First Read

Hits and Takes
By JLN Staff + Special Guest, Ray McKenzie

Six years ago, we had the idea to bring A Leg To Stand On‘s Rocktoberfest to Chicago and the results have been astounding. We have now hosted five Rocktoberfests and, in the process, raised over $400,000 for A Leg To Stand On. We couldn’t be happier with how things have turned out.

For those who don’t know, Rocktoberfest began in New York City 14 years ago as a group of music-loving members of the financial community came together to make music and raise funds for ALTSO, a non-profit organization that provides free, life-changing prosthetic limbs, corrective surgery and rehabilitative care to children with limb disabilities in the developing world. ALTSO has treated over 16,000 children since it was founded in 2002 and currently assists 10 different programs in nine different countries in Asia, Africa, and Latin America.

Right now, we’re gearing up for the 6th annual ALTSO Rocktoberfest Chicago and we welcome your support. The event will take place on October 5 at Chicago City Winery and will feature musicians from such diverse companies as Eurex, Gelber Group, Apple, CME Group, and ADM Investor Services. So sign up your firm as a sponsor, donate goods or services for the silent auction, or buy a group of tickets and bring your coworkers and customers for what is quite literally the best good time for a great cause in all of Chicago: ALTSO Rocktoberfest. ~Ray McKenzie

This week JLN featured two interviews from the FOW-JLN Trading Chicago event last month. Worth a look if you didn’t catch them: Steve Grob, director of group strategy with Fidessa on Friction, MiFID II and Populism and Gary DeWaal, special counsel with Katten Muchin Rosenman on Setting the Stage for Regulatory Divergence.~JK

Mike Burke, president of the NIBA, yesterday announced at the NIBA-DePaul University Symposium that in honor of the 25th anniversary of the NIBA they are offering free memberships to any CTA or IB for the coming year. The symposium was very successful as NIBA filled the room for the keynote address by John Lothian and two panel discussions led by Mark Shore and Matthew Kluchenek.~JJL

ION‘s Marketswiki page has been viewed 2,552 times over the past month.
We updated the Rosenthal Collins Group LLC page. The firm was originally founded in 1923 as Greene and Collins. The RCG page has been viewed 64,284 times.
Do you know Nodal Exchange? Now owned by German-based EEX, it offered its first power options contracts last month. ~JK

Earlybird registration for FIA Expo is now open. Signing up before August 19 will save you a few bucks. Sign up here. ~SD

CORRECTION: In yesterday’s newsletter, the description of the second MarketsWiki Education session referred to Pat Kenny, “who started as a runner at the CBOT and was ‘the world’s worst trader,’ before he started the ISV Patsystems…” The sentence should have read “before he started at the ISV Patsystems,” as Kenny was not the founder of the company. We regret the error. ~SR


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Are you fat or just big boned? How to tell if your weight is a danger to your health
Nick Mitchell – Telegraph
One of my biggest bugbears as a career personal trainer is the way society has made fat acceptable. I’ve written before about the ‘fat acceptance’ movement, which repeats ad infinitum the mantra ‘big is beautiful’ without confronting the health dangers of being overweight.

****** Yes, and yes?~JJL


Thursday’s Top Three
The MiFID timeline has been nutty enough, and then there’s the potential for more hijinks as described in our top story yesterday, Big HFT warns against late change to EU trading rules. Second was a Harvard Business Review think piece, The Financial Industry Needs to Start Planning for the Next 50 Years, Not the Next Five. Investing in the future rather than just buying companies who do so is a suggestion from that article and ties in well with the third top story from yesterday, Goldman Sachs is on a hiring spree to become the Google of Wall Street.


MarketsWiki Stats
104,801,641 pages viewed; 22,609 pages; 207,123 edits
MarketsWiki Statistics


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Lead Stories

Britain Hasn’t Been This Politically Risky in 40 Years
Charlotte Ryan and Eddie Buckle -Bloomberg
Parallels now with lost decade of U.K. political instability; Investors mulling whether Theresa May will last past October
Britain is having a flashback to the 1970s, and it’s not flared trousers making a comeback. As Parliament breaks for the summer, Prime Minister Theresa May needs to come up with answers to the political drama unfolding at home and threatening her Brexit strategy as investors predict more trouble on the horizon for a country once seen as the stable counterpoint to European turmoil.

Machines Poised to Take Over 30% of Work at Banks, McKinsey Says
Sarah Ponczek – Bloomberg
Report estimates impact of new tech within investment banking; It’ll ‘transform the industry’ within a few years, author says
New technologies are poised to sweep through investment banks, relieving many rank-and-file employees of roughly a third of their current workload, according to McKinsey & Co. The shift, already stoking angst on Wall Street, may take only a few years.

Insider trading probe into Deutsche Boerse CEO still open: prosecutor
Deutsche Boerse (DB1Gn.DE) Chief Executive Carsten Kengeter has not yet been exonerated of insider trading allegations, officials said on Thursday, prolonging uncertainty over his future at the German exchange operator.

Power struggle at Guggenheim Partners rattles a Wall Street star; Battle between CEO and investment chief has alarmed clients and sparked departures
Sujeet Indap, Kara Scannell and James Fontanella-Khan in New York – FT
A power struggle has broken out between Guggenheim Partners’ two most prominent executives, sapping morale, alarming clients and contributing to the departure of several top managers, according to current and former employees of the $240bn asset manager and investment bank.

Parties in Trading Technologies patent infringement case refuse to settle
Docketing statements filed on Monday show that both the appellant and the appellees, including companies like Interactive Brokers, LLC and TradeStation Group, find the case is not amenable to mediation.

KCG acquisition by Virtu completes
John Bakie – The Trade
Virtu Financial has completed its acquisition of KCG as part of a $1.4 billion deal. In a letter to clients today, Virtu CEO Doug Cifu, promised transparency, reliability and high levels of service would be the cornerstones of the new combined group.

The Upside and Downside of Liquidity-Driven Markets
Mohamed A. El-Erian – Bloomberg
Over the past few months, government bond yields have fallen, the dollar has weakened and financials have underperformed, yet the major stock indexes are at or very near record highs, as persistently supportive liquidity conditions have more than compensated for policy and growth disappointments. By boosting returns and repressing volatility, ample liquidity is a gift for investors. It makes the investment journey pleasing, comfortable and lengthy. But it is not a destination.

Amsterdam Seeks Brexit Business Despite Bank Bonus Cap
Ellen Proper and Joost Akkermans – Bloomberg
Deputy mayor acknowledges bonus cap remains a hinderance Amsterdam is seeking to lure companies and the European Medicines Agency as Brexit drives them across the Channel, even as a Dutch cap on bank bonuses keeps financial firms away.

Deutsche Bank expects subpoenas over Trump-Russia investigation; Source reveals Robert Mueller’s team and Trump’s exclusive bankers have established informal contacts and requests for information are forthcoming
Stephanie Kirchgaessner and Oliver Laughland – The Guardian
Executives inside Deutsche Bank, Donald Trump’s personal bankers, are expecting that the bank will soon be receiving subpoenas or other requests for information from Robert Mueller, the special counsel who is investigating possible collusion between the Kremlin and the Trump campaign.

Treasury using network theory to combat cyber threats; Targeted cyber attacks and random op risk threats call for different defences of financial system
Steve Marlin –
The US Treasury is applying network theory to help model defensive strategies against cyber attacks on the financial system.

Edinburgh ranked one of the world’s top cities for investment in new survey
Steve Vance – City AM
Edinburgh has been rated one of the world’s top cities for investment (Source: Getty)
Investment activity in commercial real estate in Edinburgh, relative to the city’s current economic size, has seen Scotland’s capital ranked as one of the world’s top cities for investment in the latest JLL Investment Intensity Index 2017.

Exchanges, OTC and Clearing

Redesign of Eurex Market-Making in the context of MiFID II
With the inclusion of Market-Making in the German MiFID II Implementation Act, 2. FiMaNoG, new German BˆrsG ß26c (1)) a new regulatory requirement has been introduced.

Toronto Stock Exchange Reaches Record Number of ETFs; Market open ceremony to celebrate significant milestone
Toronto Stock Exchange (TSX) today announced that it has reached a significant milestone with 500 exchange traded funds (ETFs) listed. This number has more than doubled in the past five years, bringing the total market capitalization of listed ETFs to approximately $130 billion as of June 30, 2017.

Exchange Launches Enforcement Newsletter and More Director Training Webcasts
New publication updates market on Stock Exchange’s enforcement work; New series of director training webcasts covers risk management, internal controls and ESG reporting; Aim of newsletter and webcasts is to provide guidance to issuers and directors
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today published its first Enforcement Newsletter. The newsletter will be published twice a year, and will include news and updates on the enforcement work undertaken by the Exchange.

Nasdaq Expands Analytics Hub — Adds Four Data Sets with New Signals
Nasdaq, Inc. (Nasdaq:NDAQ), a leading provider of real-time market data and analytics to large institutions, financial professionals, and retail investors, announced the addition of four new data sets to the Nasdaq Analytics Hub.


Beijing Wants A.I. to Be Made in China by 2030
Paul Mozur – NY Times
If Beijing has its way, the future of artificial intelligence will be made in China.

Bitcoin Community Cheers as Miners Back New Scaling Framework
Yuji Nakamura and Lulu Yilun Chen – Bloomberg
Prices jump about 20 percent in biggest gain since June 2016; SegWit2x could be activated if it passes grace period testing
Bitcoin backers celebrated as the community embraced a new mechanism to improve usage and allow it to scale, boosting confidence in the virtual currency and sending prices back near record highs.

Tradeweb Markets Makes Strategic Investment in DealVector
Network Drives Connectivity and Transparency in Structured Credit Market
Tradeweb Markets, a leading builder and operator of global fixed income, derivatives and ETF marketplaces, announced that it has made a strategic investment in DealVector, Inc., a leading fixed income asset registry and communication platform. The investment aims to enhance and leverage Tradeweb’s diverse network of liquidity pools, and help support new opportunities for DealVector’s innovative registry and anonymous, authenticated messaging solutions.


Trump expected to make Scaramucci communications director
Jonathan Swan – Axios
President Trump is expected to announce that Wall Street financier Anthony Scaramucci will be White House communications director, according to two sources familiar with the planning.

Global network of ‘hunters’ aim to take down terrorists on the internet; Group of volunteers obsessively tracks and reports Isis’s most prominent recruiters and propagandists, and tries to block the spread of their propaganda
Olivia Solon – The Guardian
Colonel Kurtz used to spend hours playing social games like Farmville. Now he hunts terrorists on the internet.

Mueller Expands Probe to Trump Business Transactions
Greg Farrell and Christian Berthelsen – Bloomberg
Special counsel examines dealings of Kushner, Manafort, Trump; Trump lawyer says this goes beyond Mueller’s mandate
The U.S. special counsel investigating possible ties between the Donald Trump campaign and Russia in last year’s election is examining a broad range of transactions involving Trump’s businesses as well as those of his associates, according to a person familiar with the probe.

Special Counsel Investigating Possible Money Laundering by Paul Manafort; Probe by Mueller into former Trump campaign manager is part of examination of Russian meddling in election
Erica Orden – WSJ
Special Counsel Robert Mueller is investigating possible money laundering by Paul Manafort, Donald Trump’s former campaign manager, as part of his criminal investigation into what U.S. intelligence agencies say was a Kremlin-backed campaign to meddle in the 2016 presidential election, according to a person familiar with the matter.

Here’s the Chain Reaction Trump Could Set Off by Trying to Fire Mueller
Justin Sink and Steven T. Dennis – Bloomberg
Warning on Russia investigation renews speculation of firing; Dismissing Mueller ‘not politically survivable,’ Democrat says
President Donald Trump’s interview with the New York Times on Wednesday has stirred speculation he may consider firing Special Counsel Robert Mueller for investigating Trump’s business dealings as part of the Russia probe.


Regulators Drop Pursuit of Banker, CEO Pay Restrictions; New agendas unveiled by the SEC, others show changes under Trump administration
Dave Michaels – WSJ
Several regulators have dropped pursuit of a long-running plan to restrict bonuses on Wall Street, as part of a wider effort to stop working on unfinished rules put in place after the financial crisis.

How not to approach FinTech regulation; European regulators are not aligned with their global counterparts and could be holding back the potential of blockchain technology with their misunderstandings and misconceptions, says Joshua Satten, director, FinTech Practice, Sapient Global Markets.
Joshua Satten – The Trade
There’s a distinct lack of detail or examination of the current proof-of-concepts and a real lack of nuance around what is still a fairly nascent, yet comprehensive, technology.

Blog: MiFID II could put a dampener on your holiday; The summer holiday season is here but it may not be summer as we know it.
John Bakie – The Trade
Normally this time of year is characterised by slowing market activity, longer than usual lunches and partially deserted office buildings. Soon enough, you too will be off to sit on a mediterranean beach or taking the kids to enjoy Florida’s theme parks.

Exxon sues to stop $2m fine over Russia sanctions breach; Secretary of state at helm of oil group during ‘reckless’ deals with Rosneft’s Sechin
Jessica Dye, Ed Crooks and David Sheppard – FT
ExxonMobil has sued the US Treasury in an attempt to stop a fine for allegations it behaved with “reckless disregard” for violating Russian sanctions while Rex Tillerson, now US secretary of state, was chief executive in 2014.

CFTC Orders Atlanta Resident Arthur Toole III and His Companies to Pay Restitution and Penalties Totaling More than $493,000 for Commodity Pool Fraud
The U.S. Commodity Futures Trading Commission (CFTC) announced today the settling of charges against Respondents Arthur Toole III of Atlanta, Georgia, and his companies, Billionaire Investor Group (BIG), a Texas limited liability company, The Toole Group Inc. (Toole Group), a Texas corporation, and Catalyst Traders LLC (Catalyst), a Georgia limited liability company, for misappropriating commodity pool funds, fraudulent misrepresentations, commingling pool funds, and acting as an unregistered commodity pool operator.

Effective date of Interpretive Notice to NFA Compliance Rule 2-49: Swap Valuation Dispute Filing Requirements
The CFTC recently approved NFA’s Interpretive Notice to NFA Compliance Rule 2-49 which, among other things, specifies the types of swap valuation disputes that must be reported and standardizes the information that swap dealers (SD) are required to report to NFA. The Interpretive Notice will be effective for dispute notices required to be filed on or after January 2, 2018.

Investing and Trading

Short Sellers Give Up as Stocks Run to New Records; A gauge of bets against stocks is at a four-year low even as warning signs persist
Ben Eisen and Akane Otani – WSJ
Times are tough for skeptics of the bull market. Flummoxed by the endurance of a 2017 rally that produced its 27th S&P 500 record this week, investors are backing off bets

Americans agree on the best way to invest moneyóbut they’re wrong
Emmie Martin – CNBC
If you’re saving up for the future, you’re on the right track. But where you put that money matters as much as how much you’re able to put away each month. A new survey by through Princeton Survey Research Associates International asked more than 1,000 Americans what they consider the best way to invest money they won’t need for 10 or more years. The most popular answer, chosen by 28 percent of respondents, is to use it to buy real estate.

Hedge Fund Uses Algae to Reap 21% Return
Vincent Bielski – Bloomberg
Desmond Lun’s AI trading model draws on computational biology; Biologists are ‘kicking butt’ in data science, professor says
Hedge fund manager Desmond Lun’s 21 percent average return over the last four years springs from an unlikely source — a petri dish of algae.


KCG Europe boss departs as takeover deal completes; Phil Allison, who became chief executive of KCG’s European business in 2014, is in line for a parachute payment of $7m
Samuel Agini – Financial News
One of the best-known names in European equities is on the move, after trading firm Virtu Financial today sealed its $1.4bn takeover of high speed trader KCG Holdings.

Deutsche Bank Among German Firms Hit by Escalating Turkey Spat
Elisabeth Behrmann, Asli Kandemir and Richard Weiss – Bloomberg
VW, Daimler, Siemens, Hugo Boss employ thousands in country; German exporters’ lobby says threat to business is ‘real’
A German government warning to companies against doing business with Turkey has put some of the country’s biggest firms on notice.


The Macron generation shakes up French business; Buoyed by new leader, a new wave of executives is pledging to reform corporate France
Harriet Agnew and Michael Stothard – FT
Dubbed by contemporaries as the “Macron of business”, Alexandre Bompard this week took over as chief executive of the French group Carrefour, the world’s second-largest retailer by revenue. The 44-year-old, described by those same advocates as “young, smart and successful”, is one of half a dozen new business leaders on a self-appointed mission to reform corporate France.

North Korea faces worst drought since 2001; Threat of food crisis as early-season crop harvest hit by dry spell
Song Jung-a – FT
North Korea is facing its worst drought since 2001, adding the threat of a food crisis to the long list of problems affecting the sanction-hit nation.


Citigroup and Deutsche Bank give Frankfurt a Brexit boost; US bank has decided to base its main EU trading operation in German city
Martin Arnold, Katie Martin and Laura Noonan – FT
Frankfurt’s attempt to become the EU’s pre-eminent post-Brexit financial centre received another boost on Thursday as more details emerged of Deutsche Bank and Citigroup’s plans to beef up their operations in the German financial capital.

May promises business leaders no Brexit ‘cliff edge’ for companies; PM tells first meeting of Number 10 business council she is aiming for transition deal
George Parker and Caroline Binham – FT
Theresa May has promised business leaders that she will not let companies fall over a Brexit “cliff edge” amid warnings that the City of London could haemorrhage jobs unless she delivers clarity on her exit strategy soon.

Even Brexit Can’t Dim Exodus From EU’s Fastest-Shrinking Nation
Lithuanians are still flocking to the U.K.
Aaron Eglitis – Bloomberg
If Brexit has diminished Lithuanians’ attraction to the U.K. — the No. 1 European destination for the Baltic nation’s migrants — they’re hiding it well.

Morgan Stanley picks Frankfurt as post-Brexit hub; Move by US investment bank to ensure it can keep trading across EU could put 200 jobs at risk in City of London
Simon Goodley and agencies – The Guardian
US investment bank Morgan Stanley has chosen Frankfurt as the site of its post-Brexit EU hub in a move that could put 200 jobs in the City of London under threat.

Government might be losing the Brexit spin battle, but it’s triumphing on substance
Fraser Nelson – Telegraph
Strictly speaking, Britain is not allowed to hold trade talks with anyone until we have left the European Union. But no one in London or Washington wants to wait that long so, on Monday, talks to establish a free-trade agreement will begin.

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