Bits & Pieces
By John J. Lothian
It is storming in Chicago today. Tomorrow, weathering permitting, Jim, Doug, Patrick and I head to New York for the Summer Intern Education Series at the New York Stock Exchange on Wall Street on Wednesday, July 15. There is still seating available, so sign up today
In Chicago, we have limited seating for the last day’s event, and we have promised some of it to the CME as this year’s Global Premier Sponsor. Thus, if you want to hear Chicago Mayor Rahm Emanuel and CME Group CEO Phupinder Gill at Trading Technologies’ Chicago headquarters, you need to sign up ASAP. Also, you will not want to miss the craft beer at the TT Tap after the event.
We have added a speaker to be named later from BATS, who have also agreed to be a sponsor of the Chicago series again this year. Last year the video of BATS’ Jeromee Johnson was one of our most watched. It was an impressive performance, speaking, engaging and presenting information, while holding a cup of Starbucks coffee.
We have six copies of the Series 3 Training Course from The IFM that we will be giving away during the New York and Chicago events, three at each. This has proved to be a very popular item at previous year’s events.
We will also be giving away other schwag at this year’s events. If you have some extra items in your company’ marketing closet you want to share with the interns, please contact me. T-shirts are always popular with the interns. Titleist Pro-V1 golf balls are also popular, but they usually end up in Doug’s briefcase.
The good news about the weather in Chicago is that in a week I will be at summer camp with my Boy Scout troop and the weather will be great the entire week, with only gentle rains in the middle of the night. Or so I hope.
Quote of the Day
“In China, the regulators aren’t neutral. The government’s stated intention this time was that they wanted to use the stock market boom to fuel innovation and start-ups. This isn’t how a market is supposed to work.”
Chen Zhiwu, a professor of finance at Yale University in the story, “China’s Incendiary Market Is Fanned by Borrowers and Manipulation”
Greece signs up to a painful, humiliating agreement with Europe
AT ONE point during marathon euro-zone talks in Brussels on the evening of July 12th, Alexis Tsipras was a few minutes late returning from a break. A rumour took flight: the Greek prime minister, facing brutal demands from his 18 fellow euro-zone leaders in exchange for an agreement to begin talks on a new bail-out, had fled the building. It turned out that he was in the bathroom.
Here’s What the Greek Deal Entails
MoneyBeat – WSJ
The eurozone and Greece have finally agreed terms of a third bailout. The deal can only happen if Greek Prime Minister Alexis Tsipras now manages to get tough new austerity measures approved in parliament. Many of those measures are even stricter and far-reaching than those rejected by Greeks in a referendum less than two weeks ago.
So, what does the new deal entail? Well, to begin with, a lot of money.
Plenty Deserve Blame for Greece’s Woes, but Maybe Not Goldman Sachs
Dealbook – NY Times
With Greece’s economy and its future in the eurozone both teetering, the usually astute Robert Reich has dredged up the sorry old trope that Goldman Sachs is to blame for everything, proving yet again that even a Rhodes Scholar and former cabinet secretary is clueless about the role Wall Street firms play for their clients.
Junk-Bond ETFs Show Just How Desperate Traders Are for Liquidity
Junk-bond investors are getting more and more desperate for liquidity as the Federal Reserve moves closer to ending its era of unprecedented stimulus.
The proof is in the hefty price they’re willing to pay to own the most frequently traded bonds, which have steadily returned less than the broader $1.7 trillion U.S. high-yield market for more than three years. They’re also increasingly turning to exchange-traded funds to enter and exit the market, as evidenced by bigger trade sizes.
The Chinese SEC, as in, Securities Execution Commission
The Streetwise Professor
Trying to staunch the bleeding in the stock market, China is unleashing the full power of a police state. A Securities Execution Commission, if you will:
Banking regulators heighten financial market risk
Commissioners Michael Piwowar (SEC) and J. Christopher Giancarlo(CFTC) in Reuters
The 2008 financial crisis had a devastating impact on nearly all aspects of our economy but one, the regulatory machine. In the aftermath of the crisis, policymakers seeking a simple narrative for how these events transpired claimed that financial markets, and the participants overseen by the capital and derivatives markets regulators, were the primary cause of the financial crisis. This ill-informed assertion led to a misconceived solution: a massive increase in financial regulation.
China’s Incendiary Market Is Fanned by Borrowers and Manipulation
By DAVID BARBOZA, NY Times
At the height of the frenzy for Chinese stocks, just about every company was a winner. An online gaming start-up was valued at $7 billion. Shares in a fireworks company that had moved into finance shot up 300 percent. A struggling property developer was transformed into a stock market darling, just by changing its name to suggest it was an Internet company. Then there was the case of Beijing Baofeng Technology, an online video company whose stock price soared 4,200 percent in the three months after it went public early this year. The company’s shares climbed by 10 percent — the maximum amount allowable under exchange rules — nearly every day for more than 30 days.
Managers warn of ‘massive repercussions’ from unwinding of China bubble
Natalie Kenway, Investment Week
Fund managers have warned the Chinese government’s latest intervention to halt a stock market rout will not be enough to prevent a noticeable slowdown for the world’s second largest economy, with huge repercussions for global growth.
Five Charts Putting China’s Stock Market Mayhem in Perspective
As the dust settles (for now at least) on China’s frenzied boom-and-bust stock market, it’s worth looking at the role equity markets play in the world’s second-biggest economy.
As a share of gross domestic product, stocks just aren’t as big a deal in China as they are in countries such as the U.S. or Japan, even after a run-up over the past year.
Regulators Tie High-Speed Trading to Treasury Volatility
by Ian Katz, Bloomberg
U.S. officials have concluded that high-frequency trading contributed to the Treasury market’s wild ride last October, a finding that will probably add to regulatory scrutiny of the industry.
Here’s What We Learned From the Official Report on the ‘Flash Crash’ in U.S. Treasuries
U.S Treasuries are meant to be one of the most liquid markets in the world, meaning they should in theory be impervious to big jumps in their price. Market participants have blamed a number of culprits for the day’s wild swings. These include new regulations that make it more difficult or more expensive for large banks to make markets in a number of fixed-income securities, the rise of high-speed electronic trading in the U.S. Treasury market, and heavy one-way positioning by big investors.
Concern About Trading of U.S. Treasurys Prompts Review by Regulators; Findings of study to be released Monday; investors cite rising difficulty in trading large blocks of debt
By KATY BURNE, WSJ
U.S. regulators have become increasingly concerned in recent months about unstable trading in the $12.6 trillion U.S. Treasury market, where investors turn for safe-haven securities and set interest rates that are a benchmark for much of the rest of the global financial system.
BlackRock proposes bond market liquidity reforms
Anna Fedorova, Investment Week
BlackRock has published a paper proposing a raft of reforms for regulators and asset managers to address the growing problems with liquidity in the bond market.
Puerto Rico Says It’s Too Soon to Say How Bondholders May Fare
Puerto Rico’s top finance official said it’s too soon to discuss how investors will be affected as it seeks to restructure $72 billion of debt that it’s struggling to pay because of the island’s stagnant economy.
The State of Cost-Benefit Analysis at the S.E.C.
Dealbook – NY Times
Regulators now decide whether to regulate by conducting a formal analysis of whether the costs of adopting a rule would outweigh its benefits.
The cost-benefit analysis is controversial. Influential regulatory voices ranging from the Chamber of Commerce to Cass Sunstein, President Obama’s former regulatory czar, have spoken out in favor of it.
European Central Bank, Potential Rescuer, Remains Wary
Among its many proposed measures, the eurozone’s agreement on Greece calls for an overhaul of the country’s rickety banking system. The banks’ financial condition has deteriorated recently because of controls on movements of money and surging numbers of problem loans.
China’s central bank to better regulate internet banking as private lenders start to mushroom
South China Morning Post
China’s central bank is preparing a new piece of legislation on internet banking, at a time when Premier Li Keqiang is pushing his “Internet-first” policy and several Chinese internet firms are launching private banks.
The legislation has been approved by the Central Committee and State Council, China’s cabinet, and is expected to be announced soon, according to Zhang Tao, director of the legal department at the People’s Bank of China.
Dodd-Frank legislation has expanded federal control of banks
The Federal Reserve ordering Banco Santander SA to change the way the board of directors oversees the management and operation of its U.S. subsidiaries is one of first and most meaningful examples of the expansion and extension of the Dodd-Frank legislation beyond external compliance policies, procedures and implementation by regulators.
Greece Capitulates to Creditors’ Demands to Cling to Euro
Prime Minister Alexis Tsipras surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid Greece needs to stay in the euro.
After a six-month offensive against German-inspired austerity succeeded only in deepening his country’s economic mess and antagonizing his European counterparts, there was no face-saving compromise on offer for Tsipras at a rancorous summit that ran for more than 17 hours.
How Future Bitcoin Can Prevent a Future Greece; The digital currency is at a turning point, evolving much more quickly than some observers realize
By CHRISTOPHER MIMS, WSJ
Bitcoin, the volatile digital currency, cannot help the Greeks of today. But it could mean a great deal to those caught up in currency crises to come.
The tricky business of currency hedging
John Plender, FT
It is a truism to say that today’s markets are more beholden to central bankers than ever before. It is also true that they are increasingly driven by outsize currency movements that reflect strikingly divergent monetary policy across the globe. In its latest annual report, the Bank for International Settlements shows that in the euro area a statistically significant relationship has emerged since 2014 between returns on the Euro Stoxx index and the euro/dollar exchange rate. Specifically, a 1 per cent depreciation of the euro has, on average, coincided with a rise in equity prices of around 0.8 per cent.
Indexes & Index Products
China’s market-tracking ETFs roiled by share suspensions
Josh Noble in Hong Kong, FT
A wave of stock suspensions has played havoc with exchange traded funds tracking Chinese markets, causing wild price swings and big price gaps between passive funds and the assets they track.
KBW and Nasdaq Launch Global Bank Index
Keefe Bruyette & Woods (KBW), a Stifel company (NYSE:SF), and Nasdaq (NASDAQ:NDAQ) today announced the launch of the KBW Nasdaq Global Bank Index (Ticker: GBKX), the first and only index designed to track the performance of those banks designated as global systemically important (G-SIBs) by the Financial Stability Board and Basel Committee on Banking Supervision. The 28 banks included in the KBW Nasdaq Global Bank Index represent 45% of the global investable banking universe and account for approximately $3T in total market cap.
Global index provider MSCI joins the list of those blamed for China market crash |
South China Morning Post
As Beijing fights its worst stock market crisis in years, the two most important questions facing leaders – including Premier Li Keqiang – must be where to find the money to boost the market and what was the real cause of the crash.
How to Beat a Stock Index
Money managers like to flatter their performance record by pitting it against a patsy index. If you’re shopping for such a benchmark, consider the Russell 2000. June’s end brings the annual reshuffling of this small-cap index, which comprises the 2,000 U.S. stocks whose market capitalizations trail the 1,000 large-caps of the Russell 1000.
Gold Prices Slip as Greek Deal Saps Haven Demand
Gold inched lower Monday as some investors shed the haven asset in favor of riskier investments after a surprise Greek bailout deal soothed fears of the country’s potential exit from the eurozone.
For Indians, paper gold can’t beat the real thing; Physical gold helps hide ‘black money’; Dealers to boycott tax requirement for bigger purchases; Doubts over attraction of gold-backed bonds, gold deposits
By Rajendra Jadhav, Reuters
India is meeting stiff resistance in its drive to make the buying of gold jewellery more transparent and to channel demand into paper gold to stop the metal being used to hide billions of dollars of undeclared ‘black money’.
Archaeologists Baffled By 2,000 Tiny Gold Spirals Discovered In Denmark
Finding gold in Boeslunde, Denmark, is no huge surprise—it’s known as an area where Bronze Age gold offering are often uncovered, as curators there are explaining this month. But a recent discovery has surprised and baffled archaeologists: 2,000 tiny gold spirals. It’s a “golden enigma.”