First Impressions

Joseph Niciforo, HC Technologies – Profiles in Risk: Vision and Discipline
JohnLothianNews.com

“If you don’t have disciplined risk management, you’re not going to be in the game.”

After earning a law degree in 1988, Joe Niciforo turned down a six-figure offer to join a big law firm, opting instead for a salary at 30 percent of that number, to work as a trader for the legendary Paul Tudor Jones II. He would eventually become a partner and managing director at Tudor Investment Corp, but his trading career almost got cut short once when he violated his own risk parameters and ended up taking a big loss. The next day, he received a phone call from Jones, who said, “If you ever lose more than $15,000 for me, we’ll always be friends; we’ll never do business.”

His latest venture with Tudor, LaunchPad Trading, seeks out and grooms young portfolio managers, who, hopefully, won’t make the same mistakes he did when he was a young, cocky trader.

Watch the video at MarketsWikiEducation.com »

Quote of the Day

“The Treasury auction itself was rigged, but it is broader in that we allege as well that the when-issued market was rigged and manipulated.”

Gregory Asciolla, a partner at law firm Labaton Sucharow, in the Financial Times story, “Investor lawsuits pile up claiming US Treasury market is rigged”

Lead Stories

EU watchdog unveils new rules for bloc’s securities markets
Reuters
Europe-wide curbs on commodity “speculators”, more light on the bond markets, and reinforced controls on ultra-fast trading were published by European Union regulators on Monday. The European Securities and Markets Authority (ESMA) unveiled its keenly awaited final rules to flesh out the Markets in Financial Instruments Directive II (MiFID II) law that comes into force in January 2017.
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MFA Updates Equity Market Structure Recommendations, Urges Regulators to Conduct Regular Data-Driven Volatility Control Reviews
Publishes chart highlighting actions taken or needed by regulators
Press Release
Managed Funds Association (MFA) today updated its equity market structure recommendations with the Securities and Exchange Commission (SEC) and other regulators. MFA’s recommendations would help improve critical market infrastructure, reduce operational risk, improve the overall quality of the U.S. equity markets and strengthen investor confidence through greater disclosure and transparency.
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Investor lawsuits pile up claiming US Treasury market is rigged
Joe Rennison in New York, FT
A total of 23 related cases have been filed so far, alleging the primary dealers that underwrite the US government’s debt colluded to manipulate the price of US Treasuries to their benefit. US Treasury securities are sold through an auction process in which banks and brokers listed as “primary dealers” place bids for the number of bonds they wish to buy and at what price. Investors can use primary dealers to buy at the auction or purchase them directly.
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Bankers not only ones pushing ethical boundaries
Brooke Masters, Companies editor, FT
Since the financial crisis, we have heard repeatedly that there is something uniquely toxic about banking. Critics routinely argue that the men and women of Wall Street and the City of London should be put through a modern day cultural revolution to reawaken their consciences.
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S.E.C. Turns Its Eye to Hidden Fees in Mutual Funds
By GRETCHEN MORGENSON, NY Times
As regulators have ramped up their scrutiny of private equity practices in recent years, investors have learned a lot about hidden — and dubious — fees they are paying.
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EU urges US to address Volcker Rule application to European hedge funds
Neil Roland, MLex (Subscription Required)
European Union authorities pressed US officials to decide whether the Volcker Rule’s proprietary-trading restrictions cover European hedge fund equivalents controlled by banks.
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U.S. Bonds Flash Warning Sign; Yield spreads between corporate debt and Treasurys have been climbing, a potential signal of economic trouble
By MIKE CHERNEY, WSJ
The U.S. corporate-bond market is starting to flash caution signals about the broader economy.
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Will fintech kill your banking job?
eFinancialCareers
Job losses in the banking sector have been massive since the 2008 financial crisis – UK banks alone have trimmed more than 186,000 staff. But the next wave of layoffs might not be triggered by a macro-level meltdown, but rather by a surge in new technology led by fintech companies that are both competing against banks and selling them products to streamline their in-house systems.
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As Banks Retreat, Private Equity Rushes to Buy Troubled Home Mortgages
By MATTHEW GOLDSTEIN, Dealbook – NY Times
Private equity and hedge fund firms have bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies, emerging as aggressive liquidators for the remains of the mortgage crisis that erupted nearly a decade ago.
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In a Bullish Sign, Consumer Spending Jumps in August
NY Times
WASHINGTON — Consumer spending in the United States grew briskly in August, and an important measure of inflation firmed a bit, according to economic data released on Monday.
The Commerce Department said consumer spending increased 0.4 percent after an upwardly revised 0.4 percent increase in July.
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Boaz Weinstein ‘Shocked’ by Investor Lawsuit
By ROB COPELAND, WSJ
Boaz Weinstein Peter Foley/Bloomberg News
A new lawsuit is throwing a wrench in Boaz Weinstein’s comeback bid. The former Deutsche Bank star trader and founder of hedge fund Saba Capital was sued by one of his largest former investors for allegedly cheating them as they pulled a once-$500 million investment.
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Central Banks

The More Yellen Talks Up Inflation, the Less Traders Believe Her
Alexandra Scaggs, Daniel Kruger – Bloomberg
The bond market isn’t buying what Federal Reserve Chair Janet Yellen is selling on inflation.
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Fed’s Dudley: Still Likely on Track for 2015 Rate Rise
By Michael S. Derby and Jon Hilsenrath, WSJ
NEW YORK—Federal Reserve Bank of New York President William Dudley said Monday he continues to believe the U.S. central bank will be able to boost borrowing costs this year, saying the decision will be driven by a broad array of considerations.
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Central banks haven’t lost their mojo—commentary
www.cnbc.com
Global equities are down more than 10 percent from their peak in June, the largest fall since 2011, leading investors to question the ability of central banks to protect downside and push markets higher. But while markets have reacted badly to the notion that central banks have lost their mojo, we believe investors are underestimating central bank capacity to influence markets.
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Central bank keeps base rate on hold
www.gwsnewswire.com
ISTANBUL-Turkey’s central bank on Tuesday held interest rates steady for the seventh consecutive month, prolonging policies to bolster the country’s slowing economy after the U.S. Federal Reserve delayed a move to end an era of ultracheap credit that threatens to drain cash from emerging markets. On Wednesday, the central bank lowered its 2015 inflation forecast to 4.7%, from 5% in July, partly in response to the recent decline in worldwide oil prices.
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Currencies

Currency Swings Still Pack a Power Export Punch
By Ian Talley, WSJ
Currency depreciations get nearly as big a bang for the export buck as they always have, according to a new International Monetary Fund report.
The IMF’s findings may lend credence to efforts by the European Central Bank and other authorities seeking to spur growth through policies that weaken exchange rates. But it could also bolster concerns that a series of tit-for-tat currency depreciations could undermine global growth prospects if policy makers rely o
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The public vs private debate on blockchain
Financial News
Bitcoin captured the imagination of many in the tech world because it promised to open up and disintermediate the current financial system. Private blockchains run by top-tier banks would be an ironic opposite to that libertarian dream. Jon Matonis, a founding director of the Bitcoin Foundation, believes a private blockchain, one where a central organisation or utility could decide who is allowed to participate, would not realise the cost benefits banks are hoping for.
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China’s renminbi creeps closer to global reserve status
Shawn Donnan in Washington, FT
The International Monetary Fund is creeping closer to including China’s renminbi in an elite basket of reserve currencies, with the US and other major shareholders likely to back the move unless IMF staff make a surprise recommendation against inclusion.
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Biggest Yuan Reforms in a Decade Did Little for China’s IMF Push
Bloomberg News
China’s biggest exchange-rate reforms in a decade have had little impact on the yuan’s chances of winning reserve status at the International Monetary Fund, with questions still being asked about the extent to which the currency has been freed.
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Indexes & Index Products

Active funds underperform the ‘inertia index’, never mind the market
Paul Myners, FT
Investment management has never really qualified as a profession. For a long while it was run largely as a concierge service, and even after the government began to encourage funded pension schemes to make provision for retirement in the 1960s, it took another decade to reach agreement on how to measure performance. Trillions of pounds worth of investment still turns on the consensus that emerged.
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Euronext launches the Euronext BeNe 40 Equal Weight Index; The index is composed of the 40 most traded shares of the Belgian and Dutch markets
Euronext
Euronext, the leading exchange in the Eurozone, today announced the launch of the Euronext® BeNe 40 Equal Weight index, an index reflecting the 40 most traded companies included in the BEL 20 and AEX indices.
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ETF Securities enters new partnership to launch Cyber Security fund
ETF Securities has partnered with US-based ISE ETF Ventures to bring a new ETF to the London Stock Exchange offering exposure to the cyber security sector. The new product, ETFS ISE Cyber Security GO UCITS ETF, is based on the PureFunds ISE Cyber Security ETF launched in the US, which attracted over $1.1bn in the first ten months of listing.
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iShares MSCI United Kingdom Index Sees Significant Increase in Short Interest (EWU) | WKRB News
Press Release
Shares of iShares MSCI United Kingdom Index (NYSE:EWU) saw a large growth in short interest during the month of August. As of August 31st, there was short interest totalling 2,865,302 shares, a growth of 84.2% from the August 14th total of 1,555,930 shares, MarketBeat.Com reports.
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S&P DJI unveils comprehensive China index: S&P China 500 Index
ETF Strategy
S&P Dow Jones Indices (S&P DJI), a leading index provider, has introduced the S&P China 500 Index, covering all Chinese share classes including A-shares and offshore listings.
S&P DJI unveil headline S&P China 500 index. The S&P China 500 index tracks a broad range of Chinese companies listed both domestically and offshore. The index, which is suitable reference index for exchange-traded funds, has been designed by S&P DJI to capture the complete China story and they expect the benchmark to become a flagship investable index for China.
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Catalysts for ETF Market Growth in Hong Kong and China
Indexology: S&P Dow Jones Indices
The Asia-Pacific region is the third-largest ETF market in the world, after the U.S. and Europe. Despite the fact that the ETFs listed in the Asia-Pacific region represent less than 10% of global ETF assets, the region’s asset growth rate has outpaced the two former leaders and is now ranked at the top.
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Gold

Swiss Investigate Seven Banks Over Precious Metals Market Trading; Inquiry involves possible collusion between UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui
By JOHN LETZING and ALISTAIR MACDONALD, WSJ
A Swiss regulator has opened an investigation into precious metals trading at a group of large banks, marking the latest in a line of probes into the rigging of key financial markets that have increasingly spread into the multibillion-dollar trade in metals.
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House lawmakers reject teaching ‘gold standard’
By Laura Leslie, WRAL.com
Raleigh, N.C. — The House Rules Committee voted Monday to remove a proposed requirement that high school students be taught about the gold standard.
The provision was part of Senate Bill 524, a proposal to add a list of new “Founding Principles” to those that lawmakers required state schools to teach in 2011. The measure would also add a test on the “Founding Principles” beginning next school year.
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Miscellaneous

Pulling rank
The shortcomings of the World Bank’s business-climate index
The Economist
INDIA is mildly obsessed with rankings. More claims for record-breaking feats come from the country than from any other bar America and Britain, according to Guinness World Records, the publishers of a popular compendium of them. Its politicians like to boast that, as China’s economy falters, India is (or will soon be) the world’s fastest-growing big economy. And this month the commerce department published a ranking of India’s states according to the progress they had made on economic reforms. The initiative was inspired by the World Bank’s annual Doing Business report, which ranks countries on ten criteria, including the ease of starting a business, paying taxes and registering property. India lies a lowly 142nd out of 189 countries on the World Bank’s scorecard, but Narendra Modi, its prime minister, has pledged to propel it into the top 50.
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