Chicago’s CME Strains to Reflect Global Grain Trade

Jul 23, 2018

Chicago’s CME Strains to Reflect Global Grain Trade

Jul 23, 2018

Jeff Bergstrom

Jeff Bergstrom

CIO

First Read

Hits & Takes
JLN Staff

MarketsWiki Education World of Opportunity in Chicago is just a week away. There is still room to sign up students and interns for the series. For that matter, anyone is welcome who is interested. See www.marketswikieducation.com for details.~JJL

For the first time in 11 years, I did not head north with my Boy Scout Troop for summer camp. However, I am going to make a day trip on Tuesday just to check on them.~JJL

BarclayHedge reported that hedge funds took in $4 billion in May and assets remained at an all-time high of $3 trillion. Managed futures took in $530 million in May, the firm said.~JK

‘Hi, I’m a soybean’: In trade war, China deploys cartoon legume to reach U.S. farmers. ~JB

What’s in an index? How about market makers. The trueDigital Bitcoin and Ether reference rates and indices are based on bid and offer pricing from Hehmeyer, Genesis Global Trading, XBTO Group, Circle, DV Chain and Altonomy.~JK

From the Wall Street Journal’s piece today on the CME Group ags, open interest on its ag contracts hit a record 10 million contracts in June.~JK

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Fraud v. Fraud-Based Manipulation; Litigation Holds; Gifts and Entertainment; ATSs; Customer Funds Investments
Gary DeWaal – Bridging the Week
A federal court in Brooklyn, New York, rejected a defendant’s request to reconsider an earlier denial of his motion to dismiss an enforcement action against him by the Commodity Futures Trading Commission for fraud in connection with his alleged provision of virtual currency trading advice and discretionary trading of virtual currencies. The defendant had claimed that a subsequent decision in a California federal court related to a metals dealer supported the proposition that the CFTC has no authority to bring an anti-fraud case in connection with transactions involving commodities that are not derivatives, unless the CFTC alleges that a fraud-based market manipulation has occurred. Separately, the Securities and Exchange Commission sanctioned a broker-dealer for inadvertently deleting audio records of telephone conversations of eight salespersons subject to an SEC request, as well as for not properly documenting and maintaining records of some employees’ gifts and expenses.
bit.ly/2LB5i4K

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The Future of the U.S. Looks a Lot Like Chicago; How can Sun Belt cities learn from what Chicago got right and wrong?
Conor Sen – Bloomberg
Of all America’s major cities, Chicago may be unique. The rest of the nation — particularly newer, faster-growing cities — should pay close attention to its evolution, because the future of America looks a lot like Chicago.
/jlne.ws/2LtCtY6

***** The future looks deep dish and gooey?~JJL

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Deadly Japan Heat Wave Continues as Temperatures Reach Highest Ever
Eli Meixler – Time
A deadly heat wave blistering across Japan has claimed more than 40 lives this month, with little relief in sight as record temperatures are expected to persist until later this week.
/jlne.ws/2Ls43VA

***** Stay cool my friends!~JJL

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Friday’s Top Three
The common thread on Friday was about busting things. The New York Times’ piece about Libor, The Most Important Number in Finance Is Going Away was the top read piece. The second most read piece of the day was from DTCC’s Murray Pozmanter on reduced settlement times in Regulation Asia’s A Different Approach to Accelerating Settlement and Reducing Risk, busting up the T+2 settlement times. Third was about two guys named Edward Bases and John Pacilio who got busted by the US Department of Justice, in Two Connecticut Men Charged For Deceptive Trading Practices Executed On U.S. Commodities Markets

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MarketsWiki Stats
129,905,379 pages viewed; 23,206 pages; 214,315 edits
MarketsWiki Statistics

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Lead Stories

Chicago’s CME Strains to Reflect Global Grain Trade
Benjamin Parkin – WSJ
Tariffs add to forces changing wheat and soybean flows, threatening to leave futures pioneer behind. The world’s largest exchange company is struggling to keep up with tariffs and a surge in global crop production that is reshaping agricultural trading.
/on.wsj.com/2OcpZT1

Are we sliding back to the chaos of the 1930s?
Tim Lister – CNN
US President Donald Trump swept through Europe like a hurricane. He asked why his country was obliged to defend its allies, carped about “unfair” trade practices, blasted the UK and Germany as weak on migration and suggested President Vladimir Putin was as credible as America’s own intelligence agencies when it came to Russian hacking.
/jlne.ws/2LyhrHI

Currency War Erupts, Threatening to Ripple Across Global Markets
Katherine Greifeld – Bloomberg
Trade fight spreads to FX as president talks down dollar; Equities, oil, and emerging-market assets at risk from FX war
The currency war has arrived. So say some of the best and brightest in the $5.1 trillion-per-day foreign-exchange market. U.S. President Donald Trump on Friday accused China and the European Union of “manipulating their currencies and interest rates lower.” The comments came after the yuan plunged to its lowest level in a year, with little sign of China’s central bank intervening to stem the slide. They also follow a decline in the euro this year and add to the calculus that European Central Bank policy makers might need to consider when they meet next week.
/jlne.ws/2LtuRon

Decade After Crisis, a $600 Trillion Market Remains Murky to Regulators
Emily Flitter- NY Times
In the maze of subsidiaries that make up Goldman Sachs Group, two in London have nearly identical names: Goldman Sachs International and Goldman Sachs International Bank. Both trade financial instruments known as derivatives with hedge funds, insurers, governments and other clients.
/jlne.ws/2LsACTf

Trump Opens a Dangerous New Trade-War Front; Competitive currency devaluation probably won’t end well.
Mark Gongloff – Bloomberg
President Donald Trump hasn’t quite won the trade wars yet. Just a week ago, some were arguing his tariffs, and threats thereof, had already made China blink, suggesting the war was over before it had really begun. It turns out China wasn’t so much blinking as napping – not even bothering to negotiate with the U.S., according to Trump adviser Larry Kudlow. So Trump has cranked the rhetoric up to 11, threatening to slap tariffs on all $500 billion-plus of Chinese imports and hinting at a new weapon: devaluing the dollar to boost American exports.
/jlne.ws/2Lr9R1J

Climate Change Is Disrupting the Planet’s Seasons; Four decades of temperature observations show what many suspected: Human activity is disrupting the behavior of plants, animals, and the march of the seasons.
Eric Roston – Bloomberg
Poring over four decades of satellite data, climate scientists have concluded for the first time that humans are pushing seasonal temperatures out of balance—shifting what one researcher called the very “march of the seasons themselves.” Ever-mindful of calculable uncertainty and climate deniers, the authors give “odds of roughly 5 in 1 million” of these changes occurring naturally, without human influence.
/jlne.ws/2LCcaPG

Trade Tensions Threaten Global Economic Growth, G-20 Cautions
Patrick Gillespie, Paul Jackson, and Jorgelina Do Rosario – Bloomberg
Global economy is less synchronized than it was in March; Pledge to refrain from currency devaluation removed from text
Trade tensions threaten global growth as the engines of leading economies fall out of sync, the world’s top finance chiefs warned on Sunday.
/jlne.ws/2LvxHcp

JPMorgan is thriving under Dimon a decade after financial crisis
Jonathon Trugman – NY Post
In an interesting twist of fate, Lloyd Blankfein’s departure from Goldman Sachs, announced last week, leaves JPMorgan’s Jamie Dimon as the lone survivor from the financial crisis. (Blankfein will officially retire Sept. 30.)
/jlne.ws/2LqgLV1

Tread Warily Into China’s Massive Bond Market; Foreign interest is rising fast, even as defaults and yields head upward
Andrew Peaple – WSJ
Chinese domestic bonds may once have been the world’s biggest market that no one paid attention to. No longer. Mounting defaults and steepening yields have raised doubts about the $12 trillion market’s health, just as China’s economy shows signs of faltering. All the same, foreign investors have been piling in this year. Are they headed for a rude awakening?
/jlne.ws/2LxgbVa

BOJ Policy Change Speculation Roils Markets
Masaki Kondo and Chikafumi Hodo – Blomberg
Central bank’s offer to buy unlimited bonds drew no sellers; Yield curve bear-steepens before 40-year debt sale on Tuesday
A dramatic day for Japan’s debt market saw yields surge on media reports of possible changes to the nation’s ultra-loose monetary policy, spurring the central bank to offer to buy an unlimited amount of bonds.
/jlne.ws/2LC8mxS

Stock-pickers to manage less than 30% of assets by 2022; Fund managers should use the proceeds of a bumper 2017 to retool for the future, management consultancy BCG advises
Mark Cobley – Financial News
Traditional stock-picking equity and bond managers will account for less than a third of the global asset management industry within five years, according to Boston Consulting Group.
/jlne.ws/2LB6Zz8

KPMG appoints risk management chief after accounting scandals; Mary O’Connor hired by auditor for new position
Hannah Murphy – FT
KPMG has created a new position to oversee both its risk and legal operations in the UK, as the Big Four auditor grapples with a string of damaging accounting scandals and recent scrutiny from regulators over its resilience.
/jlne.ws/2LudkfW

Activism in banking is tougher than on the fringes of finance; A bank break-up has proved impossible due to concerns about financial stability
Patrick Jenkins – FT
Europe’s financial services companies, particularly the region’s banks, have long seemed ripe for intervention by activist investors.
/jlne.ws/2LqkKAX

AngloGold poaches new CEO from rival Barrick Gold
Neil Hume – FT
AngloGold Ashanti has moved to fill the hole left by the departure of its chief executive by poaching a senior director from rival Barrick Gold.
/jlne.ws/2JJ8I0x

Exchanges, OTC and Clearing

Maker-taker irony as NYSE and Nasdaq challenge SEC; Regulator’s scrutiny of fee structure highlights need for greater transparency
Norma Cohen – FT
The New York Stock Exchange and Nasdaq, two of the world’s largest stock exchanges, are pitched against some of their biggest customers in a row with national regulators over the assessment of trading fees.
/jlne.ws/2LynFHA

CODA Markets Releases Second Quarter 2018 metrics for CODA Block
CODA
Markets, operator of on-demand auction markets for U.S. equities, today announced Second Quarter 2018 metrics for CODA Block, the 30-second on-demand equity auction facility. Launched in February 2017, CODA Block helps institutional investors discover and aggregate natural liquidity, reduce information leakage and minimize market impact.
Among the highlights of CODA Block’s Second Quarter 2018 metrics:460,000,000 – shares initiated over 27K auctions.2,829 – successful auctions, or 10.2 % hit rate for initiating orders. 16,900 shares – average auction initiation size. 6,900+ – average trade size. 33% – daily unique symbol hit rate.0.76bps – NBBO average mid-move at 30 seconds post-auction.

China’s investor curb raises concerns on HKEX listings; Restriction has wide ramifications for foreign companies, including Saudi Aramco
Emma Dunkley in Hong Kong – FT
When luxury Italian fashion brand Prada listed on the Hong Kong stock exchange in 2011, it was among a number of foreign consumer companies seeking to take advantage of the increasingly affluent population in mainland China while appealing to the local investor base.
/jlne.ws/2LsFAPT

The NYSE holds a troubling monopoly on trade data
J.W. Verret – TheHill
In recent years and across a multitude of policy areas, Washington policymakers are asking questions about who owns the data you provide through online apps or via payment methods. The simplest and arguably best solution so far has been to leave the question to the terms of the contract. If a user freely contracts to allow their data to be sold in exchange for, say, a free email service, then the terms are fairly negotiated.
bit.ly/2LBOjj7

First mover advantage; The Australian Securities Exchange (ASX) has been the first adopter of blockchain technology for its equity post-trade infrastructure. Will this move resonate with other clearing houses, and is this the time to embrace blockchain?
By Sarfraz Thind – The Trade
Blockchain had its first major foray into the clearing and settlement process with the announcement last December that the Australian Securities Exchange (ASX) will replace its legacy CHESS equity clearing platform with distributed ledger technology (DLT) developed by Digital Asset. Full deployment is set to go live by 2021 but participants are already taking note.
/jlne.ws/2uYSScP

Round-up: our Equity segment in Q2
Eurex
We at Eurex offer roughly 750 equity options and 800 single stock futures from more than ten countries. Below you will find the latest news on our Equity segment in Q2.
/jlne.ws/2uYgJJw

LCH Ltd commits to FX Global Code and UK Money Markets Code
LCH
LCH Ltd (LCH), a leading global clearing house, today confirmed its commitment to the FX Global Code and the UK Money Markets Code. The FX Global Code is a set of global principles of good practice in the foreign exchange market, and the UK Money Markets Code sets out the standards and best practice expected from participants in the deposit, repo and securities lending markets in the United Kingdom.
/jlne.ws/2JNbzFT

SGX enables listing at earlier development stage for MOG companies
SGX
Singapore Exchange (SGX) is amending the Mainboard and Catalist Listing Rules for mineral, oil and gas (MOG) companies to reflect how the sector categorises companies based on each firm’s stage of development.
/jlne.ws/2uVGVV5

BSE, NSE put detailed framework in place for enhanced monitoring of cos
BS India
Leading stock exchanges BSE and NSE have put in place a detailed framework for shortlisting and reviewing of securities under graded surveillance measures (GSM), wherein investors need to be extra cautious while dealing in such stocks. These additional guidelines have been made after a joint surveillance meeting of markets regulator Sebi with exchanges last week, the bourses said in separate circulars. Under the new criteria, securities having a networth of less than or equal to Rs 10 crore and net fixed assets of less than or equal to Rs 25 crore are eligible for inclusion under the GSM framework.
/jlne.ws/2JScBQY

MiFID II – Six Months On – SIX Trader Survey
MondoVisione
It is just over six months since the implementation of MiFID II and the findings from the SIX trader survey, conducted in April this year, make for interesting reading.
/jlne.ws/2JNYc82

Fintech

Private messaging apps increasingly used for public business
Ryan J. Foley – AP
One app promotes itself as a way to discuss sensitive negotiations and human resources problems without leaving a digital record. Another boasts that disappearing messages “keep your message history tidy.” And a popular email service recently launched a “confidential mode” allowing the content of messages to disappear after a set time.
/jlne.ws/2LB3kBo

Barclays signs up artificial intelligence to aid bankers; Deal with simulation firm gives UK lender advanced modelling skills
Laura Noonan in Dublin Y- FT
Artificial intelligence could soon be powering a new way of making decisions across Barclays’ trading, lending and risk management divisions after the UK bank became the flagship customer of AI simulation firm Simudyne Technology.
/jlne.ws/2Lym6JI

State Street to build out Charles River team following acquisition; State Street will make additional hires to the Charles River team and will invest in its technology and software.
Jon Watkins – The Trade
State Street has outlined plans to build on Charles River’s team with new additions following the announcement of its $2.6 billion acquisition of the front-office services provider.
/jlne.ws/2JOLcz5

Credit Suisse invests in buy-side software startup; Assetmax gains investment from Credit Suisse’s SME FinTech investment arm SVC Ltd.
Hayley McDowell – The Trade
Credit Suisse has participated in a funding round for a Zurich-based software platform provider for asset managers though its investment vehicle, SVC Ltd.
/jlne.ws/2uYtHH4

Blackstone Wins EU Approval To Buy Thomson Reuters Financial And Risk Unit
MondoVisione
The European Commission has given antitrust approval for U.S. private equity firm Blackstone Group to acquire a majority stake in Thomson Reuters’ Financial and Risk unit.
/jlne.ws/2JSdx7W

Cryptocurrencies

trueDigital Launches Bitcoin and Ether Reference Rates and Indices; Provides the transparency and confidence needed to enable institutional-grade derivative products
trueDigital Holdings
trueDigital Holdings (“TDH”), a leading developer of institutional-grade digital asset trading solutions, has partnered with 10 liquidity providers and contributors including Genesis Global Trading, XBTO Group, Circle, DV Chain, Hehmeyer and Altonomy to create the first market maker based Bitcoin and Ether pricing indices. The launch of the trueDigital Bitcoin and Ether reference rates sets a new standard for the digital asset market and allays common concerns about the robustness and lack of transparency inherent in retail exchange-based bitcoin pricing composites.
/jlne.ws/2LB5iBM

Japanese Minister Denies Association with Cryptocurrency Firm Under Investigation
CCN – Japan
Seiko Noda, Japan’s internal affairs minister, denied having an interest in a cryptocurrency company under investigation and interfering in that investigation, according to a report in Asahi Shimbun. As a Cabinet minister, Noda could be accused of trying to influence a government investigation.
/jlne.ws/2Ls8pMq

EU Issues Worrying Warning Over Future Of Bitcoin
Billy Bambrough – Forbes
Despite bitcoin’s latest price rally, the world’s largest cryptocurrency is still struggling to reach mainstream adoption, and now the European Union (EU) has warned bitcoin and other decentralised cryptocurrencies could be derailed by the world’s central banks.
/jlne.ws/2Lu6l6I

Blockchain: India Likely To See Brain Drain As 80% Developers May Move Abroad
Meha Agarwal – Inc42.com
Blockchain: India Likely To See Brain Drain As 80% Developers May Move Abroad
More than 80% of the blockchain developers in India may move abroad in search of better opportunities due to lack of “robust regulatory framework” in the country on blockchain technology.
/jlne.ws/2Ls6mIe

India’s cryptocurrency exchanges face another 50 days of uncertainty
Nupur Anand – Quartz
The wait continues for Indian cryptocurrency exchanges.
On July 20, after a short hearing, India’s supreme court set Sept. 11 as the date for the next hearing—and the pronouncement of a verdict—in the cases filed by the bourses against the Reserve Bank of India (RBI).
bit.ly/2Lyqdp8

The reality of what asset managers are really doing about cryptocurrencies; The exploration of cryptocurrencies from asset managers should not always be taken as a sign of intent, more just what you’d expect from the biggest players in the financial markets.
Jon Watkins – The Trade
In what may seem like conflicting stances, some of the world’s largest traditional asset managers are exploring cryptocurrencies, while at the same time seeing little demand from clients, according to multiple industry experts. This exploration is not always a sign of intent however, more just what you would expect from some of the biggest financial institutions on the planet – essentially just having their finger on the pulse.
/jlne.ws/2JNVQpI

Broker to world’s biggest banks explores crypto trading; TP Icap working group was set up under recently-ousted CEO John Phizackerley
By Samuel Agini – Financial New
TP Icap, one of the largest brokers sitting between banks in the global financial markets, has set up a working group to examine how it should approach cryptocurrencies.
/jlne.ws/2JRfQb4

Aite Reports Crypto Trading Will Hit and Breach $1Tr in 2018
John D’Antona Jr. – Traders Magazine Online News
Aite Group, in its latest report, “The Cryptocurrencies Market Landscape: A New Frontier,” wrote that forecasts the total trading value of cryptocurrencies to be just over US$1 trillion in 2018.
Bitcoin has failed to gain much attention and adoption for its original purpose, which is to serve as a digital cash payment system replacing the fiat currency payment system. But both trading volume and market cap of bitcoin have grown dramatically over the past few years and have led to an entirely new market of tradable instruments, which are collectively known as cryptocurrencies. With rapid price appreciation and an increase in total market cap, cryptocurrencies have quickly emerged into a new asset class that nobody can afford to ignore.
/goo.gl/nX7jA1

Politics

Trump threatens tariffs on all $500 billion of Chinese imports
Lisa Lambert – Reuters
U.S. President Donald Trump on Friday said he was ready to impose tariffs on all $500 billion of imported goods from China, threatening to escalate a clash over trade policy that has unnerved financial markets.
/jlne.ws/2LrHWPf

Trump and the U.S. dollar: Actions speak louder than words
Saqib Iqbal Ahmed and James Thorne – Reuters
U.S. President Donald Trump may not be happy about the strength of the U.S. dollar, but the greenback’s recent rally may partly be a product of his own making.
/reut.rs/2O24Lat

Reagan aide: Condemn Trump’s ‘enemy of the people’ rhetoric
Mark D. Weinberg -CNN
In a rare display of bipartisan unity, Republican and Democratic senators and representatives are practically tripping over each other to get in front of television cameras to blast Russian President Vladimir Putin for attempting to undermine our democracy by seeking to tamper with the 2016 presidential campaign. They correctly claim that interference with our elections strikes at the heart of America, is something that cannot be ignored and must not be allowed to happen again.
/jlne.ws/2LtCbjY

George Soros Bet Big on Liberal Democracy. Now He Fears He Is Losing; His enemies paint him as all-powerful, but the billionaire philanthropist believes that his political legacy has never been in greater jeopardy.
Michael Steinberger – NY Times
On a clammy Tuesday morning in Paris at the end of May, George Soros, the world’s second-most-vilified New York billionaire (but worth many billions more than the other one), addressed the European Council on Foreign Relations, an organization he helped found a decade ago. Described by the woman who introduced him as a “European at heart,” the Hungarian-born Soros, who made his fortune running a hedge fund and is now a full-time philanthropist, political activist and freelance statesman, was there to share his thoughts on salvaging the European Union.
/jlne.ws/2LwjCvl

America’s creditors are fed up with Trump’s squander of US economic growth as he picks fights
William Pesek – South China Morning Post
Donald Trump is irked about many things – China’s trade policies, Russia-related investigations, critics in the media. Now, add the Federal Reserve to the US president’s fed-up list.
/jlne.ws/2LrH4tX

Trump Lines Up Fed Chairman as Fall Guy If Tax, Trade Moves Sour
Rich Miller – Bloomberg
President again criticizes Fed for raising interest rates; Treasury secretary says Trump ‘fully supports’ independent Fed
President Donald Trump looks to be lining up Federal Reserve Chairman Jerome Powell to be the fall guy if the president’s trade and tax policies don’t succeed.
/jlne.ws/2Lxkhww

The GOP has one big problem in November
Dean Obeidallah – CNN
President Trump took to Twitter on Saturday to lash out at someone. (I know, what’s new?) While Trump’s target, special counsel Robert Mueller, was familiar, Trump’s line of attack was new. The President tweeted that the Mueller investigation “seems intent on damaging the Republican Party’s chances in the November Election.”
/jlne.ws/2LwKHyB

As Trump Struggles With Helsinki’s Fallout, Congress Faces a New Charge: Complicity
Nicholas Fandos and Sheryl Gay Stolberg – NY Times
In the nearly two years since Russia attacked the American democratic process, congressional Republicans have played conflicting roles in the drama: Some have pressed to impose sanctions on Russia and quietly pursue investigations, but they have been outshouted by Republicans who have obfuscated and undercut efforts to uncover the Kremlin’s plot.
/jlne.ws/2LuudXT

Putin-Trump idea for bilateral business forum hits early trouble; Deep scepticism in Russia that plan hatched at Helsinki summit can get off the ground
Kathrin Hille and Henry Foy in Moscow – FT
An idea Vladimir Putin and Donald Trump hatched at their summit a week ago for a new dialogue forum for Russian and American business leaders already appears to be dead in the water, highlighting the difficulty of making even small steps forward in the deadlocked relationship between Moscow and Washington.
/jlne.ws/2Lwip7h

Regulation

Deutsche Bank to pay nearly $75m for mishandling ADRs, SEC says
Kadhim Shubber – FT
Deutsche Bank will pay nearly $75m to settle charges it improperly handled US securities that represent shares in overseas companies, the Securities and Exchange Commission said on Friday.
/jlne.ws/2LvzeiF

Deutsche to pay $75 million to settle ADRs abuses case, U.S. SEC says
Katanga Johnson – Reuters
The U.S. Securities and Exchange Commission said on Friday that Deutsche Bank (DBKGn.DE) (DB.N) has agreed to pay nearly $75 million to settle an investigation into the mishandling of pre-release American Depositary Receipts (ADR).
/jlne.ws/2LrbAEf

Deutsche Bank to Pay Nearly $75 Million for Improper Handling of ADRs
SEC
The Securities and Exchange Commission today announced that two U.S.-based subsidiaries of Deutsche Bank AG will pay nearly $75 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs).
/jlne.ws/2uWpF24

Former executive charged with insider trading
ASIC
Former executive of Healthe Care Pty Limited Mr Gregory Campbell, of Bundall, Queensland, has been charged with three counts of insider trading. The filing hearing for Mr Campbell’s charges was listed at the Melbourne Magistrates’ Court on 20 July 2018.
/jlne.ws/2JLYoF1

ESMA fines five banks EUR2.48 million for issuing credit ratings without authorisation
ESMA
The European Securities and Markets Authority (ESMA) has today fined Danske Bank, Nordea Bank, SEB, Svenska Handelsbanken and Swedbank EUR495,000 each and issued five public notices for negligently breaching the Credit Rating Agencies Regulation (CRAR). ESMA found that the five banks infringed the CRAR by issuing credit ratings without being authorised by ESMA to do so.
/jlne.ws/2uS8PkW

CFTC Chairman J. Christopher Giancarlo Response to Bollettino
CFTC
/jlne.ws/2uXNlDk

FCA and Practitioner Panel publish findings from 2018 joint survey
UK FCA
We and the Practitioner Panel have published a report from our 2018 joint survey of FCA-regulated firms. The survey gives views across the financial services sector of our performance as a regulator.
/jlne.ws/2JLAKbP

Investing and Trading

Opinion: This Wall Street magic trick makes stocks appear cheaper than they are
Mark Hulbert – MarketWatch
Some Wall Street analysts are playing games with the S&P 500’s price/earnings ratio. These analysts are calculating the S&P 500’s SPX, -0.09% P/E ratio on the basis of what they think corporate earnings will amount to in the coming calendar year. Nowadays, that means their P/Es are based on 2019 earnings — a number that won’t actually be known for another 20 months or so.
/jlne.ws/2LB2bd4

Volatility’s Coming for Your Summer Break as Headwinds Build
Dani Burger – Bloomberg
Liquidity risk takes center stage amid August’s thin trading; Managers prepare to do work on vacation if shock materializes
A yuan slump, a correction in commodity markets, Trump broadsides against the Fed, a trade war, and fresh Italian risk. For Voya Asset Management in New York, they’re headwinds threatening to disrupt the summer break.
/jlne.ws/2LuROYo

It’s Apple vs. Amazon in the Race to $1 Trillion
Brad Stone – Bloomberg
As we head into the heat of earnings season this week, two technology giants sit at the threshold of a monumental achievement: surpassing $1 trillion in market capitalization.
/jlne.ws/2LBMz9z

Consultants’ claims and the evasion of responsibility; ‘Safety in numbers’ mindset contributes to investment herding
John Authers – FT
Few things in life are harder, but more necessary, than to take responsibility for our actions.
/jlne.ws/2LvCmLr

Prolonged Slump in Bond Liquidity Rattles Markets; Investors are finding it harder to buy and sell bonds
Riva Gold and Christopher Whittall – WSJ
Many bonds around the globe are becoming harder to trade, prompting some investors to shift to other markets and raising concerns about a broad decline in liquidity.
/jlne.ws/2JLMXNJ

Institutions

This Is What the Market Looks Like Without FANGs
Elena Popina and Lu Wang – Bloomberg
The tech megacap bloc is no help to the Nasdaq 100 right now; Averages still eke out a gain as earnings exceed estimates
Rarely does a day go by in the U.S. stock market without someone decrying its addiction to gains in the FANG bloc of tech megacaps.
/jlne.ws/2LCbzNW

Can factor investing kill off the hedge fund?; Data-driven funds that systematically exploit human weaknesses are disrupting traditional asset management
Robin Wigglesworth in New York – FT
In 2001 Clifford Asness, a cerebral but fiery-tempered hedge fund manager with a penchant for comic book memorabilia, penned a paper arguing that his industry’s skills were “overstated”. Understandably, it went down like a lead balloon.
/jlne.ws/2LxjCv2

CNNMoney exclusive: Jamie Dimon on the trade war, infrastructure ’emergency’ and Trump
Julia Horowitz – CNN Money
JPMorgan Chase CEO Jamie Dimon is worried the economy’s momentum could be derailed by President Donald Trump’s trade wars.
/jlne.ws/2Lwfqf5

Julius Baer Falls as Asset Growth Slows to Three-Year Low
Jan-Henrik Foerster – Bloomberg
Market volatility, weaker new money weigh on assets, fees; Helvea says shares look fairly valued on ‘normalized’ growth
Julius Baer Group Ltd. fell in Swiss trading as assets under management grew at the weakest pace in three years, rekindling concern that the wealth manager may not be able to sustain past growth rates.
/jlne.ws/2LreJUz

UBS Bucks Trend by Keeping $2 Million Threshold for Rich Clients
Frederik Balfour – Bloomberg
Cites example of Chinese client enriched by company listing; China head of global wealth management speaks in interview
UBS Group AG has no plans to follow other banks and raise the $2 million threshold for access to its private banking services, the Swiss bank’s China head of global wealth management said.
/jlne.ws/2LwmvfF

Questions of culture divide Goldman from Lehman Brothers; The collapsed bank failed to heed sensible advice to control its toxic elements
Andrew Hill – FT
The senior partner of a law firm asks colleagues a simple question to assess the health of the organisation’s culture: “Why do you stay?”
/jlne.ws/2LubR9q

Pimco Executive Resigns After Allegations of Inappropriate Behavior; Bill De Leon’s resignation follows an internal review into his alleged behavior at a May 2017 charity event
Justin Baer – WSJ
A senior Pacific Investment Management Co. executive resigned on Friday after facing allegations he acted inappropriately toward a colleague, people familiar with the matter said.
/jlne.ws/2JOJhdR

Regions

U.S. tariffs to cost Germans up to 20 billion euros this year: report
Reuters Staff
U.S. President Donald Trump’s tariffs will lead to a drop in prosperity in Germany this year and are likely to cost Germans up to 20 billion euros ($23.44 billion), the head of German think-tank IMK said.
/jlne.ws/2LyhJyi

The Chinese Blind Spot in U.S. Companies’ Financials; Some multinationals are partially audited by Chinese accounting firms that U.S. regulators can’t check
Michael Rapoport – WSJ
There’s a blind spot in U.S. regulators’ oversight of audit firms–and it could mean investors in companies like Walmart Inc., Pfizer Inc. and 3M Co. are vulnerable.
/jlne.ws/2Lrap7N

Imagine a World Without OPEC; The NOPEC bill would decimate the world’s energy safety net.
Julian Le – Bloomberg
Imagine a world without OPEC. This is what the sponsors of legislation introduced in both houses of Congress seem to want. Versions of the “No Oil Producing and Exporting Cartels Act,” or the NOPEC bill, are working their way through the Senate and the House of Representatives, and are likely to find much more support from the White House than they have in the past — Presidents George W. Bush and Barack Obama both threatened to veto similar legislation.
/jlne.ws/2Lv4heM

Korea GDP in Focus for Global Investors Piling Into Bond Market
David Finnerty – Bloomberg
Strong print would put BOK hike back on the table for August; Global funds have bought net $29 billon of local bonds in 2018
A lone dissenter at the Bank of Korea’s July gathering is raising the specter of a rate hike as soon as next month, adding extra weight to this week’s growth figures for international bond investors who’ve p
/jlne.ws/2LsBhUJ

Iran’s Rouhani warns Trump about ‘mother of all wars’
Reuters Staff
Iranian President Hassan Rouhani on Sunday cautioned U.S. President Donald Trump about pursuing hostile policies against Tehran, saying “war with Iran is the mother of all wars”, but did not rule out peace between the two countries.
/jlne.ws/2Lv3BGg

Bank of Korea Sees Possible Impact From China Deleveraging Plan
Heejin Kim – Bloomberg
South Korea GDP May Be 0.3 Percentage Point Less in 2018; China defaults appear to be ‘natural’ restructuring procedure
The economy of South Korea, which is very reliant on China, may see more adverse impact than previously expected from China’s plan for deleveraging, the Bank of Korea said in a report on Sunday.
/jlne.ws/2Ls7Kuq

Renminbi weakness represents a new risk for Asian currencies; For investors the latest shift suggests risk of broader market and economic stress is rising
Roger Blitz – FT
China’s weakening renminbi represents a new risk for a number of Asian currencies that had managed to escape much of the recent rout in emerging markets until now.
/jlne.ws/2LwhcNh

India Shortchanges Its Banks; Politics and fear-mongering have doomed a key reform.
Ila Patnaik – Bloomberg
India needs a strategy to get the government out of banking. Non-performing loans among state-owned banks — a legacy of India’s socialist past which account for nearly 70 percent of deposits — have crossed 5 percent of GDP. The central bank has restricted lending at 11 of them and forced one, IDBI Bank Ltd., to sell itself to the government-owned Life Insurance Corporation of India.
/jlne.ws/2Lwg8ZN

Top Japanese Official Has No Interest in Trade Deal With Just the U.S.
Connor Cislo and Emi Nobuhiro – Bloomberg
Chief Cabinet Secretary Suga says U.S should return to TPP; Suga expects Abe to stand for re-election as party chief
One of Japan’s top policy makers indicated the government will continue to resist U.S. efforts to create a bilateral free trade agreement between the two nations.
/jlne.ws/2LvHvmQ

Brexit

Brussels rejects UK’s financial services Brexit plan; Barnier dismisses white paper’s ‘enhanced equivalence’ and says EU needs autonomy
Jim Brunsden in Brussels – FT
Brussels has rejected the UK’s proposals on how to govern the City of London’s access to the European market after Brexit, saying Theresa May’s latest financial services plan would rob the EU of its “decision making autonomy”.
/jlne.ws/2LygvDc

The City of London just suffered a major defeat from the EU over plans for Brexit
Will Martin 0m – Business Insider
The European Union late last week dealt a major blow to the UK’s financial services sector in the lead up to Brexit, after negotiators rejected the plans for the sector laid out by the British government in Prime Minister Theresa May’s controversial white paper.
/jlne.ws/2Ls51RI

U.K. Says It Won’t Blink First on Brexit So EU Must Back Down
Patrick Donahue and Tim Ross – Bloomberg
British Foreign Secretary Jeremy Hunt said the U.K. will not “blink” in Brexit negotiations, as he warned the European Union it risks forcing the country to crash out of the bloc with no deal.
/jlne.ws/2LtvMFl

Amazon Warns No Deal Brexit Risks ‘Civil Unrest,’ Times Reports
Colin Keatinge – Bloomberg
Amazon.com Inc.’s U.K. head, Doug Gurr, said there could be “civil unrest” within two weeks if Britain leaves the European Union with no deal, the London-based Times reported.
/jlne.ws/2LxUVyS

US banks urge UK to cut corporate taxes to stop Brexit exodus; Wall St executives say London is losing edge against New York after Trump deregulation drive
Martin Arnold, Banking Editor – FT
US banks are calling on the British government to cut taxes and red tape that they say could lead to financial assets and jobs pouring out of the UK after Brexit.
/jlne.ws/2Lz0FrW

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John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

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Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

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