First Read

Run Gary Run
By Jim Kharouf

It has been almost two years since Gary Gensler left the Commodity Futures Trading Commission as perhaps its most talked about, debated and in some circles, despised chairman. To some, his unrelenting drive to pound home rules established by the Dodd-Frank Act was considered a declaration of war against the derivatives industry. To his supporters, his determination was lauded, and he was considered one of the guys who was ready to stand up to Wall Street and LaSalle Street all in the name of Main Street.

Now Gensler has grabbed attention this week at the FIA Expo in Chicago. On the Washington panel Thursday, Gensler’s name was brought up because of rumors that he is in the running to be the next U.S. Treasury secretary. CME’s Terry Duffy said he thought it was doubtful that Gensler, now an advisor to Hillary Clinton, would actually get the nod if she won the presidency, as there may be other qualified candidates that fit the profile. Jimmy Ryan, partner and co-founder of Subject Matter, said Secretary Clinton has made it clear that she would like more women in her cabinet, and Treasury secretary may well be one of the posts.

On the other hand, it’s been reported that Gensler has the support of Senator Elizabeth Warren, who has been laying into anyone and everyone connected to Wall Street. Her scathing attack on Wells Fargo CEO John Stumpf helped make him ex-CEO. Oddly, Senator Warren hasn’t weighed in on fellow Democrat Jon Corzine, who somehow managed to settle his case at a profit, and escaped the heavy hammer of Gensler while he ran the CFTC during the MF Global disaster.

So here we are, heading toward a likely Clinton presidency, and the one man in the industry who could actually qualify for Dancing With the Stars may become our next Treasury secretary. Who in this industry will be the first to shake his hand?


A Great Week
By John J. Lothian

It has been a great week in Chicago for the FIA EXPO and the financial services industry, culminating with a terrific turnout for The Great Steakout.

The industry and the EXPO crowd came out in force last night at the Chicago Hilton for the end of conference fundraiser to support the Greater Chicago Food Depository. There were even people there at the fundraiser who did not come to the EXPO.

The Steakout is proving to be an invaluable, innovative and brilliant way to end EXPO on a positive note. Beyond raising funds for a great cause, the Steakout allows attendees to network, enjoy great food and drink and even watch a little sports. The go-ahead home run by Addison Russell of the Chicago Cubs last night in the National League Championship Series versus the Los Angeles Dodgers drew a huge cheer from the crowd.

The great steakhouses of Chicago were on display last night, which proves valuable to them as these attendees come back to town in future months. It was a win-win all around, with even a big W for the Chicago Cubs.

I could not be more proud of the industry for the way they turned out and supported this fundraiser. As the co-chair of this year’s LaSalle Street Trading Tech Awards event for the Boy Scouts, I hope we can capture some of this momentum for our event.

Nice job people. Congratulations on a great week, and a good deed.


Women In Fintech Panel
Sarah Rudolph – JLN
Both women and men gave high marks to the Women in Listed Derivatives-sponsored panel on Women Who Shape Fintech, moderated by Diane Saucier, the president of WILD and client relationship manager at Fitch Learning.

Some of the takeaways were:

  • There is still a “confidence gap” between men and women. For example, women are often hesitant to apply for a particular job unless they meet 100 percent of the qualification requirements, whereas men often take a chance even if they only meet 70 percent.
  • Only about 7 percent of entrepreneurs getting funding are women. And there are even fewer in fintech.
  • In the real world, you have to sell yourself. Working hard while keeping your head down isn’t enough.
  • Get out of your comfort zone, and don’t be afraid to fail. With Fintech, there is always a real risk that it won’t work (at least at first).
  • Having an opinion means you get invited back to the table.
  • Game changers in the fintech world include blockchain, or distributed ledger technology. “We are sitting in the middle of a distributed ledger storm.” Among those working on using the technology are the Cook County Recorder of Deeds and real estate groups who are partnering with trading tech companies. And of course DRW.
  • If we want to help girls become interested in fintech, we have to start before middle school, and give them mentors and role models.


MWE Europe 2016


Firms of the Future: Regulation, Technology and Finding Your Niche
Jim Kharouf – JLN
In this special report on the state of the futures industry, John Lothian News spoke with several key FCM and proprietary trading firm executives to discuss today’s challenges and opportunities in their respective markets. This off-the-record meeting covers everything from the current market landscape to the challenges of regulation to technology and the future of our industry. Click here to see what executives had to say in this dynamic and shareable report.


The cult of the expert – and how it collapsed; Led by a class of omnipotent central bankers, experts have gained extraordinary political power. Will a populist backlash shatter their technocratic dream?
by Sebastian Mallaby – The Guardian
On Tuesday 16 September 2008, early in the afternoon, a self-effacing professor with a neatly clipped beard sat with the president in the Roosevelt Room of the White House. Flanked by a square-shouldered banker who had recently run Goldman Sachs, the professor was there to tell the elected leader of the world’s most powerful country how to rescue its economy. Following the bankruptcy of one of the nation’s storied investment banks, a global insurance company was now on the brink, but drawing on a lifetime of scholarly research, the professor had resolved to commit $85bn of public funds to stabilising it.


Thursday’s Top Three
Yesterday’s top read piece was Wednesday’s most read item as well, the John Lothian & Co. report called Firms of the Future: Regulation, Technology and Finding Your Niche. This report, sponsored by Itiviti was mentioned frequently at Expo this week and worth a read. Second place went to the always attention grabbing case of Igor Oystacher, a consistent most read topic for our readers. Here is the latest, and perhaps one of the last pieces we see on it from Reuters, U.S. CFTC agrees to settle lawsuit against accused ‘spoofer’. Third went to Pensions & Investments’ piece on Reg AT, CFTC chairman: Managers’ concerns over algorithm codes disclosure to be addressed

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Lead Stories

Hedge Fund Managers Struggle to Master Their Miserable New World
Saijel Kishan – Bloomberg
Average returns over past three years were only 2 percent; ‘This feels like cancer to many people, a slow death’
Howard Fischer, wearing a white shirt and khakis, leans back into a window seat at a juice bar in Greenwich, Connecticut, sips a cold-brewed Mexican mocha and shares his angst.

Scam, Prank Or Abstract Art? New Phony SEC Filing Indicates $88 Billion Purchase Of Bank Of America Stock
Wayne Duggan – Benzinga
Whether it be an odd prank, a publicity stunt, an amateurish scam or some kind of extremely abstract art, a new fake filing related to Bank of America Corp has shown up on the U.S. Securities and Exchange Commission’s Edgar regulatory filing system

U.S. Treasury official urges move away from Libor
A U.S. Treasury Department official said on Thursday it is critical for financial markets to make plans for a transition to an alternative reference rate to Libor, the London interbank offered rate, because of its flaws.

Squeezing Hedge Funds Is Path to Profit at Three Big Banks
Dakin Campbell, Hugh Son – Bloomberg
Morgan Stanley, Goldman Sachs, JPMorgan market share climbs; Citigroup, Bank of America post drop in stock-trading revenue\
In the battle for supremacy on Wall Street’s equity trading desks, the most successful banks are dangling a precious resource in front of hedge-fund clients: a balance sheet.

Hedge Funds Hurt as Investors Remove $28 Billion in 3 Months
It has been a bruising year for hedge funds. Big bets have been disastrous, investors have voiced discontent and some managers have been forced to rewrite their playbooks or call it quits.

ICE warms to expanding US clearing model; ICE exploring new direct clearing models for US derivatives.
By Joe Parsons – The Trade
Intercontinental Exchange (ICE) is currently exploring new direct clearing models for the US derivatives market. Hester Serafini, chief operating officer for ICE Clear US, told delegates at FIA Expo 2016 that it is looking to replicate its European “Sponsored Principal” model, which allows clients to become a direct counterparty to the clearing house with separate position, margin and asset accounts.

Making Billions With One Belief: The Markets Can’t Be Beat
Jason Zweig – WSJ
The fastest-growing major mutual-fund company in the U.S. isn’t strictly an active or passive investor. It’s both. Dimensional Fund Advisors LP, or DFA, is the sixth-largest mutual-fund manager, up from eighth a year ago, according to Morningstar Inc., adding nearly $2 billion in net assets per month at a time when investors are fleeing many other firms.

Hedge Fund Managers Expect ‘Massive’ 34% Pay Cut, Survey Says
Portfolio managers at hedge funds, facing an exodus of investors frustrated with high fees, are about to feel the pain from an estimated 34 percent reduction in their compensation.

UBS’s Currency Trading Volume Hit Record as Pound Crashed
Netty Idayu Ismail – Bloomberg
‘We processed our highest volume of trades in a minute’: Hall; Fed move, other central bank policy changes to boost trading
UBS Group AG, the world’s third-biggest currency trader, said it processed a record number of currency trades during the minutes of the pound’s flash crash this month.

Inside Billionaire Steve Cohen’s Comeback
By Jen Wieczner
In 2013, an insider-trading scandal brought down his hugely successful hedge fund. In his first interview about the firm since then, Cohen tells Fortune how he’s rebuilding for redemption.


Lawyers Are Thriving Because of Brexit; The vote to quit the EU heralds fat times in the advice industry—for now.
Matthew Campbell, Stephanie Baker – Bloomberg
In the four months since Britain voted to leave the European Union, the pound has plummeted, home prices are down, and banks have threatened to move jobs from the U.K. One business, though, is thriving and poised for a very profitable 2017: peddling advice. Extricating the U.K. from 40 years of European integration will be one of the most complex legal and regulatory exercises ever, which is why demand for legal and consulting services is surging. “The panic is starting to set in,” says Miriam Gonzalez, co-chair of the international trade and government regulation practice at law firm Dechert. “Those who have a lot of interests at stake need to do work now.”

Deutsche Bank News

Deutsche Bank Shares Back to Level Before DOJ $14 Billion Demand
Nicholas Comfort – Bloomberg
Shares traded at 13.10 euros before company confirmed request; Deutsche Bank has said it won’t pay as much as U.S. sought
Deutsche Bank AG’s shares have recovered from the selloff sparked by the U.S. Department of Justice’s request for $14 billion to settle a probe tied to its mortgage-backed securities business.

U.S. judge picks monitor for Deutsche Bank over regulator’s choice
By Nate Raymond – Reuters
A U.S. judge on Thursday approved a U.S. Commodity Futures Trading Commission deal with Deutsche Bank AG in which a monitor would be appointed to ensure the bank reports swaps data properly, but named someone other than the regulator’s choice. U.S. District Judge William Pauley in Manhattan, who previously warned he had a duty to not simply “rubber stamp” settlement agreements, agreed the appointment of an independent monitor was warranted. But Pauley said that after reviewing three candidates the CFTC submitted to serve as monitor, including its preferred and vetted choice of Chatham Financial, he decided to conduct his own search.

Deutsche Bank vs. DOJ: Here’s why it’s all taking so long
Spriha Srivastava – CNBC
It’s been a month since the first mention of reports that Deutsche Bank would have to stump up $14 billion to settle with the U.S. Department of Justice (DOJ). Despite the bank’s stock taking a hammering in the markets — Deutsche Bank shares are down 45 percent since the start of the year — we appear to be no closer to a resolution that won’t cripple the bank or hurt the DOJ’s reputation.

Exchanges, OTC and Clearing

CME Group and Thomson Reuters Name Morgan Stanley as new LBMA Silver Price Participant
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, and Thomson Reuters today announced that Morgan Stanley has joined the LBMA Silver Price as a new member. CME Group and Thomson Reuters operate the Silver Price.

No Trading Today in Securities and Derivatives Markets due to Issuance of Typhoon Signal No. 8
Hong Kong Exchanges and Clearing Limited (HKEX) announced that today’s trading sessions in the securities and derivatives markets, including After-Hours Futures Trading, have been cancelled due to the issuance of Typhoon Signal No. 8.

Unscheduled Free Float Adjustment in SDAX; Changes to take effect from 25 October
Deutsche Boerse
The German Börse AG announced an extraordinary adjustment of the free float share of Capital Stage AG in SDAX on Thursday. Following a company takeover, there is a capital increase and a significant change in the shareholder structure of Capital Stage AG; by the free float share of Capital Stage AG has changed by more than 10 percentage points.

Equity Index Derivatives: STOXX® Europe 50 options: Adjustment of Market-Maker obligations
Effective 24 October 2016, the Market Maker obligations for STOXX Europe 50 options (product code: OSTX) will be adjusted.

LCH to revise margining after Brexit backlash; Excess intra-day margin will offset other collateral calls from November 3
Peter Madigan – The Trade
LCH is to alter its margin processes after banks complained about the size of the intra-day calls they faced in the wake of the UK’s Brexit vote. As revealed yesterday, some members had to post up to $1 billion in margin to the clearing house on June 24, and LCH now plans to let banks subtract some of this intra-day margin from the following day’s calls. Currently, futures commission merchants (FCMs) can end up posting excess cash to LCH in a series of three intra-day margin calls, referred…


Amazon CEO Jeff Bezos Says Trump Is ‘Eroding Our Democracy’
Spencer Soper – Bloomberg Inc. Chief Executive Officer Jeff Bezos said Republican presidential nominee Donald Trump is “eroding our democracy around the edges” by threatening retribution against those critical of him and hinting that he wouldn’t gracefully accept a loss on election day.

Niall Ferguson: It’s Over for Trump
Niall Ferguson, senior fellow at Hoover Institution and Stanford University, discusses the third and final presidential debate, Trump’s candidacy and the possibility of Donald Trump not accepting the election outcome. He speaks to Bloomberg’s Haslinda Amin on “Bloomberg Markets: Middle East” from the Barclays Asia Forum in Singapore.

Some of Wall Street’s One-Percenters Are Trying to Convince Themselves That Trump Isn’t Crazy
By Jessica Pressler – NY Magazine
Republican presidential candidate Donald Trump reacts as his son Barron looks on at the end of the Republican National Convention on July 21, 2016, at the Quicken Loans Arena in Cleveland, Ohio. Photo: Chip Somodevilla/Getty Images
One of the more bizarre and unsettling aspects of Donald Trump’s bizarre and unsettling campaign has been the repeated insistence from some of his supporters that the person he represents on the campaign trail is not who he actually is.

Hedge-fund manager S. Donald Sussman gave $21 million to pro-Clinton super PAC Priorities USA
By Matea Gold- Washington Post
Hedge fund manager S. Donald Sussman has given a total of $21 million to the top super PAC supporting Hillary Clinton, putting him on track to be the Democratic nominee’s biggest political backer this cycle.

Investing and Trading

Capturing pricing anomalies: China A- and H-shares (part 1 of 2)
Eddie Pong – FTSE Russell Blog
The Chinese equity market has seen enormous growth over the last two decades. This growth partly originated when China permitted its State Owned Enterprises (SOEs) to list on the Hong Kong Stock Exchange (HKEx) in 1992.[1] Now, Chinese companies can choose to be listed on domestic exchanges (A-shares), the HKEx (H-shares) or both. If a company chooses to be dual-listed, what is the effect of the price differences in the foreign and domestic markets when the company is included in an index?

Bitesize: 250 years of the bond-equity correlation
Bank Underground
For most of the 18th-20th centuries, government bonds usually behaved like a risky asset. When equity prices fell, bond yields rose, i.e. bond and equity returns were positively correlated (bond prices move inversely to yields). But since the mid-2000s, bond and equity returns have been negatively correlated, i.e. bonds became a hedge for risk. Before this, the last time this correlation was near zero for a prolonged period was the long depression in the late 19th century.

Sequoia Capital Hires Yahoo’s Jess Lee as First Woman U.S. Investing Partner; Lee will leave her post as CEO of fashion and home decor site Polyvore.
Lizette Chapman and Sarah McBride – Bloomberg
For the first time in its 44-year history, Sequoia Capital, one of the most vaunted venture capital firms in Silicon Valley, has hired a female investing partner for its U.S. operations.

An Index with a Scary Name and a Serious Return
Reid Steadman – Indexology
Passive investors do not buy and sell single securities, but they are often active in another way, in their search for indices that provide compelling return profiles. This is why I’m befuddled that a certain index – which is up 300% over the past 5 years – attracts so little attention.


Squeezing Hedge Funds Is Path to Profit at Three Big Banks
Dakin Campbell and Hugh Son – Bloomberg
In the battle for supremacy on Wall Street’s equity trading desks, the most successful banks are dangling a precious resource in front of hedge-fund clients: a balance sheet. Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. grabbed a bigger share of the market last quarter by forcing hedge funds hungry for financing to send more stock-trading business their way. The three firms booked $5.1 billion from equities in the third quarter, or 76 percent of the total posted by the five largest U.S. investment banks, according to their financial statements. That was the most for the period since 2012.

Investment banks scramble to fill top jobs in Italy
Pamela Barbaglia and Anjuli Davies – Reuters
Headhunters are trying to lure Italian bankers in London back to jobs at home, hoping to use Britain’s vote to leave the EU as leverage to fill a string of vacancies at investment banks in Europe’s fourth largest economy.

Rosebrook Capital says central banks are causing hedge fund pain
Rachael Levy – Business Insider
Hedge funds’ dismal performance might be a warning sign to the greater economy. Several hedge funds have blamed their poor performance on central bankers, whose low interest rates, in the funds’ view, are distorting markets.

These Investors Said ‘No’ to CEO Pay at Goldman Sachs, Citigroup
Caleb Melby and Alicia Ritcey – Bloomberg
When investors in Goldman Sachs Group Inc. and Citigroup Inc. met for annual meetings earlier this year, some of the bigger ones came bearing a surprise.

Citigroup Said to Offer London Canary Wharf Space After Job Cuts
Jack Sidders – Bloomberg
Citigroup Inc. is weighing subleasing space in London’s Canary Wharf district after cutting staff numbers in the U.K. capital, according to three people with knowledge of the plan.

Goldman Sachs is recruiting on Spotify
Portia Crowe – Business Insider
Goldman Sachs is turning to a new platform to help recruit young talent. The firm on Wednesday launched an advertising campaign on Spotify, the music streaming app, to catch the attention of prospective job applicants.

How a Goldman Sachs trader can make $100 million in the Volcker Rule era
Francine McKenna – MarketWatch
It looks like proprietary trading. It walks and talks like proprietary trading. A Goldman Sachs junk-bond trader earned more than $100 million in profits buying and selling distressed corporate debt earlier this year, but according to a Wall Street Journal report on Wednesday, the trades don’t violate the so-called Volcker Rule because the trader is a market-maker not a soon-to-be prohibited proprietary trader.

Ex-Goldman recruit drives HSBC’s investment banking ambitions
Lawrence White – Reuters
Using a rare hire from a Wall Street firm, HSBC (HSBA.L) is pushing hard to become the top European-based investment bank while its regional rivals struggle with regulatory fines and falling revenues. Former Goldman Sachs banker Matthew Westerman, who took over as head of the Global Banking division in May, has made sweeping changes in the drive to steal market share in a business area where HSBC lags most of its major peers.

As hedge funds suffer, so do their imitators
Ryan Vlastelica – MarketWatch
Hedge funds have had a rough year. So have their closest equivalents among exchange-traded funds. Amid heavy outflows and a number of high-profile closures—trends related to the growing consensus that hedge funds are both more expensive and worse performing than their low-fee passive fund equivalents—so-called hedge-fund replicator ETFs are losing favor. Not only have they underperformed the broader market, even before their hefty fees are taken into account, but investors have been pulling out of the category.

Voices From Wells Fargo: ‘I Thought I Was Having a Heart Attack’
Stacy Cowley – NY Times
The scandal at Wells Fargo over the creation of unauthorized accounts shook its customers’ faith in the bank, but it took an even sharper toll on the company’s workers. A number of them say they faced a stark choice: Create new accounts by any means possible, or risk being fired for falling short of their sales goals.

JPMorgan Facing Criticism on Valuation of Complex Bonds It Sold
Carolina Wilson – Bloomberg
Bank ignored fees when determining values, consultant says; Investors may have been shortchanged, consultant’s report says
JPMorgan Chase & Co. inflated the value of complex bonds it sold to individual investors, by 15 percent in one example, according to a study by a financial consulting firm that works with plaintiffs in securities litigation.

BlackRock says its ETF business crosses $100 billion sales mark
BlackRock Inc’s (BLK.N) iShares exchange-traded fund business has taken in $100 billion in new cash this year, a pace faster than its record-setting 2015 haul, the fund company said on Thursday on Twitter.


Connamara Expands Sales Team; Connamara Adds Daniel Curry to Head Sales and Business Development
Connamara, the premier provider of matching engine technology for frontier and startup exchanges, has added Daniel Curry as Director of Sales and Business Development. The newest Connamara team member will be leveraging his experience in growing new businesses in the capital markets arena.

The Fintech Effect: What Will Bring the Most Change?
Larry Cao – Enterprising Investor
Fintech has increasingly captured the attention of the financial services industry over the past several years. Since I started writing on the topic about a year ago, the discussion has evolved from simply defining fintech to more involved narratives about its potential drawbacks. In that time, our focus on the subject has never wavered. Why? Because fintech will have a significant and potentially revolutionary influence on a broad set of sectors within the financial services industry and across the globe.

How A Poker-Game Brainstorm Produced Fintech Startup YapStone And $235M In Revenue
Am Feldman – Forbes
Back in 1999, Tom Villante, a former investment banker at S.G. Warburg and a partner at private-equity firm The Seidler Co., was sitting around with a few buddies playing poker and talking about businesses they could start. As the cash moved around the table, Villante recalls, the conversation turned to PayPal and markets that might move away from getting payments by check. “I didn’t want to do anything that couldn’t scale,” he says.


Chinese Regulator Probes Six Companies in IPO Fraud Crackdown
Bloomberg News
Five of the companies have already listed on exchanges
CSRC says it will puruse underwriters, auditors and lawyers\
The China Securities Regulatory Commission said Friday it’s investigating six companies over alleged wrongdoings related to initial public offerings and disclosures.

SEC to probe rapid growth of ETF industry; Accounts for 30% of all US shares traded
By Tom Eckert – InvestmentWeek
The US Securities and Exchange Commission (SEC) is set to commence a large-scale review of exchange-traded funds, amid concerns the rapid growth of these vehicles may be increasing market volatility.

Company and Former Executives Paying Penalties for Accounting Violations
The Securities and Exchange Commission today announced that a Houston-based technology solutions company has agreed to pay a $2.5 million penalty to settle charges that it overstated profits in one of its business segments. Two then-executives at the company agreed to settle charges that they caused the violations to meet internal targets.

Verena Ross, Executive Director, ESMA, Speech On Regulatory Developments
The Trade
Verena Ross, Executive Director, spoke at the Norwegian Finanstilysnet 30th Anniversary Conference in Oslo on Thursday 20 October. Her speech covered recent regulatory and supervisory developments in the EU and the challenges ahead, focusing on issues such as MiFID II, Capital Markets Union, PRIIPs, CFDs and data quality.

Verena Ross Speech on Regulatory Developments
Verena Ross, Executive Director, spoke at the Norwegian Finanstilysnet 30th Anniversary Conference in Oslo on Thursday 20 October. Her speech covered recent regulatory and supervisory developments in the EU and the challenges ahead, focusing on issues such as MiFID II, Capital Markets Union, PRIIPs, CFDs and data quality.

Fund manager’s FCA ban upheld by tribunal; Failed to stop a client committing market abuse
Laura Dew – InvestmentWeek
The Financial Conduct Authority has won an appeal to ban former Somerset Asset Management fund manager Tariq Carrimjee from carrying out compliance and significant influence functions.

ESMA Publishes Official Translations on MAR Guidelines
The European Securities and Markets Authority (ESMA) has published today 22 language versions of two sets of guidelines under the Market Abuse Regulation (MAR).

SIFMA Recommends Full Market Close on November 11 in Observance of the US Veterans Day Holiday
SIFMA has confirmed its previous recommendations for a full market close on Friday, November 11 for the trading of US dollar-denominated fixed-income securities in the U.S., UK and Japan in observance of the U.S. Veterans Day Holiday.

FINRA Files Rule Proposal With SEC to Protect Seniors and Other Vulnerable Adults From Financial Exploitation
he Financial Industry Regulatory Authority (FINRA) submitted to the Securities and Exchange Commission (SEC) proposed rules addressing the financial exploitation of seniors and other vulnerable adults. FINRA is proposing amendments that would require firms to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. In addition, FINRA is proposing a new rule that would permit firms to place a temporary hold on a disbursement of funds or securities when there is reasonable belief of financial exploitation, and to notify the trusted contact of the temporary hold. The rule change is not effective until approved by the SEC.

October 2016 Issue of IQ: ISDA Quarterly Now Available


Emerging Markets Q3 Recap: Sentiment Remains Strong
Mark Mobius – Franklin Templeton Investments
Templeton Emerging Markets Group has a wide investment universe to cover—tens of thousands of companies in markets on nearly every continent! While we are bottom-up investors, we also take into account big-picture context. Here, I outline what’s happened in the emerging-markets universe in the third quarter of the year, including some key events, milestones and data points going back a bit further to offer some perspective. Overall, emerging markets saw a strong quarter despite a few global market uncertainties.

Asia’s oil markets are tightening as China cuts output, fuel stocks dwindle
Seng Li Peng and Mark Tay – Reuters
From sharp cuts to Chinese oil production to falling inventories of refined fuel products, signs are mounting that Asia’s oil markets are slowly returning to balance. Global inventories of refined products – made up from light and middle distillates like gasoline and diesel, as well as residual fuel such as fuel oil – have all fallen since the beginning of the month. They are now at or below levels seen this time last year, data in Thomson Reuters Datastream shows.

Can Fintech Fill Asia’s SME Lending Gap?
By Sean Creehan – Federal Reserve Bank of San Francisco
Perhaps no sector has more to gain from innovations in financial technology than small- and medium-sized enterprise (SME) finance, especially in Asia. SMEs accounted for 42 percent of Asia’s GDP in 2014 yet received only 18.7 percent of bank lending according to the Asian Development Bank. Fintech can particularly leverage the rapid growth of Asia’s e-commerce and regional trade, trends that complement SME development.

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