of the American Economic Association, a “market” might seem the mot juste. Or perhaps, judging by the tendency of those writing economic papers to follow the latest fashion, a “herd” would be best. This year the hot technique is machine learning, using big data; Imran Rasul, an economics professor at University College, London, is expecting to read a pile of papers using this voguish technique.
/goo.gl/rK7c4D

Universities’ AI Talent Poached by Tech Giants; Google, Baidu, Facebook lure away top computer science researchers responsible for training students
By DANIELA HERNANDEZ and RACHAEL KING – WSJ
Alphabet Inc.’s Google division last week hired the director of Stanford University’s artificial intelligence lab to lead a new AI unit, the latest in a long line of academic stars in artificial intelligence lured away by tech giants.
/goo.gl/64S7SE

ESMA: Blockchain will render some processes redundant
The Trade
The European Securities and Markets Authority (ESMA) has said distributed ledger technology (DLT) could render some processes in the trade lifecycle redundant. A report on blockchain explained ESMA understands DLT could also change the role of certain market participants over time, leading to certain regulatory requirements becoming less relevant.
/goo.gl/2YhQ7q

Move over Bitcoin, the blockchain is only just getting started
Wired
Bitcoin isn’t just reinventing money, it’s the underlying platform being used to build a huge and versatile trust network
/goo.gl/iLHo5B

Regulation

FIA Welcomes EC Proposals On Capital Requirements
Mondovisione
FIA welcomes today’s publication of the European Commission’s (EC) proposals to amend the Capital Requirements Directive 2013/36/EU (CRD IV) and the Capital Requirements RegulationEU No 575/2013(CRR). The proposals released today include numerous comprehensive changes and new provisions, many of which are being driven by principles set by global standard setters, including the Basel Committee on Banking Supervision.
/goo.gl/e8wpAS

Regions

Cash Ban the Best Thing to Happen to Indian Digital Payments
Bloomberg
Vijay Shekhar Sharma’s Twitter feed has come alive these past two weeks. From a roadside egg-seller in Bhopal to a soda hawker in Bangalore, the founder of Paytm has posted snapshots of the unusual array of merchants who ply the teeming streets of India — and are now turning to his digital payments startup for help.
/goo.gl/5rc2JD

China Struggles to Steady Yuan’s Decline
WSJ
China is facing an uphill battle to maintain an orderly depreciation of the yuan as investors pile up bearish bets against the currency outside the mainland.
/goo.gl/Y7Q67L

India’s Modi defends demonetisation as backlash mounts; New Delhi tightens black money crackdown by ending over-the-counter rupee exchanges
by: Amy Kazmin in New Delhi – FT
India’s prime minister, Narendra Modi, has lashed out at critics of his draconian ban on high-value currency notes, saying they are frustrated at being caught out with illicit cash themselves.
/goo.gl/BnVNSz

Indian cash crunch hits gold demand during peak wedding season
Rajendra Jadhav and Sethuraman N R – Reuters
Mumbai resident Shashikant Zhalte’s wedding this weekend will be less sparkling than his family had hoped, thanks to a cash shortage following Indian Prime Minister Narendra Modi’s shock withdrawal of high-value notes to fight “black money”. Zhalte bought gold jewelry for his wife-to-be months ago, but had delayed purchases for his mother and sisters.
/goo.gl/a8LHfb

Miscellaneous

More company climate votes ahead, as Trump may loosen energy rules
Ross Kerber – Reuters
Activist shareholders plan a record number of resolutions focused on climate change at U.S. company annual meetings in 2017, even as President-elect Donald Trump looks set to loosen environmental regulations.
/goo.gl/dT7iaJ

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