Investors in Their Pajamas on Other Side of the Trade in China

Jun 1, 2018

Investors in Their Pajamas on Other Side of the Trade in China

Jun 1, 2018

Jeff Bergstrom

Jeff Bergstrom

CIO

First Read

Can tZero and BOX Digital Markets change the face of capital markets?
Jim Kharouf – John Lothian News

It would not be an understatement to say that Patrick Byrne thinks big – really big – like a quadrillion dollar market.

The Overstock founder and CEO has been building the firm’s tZero subsidiary, a distributed ledger platform, since 2016 in an attempt to disrupt today’s capital market structure. Last week’s announced deal with BOX Digital Markets, a sister company to BOX Options Exchange, to create a Securities and Exchange Commission regulated market that lists and trades security tokens may do just that. The partnership could dramatically change how capital is raised across multiple asset classes and kickstart the clear rules from the SEC that govern so-called security tokens.

Much has been made about how this partnership will leverage BOX’s equity market medallion to offer security tokens using tZero’s decentralized ledger trading platform. But this stands to be one of the most groundbreaking moves in the digital asset space to date. Let’s start with the potential Byrne sees with tZero’s platform.

To read the rest of this story, go here

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Hits & Takes
JLN Staff

MarketsWiki Education World of Opportunity 2018 is open for registration. We will be sending out a notice today with the lineup of speakers, locations and times. Look in your inbox for details shortly.~JJL

IDX here we come. Members of the JLN team are off to London tomorrow to attend IDX next week. Spencer Doar, Mike Forrester, Jim Kharouf and our newly hired intern Robby Lothian and I will be at the conference. We have 10 video interviews lined up for the conference so far, but we are always looking for more. Hats off to the talented and detail-focused FIA team, including Charlie Jones, Emma Davey and Adoncia Boykins, for their help. We appreciate their hard work and have great expectations for a terrific IDX.~JJL

If you find yourself in London on the evening of June 6th without plans, consider A Leg To Stand On’s Rocktoberfest charity event. The charity has helped treat more than 16,700 children with limb disabilities in the developing world since its inception.~SD

The Cboe will host their 2018 Risk Management Conference Europe in September in Enniskerry, County Wicklow, Ireland.~JJL

NFA is seeking a Quantitative Analyst to join their Market Regulation team. This role will provide the opportunity to perform trade practice and market surveillance services while developing quantitative systems to support these practices.~JJL

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Ed Wedbush, fixture of L.A. finance, steps down from his troubled firm
James Rufus Koren – LA Times
Ed Wedbush, a fixture of L.A.’s finance industry for more than half a century, is stepping down as president of Wedbush Securities, the stock brokerage he co-founded in 1955 that has lately been accused of several irregularities.
/jlne.ws/2kEG2f1

**** 50 years is a long run.~JJL

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Dash CEO on Buy-Out and SEC Fee Pilot

JohnLothianNews.com

In March, Dash Financial Technologies co-founders Peter Maragos and David Karat, in partnership with private equity firm Flexpoint Ford, acquired Dash in a management-led buyout. In this video, Dash CEO Maragos describes the thought process behind the buyout, the outlook for the firm’s equities and options businesses, and issues with the SEC’s proposed fee pilot.

Watch the video here »

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Thursday’s Top Three
Our top read stories from Thursday could not be more different from one another. The most read item was The Largest U.S. Cannabis Company Finds a Home on a Canadian Exchange from Thestreet.com. Second was Jim Falvey’s piece Regarding the Pope and Credit Default Swaps from JLN. And third was the announcement Itiviti Appoints Executive Management Team Following Merger With ULLINK

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MarketsWiki Stats
126,974,860 pages viewed; 23,131 pages; 213,224 edits
MarketsWiki Statistics

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Lead Stories

Investors in Their Pajamas on Other Side of the Trade in China
Tian Chen – Bloomberg
The bed is Xiao Xing’s preferred place to trade shares. The Beijing media worker is still in her pajamas when the Shanghai Stock Exchange opens for the day. That’s when she starts browsing the social media accounts of self-proclaimed stock-market “old drivers” — a Chinese term for experts — and trawling the online rumor mill for tips on what to buy and sell.
/jlne.ws/2svqGwY

Lawsuit Reveals Deutsche Bank Probe of Ties to Russian Ministers
Jonathan Browning and Donal Griffin – Bloomberg
Deutsche Bank AG called it Project Dastan, a Persian word for the kind of ornate oral histories that are common across Central Asia, including heroic tales of resistance to Russian occupation.
/jlne.ws/2Hc8OfD

Stock Connect trading shrinks as China stock falls after MSCI inclusion
Joe Parsons – The Trade
Trading through the Shanghai and Shenzhen Connect programme declined on the go-live of China-A shares inclusion to the MSCI Index, following muted trading in mainland stocks.
/jlne.ws/2H9ilEz

Citi, Deutsche Face Cartel Charges in $1.9 Billion Share Sale
Angus Whitley – Bloomberg
ANZ Bank, underwriters deny wrongdoing in 2015 equity raising; Case is unprecedented legal foray into Australian underwriting
Australia’s banking industry faces an unprecedented criminal prosecution as Australia & New Zealand Banking Group Ltd. and two of its underwriters, Deutsche Bank AG and Citigroup Inc., brace for cartel charges over a A$2.5 billion ($1.9 billion) share sale.
/jlne.ws/2HbsPmK

Buy-side shifts focus from MiFID II to Bitcoin; Survey by Linedata suggests the buy-side is less concerned about MiFID II but increasingly interested in cryptocurrencies.
Hayley McDowell – The Trade
Asset managers are shifting their attention from regulatory matters, such as MiFID, II to cryptocurrencies and emerging disruptive technologies, according to a new survey from Linedata.
/jlne.ws/2ss0N0W

U.S. Opens Criminal Probe Into Trading in Fannie, Freddie Bonds
David McLaughlin and Tom Schoenberg – Bloomberg
Prosecutors seen examining possible fraud, antitrust crimes; Focus is on secondary market trades of firms’ corporate debt
The U.S. has opened a criminal investigation into whether traders manipulated prices in the $550 billion market for corporate bonds issued by Fannie Mae and Freddie Mac, according to people familiar with the matter.
/jlne.ws/2H9RYhC

World Cup Fever Is Coming as Traders Seek Market Mayhem Rescue
Natasha Doff – Bloomberg
Adage says summer lull starts early in World Cup years; Volatility fell during four out of the last five tournaments
There may be hope in sight for traders reeling from the recent market swoons and it comes from an unlikely source – Russia.
/jlne.ws/2swJSu5

Would a Central Bank Digital Currency disrupt monetary policy?
Ben Dyson and Jack Meaning – Bank of England’s Bank Underground Blog
A “Central Bank Digital Currency” (CBDC) may sound like it’s from the future, but it’s something that many central banks are researching today, including those in Sweden, Canada, Denmark, China, and the European Central Bank and Bank of International Settlements (BIS). In a new working paper, we set aside questions about the technological, regulatory and legal aspects of central bank digital currency, and instead explore the underlying economics. Could the existence of a CBDC make it easier or harder for central banks to guide the economy through monetary policy? And could the existence of CBDC make the monetary transmission mechanism (MTM) faster or slower, stronger or weaker?
/goo.gl/tH7ksK

UK bank derivative balances a mixed bag
Alessandro Aimone – Risk.net
UK banks’ aggregate derivative balances with UK institutions slid toward the red in the first quarter of the year, while those with non-UK entities improved.
bit.ly/2xy9aOi

Guggenheim parts ways with executive at heart of favouritism storm; The promotion of Alexandra Court had sparked tension at the top of the asset manager
Joe Rennison and Sujeet Indap in New York – FT
A senior sales executive at Guggenheim Partners, whose promotion sparked an internal revolt among top management at the $240bn asset manager, has left the firm after an extended sabbatical, according to her LinkedIn profile and a personal website she has set up.
/jlne.ws/2HaIJ0C

Wall Street Firms Are Moving West. Here Come the Luxury Hotels
Patrick Clark – Bloomberg
Relocation of tenants like KKR and EY creates opportunity; Brookfield, Pendry to offer high-end rooms at Manhattan West
Blue-chip office tenants are migrating to Manhattan’s far west side. It’s only a matter of time before the luxury hotels follow.
/jlne.ws/2HbwTmZ

Exchanges, OTC and Clearing

Amendments to the Clearing Conditions of Eurex Clearing AG
Eurex
This circular contains information with respect to Eurex Clearing’s service offering and corresponding amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) regarding the following topics:
/jlne.ws/2HbgqPC

Monthly Report Cash Market: Rising Trading Turnover, Record Gold Holdings
Deutsche Börse
While trading in Deutsche Börse’s cash markets reached 145.8 billion euros in May, an increase of around ten percent over the previous year, the gold holdings held by Deutsche Börse rose above the 180-ton mark for the first time. Currently this is 181.8 tons, at the beginning of the year it was still 174.2 tons. Holdings increase whenever investors buy Xetra-Gold on the stock market.
/jlne.ws/2HbGCcZ

STS Group AG since today at the Frankfurt Stock Exchange
Deutsche Börse
STS Group AG (ISIN: DE000A1TNU68 ) has been listed on the Frankfurt Stock Exchange since today. The automotive supplier from Hallbergmoos near Munich is listed in the Prime Standard segment and achieved a first market price of EUR 24.00. The issue price of the papers was also 24.00 euros. The number of IPOs in Frankfurt since the beginning of the year thus increases to ten.
/jlne.ws/2HaPZto

Momentum Continues in Toronto Stock Exchange ETF sector; Total assets under management reaches new high of $150 billion as TSX expands its leading roster of providers and listed funds
TMX
TMX Group today announced that the exchange traded funds (ETF) sector on Toronto Stock Exchange (TSX) has reached a record high of approximately $150 billion in assets under management (AUM), as of April 30, 2018. Total AUM* of listed ETFs listed on TSX has more than doubled in the past five years. In the first four months of 2018, TSX listed 35 new ETFs and welcomed three new institutions to its group of ETF providers: Bristol Gate Capital Partners Inc., Brompton Funds Limited and Scotia global asset management – the fourth major Canadian bank to offer ETFs.
/jlne.ws/2suIcRX

High-Level Forum on Hong Kong Market’s Future Role as China Opens Further
HKEX
Prominent financial experts from Mainland China and Hong Kong took part today (Friday) in a lively discussion to review Hong Kong’s contributions to China’s opening up, and the role the city can play as the country enters a new phase of capital market reforms, at a forum held at Hong Kong Exchanges and Clearing Limited’s (HKEX) Connect Hall.
/jlne.ws/2HdkyP4

Exchange Publishes Results of its Latest Review of Listed Issuers’ Financial Reports
HKEX
Exchange publishes its ninth Financial Statements Review Programme Report; Report summarises key findings from a review of 100 annual and interim reports; Objective is to increase issuers’ awareness of possible pitfalls and improve the quality of their future reports
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a report summarising key findings from its review of 100 periodic financial reports released by listed issuers (issuers) between February 2017 and April 2018 (Note).
/jlne.ws/2sz87rL

HKEX Joins UN Partnership Programme for Sustainable Capital Markets ; Joining partnership programme reflects HKEX’s commitment to further promote sustainable and transparent capital markets
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) has become a Partner of the United Nations (UN) Sustainable Stock Exchanges (SSE) Initiative, committing to further promote sustainable and transparent capital markets.
/jlne.ws/2ss2Y4C

Trading Overview in May 2018; Japan Exchange Group released Trading Overview in May 2018.
JPX
Cash Equity Market – In May 2018, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 3.0213 trillion.
Derivatives Market – In May 2018, total derivatives trading volume was 21,013,520 contracts.
/jlne.ws/2HaTm3w

Publication of Revised Japan’s Corporate Governance Code
JPX
Tokyo Stock Exchange, Inc. (TSE) has partially revised the Securities Listing Regulations pertaining to the revision of Japan’s Corporate Governance Code (hereinafter the “Code”) (*) with effect from June 1, 2018. This revision is based on the proposals made by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code (hereinafter the “Council”). Jointly operated by the Financial Services Agency and TSE, the Council made proposals to revise the Code in order to advance governance reform not just in form but also in substance through dialogue between companies and investors.
/jlne.ws/2sxiufB

Credit Suisse with second membership; Credit Suisse AG starts trading on the Swiss exchange as a new participant.
SIX
As of today, Credit Suisse joins the Swiss exchange with a second membership. Gregor Braun, Head Sales Switzerland & Europe, Securities & Exchanges, SIX: “We are happy that Credit Suisse AG has now joined us as the second participant from Credit Suisse.” At present, 101 participants enjoy our outstanding order book quality for Swiss securities as well as our technologically leading and highly reliable trading infrastructure.
/jlne.ws/2sqkx5O

Nasdaq Helsinki Launches Sustainable Bond Segment
Markets Media
Nasdaq today announced that Nasdaq Helsinki is launching a new sustainable bond market segment on the Main Market. The first green bond issuer is Municipality Finance Plc (MuniFin).
/jlne.ws/2kEGwBR

Fintech

Imagine Software CEO: “Market risk is not physics. It just acts like it. Until it doesn’t.”
David Beach – bobsguide
One of the early quants at former Wall Street heavyweight Salomon Brothers, Dr Lance Smith has a rich mathematical background, but believes there is much more to risk management than the mathematical models.
/goo.gl/HCHRnv

BNY’s Eagle moves to the Microsoft Cloud
David Beach – bobsguide
Investment technology subsidiary of BNY Mellon, Eagle Investment Systems, recently announced the launch of its partnership with Microsoft, fitting in to the wider trend of harnessing cloud technology to comply with regulations and improve cost-to-income ratio.
/goo.gl/Z1Wiix

For Tradeweb, ETF Business is Booming
Markets Media
It all began two years ago. Tradeweb, one of the world’s leading electronic trading platforms entered the U.S. ETF market in 2016 and has never looked back. The firm’s ETF trading platform connects institutional investors to OTC markets in U.S. ETFs and has become a leading player in just two years.
/jlne.ws/2kFZPdR

DSB Announces Technology Advisory Committee Membership; Expands Committee Size to Accommodate Increased Industry Interest
Derivatives Service Bureau
The Derivatives Service Bureau today announced the members of its newly formed Technology Advisory Committee (TAC). The mission of the TAC is to provide guidance and recommendations to the DSB Board on technology implementation and investment to support the DSB role as a critical market infrastructure for providing financial instrument identifiers. As part of the DSB governance structure, it will also enable the DSB to sample industry sentiment regarding potential changes in services or performance.
/jlne.ws/2suDqVx

Cryptocurrencies

In the World of Cryptocurrency, Even Good Projects Can Go Bad
Nathaniel Popper – NY Times
While scams proliferated in the unregulated world of virtual currencies over the last year, a company in Switzerland called Envion seemed to be one of the more legitimate outfits creating its own cryptocurrency.
/jlne.ws/2LPTybZ

Estonia Scales Down Plan to Create National Cryptocurrency
Ott Ummelas – Bloomberg
Cryptocurrency plan irked ECB, local banking supervisors; Estonia won’t peg tokens to euro or offer them to whole nation
Estonia, an eastern European nation that switched to the euro in 2011, scaled down its plan to create a national cryptocurrency after it drew criticism from Mario Draghi and local banking authorities.
/jlne.ws/2H9SAE9

Blockchain Shows Leveraged Loans a Path to the 21st Century
Katie Linsell – Bloomberg
European trades take 33 days to settle on average, LMA says; Slow settlement deters investors from loans: Credit Suisse
Credit markets were given a reminder this week of how quickly liquidity can evaporate as even the most highly-traded securities proved difficult to shift in the turmoil sparked by Italy’s political crisis.
/jlne.ws/2sz2pWR

Ethereum wallet imToken raises $10M Series A from IDG to expand in the U.S., Asia and Africa
Catherine Shu – TechCrunch
imToken, which claims to be the world’s largest Ethereum wallet, will focus on expanding in Asia and the United States after raising a $10 million Series A from IDG Capital, it announced today. The capital will also be used to add new features, including support for Bitcoin, EOS and other blockchains.
/jlne.ws/2st8dko

Ripple CEO Says Bitcoin Is the ‘Napster of Digital Assets’
Polina Marinova – Fortune
Ripple CEO Brad Garlinghouse just made some bold comparisons at Recode’s Code Conference.
/jlne.ws/2sv51VJ

Headphones Maker Monster Products Files for a $300 Million ICO
Janine Wolf – Bloomberg
Company is also issuing 75 million shares of common stock; Monster expects to roll out blockchain network in three stages
The former maker of Beats headphones is looking for a lift from the digital-currency market.
/jlne.ws/2H9crDp

Goldman-Backed Crypto Exchange Rattles Users With Terms Change
Camila Russo – Bloomberg
Poloniex suspends accounts until required verification filed; Circle Internet agreed in February to purchase the exchange
Poloniex LLC suspended trading and withdrawals until clients upload new documentation required to verify accounts, spurring concern among some users that they won’t be able to recover their funds.
/jlne.ws/2HbQmDU

Bittrex Gets Bank Agreement to Help You Buy Bitcoin With Dollars
Lily Katz – Bloomberg
U.S. crypto exchange to offer fiat trading to corporate users; Firm will work with Signature Bank, other financial firms
Bittrex Inc., a Seattle-based cryptocurrency exchange that lets users swap nearly 200 different digital coins, said it forged banking agreements that will allow some customers to trade in U.S. dollars.
/jlne.ws/2HabElA

The most valuable banknote in circulation is worth about as much as a bitcoin
John Detrixhe – Quartz
According to its most feverish supporters, bitcoin will eventually replace traditional legal tender like the dollar. Tim Draper, the crypto millionaire and venture capitalist, told Forbes that fiat currency usage will be a laughable anachronism in five years. But for now at least, with the bitcoin price down by more than half from its peak, the original crypto asset has about the same market value as the largest banknote in circulation.
/jlne.ws/2syFevA

Politics

Make America 1929 again; The president is committed to the pursuit of a trade war even if it costs the country dearly
Edward Luce – FT
The Republican senator, Ben Sasse, put it best: “‘Make America Great Again’ shouldn’t be ‘Make America 1929 Again’.”
/jlne.ws/2syx0Uj

Macron warns Trump of EU retaliation against tariffs; French president says steel duties are ‘illegal’ as allies prepare to hit back
Anne-Sylvaine Chassany in Paris – FT
Emmanuel Macron has told Donald Trump that new US tariffs on steel and aluminium imports that went into effect are “illegal” and a “mistake”, as leaders from the EU, Canada and Mexico prepared retaliatory duties on US products.
/jlne.ws/2sxQmca

Trump Appeasement Fails, So Trudeau Takes the Gloves Off
Josh Wingrove – Bloomberg
Canadian PM fires back on steel, sees no U.S. ‘common sense’; ‘We’ve all had just about enough of Donald Trump,’ Wynne says
After more than a year of trying to make nice, Justin Trudeau finally looks fed up with Donald Trump.
/jlne.ws/2syHgvK

Republicans gobsmacked by Trump’s tariffs; GOP lawmakers thought the president was going to hit China — not key U.S. allies.
Burgess Everett – Politico
Republicans are bitterly protesting the Trump administration’s decision to impose sweeping tariffs on U.S. allies — alarmed that the White House ignored their frenzied lobbying campaign and afraid that the party could suffer at the polls in November.
/jlne.ws/2swI6sV

Regulation

Goldman Sachs vice president charged with insider trading
Brendan Pierson – Reuters
Federal prosecutors charged a vice president at Goldman Sachs Group Inc (GS.N) on Thursday with insider trading by illegally using non-public information about several companies that were clients of the investment bank.
/reut.rs/2LM71Bu

Goldman Sachs Banker Charged With Fraud in Insider Trading Case
Emily Flitter – NY Times
Federal prosecutors on Thursday accused a Goldman Sachs investment banker in San Francisco of insider trading, alleging that Woojae Jung used confidential information to trade in a dozen stocks over three years.
/jlne.ws/2H9KQSw

SEC Charges Investment Banker in Insider Trading Scheme
SEC
The Securities and Exchange Commission today charged an employee of a prominent investment bank with repeatedly using his access to highly confidential information in order to place illicit and profitable trades in advance of deals on which the bank was providing investment banking advisory services.
/jlne.ws/2smllZk

ASIC consults on foreign financial services providers relief proposals
ASIC
ASIC has today released a consultation paper proposing a modified licensing regime for foreign financial service providers carrying on a financial services business in Australia with wholesale clients. These foreign providers are global investment banks or wholesale managed funds. This approach would provide ASIC with a broader range of tools to regulate the activities of foreign providers in Australia.
/jlne.ws/2swY0ng

Chyhe Becker Named Acting Chief Economist and Acting Director of the Division of Economic and Risk Analysis
SEC
The Securities and Exchange Commission today announced that Dr. Chyhe Kim Becker has been named as the Acting Chief Economist and Acting Director of the Division of Economic and Risk Analysis (DERA).
/goo.gl/d1E4au

SEC Names Julie A. Erhardt Acting Chief Risk Officer
SEC
The Securities and Exchange Commission today announced that Julie A. Erhardt has been named the Commission’s Acting Chief Risk Officer, to serve while the agency completes its search to fill this important new position.
bit.ly/2LLT2fj

Sebi defers implementation of new higher margin norms for derivatives; Sebi said besides collecting initial margin, trading members will have to collect exposure margin
Business Standard
Capital market regulator Securities and Exchange Board of India (Sebi) has deferred the implementation of norms requiring brokers to collect higher upfront exposure from clients. The new norms were to come into effect from June 1. Instead, they will now come into effect from July 1, the National Securities Clearing Corporation (NSCCL), an arm of the National Stock Exchange (NSE), has said in a circular.
/jlne.ws/2syExT5

ESMA adopts final product intervention measures on CFDs and binary options
ESMA
The European Securities and Markets Authority (ESMA) has formally adopted new measures on the provision of contracts for differences (CFDs) and binary options to retail investors.
/jlne.ws/2kEDVrB

Podcast: CFTC Talks EP045: ICAPITAL CEO LAWRENCE CALCANO, Part 1
CFTC
This week on CFTC Talks, we speak with iCapital CEO Lawrence Calcano on the state of the alternative investment sector. We cover how iCapital chooses the funds they invest in, the way they use fintech and what are interesting sectors for future investment. This will be a two part series with part 1 released on Friday and part 2 released the week after.
/jlne.ws/2snebEo

NSE Algo Scam: CBI Steps in Where SEBI Was Pussyfooting
Sucheta Dalal – MoneyLife.in
In a sensational twist to the investigation into the misuse of co-location facilities of the National Stock Exchange (NSE) by select brokers (also known as the algo scam), the Central Bureau of Investigation (CBI) seems to have sidelined the powerful market regulator and has filed a first information report (FIR) on 30 May 2018. The FIR lists unnamed officials of the NSE, the Securities and Exchange Board of India (SEBI) and specifically names Ajay Narottam Shah, an academic who has worked exceedingly closely with the Finance Ministry, the NSE top brass and SEBI, for many years now.
/jlne.ws/2soQlYY

Investing and Trading

Oil Trader Trafigura Rebuilds Reputation While Making Billions
Andy Hoffman and Javier Blas – Bloomberg
Trafigura, the commodities trader, has been seeking redemption ever since its toxic-waste spill a dozen years ago.
/bloom.bg/2H8VTey

Volcker 2.0 Comes at a Good Time for Banks; New rules will let banks take some advantage of rising global volatility
Under Pressure
Aaron Back – WSJ
The new Volcker rule comes at an opportune time for banks, which are poised to ride a new wave of global market volatility.
/jlne.ws/2H9Go5W

How Italy’s Politics Helped Ignite A Historic Trading Day
Blu Putnam – CME Group OpenMarkets
The markets were in motion coming off the U.S. Memorial Day weekend, driven mostly by the chaos in Italian politics which has put anti-EU and anti-Euro sentiment in the spotlight.
The Euro weakened against almost every currency, while the yen strengthened against the U.S. dollar.
bit.ly/2LK8GHP

Bond Traders’ Fed Wagers Now Hinge on Jobs With Italy Angst Fading
Katherine Greifeld – Bloomberg
After Italian politics whipsawed Treasuries this week, bond traders are about to turn their focus back to U.S. domestic prospects with Friday’s release of the monthly labor report.
/bloom.bg/2xxhFJz

Index IDEA: Multi-factor top-of-mind
FTSE Russell Blog
Results from FTSE Russell’s fifth annual global institutional smart beta survey, shared earlier this month, found that 70% of asset owners are currently evaluating multi-factor combination strategies, far surpassing all other strategies measured. Additionally, 87% of those who have had a smart beta allocation for less than two years report using a multi-factor approach.
/goo.gl/oR9CJ8

EPA Gives $30 Million-Plus in Ethanol Credits to Oil Refiners, Angers Corn Growers; The credits were designed for small refineries facing economic hardship, but courts have ruled some applicants were unfairly denied in recent years
Timothy Puko and Christopher M. Matthews – WSJ
The Trump administration is giving two oil refiners tens of millions of dollars’ worth of retroactive biofuels credits, unprecedented help for refining operations that is refueling a fierce conflict between energy companies and corn growers.
/jlne.ws/2H879Yx

Volcker rule reforms promise banks trading boost; Critics warn changes will encourage Wall St to gamble as they did before crisis
Ben McLannahan in New York and Barney Jopson in Washington – FT
Big Wall Street banks will be given a chance to rebuild their trading arsenals under a softened version of the Volcker rule on risk-taking, but they are expected to stop short of the kind of buccaneering bets they routinely made a decade ago.
/jlne.ws/2Hcdi5X

S&P Cuts Deutsche Bank Rating in Latest Blow for Sewing’s Revamp
Ross Larsen and Geoffrey Smith – Bloomberg
CEO says in response that financial strength ‘beyond doubt’; Shares rebound from record low as S&P highlights liquidity
Deutsche Bank AG’s new chief executive officer, Christian Sewing, suffered a fresh setback in his efforts to reinvigorate Europe’s largest investment bank as S&P Global Ratings cut the lender’s credit rating.
/jlne.ws/2H9QJz8

Brent-WTI oil spread rises above $11 for first time since 2015; US price discount reflects pipeline constraints as shale production booms
David Sheppard in London and Gregory Meyer in New York – FT
US oil prices are falling well behind their international rivals, as booming shale production has created pipeline constraints, driving the biggest discount to North Sea Brent in three years.
/jlne.ws/2sx75MW

It May Be Too Late to Get Into This Leading Equity Market
Matthew Burgess – Bloomberg
New Zealand index trades above 5-year average, global stocks; Index expected to post region’s smallest gain over next year
Most of Asia’s stock markets fell in May — New Zealand was one of the rare exceptions. That could mean the future won’t be as bright.
/jlne.ws/2st6L1q

Institutions

Goldman Sachs Expects Marcus to Get ‘Very Big, Very Profitable’
Will Mathis – Bloomberg
Goldman Sachs Group Inc.’s push into consumer finance has even bigger aims than investors might imagine.
Personal loans are just the start, with possible expansion opportunities for its Marcus brand in mortgages, credit cards, auto loans and insurance, Goldman Sachs President David Solomon said in a presentation Thursday.
/bloom.bg/2H9rb51

‘David’ takes aim at ‘Goliath’ Invesco in row over fund fees; Falling out between trust and manager is ‘line in sand’, say analysts
Kate Beioley – FT
A row between a small investment trust and Invesco, the giant asset manager, has “drawn a line in the sand” over high fund charges, say analysts.
/jlne.ws/2H86lTv

Italian bonds’ extreme volatility exposes liquidity strains; Wild swings in one of the world’s largest sovereign bond markets puts scrutiny on market structure
Kate Allen and Miles Johnson in London and Robin Wigglesworth in New York – FT
Although Italy’s politics are a byword for crisis they still managed to rattle investors this week. But even more shocking to some was the sudden evaporation of liquidity in the country’s bond market.
/jlne.ws/2HcdFgR

Bill Gross’s second act isn’t running to script; After jumping from Pimco, the man dubbed the bond king has lost his lustre
Robin Wigglesworth – FT
When “bond king” Bill Gross shocked the finance industry by jumping ship from Pimco, the fixed income investment house he founded and led, it was widely seen as a stunning coup for smaller rival Janus Henderson, which offered him refuge.
/jlne.ws/2HccoGB

Goldman Tops 2017 Commodity Revenue in Just 4 Months
Jack Farchy and Sridhar Natarajan – Bloomberg
Bank said to have made money on energy and metals trades; Improvement follows unit’s worst year since at least 1999
Goldman Sachs Group Inc. has shaken off its commodities woes, making more money in the sector in the first few months of this year than it did in all of 2017, according to people familiar with the matter.
/jlne.ws/2sxDJxH

Goldman Sachs Expects Marcus to Get ‘Very Big, Very Profitable’
Will Mathis – Bloomberg
Solomon says it could expand into mortgages, cards, auto loans; Goldman president sees build-up ‘over the next 50 years’
Goldman Sachs Group Inc.’s push into consumer finance has even bigger aims than investors might imagine.
/jlne.ws/2swQn06

Regions

That Calm Chinese Stock Market? It’s Engineered by the State; This hidden hand is about to affect a larger number of overseas investors when Chinese stocks are added to a global index on June 1
By Shen Hong and Stella Yifan Xie – WSJ
Long derided as a casino, China’s once-volatile stock market is going through a long stretch of calm. One reason is an orchestrated government effort to keep traders and investors in line.
/jlne.ws/2srYye2

Chinese stocks make symbolic debut on widely followed index
Cheang Ming – CNBC
Close to 230 China A shares debuted on index provider MSCI’s emerging markets benchmark on Friday, a move investors expect will attract billions of dollars in inflows to the mainland market.
/jlne.ws/2suz8fT

Landmark moment in trading China as A-Shares go live on MSCI Emerging Markets Index; Chinese A-Shares go live on MSCI Emerging Markets Index after three years of rebuffs.
By Joe Parsons, John Brazier – The Trade
Chinese A-Shares have gone live on the MSCI Emerging Markets Index for the first time, enabling global passive investors to gain exposure to an equity market second only in size to the US.
/jlne.ws/2Hdj1Zk

Brexit

Brexit: How US tariffs on the EU, Mexico, Canada indicates difficult future trade talks for Britain
Lianna Brinded – Quartz
When the US today announced steep tariffs on steel and aluminum imports from the EU, Mexico, and Canada, it also offered a warning about Britain’s future in trade negotiations.
/goo.gl/UrvocZ

Miscellaneous

Should U.S. Farmers Fret Over Falling Ag Currencies?
Erik Norland – CME Group
Argentina has slipped into a financial crisis, again. The Argentine peso has fallen 23% against the U.S. dollar this year. The central bank has raised interest rates to 40% to combat capital flight. The currencies of other major agricultural exporters are also suffering. The Brazilian real is down 15% since January 23 while the Russian rouble has declined 10% over the same period (Figure 1).
bit.ly/2xvYmjz

Ted Dabney, a Founder of Atari and a Creator of Pong, Dies at 81
Nellie Bowles – NY Times
Samuel F. Dabney, an electrical engineer who laid the groundwork for the modern video game industry as a co-founder of Atari and helped create the hit console game Pong, died on May 26 at his home in Clearlake, Calif. He was 81.
/jlne.ws/2svwgzq

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

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

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