First Read

The University of Chicago worries about a lack of competition; Its economists used to champion big firms, but the mood has shifted
The Economist
One sign that monopolies are a problem in America is that the University of Chicago has just held a summit on the threat that they may pose to the world’s biggest economy. Until recently, convening a conference supporting antitrust concerns in the Windy City was like holding a symposium on sobriety in New Orleans. In the 1970s economists from the “Chicago school” argued that big firms were not a threat to growth and prosperity.

***** The pendulum swinging against monopolies in the academic world does not stop them in the real world. But it is a moment to pause and consider the state of competition.


“The Sense That the System Is Rigged Relates to Governments’ Failure to Address Inequality and Concentration”
ProMarket writers
In this installment of ProMarket’s interview series on the economic theory of the firm, we ask Stanford professor Anat Admati about the role of corporations and governments in the market.

****** The University of Chicago’s Stigler Center has a great blog.


I Was a Whistleblower. The Fed Is Not Doing Enough to Fix Wall Street’s Culture of Fear
Eric Ben-Artzi – Pro-Market
Deutsche Bank whistleblower Eric Ben-Artzi, who publicly rejected a multimillion dollar award from the Securities and Exchange Commission this summer, writes about the failure of regulators to fix the culture that wreaked havoc on the financial system.

****** Changing cultures is not that easy, though this may be why the Cubs’ Theo Epstein was voted the world’s best leader.


Want to help Chicago teens? Teach them finance.
Alec Litowitz – Crain’s Chicago Business
Finance is a subject usually viewed as a realm of college or graduate students, and maybe of a few math whizzes in high school. By far, most Chicago students complete their senior years witho…

****** A little bit of finance training goes a long way.


Teach STEM skills to all, urges report
Tim Wallace – Telegraph
All students should learn at least some science and technology skills to make sure they can fit into modern digital jobs, even if they study other very different degrees, new research says. Companies across the entire economy need science, technology, engineering and maths (STEM) skills, it found.

****** STEM education goes even further.


Bridging the Week by Gary DeWaal: April 10 to 14 and 17, 2017 (Theft of Trade Secrets; No Spoofing; Third-Party Payments; Fake News)
Gary DeWaal – Katten Muchin Rosenman LLP
Two employees of unrelated trading firms were criminally charged in a federal court in New York City with stealing or trying to steal the source code of their employers’ proprietary trading platforms – one individual last week and the other on April 7. Separately, a broker-dealer and its chief executive officer accused last month by the Securities and Exchange Commission of aiding and abetting a client’s purported ongoing manipulative trading activities vehemently disputed such allegations, and said that its customer’s trading represented ordinary market activity. Additionally, the SEC sued 27 firms and individuals for their role in issuing fake news related to certain companies. Fake news? I’ve heard that somewhere before! As a result, the following matters are covered in this week’s edition of Bridging the Week:


Friday’s Top Three
Our top read stories from Friday were led by the question many are asking: Who might be our next CFTC commissioners? The Wall Street Journal addresses the question with White House Weighs Renominating Ex-House Aide to CFTC. Second went to Cliff Asness’ piece Lies, Damned Lies, and Data Mining. And finally, another essay from Andy Rachleff of Wealthfront, comparing ETFs from Blackrock and Vanguard in Why We Avoid BlackRock ETFs


MarketsWiki Stats
98,126,001 pages viewed; 22,464 pages; 205,359 edits
MarketsWiki Statistics


Lead Stories

Commodities in Your Portfolio? It’s All Hogwash, Says Wall Street Dissenter; Campbell Harvey, a finance professor at Duke, is looking to upend conventional investing wisdom again
Ira Iosebashvili and Timothy Puko – WSJ
Campbell Harvey looks at Wall Street and sees a lot of ideas that are easy to sell, but hard to trust. The Duke University finance professor is making a career out of challenging research backing the products firms pitch to investors. A lot of it, he says, just isn’t sound. His studies have shown that more than half of all research pumped out by both academics and analysts is, in his words, “likely false.” Mine enough data, and you can find a result that backs up your idea, Mr. Harvey says.

The ‘London Whale’ trader lost $6.2 billion, but he may walk off scot-free
Renae Merle – Reuters
Bruno Iksil achieved Wall Street notoriety with one of the worst trades in history. He lost $6.2 billion ó more than three times the yearly budget of the Securities and Exchange Commission ó placing risky bets on complex financial instruments while working for JPMorgan Chase.

The Expensive Ingredient of Cheap ETFs; The hidden costs of trading ETFs may exceed $18 billion a year, according to one expert
Jason Zweig – WSJ
The costs of trading are one of the worst destroyers of investment returns. That’s a fact of life in the markets, although it’s easy to overlook in exchange-traded funds, where commissions and management fees have shrunk almost to zero.

Vanguard Is Growing Faster Than Everybody Else Combined
Landon Thomas Jr. – NY Times
The Vanguard trading floor is the epicenter of one of the great financial revolutions of modern times, yet it is a surprisingly relaxed place.

U.S. Treasury Has Switzerland in Its Sights
Catherine Bosley and Alice Baghdjian – Bloomberg
U.S. Treasury’s semi-annual report looks at currency practices; SNB isn’t engaging in competitive devaluation, Jordan has said
Switzerland was again included among the countries singled out by the U.S. Treasury for the value of their currencies and exports.

Fed Puts Together Plan to Unwind Securities Portfolio; As central bank officials hammer out details, the size and speed of process are crucial considerations
Nick Timiraos – WSJ
The Federal Reserve is moving quickly to fill in the details of how it will wind down its securities holdings in the years ahead, a process that could start this year and become the next big challenge for investors grown accustomed to easy money from the world’s most important central bank.

Calpers Is Sick of Paying Too Much for Private Equity; Pension fund’s private-equity returns were 12.3% over 20 years, but they would have been 19.3% without fees and costs
Dawn Lim and Heather Gillers – WSJ
The largest public pension fund in the U.S. is studying dramatic changes in how it invests in private equity that would slash payments to Wall Street managers, according to people familiar with the matter.

Exchanges, OTC and Clearing

System Status RSS
A new software version was applied to the primary CFE trade server on Sunday 4/9/17 prior to the 5:00pm CT start of trading. Sporadic order book complaints and systems errors (less than 10) occurred Monday 4/10/17 through Tuesday 4/11/17 at 3:15pm CT.

Research could be next for trading floor
Rick Baert – Pensions & Investments
The next commodity traded on an exchange could be manager research. Buying and selling investment research in a market is seen by some industry analysts as a natural progression from the current trend of aggregating a variety of research through financial technology. Impending European rules that will require unbundling and disclosure of research costs is only accelerating this evolution, they said.

SIX Swiss Exchange: March 2017: Strongest month in the year to date
March was the strongest month on SIX Swiss Exchange so far this year in terms of both trading turnover and the number of transactions. Trading turnover reached a total of CHF 143.1 billion in March, which marked an impressive increase of 32.2% on the previous month. There was also a marked rise in the number of trades, which were up by 17.8% to 4’682’615.

These are the World’s 20 Largest Stock Exchanges… (INFOGRAPHIC)
Visual Capitalist
Investors know the NYSE as a home for the world’s most important blue chip stocks. Massive companies like Walmart (WMT), Berkshire Hathaway (BRK.A), Exxon Mobil (XOM), and Coca-Cola (KO) are listed on the exchange along with roughly 2,400 other companies, and together they add up to an astounding $20 trillion in value. But how do other exchanges around the world, such as the ones in Toronto or London, compare to the famed NYSE?

The Saudi Stock Exchange Announces The Publication Of The Weekly Stock Market Ownership And Trading Activity Report (By Nationality And Investor Type)
The total value of shares traded for the week ending 13 April 2017 amounted to SAR 15.10 billion, decreasing by 0.29% over the previous week; while total stock market capitalization reached SAR 1,662.26 billion at the end of this period, decreasing by 0.08% over the previous week.


Global blockchain innovation: U.S. lags, Europe and China lead | VentureBeat | Business
Richard Kastelein – VentureBeat
SEC puts breaks on U.S. ecosystem
But overall, the blockchain ecosystem in America is moving slowly. The U.S. Securities and Exchange Commission has put up a major roadblock to innovation by not addressing the new phenomenon of Initial Coin Offerings (ICOs) and providing no regulatory framework for them to exist, thus stagnating U.S. blockchain developments.

The Johnson Financial Group Inc. Has $3,078,000 Stake in Fidelity National Information Services, Inc. (FIS)
A number of other hedge funds and other institutional investors have also recently modified their holdings of FIS. Zurcher Kantonalbank Zurich Cantonalbank boosted its stake in Fidelity National Information Services by 2.9% in the second quarter. Zurcher Kantonalbank Zurich Cantonalbank now owns 138,658 shares of the company’s stock worth $10,216,000 after buying an additional 3,887 shares during the last quarter. California State Teachers Retirement System boosted its stake in Fidelity National Information Services by 13.8% in the second quarter.

R3’s Denial of Russia’s Sberbank is Against the Principles of Blockchain
Cryptocoin News
After long and careful consideration, R3CEV, better known as the R3 consortium, also simply called R3, reportedly denied the application of Russia’s Largest Bank, Sberbank, to join the rest of the banks in the consortium due to international sanctions against Russia. Since the introduction of Bitcoin and the concept of blockchain technology in 2009, the blockchain has represented the following attributes: decentralization, transparency, immutability and security.

Hacking Group Claims N.S.A. Infiltrated Mideast Banking System
Nicole Perlroth – NY Times
For the past few months, an elite hacking group calling itself the Shadow Brokers has sporadically leaked sensitive data from the National Security Agency. On Friday, just when its leaks had appeared to slow, the group released what appears to be its most damaging leak so far: a trove of highly classified hacking tools used to break into various Microsoft systems, along with what it said was evidence that the N.S.A. had infiltrated the backbone of the Middle East’s banking infrastructure.

Bitcoin Wallets Under Siege From ‘Large Collider’ Attack
Jeff John Roberts – Fortune
A group called the “Large Bitcoin Collider” claims it can smash open bitcoin wallets by using a so-called brute force attack, which directs mass amounts of computer power at individual wallets in order to guess their private keys.

Regulating Bitcoin: how new frameworks could be a catalyst for cryptocurrencies
Tom Rees – Telegraph
Computer geeks packing away hard drives was never going to be quite as dramatic as sharp-suited bankers carrying boxes of their possessions and pieces of office art down Wall Street, but the collapse of the Bitcoin currency exchange Mt Gox in 2014 was widely seen as the alternative digital currency’s Lehman Brothers moment.

Global blockchain innovation: U.S. lags, Europe and China lead
Richard Kastelein – Venture Beat
No one can predict the future of blockchain in the same way we could not predict the future of the Internet in the early ’90s. But it is clear this technology is going to have a significant impact.

Bullion on the Blockchain: A New Gold Standard?
Noelle Acheson – Coin Desk
It’s hard to believe that the price of gold was fixed twice a day via conference call as recently as two years ago.


Cohn’s Goldman Shares Sold as He Touted Financial Overhaul
Bill Allison – Bloomberg
Unclear whether White House adviser knew about sale’s timing; Bank’s share price increased on news of regulatory review
On the same day that President Donald Trump’s top economic adviser, Gary Cohn, publicly promoted the administration’s plans to overhaul financial regulations, part of Cohn’s stake in Goldman Sachs Group Inc. was sold, according to federal financial-disclosure documents.

Wall Street banker Cohn moving Trump toward moderate policies
James Oliphant and Svea Herbst-Bayliss – Reuters
In a White House marked by infighting, top economic aide Gary Cohn, a Democrat and former Goldman Sachs banker, is muscling aside some of President Donald Trump’s hard-right advisers to push more moderate, business-friendly economic policies.

Trump Is a Global ‘Instability Factor,’ Fillon’s Top Aide Says
Helene Fouquet – Bloomberg
French presidential candidate’s aide speaks in an interview; Europe must counter the U.S.’s ‘global domination,’ he says
U.S. President Donald Trump’s unpredictability and his positions on North Korea and Russia could bring global instability, said Jean-Pierre Raffarin, a former French prime minister and a top aide to presidential candidate Francois Fillon.


SEC freezes brokerage accounts behind alleged insider trading
The Securities and Exchange Commission said on Friday it had frozen assets in two brokerage accounts used last week to reap more than $1 million in alleged insider trading profits in connection with a merger announcement by Liberty Interactive Corp and General Communication Inc.

CFTC Seeks Public Comment On Request From CME For Order Permitting Commingling Of Funds In Connection With Futures And Foreign Futures Contracts Listed On The Dubai Mercantile Exchange Limited
The U.S. Commodity Futures Trading Commission (CFTC) is requesting public comment on a petition submitted by Chicago Mercantile Exchange, Inc. (CME) for an order pursuant to Section 4d of the Commodity Exchange Act (CEA).

The shadow hanging over central bank control; In modern finance, money and debt have become increasingly commingled in a risky way
Wolfgang M¸nchau – FT
Every few decades or so, the world of central banking turns upside down. Over the last 100 years we had systems in which central banks targeted a fixed conversion rate to gold, the supply of money in circulation or, more recently, a rate of expected future inflation. A combination of deep changes in the money markets and financial crises is now conspiring towards another big change.

US Treasury Releases Report On Foreign Exchange Policies Of Major Trading Partners Of The United States
The Department of the Treasury issues this Report on developments in international economic and exchange rate policies and submits it to Congress pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. ß 5305 and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015.

Top Wall Street lawyer takes aim at SEC in new book
Kevin Dugan – NY Post
One of Wall Street’s top lawyers is taking aim at one of Washington’s biggest regulators.
In his new book, “Going Public: My Adventures Inside the SEC and How to Prevent the Next Devastating Crisis,” veteran lawyer Norm Champ recounts his tumultuous five years at the Securities and Exchange Commission.

Investing and Trading

Exchange traded funds attract record inflows in first quarter; Investors continue their shift from active management in protest at high fees
Chris Flood – FT
Exchange traded funds attracted record inflows in the first three months of 2017 as investors continue to move out from traditional actively managed funds in protest against inconsistent performance and high fees.

Hedge fund legend Ray Dalio to individual investors: Market timing is ‘like playing poker’ against world’s best
Business Insider
This week’s episode of The Bottom Line with Henry Blodget includes Part 2 of Henry Blodget’s extended interview with Bridgewater’s Ray Dalio.

Stock-Picking Fund Managers Are Even Worse Than We Thought At Beating the Market
Jeff Bukhari – Fortune
Rather than hiring a stock picker to run your investment portfolio, you’re probably better off just investing in market indexes.

Private equity bets big on software ; A new wave of funds thinks it can win with aggressive investments in tech businesses
Tom Braithwaite – Financial Times
For someone who prefers a low profile, Robert Smith has a knack for attracting attention. Mr Smith, who rarely gives interviews, held his wedding in 2015 at an inaccessible Italian villa, in theory far from the gazing eye. But given that his bride Hope Dworaczyk was a former Playboy Playmate of the Year and the entertainment was provided by John Legend and Seal, photos of the ceremony made the tabloids anyway.

Undaunted by oil bust, financiers pour billions into U.S. shale
Ernest Scheyder – Reuters
Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry’s resurgence.

Securities-based loans are scaring fiscal experts
Kevin Dugan – NY Post
Forget subprime mortgages ó one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets.

ETFs Show Limits in World of Emerging-Market Bonds; Debt issued by governments and companies in emerging economies can be harder to buy and sell, while higher transaction costs have resulted in tracking errors
Carolyn Cui – WSJ
Exchange-traded funds have jolted stock picking with their low costs and strong performance. But in emerging-market debt, they are facing greater competition from active investors.


Cryan eyes Deutsche Bank turnaround after EUR8bn cash call
Ben Martin – Telegraph
When Deutsche Bank poached veteran mergers and acquisitions banker Tom Cooper from Swiss rival UBS in 2009, Germany’s largest lender said the rainmaker would be “a huge asset to the team”.

UK small brokers make a move into banks’ M&A turf; Numis, Investec and Panmure Gordon among those broadening services as IPOs slow
Chloe Cornish and Thomas Hale – FT
UK corporate activity is on two different speeds this year. British companies are being bought at their fastest pace since the global financial crisis. But the rate of London stock market listings continues to be slow.

Henry Hillman, Who Helped Fund KKR, Kleiner Perkins, Dies at 98
Laurence Arnold – Bloomberg
Pittsburgh billionaire expanded the family’s industrial base; He was among the ‘least-known powerful individuals in America’
Henry Hillman, a billionaire who diversified his family’s Pittsburgh-based coal and coke fortune and provided startup funding for private-equity firm KKR & Co. and Silicon Valley venture-capital company Kleiner Perkins Caufield & Byers, has died. He was 98.

Wells Fargo Board Faces High-Stakes Vote; Investor concerns about the response to sales-practice issues and an ISS recommendation are among the threats to reelection
Emily Glazer and Joann S. Lublin – WSJ
Wells Fargo & Co. faces something few other big banks have dealt with since the financial crisis: a serious effort to vote out most of its directors.

BRIEF-KCG says in March KCG Institutional equities averaged 206.0 mln U.S. equity shares traded per day


A $161 Billion Manager Says the Japanese Stock Gloom Is Overdone
Tom Redmond and Min Jeong Lee – Bloomberg
Pictet says it’s less concerned about earnings, North Korea; Benchmark Topix index has tumbled for five straight weeks
Japanese stocks have been battered so badly that they’re too cheap to ignore, says the $161 billion investor Pictet Asset Management Ltd., after the Topix index tumbled to its fifth straight weekly loss.

Simsek Rules Out Turkey Elections Before 2019 on Erdogan Promise
Onur Ant – Bloomberg
Government will focus on structural reforms to fix economy; Simsek speaks to Bloomberg in Ankara following referendum win
Deputy Prime Minister Mehmet Simsek said Turkey is unlikely to hold an early election to speed up the transfer of power to the president’s office, pledging that Sunday’s referendum victory will usher in an agenda that will restore political stability and accelerate economic growth.

Japan says it’s committed to G20 agreement on forex policy
Japan is committed to the G20 agreement on foreign-exchange policy and is not manipulating its currency, Chief Cabinet Secretary Yoshihide Suga, the country’s top government spokesman, said on Monday.

This Is a Dangerous Time to Own Emerging-Market Stocks; Some worry a recent buying spree has resulted in lofty valuations as geopolitical tensions rise
Saumya Vaishampayan and Ira Iosebashvili – WSJ
A crack is forming in the emerging-market resurgence.


Brexit will damage UK standards of living, say economists; Verdict comes a year on from Treasury forecast of dire economic consequences
Chris Giles – FT
The consequences of Brexit for UK standards of living are negative and highly uncertain, economists have said as Britain and the remaining EU-27 member states prepare to start divorce talks.

London battles to keep hold of two main EU agencies; David Davis claims medicine and banking bodies will not have to leave Canary Wharf
George Parker and Duncan Robinson – FT
Britain is fighting to remain the home of two of the EU’s most prestigious agencies covering medicines and banking after Brexit, in a move that is likely to cause astonishment in European capitals.


Journalism faces a crisis worldwide – we might be entering a new dark age
Margaret Simons – The Guardian
Almost anyone can use the worldwide web to be a media outlet, so how will we differentiate between truth, myth and lies?

Business school students find voices in an age of protest; MBAs are turning to campus activism, inspired by business leaders
Jonathan Moules – FT
When Keith Scott was shot and killed by a policeman in North Carolina in September, Matt Bubley felt compelled to rally his fellow students at Dartmouth College’s Tuck School of Business.

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