First Impressions

MarketsWiki Education World of Opportunity Lineup Expanded
By JLN Staff

MarketsWiki Education’s World of Opportunity keeps getting better. We are pleased to announce additional speakers for Chicago and New York.

We try to assemble a wide variety of speakers from different disciplines and risks. Our most recent additions to the speaker lineup really emphasize that, as we have software, clearing, human resources and artificial intelligence represented.

Rob D’Arco of software company Rival Systems will be joining the Chicago lineup, as will
Tracy Raben, OCC‘s SVP and Chief Human Resources Officer.

Also, we are pleased to announce Neurensic CEO David Widerhorn will be presenting in Chicago. Glenstar Properties managing director Christian Domin will also be a Chicago speaker, giving us a perspective on real estate risk as it relates to trading and trading groups.

Also, LME has agreed to sponsor the social event after the series in London.

This week we announced the dates and speakers for the U.S. leg of this year’s education series. Read this week’s submissions, including the the rollout announcement and yesterday’s commentary by John Lothian, MarketsWiki Education Is More Than Paying It Forward. Register by clicking HERE or by clicking the graphic below. (Yes; it’s the same registration portal for both Chicago and New York).
MWE Chicago 2016

Quote of the Day

“You don’t want to mess with Mary Jo.”

President Obama in the story, “Despite travails, White calls SEC ‘aggressive and successful'”

Lead Stories

Lessons From a Bank Heist
Swift can’t do it alone. The Society for Worldwide Interbank Financial Telecommunication, an organization that enables money transfers worldwide, has come under fire after a rash of bank hackings — some of which bear fingerprints of nation-states including North Korea. In response, it announced this week a series of new measures aimed at protecting the global financial system from cybercrime.

Global funds raise cash, bond holdings on Brexit, Fed fears
Global investors have raised their holdings of cash and bonds, citing fears about potential shock waves from a Brexit vote rippling beyond Britain and the increased likelihood of a rise in U.S. interest rates this summer. Fund managers polled by Reuters in the United States, Europe, Britain and Japan raised cash allocations to 6 percent in May, the highest level since January when global equity markets were in free-fall. They also increased their bond exposure to 37.8 percent from 37.6 percent in April.

IMF warns that neoliberalism’s benefits might be oversold
Business Insider
The International Monetary Fund thinks all that neoliberalism might’ve been too much of a good thing. Neoliberalism — which IMF researchers Jonathan Ostry, Prakash Loungani, and Davide Furceri loosely define as the opening of economies to foreign capital along with a reduction in government debt burdens — has been the dominant trend in economic policymaking over the past 30 years.

North Korea Linked to Digital Attacks on Global Banks
NY Times
Security researchers have tied the recent spate of digital breaches on Asian banks to North Korea, in what they say appears to be the first known case of a nation using digital attacks for financial gain.

The US housing market is starting to boom
The evidence is piling up. The latest indicator comes from the updated US GDP numbers published this morning, which showed the US growing at a faster-than-first-reported 0.8% clip in the first quarter. They show residential investment in things like homebuilding and renovation rising at an annual pace of more than 17%, a reading that would have put it among the hottest moments during the pre-crisis housing boom.

EU member states should stress-test banks’ cyber risks: European Banking Authority chairman
Domestic authorities in European Union member states should stress-test their financial institutions for cyber risks, a top E.U. supervisor said, warning banks might be required to hold extra capital as a buffer against what is an emerging threat.

FX Conduct and Disappearing Bonds
The job of a financial market intermediary is to acquire and manage information. If you are a broker or dealer or trader or M&A adviser, you have to know who’s buying so you can help sellers sell, and you have to know who’s selling so you can help buyers buy. So you will always have conflicts of interest. You’ll talk to a buyer who’ll say “boy I really would like to buy,” and then you’ll talk to a seller who’ll say “man I am just desperate to sell,” and there will be some gains from trade available there, and your decisions about what to tell whom when will help shape who — the buyer, the seller, or you — benefits most from them.

Lagarde remote control makes Europeans doubt IMF role in Greek deal
Another sleepless night in Brussels before another debt deal with Greece. So far, so routine in the euro zone crisis. But for once it was not high-stakes calls to Athens that kept Europe’s finance ministers up into the early hours. This time they were kept waiting for IMF officials to yield after months of wrangling with Greece’s euro zone creditors over the Fund’s demands that the Europeans give Athens debt relief.

Central Banks

ECB’s bad loans crackdown may reach smaller banks later: Nouy
The European Central Bank’s nascent policy on working off bad bank loans may be extended to smaller lenders not directly supervised by the ECB, its chief supervisor said on Friday. The ECB is crafting new guidelines aimed at forcing banks, especially in financially stretched countries such as Italy, Greece and Portugal, to reduce the pile of soured credit sitting on their balance sheet.

Central Banks Can’t Go It Alone Anymore
Mohamed A. El-Erian – Bloomberg
Whether through signals from the Group of Seven meeting this week or in the outcome of the latest round of European negotiations on Greece, officials of advanced countries increasingly are acknowledging that the problems facing their economies require a new response to take over from the overlong use of narrow short-term tools.

Do not ignore the impact of central banks’ policies
Financial Times
Sir, Martin Wolf’s article on “The risks of central banks’ radical treatments” (G7 Japan, Special Report, May 26) is extraordinary in that he focuses solely on the direct relationships between central bank policies and the real economy without any mention of the necessary transmission mechanism between central bank policies and the real economy via the intermediation of the financial system; thus there is no mention of commercial banks, or broad monetary growth, or bank lending or anything that might lie between central bank policies and the real economy. This assumption of a world without financial frictions has been a fundamental weakness in much macroeconomic analysis.

Investors Bet on July Hike Ahead of Yellen Harvard Event: Chart
Eye on July, caveat Yellen. Investors see the U.S. central bank’s July meeting as the most likely timing for its next rate increase, thanks to Federal Reserve Governor Jerome Powell.

BoE pushes on with bank ringfencing rules
Financial Times
The Bank of England is to push ahead with its new rules for banks on ringfencing their retail operations, shrugging off criticism from one of the architects of post-crisis reforms that its regulation system will be too weak.

BOJ Harada says should be ready to ease further if growth risks heighten
Bank of Japan board member Yutaka Harada said on Friday the central bank should not hesitate to expand monetary stimulus further if risks, such as a deeper slowdown in emerging economies, derail Japan’s economic recovery.

Can The European Central Bank Go DAO? How Blockchain Will Help Europe
Can, in not too distant future, the European Central Bank become a decentralized autonomous organization?
In Part 1 of the article “How the European Parliament Views Blockchain” we looked into how Euro Parliament has taken on cryptocurrencies in its latest report. Here, in Part 2, we continue to analyse it.

Regulatory News

Former Australian Rabobank trader agrees to U.S. extradition: court
Former Australian Rabobank [RABO.UL] trader Paul Dion Thompson on Friday consented to being extradited to the United States to face charges for alleged benchmark interest rate manipulation, a court said.

Ex-Barclays Trader Disrupts Libor Testimony Shouting ‘No’
A former Barclays Plc trader on trial for rigging Libor was admonished by the judge for an outburst that interrupted a co-defendant being questioned by a prosecutor.

Banks Set for Capital Reprieve as EU-SEC Derivatives Talks Drag
Banks using some U.S.-based clearinghouses to handle their derivatives trades are set to win a reprieve from tougher capital rules as the European Union continues talks with the Securities and Exchange Commission on regulatory equivalence.

Despite travails, White calls SEC ‘aggressive and successful’
The Washington Post
After three years as Wall Street’s top watch dog, Mary Jo White defends the track record of the Securities and Exchange Commission with a prosecutor’s knack for building a case. Despite complaints that the agency has not been tough enough on Wall Street, White points to the 89 senior executives and more than 100 companies charged with misdeeds associated with the 2008 financial crisis. The agency has collected $3.76 billion for those misdeeds, she says.

China’s angry Fanya investors leap the Great Firewall—and are shocked by what they learn about Beijing
China’s elaborate censorship mechanism, nicknamed the Great Firewall, blocks tens of thousands of foreign websites deemed hostile to the Communist Party regime. While some internet users inside China count on services like VPNs and proxies to get access to Facebook, Twitter, and overseas news outlets, many Chinese netizens never bother. They’re satisfied with the filtered information they get on China’s “intranet,” as it is sometimes jokingly called in China.


Currency Traders Look Beyond the Pound to Combat Brexit Turmoil
It’s one of the biggest dilemmas facing currency managers: how to protect against the fallout from the U.K. leaving the European Union without losing money should it vote to remain.

Currency traders told not to lie or cheat – and they must keep chatting to the authorities
The Telegraph
Foreign exchange traders have been given a new set of rules from global regulators banning the discussion of confidential information on clients and trades, but encouraging the dissemination of “market colour,” or more vague information on market trends.

Dollar Traders Await Yellen With Best Month in Year Up for Grabs
Wait and see is the mantra for currency traders weighing whether to buy into the dollar’s best month in more than a year. With the U.S. currency poised to gain more than 3 percent in May, Federal Reserve Chair Janet Yellen delivers a speech that has the potential to determine the fate of the greenback’s recent rally. A string of central bank officials have signaled their willingness to tighten policy as soon as next month, and any hint that higher interest rates may be delayed threatens to erode the dollar’s advance.

China’s central bank condemns foreign media reports on yuan
China’s central bank on Friday condemned two news reports from foreign media outlets published this week about currency reforms and monetary policy. The People’s Bank of China (PBOC) said in a statement on its official Weibo account the reports “fabricated facts, misled readers, misled markets”, and that it reserved the right to take legal action.

Nigeria Currency Crisis Explained: What We Know and Don’t Know
Nigeria’s central bank may soon give bond and stock investors what they have been pleading for: a weaker naira.
Governor Godwin Emefiele announced after a meeting of the Monetary Policy Committee in Abuja, the capital, on Tuesday that a more flexible foreign-exchange system would be unveiled “in the coming days.” But his statement was short on details and left plenty of questions. Here are some answers:


BlackRock Is an ‘Active’ Player in Europe’s Craze for Long Bonds
BlackRock Inc., the world’s biggest money manager, says it snapped up some of the euro region’s long-dated government bond issues recently, attracted by their relatively high yields as well as signs of economic progress in the countries concerned.

Credit Suisse Sells Operational Risk Bonds, Insuring Rogue Trading, Cyber Crime
Insurance Journal
Credit Suisse Group AG sold 220 million Swiss francs ($222 million) of bonds designed to offload potential losses on events like rogue trading, with some investors sidestepping the issue because of the incalculable risk.

Invesco: long-term U.S. bond yields unlikely to rise even if Fed hikes
Even though the Federal Reserve is expected to raise interest rates, long-term U.S. bond yields are unlikely to rise due to China’s slowdown and negative rates in Japan and Europe, the top fund manager of Invesco Ltd’s (IVZ.N) $240 bln global bond funds said. Gregory McGreevey, Atlanta-based CEO of Invesco Fixed Income also said most U.S. bonds are no longer cheap but still many of their valuations are at fair value.

Indexes & Index Products

Shanghai, Shenzhen stock markets tighten rules on share trade suspension ahead of MSCI review
South China Morning Post
China’s two bourses are to implement tougher restrictions on voluntary trading suspensions, the policy change coinciding with the annual review by index compiler MSCI on whether to include mainland shares into its widely-tracked emerging markets index.

ESMA issues consultation on technical advice given on Benchmarks Regulation
FTSE Global Markets
European markets regulator ESMA has issued a consultation paper (CP) following ESMA’s technical advice to the European Commission, based on the Benchmarks Regulation text published by the European Parliament. A separate CP on the draft technical standards only will be published by ESMA in due course, it adds.

The Dow: An Index of Winners
The Atlantic
One hundred and twenty years after its birth, the Dow Jones Industrial Average is as relevant as ever. There’s hardly a news story about the American stock market that doesn’t mention the index’s industrial average.

U.S. Consumer Sentiment Index at Highest Level in 11 Months
Americans are more confident than at any time in almost a year, as cheap gasoline, low interest rates and a rebound in stocks boost the economy’s prospects. A measure of consumer sentiment rose to a reading of 94.7 in May, up 5.7 points from April’s reading of 89, the University of Michigan said Friday. That marked the biggest jump in a single month since 2013 and the highest the index has been since last June’s 96.1 reading.

Why Index-Tracking ETFs Don’t Perfectly Track Indexes – Focus on Funds
Nearly all exchange-traded funds track indexes. But there are many reasons why an ETF might not track its index perfectly. Mariana Bush, head of closed-end and exchange-traded fund research at Wells Fargo Advisors, highlights the reasons that an ETF’s net asset value might not track its corresponding index. For instance, NAVs of big, heavily traded funds ETFs such as the Vanguard High Dividend Yield ETF (VYM) track within 0.03% of the index, according to XTF, a research firm. For others, such as the iShares MSCI Japan ETF (EWJ), that tracking error can be closer to 1.8%.

High Yield Bond Funds See $562M Cash Withdrawal, Mostly Via ETFs
U.S. high-yield funds recorded an outflow of $562 million in the week ended May 25, according to Lipper. The outflow dents last week’s inflow of $1.1 billion and represents the third outflow over the past four weeks for a net withdrawal of $3.1 billion over that span.

It’s Not Surprising That SPLV, USMV Are 2016’s Most Popular Smart Beta ETFs
Data out earlier this week, courtesy of index provider FTSE Russell confirm professional money managers are increasingly turning to smart or strategic beta exchange-traded funds. That is not surprising, as various data points and studies in recent years have confirmed as much.


‘Strong Hands’ Returning to Gold in New World of Negative Yields
At a time when about $8.1 trillion of global government bonds imply investors are paying borrowers for the privilege of holding the debt, it’s easy to understand why gold and the companies that mine the metal are back in favor.

How Are Central Bank Demands Impacting Gold?
Yahoo Finance
Gold has been falling, and the Markets have been taking a skeptical approach to the precious metal. But major banks such as JPMorgan Chase, Goldman Sachs, and HSBC are remaining optimistic on gold. Read our series What Do Major Banks See Ahead for Gold? for further details on bank views.

Gold Investors Await Yellen’s Signals After Another Losing Week
Gold looks very different from the beginning of May. Along with platinum, palladium and silver, it is heading for the biggest monthly loss since November as investors anticipate higher borrowing costs in the U.S.

ETFs help London to eclipse China for Swiss gold imports
Financial Times
London has overtaken the traditional gold centres of India and China for shipments of bars from refineries in Switzerland, as the precious metal is sent to UK vaults to back a surge of buying from exchange traded funds.

How to Pan for Gold
NY Times
“Gold is funny — you don’t talk about it,” says Susan Okey, a gold-­panning instructor at Marshall Gold Discovery State Historic Park in Coloma, Calif., where James W. Marshall spotted a few flecks of gold in a sawmill in 1848, prompting the greatest voluntary mass migration of people the Western Hemisphere had ever seen. You will be tempted to yelp when you see that telltale metallic glow. Control yourself. “If you yell ‘Eureka!’ everybody is going to come over to where you are and start looking,” Okey says.

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