First Read

Hits & Takes
Can you get transcendent for charity? – ohmmmmm, yes. Check out the SweatForALTSO X ASCEND event Sept. 6th in Chicago. It’s a yoga/meditation event and part of the series of active events A Leg To Stand On usually hosts in New York. This is ALTSO’s first such Chicago event! ~JK

Hoosier humor. The increasingly funny Walt Lukken had the tweet of the day yesterday when he posted “Life’s constants: Death, taxes and Lothian’s plugging of Pat Kenny. Great advice for interns” along with links to the Pat Kenny MarketsWiki Education video.~JJL

(Click for larger image)
US Bank branch manager at the Rookery Building in Chicago LaTacha Knox and several associates taught the Personal Management merit badge as part of Trading Tech 300 yesterday. They had presentations on banking, credit, investing and more from various departments and the Scouts even had a tour of the U.S. Bank trading floor. Congratulations to U.S. Bank on a great day for the Scouts.~JJL

The CME Group celebrated 40 years of trading the 30-year Treasury Bond on August 22. Trading was launched on August 22, 1977. It took four years for the 30-year Treasury Bonds to become the most actively traded futures contract in the world.~JJL

Today’s video from MarketsWiki Education World of Opportunity in Chicago is of Julie Lerner of the PanXchange.~JJL

Cinnober’s interim results are out, reflecting many of their investments in the future.

Floyd Mayweather is promoting yet another initial coin offering (ICO). In case anybody forgot, Mayweather vs. McGregor is this Saturday. There’s some fun bookmaking going on for this fight as well – odds are so in favor of Mayweather that 95 percent of bets at the MGM are going for McGregor. This lopsided market means huge losses (~$50m is the estimate) for Vegas sports books. ~SD


Mnuchin’s Fort Knox Quip: ‘I Assume the Gold Is Still There’
Saleha Mohsin and Alister Bull – Bloomberg
Only third Treasury secretary to visit U.S. Bullion Depository; $200 billion worth of gold, though not counted since 1953
U.S. Treasury Secretary Steven Mnuchin paid a rare official visit to Fort Knox to check out the nation’s gold stash on Monday — while keeping an open mind for future film projects.

***** Remember what Warren Buffett said about gold (Courtesy of Minyanville): “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”~JJL


Trump Takes Aim at the Press, With a Flamethrower
Jim Rutenberg – NY Times
Every time you think President Trump’s anti-press rhetoric can’t get worse, he finds a way of surprising you and not surprising you all at the same time.

***** Luckily, I am part Targaryen.~JJL


Global Trading Markets, Disruptive Tech and Entrepreneurship – Julie Lerner

“You can’t be an entrepreneur until you get that big idea. And that idea needs to be so big it feels like a curse as much as a blessing in the sense that you know you have to go do it.”

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Julie Lerner, CEO of PanXchange, discusses the convergence of global markets and being a successful entrepreneur. Lerner maintains that not only do you need passion, you need a specific niche. She realized she found hers when she learned how to embed options into cash contracts while working for Cargill trading Latin American sugar. Lerner’s passion is commodities, but her niche is business development. Any entrepreneur trying to develop a business must have the network and reputation to give the endeavor legs. A great idea is useless in a vacuum.

Read the rest and watch the video »


CASE STUDY; University of Chicago: Midwest Trading Competition
Trading Technologies
The University of Chicago (UChicago) launched the annual Midwest Trading Competition in 2013. Schools from California to Texas to New York and beyond travel to Chicago to compete in this day-long matchup, which is billed as “the nation’s premier algorithmic trading competition.” The event, which sprouts from UChicago’s Career Advancement Department, was created to foster an authentic environment to equip students with beneficial skills, experience and networking opportunities in the world of trading. As the competition has grown over the years, UChicago decided that for the 2017 competition, they wanted to provide a more realistic and robust trading platform to enhance the competitor experiences. The new platform needed to be able to handle a high volume of messages in a short period of time and exhibit real-market data showing high volatility, high liquidity and real commodity prices. That’s where TT came in.


Wednesday’s Top Three
Our top read piece of the day yesterday was the Forbes article Wall Street’s Cowboy Traders Find New Riches In Bitcoin And Cryptocurrencies. Second went to the report on the Michael Coscia case from Crow & Cushing. Third went to the New York Times’ piece How Many Americans Would Pass an Immigration Test Endorsed by Trump?


MarketsWiki Stats
106,525,445 pages viewed; 22,682 pages; 207,967 edits
MarketsWiki Statistics


Lead Stories

How Fair Is Stock Trading? The SEC May Soon Decide
Annie Massa – Bloomberg
SEC eyes test of how exchange payouts to traders affect market; Equity players debate system with near-religious zeal
When it comes to fairness on U.S. stock exchanges, nobody really knows the truth. There’s never been a comprehensive study on the desirability of the system in place at the three biggest U.S. stock exchanges, which pay some traders to use their platforms and charge others. That hasn’t stopped advocates on both sides of the issue from making arguments in favor or against the practice with similar near-religious zeal.

U.S. Gets Easier Path to Insider-Trading Convictions; Judges reject former SAC Capital Advisors manager Mathew Martoma’s request for new trial
Nicole Hong – WSJ
Prosecutors recovered lost ground in their fight against insider trading with a court decision Wednesday upholding the 2014 conviction of former SAC Capital Advisors LLP portfolio manager Mathew Martoma.

Soc Gen promotes O’Hara to lead US prime brokerage and clearing; O’Hara replaces Alain Courbebaisse, who joined Euronext in May as its new chief information and technology officer.
Joe Parsons – The Trade
Societe Generale has promoted John O’Hara as head of prime brokerage and clearing business for the Americas, marking the latest reshuffle for the former Newedge unit.

**To see some of SocGen’s history, see last year’s JLN piece We Can Rebuild It: SocGen Prime Services Group Reengineered And Growing

Typhoon Hato kills 12 in Macau and southern China; Thousands evacuated, flights cancelled and schools closed after the storm triggers Hong Kong’s most severe warning
Associated Press via The Guardian
Typhoon Hato has killed at least 12 people after it tipped across southern China on Wednesday, battering Hong Kong skyscrapers, flooding streets and forcing thousands to flee to shelters.

BOX Trading Floor Launches
PR Newswire
BOX Options Exchange, an innovator in market structure and client services, is pleased to announce the launch of BOX’s new trading floor today.

Lack of Disclosures Raises Questions About Who Controls Chinese Conglomerate
David Barboza – NY Times
Questions about the ownership and corporate structure of the HNA Group, one of China’s biggest — and most acquisitive — companies, are mounting, prompting scrutiny by regulators in the United States and Europe and leading at least one Wall Street bank to step away from it.

Three challenges facing investors ahead of Mifid II; Looming regulation aims to inject greater transparency into all markets
Philip Stafford – FT
Europe’s big bang of market reforms, known as Mifid II, is approaching faster than the financial services industry would like.

Investors pour back into crisis-era credit product; Market for bundles of credit default swaps more than doubles for year to date
Joe Rennison in New York – FT
Hedge funds are embracing an esoteric credit product widely blamed for exacerbating the financial crisis a decade ago, as low volatility and near record prices for corporate debt tempt them into riskier areas to seek higher returns.

Mario Draghi and Janet Yellen pose headline risks for traders; Central banks gathering in Jackson Hole may spur sleepy August markets into life
Robin Wigglesworth – FT
Washington’s House of Cards-rivalling political drama has dominated investor attention this summer, but this week the focus is shifting to a sleepy valley in Wyoming.

The EU and U.S. Want to Change the Rules of the Bond Market; European officials think voters are more important than the institutions that buy their bonds, but that’s a costly error.
Mark Grant – Bloomberg
What are the powers that be at the European Union and European Central Bank thinking? They have now concocted a very dangerous scheme to buy back junior bank bonds that were “mis-sold” to retail investors and “voiding” — yes, “voiding” — EU bank indentures in the process. I suppose they think voters are more important than the institutions that buy their bonds, but that’s a costly error.

Lots of Firms May Dodge the Full Brunt of MiFID
Silla Brush – Bloomberg
EU Parliament’s Ferber eyes industry’s ‘regulatory arbitrage’; Tudor, Brevan Howard switched licenses ahead of MiFID II start
Europe’s MiFID II rules haven’t even kicked in, yet policy makers are already busy trying to make sure their oversight of financial markets is up to date.

Conviction upheld in biggest insider-trading case in history
Carleton English – The New York Post
Mathew Martoma won’t be breathing the fresh air anytime soon.
The ex-SAC Capital trader, who was caught in the most lucrative insider-trading scheme in US history, saw his conviction upheld by the Second US Circuit Court of Appeals on Wednesday.

Exchanges, OTC and Clearing

Arrival of Last Trading Day for Options contracts on 10-year JGB futures

Base prices and daily price limits for newly listing ETF :iShares USD Investment Grade Corporate Bond JPY Hedged ETF and 1 other
The base price, etc. of 2 ETFs, including iShares USD Investment Grade Corporate Bond JPY Hedged ETF (Code: 1496), which is scheduled for initial listing on August 25, are as below.

HKEX signs MOU with Sichuan Provincial Government
Hong Kong Exchanges and Clearing Limited (HKEX) and the People’s Government of Sichuan Province (Sichuan Provincial Government) today (Thursday) signed a Memorandum of Understanding (MOU) to strengthen mutual communication and cooperation, aiming to support and promote future development in both capital and commodities markets.


Bitcoin and Ether rise, helping take crypto space above $150 billion market cap
By Ryan Vlastelica – MarketWatch
The price of digital currency bitcoin rose on Wednesday, putting it on track for a second straight daily increase, a rally that took total market capitalization of the entire cryptocurrency space above $150 billion.


Trump’s Border-Wall Pledge Complicates GOP Efforts to Avoid Government Shutdown
Kristina Peterson and Siobhan Hughes – WSJ
President Donald Trump’s threat to shut down the government if Congress doesn’t approve funding for a wall along the Mexico border raised alarm among some GOP lawmakers, injecting new volatility into an already uncertain political climate this fall.

Federal Electricity Study Hints at Future Support for Coal
Brad Plumer – NY Times
The Trump administration on Wednesday released a major report urging actions to protect the “reliability and resilience” of the nation’s electric grid, a move that could lay the groundwork for future support of America’s ailing coal and nuclear industries.

Fearing Trump effect, US governors seek to reassure foreign investors; Local officials feel need to compensate for president’s combative rhetoric
Shawn Donnan in Washington – FT
Governors and mayors across the US are mounting a push to reassure foreign companies they are welcome in the US despite Donald Trump’s combative “America First” rhetoric and his increasingly tense relationship with the American business community.


Big four banks change loan contracts to eliminate unfair terms
Following a commitment to further review their small business loan contracts, the big four banks have now agreed to specific changes with ASIC to eliminate unfair terms from their contracts.

ASIC remakes ‘sunsetting’ class order on disclosure relief for an offer to a director or secretary
ASIC has remade Class Order [CO 04/899] Definition of ‘senior manager’—modification which was due to expire (‘sunset’) on 1 October 2017.

ASIC launches Small Business Strategy 2017-2020
ASIC has today outlined its approach and broader vision for working with small business with the launch of its Small Business Strategy 2017-2020.

Sebi to look afresh into governance-related complaints at Infosys
Business Standard
Watchdog Securities and Exchange Board of India (Sebi) will look afresh into complaints of alleged corporate governance-related lapses at Infosys amid a high profile leadership crisis and public spat between founders and top management of the IT firm.

RBI should not step into day-to-day activities of banks, says Subbarao
By Namrata Acharya – Business Standard
Former Reserve Bank of India (RBI) governor D Subbarao on Wednesday said the banking regulator should not step into day-to-day activities of banks, as it does not have the expertise to manage a bank’s business. Subbarao was referring to the May 5 ordinance amending the Banking Regulation Act, which said the central bank has the powers to suggest and even compel banks to invoke proceedings against defaulters.

Muni Bond Issuer and Underwriter Charged With Disclosure Failures
The Securities and Exchange Commission today announced that a municipal financing authority in Beaumont, California, and its then-executive director have agreed to settle charges that they made false statements about prior compliance with continuing disclosure obligations in five bond offerings.

Investing and Trading

Why Options ETFs Are Gaining Traction
Sumit Roy –
Options strategies aren’t used very often in the exchange-traded fund world. There are only nine ETFs that regularly use options, with total assets under management of a combined $800 million—small potatoes in the $3 trillion ETF industry.

Top Wall Street quant could be entering the ETF game
Evelyn Chang – CNBC
AQR Capital Management manages $195 billion in assets and filed last Thursday with the U.S. Securities and Exchange Commission for an exemption that could allow it to introduce exchange-traded funds.

Hedge funds can’t stop betting on the stock market’s secret weapon
Joe Ciolli – Business Insider
The US dollar is already down almost 9% in 2017, bucking bullish expectations heading into the year. But can the greenback fall further?
Hedge funds think so. In fact, they’re the most bearish in three years.

Indexers take action on voting rights
Mary Fjelstad, senior research analyst – FTSE Russell
Concerns over how corporate governance is affected by the growth of passive investments are not new. Some argue that passive investors do not care how companies are managed because they do not base their stock purchase/sale decisions on the idiosyncratic characteristics of individual companies.

These are the world’s 10 most crowded trades in the stock market right now
Shawn Langlois – MarketWatch
Swiss bank UBS this week released its list of the 10 most crowded trades, and among the mostly familiar crop of names, there are a few you wouldn’t necessarily expect to see, including the stock holding the top spot.

Bitcoin and Ether rise, helping take crypto space above $150 billion market cap
Ryan Vlastelica – MarketWatch
he price of digital currency bitcoin rose on Wednesday, putting it on track for a second straight daily increase, a rally that took total market capitalization of the entire cryptocurrency space above $150 billion.
Ether, the chief rival to bitcoin, which runs on the Ethereum network, also rose on Wednesday, and hit its highest level since June.

Bull Market in Uncertainty Propels Gold Rush; The precious metal is rising faster than the S&P 500 for the first time in six years
Ira Iosebashvili and Amrith Ramkumar – WSJ
Gold is on track to outperform stocks for the first time since 2011, highlighting the uncertainty that has accompanied this year’s stock market gains.

Potential Risks When Constructing a Sustainable Lifetime Income
S&P Dow Jones Indices Indexology
In retirement, financial ruin is taken to mean when one’s savings have been depleted before one passes away. If one’s savings are invested in a diversified portfolio, financial ruin is taken to mean the combined effects of withdrawals and adverse market conditions that can potentially deplete the portfolio before one’s passing.

Invesco Close to Deal for Guggenheim ETF Business; Deal valued at more than $1 billion, sources say
By Justin Baer – WSJ
Invesco Ltd. is nearing an agreement to buy Guggenheim Partners’s exchange-traded-funds business for more than $1 billion, people familiar with the matter said.

These are the world’s 10 most crowded trades in the stock market right now
By Shawn Langlois – MarketWatch
Swiss bank UBS this week released its list of the 10 most crowded trades, and among the mostly familiar crop of names, there are a few you wouldn’t necessarily expect to see, including the stock holding the top spot.


Invesco Has Right Mix at the Right Price
Aaron Back – WSJ
Shares of asset-management firms have taken a drubbing over the past month. This presents a compelling buying opportunity for at least one promising company.
Atlanta-based Invesco stands out against many of its peers for its diversity across asset classes and strategies. Since saying it expects marginally higher expenses in a conference call last month, however, its shares are down by around 9%.

This tangled web: banks seek to contain systemic model risk; Network studies are being used to identify model dependencies and concentrations
Louie Woodall –
Ask any bank risk manager about interconnectedness and the conversation will quickly turn to the complex interlinkages that tie the fortunes of one firm to those of other financial institutions.

RBS Settles Property Developer’s $856 Million Libor-Rigging Suit
Gavin Finch – Bloomberg
Stuart Wall said RBS mis-sold him interest-rate hedging tools; Wall claimed the swaps contributed to collapse of his business
Royal Bank of Scotland Group Plc settled a lawsuit filed by the owner of a bankrupt student- housing company that claimed the bank had sold him hedging products linked to Libor while at the same time trying to rig the interest-rate benchmark.

Germany’s central bank just shifted 50,000 gold bars held overseas due to Cold War fears
Karen Gilchrist – CNBC
Germany’s central bank completes transfer of $27.9 billion worth of gold bars back to Frankfurt.
A total of 53,780 bars were being held by the Federal Reserve in New York and France’s central bank to hedge against political and currency risks.
The transfer was completed three years ahead of expectations.


Germany Finishes Bringing Gold Reserves Back From France
Germany’s central bank says it’s completed a plan to repatriate gold reserves it stashed abroad during the Cold War three years ahead of schedule.


Britain urgently needs a new economic plan to show that it’s ready for Brexit
Allister Heath – Telegraph
Slowly but surely, the government is getting its act together on Brexit. It needs to start making actual hard choices in its “position papers”, not merely lists of options, but it is clear from the stream of documents being published that ministers and civil servants are finally gripping the issues in all of their bureaucratic complexity.

Paris or Frankfurt? BofA Executives Debate Trading Hub Location
Laura J Keller – Bloomberg
One plan would put bond trading in France, equities in Germany; Dublin, already embraced by CEO Moynihan, is also in the mix
Bank of America Corp.’s investment bank executives are divided over where their European Union trading hub should be after Brexit, according to people with knowledge of the matter.

Amsterdam’s Secret Brexit Sauce Is a Friendly Regulator
Will Hadfield and Ellen Proper – Bloomberg
Dutch financial center becomes a magnet for traders and venues; While speed traders flourish, the bonus cap is deterring banks
Frankfurt has the banks, and Paris has the culture, but for trading firms looking for a post-Brexit European home, Amsterdam may have the best attraction of all: a friendly regulator.

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