First Read

Looming ‘Brexit’ Vote Rattles Global Markets; Volatility rises across markets as polls show momentum growing in favor of Britain leaving the EU
The growing possibility that the U.K. might leave the European Union shook markets globally on Monday, reflecting broad concern that next week’s referendum could slow down the world’s economy.

**** New T-shirt for sale: EXPECT VOLATILITY!!!


The VIX Just Had a Huge Day
Wall Street’s favorite fear gauge notched a new first on Monday, underscoring the jitters roiling global markets.

****** CBOE should sell those T-shirts.


There’s a Seismic Change Coming to Money Markets; But we don’t quite yet know what it will be.
Tracy Alloway, Luke Kawa – Bloomberg
Bankers seeking to manipulate the London Interbank Offered Rate with a flurry of tactless messages probably had little idea that the impact of their actions would be felt all the way to the Federal Reserve target rate. But—like bubbles from a bottle of Bollinger champagne—the effects of the Libor scandal are still emanating across money markets many years later.

****** The SEC should give away T-Shirts that say: EXPECT MANIPULATION!!!


Former Delta fuel executive, wife banned by CME
CME Group on Monday banned a former Delta Air Lines fuel trading executive for using his wife’s accounts to “front-run” the airline’s hedging positions – trades that netted him a profit of more than $3 million.

***** As Delta used to say(ish), they are ready when you are.


What the LinkedIn Deal Reveals About Bubbles
By Conor Sen – Bloomberg
Microsoft’s move to purchase LinkedIn for $26.2 billion — the largest company-for-company acquisition in the technology industry since Hewlett-Packard’s 2002 purchase of Compaq — is bringing out the predictable talk of irrational exuberance. But if the deal does indicate a bubble, it’s not necessarily in tech or in stocks.

***** So many people want to make bubbles ordinary. They are extraordinary: extraordinary popular delusions. Just ask Charles Mackay


CME Group Takes a Swing at Trading Floor Future
The CME Group held an event on the trading floor last night to show it off for future uses.
Among the ideas was an indoor golf range.
Have you ever wanted to perfect your golf swing on the @CMEGroup trading floor at the @cbotbuilding:

MWE Chicago 2016

MWE Chicago 2016

Ice cream was also served in a trading pit for the assembled real estate professionals.

MWE Chicago 2016


Top Three Stories for Monday
Yesterday’s most read stories ranged from the interview between TT’s Rick Lane and DRW’s Don Wilson (both former guest editors of JLN). The top story was Wizards Of Today’s Markets: Don Wilson, DRW, Part 2. If you missed it you can read Part 1 here. Second was an essay about birdwatching and finding something else to do with your time, from Bloomberg A man and his hobbies: If you want to be a better person, find something to do outside of work, and a profile of Ari Rubensten in the FT A former flash boy – Ari Rubenstein, CEO, Global Trading Systems


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New Industry Courses Offered in New York & London

The Institute for Financial Markets, launches new educational course on Algo Trading across listed equities, futures and options, and OTC markets. The one-day program explores the latest technologies adopted by market participants, and the impact of rapidly evolving regulations in the U.S. and the E.U. along with potential legal pitfalls. The course is geared to traders, trading desk directors, institutional portfolio managers, risk managers, brokers, exchange and OTC platform operators, market regulators, and attorneys. The course is offered July 19, 2016 in New York and September 19, 2016 in London.

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Lead Stories

German 10-year bond yield turns negative in race for safety; Historic rally in government bonds records new milestone as risk aversion deepens
Richard Blackden – FT
Germany set the pace in a historic rally in government bonds on Tuesday, with the yield on its 10-year bond falling into negative territory for the first time as investors raced for safety.

Finra Names Robert Cook Its Chief Executive
The brokerage industry’s overseer, the Financial Industry Regulatory Authority, on Monday named a former markets regulator, Robert W. Cook, as its president and chief executive officer.

ISE Surpasses 50 Million Contracts Traded Through Implied Order Functionality
The International Securities Exchange (ISE) today announced that trading of multi-legged strategy orders through its Implied Order* functionality has exceeded 50 million contracts. ISE’s Implied Order functionality has accounted for approximately 5.6 percent of all non-crossing, multi-legged contract volume executed on ISE year-to-date.

CME Group preps for possible market disruption from Brexit vote
CME Group Inc is “continuously and actively monitoring” its markets for impacts related to Britain’s vote on whether to leave the EU, the futures exchange operator said on Monday, amid expectations the outcome will spark sharp moves in currencies.

U.S. court skeptical of lawmaker immunity in trading probe
By David Ingram – Reuters
A federal appeals court fired skeptical questions on Monday at a lawyer for a U.S. congressional committee and a former staffer who argued that Congress is immune from having to cooperate with an insider-trading investigation.

LME chief says possible link between higher fees, lower volumes; CEO says could be link between fee-hike, decline in volumes; But says main reason for fall is faltering global economy; LME trade volumes dropped 9 pct in first quarter (Adds detail)
By Melanie Burton – Reuters
The head of the London Metal Exchange on Tuesday said the bourse’s falling trade volumes could be linked to a fee-hike introduced early last year, but added that the main reason for the decline was a downturn in the global economy.

HK Exchanges Makes New Bid to Boost China Metal Market Role
Bloomberg News
Bourse wants platform to generate China pricing benchmarks; Exchange to seek to develop warehouse, logistics in China
Hong Kong Exchanges & Clearing Ltd., which bought the London Metal Exchange in 2012 for $2.2 billion, plans to start a metals trading platform in the first half of next year in southern China as it bids to secure a foothold in the world’s biggest consumer and producer of raw materials.

Charles Li says LME not ‘ripping off’ members over fees; Exchange’s parent HKEx open to discussion on fees amid talk of rival metals platform
Jennifer Hughes in Hong Kong – FT
The London Metals Exchange is not “ripping off” its members but is open to discussion on fees, according to Charles Li, head of its Hong Kong parent, in his first comments since talk surfaced last week of a rival metals platform led by disgruntled traders.

What is Brexit all about, and why does it scare the equity markets?; All you need to know about the UK’s Brexit dilemma and how it is making global markets jittery
Shishir Asthana – Business Standard
Anxiety is never good for the body or the markets. Global markets are worried about the outcome of how Britain will vote in the upcoming referendum on whether to stay with the European Union or not. Recent polls suggest a clear tilt towards the exit vote, adding to nervousness in the market.

German 10-Year Government Bond Yields Dip Below Zero for First Time; Decline in bund yield is a milestone in investors’ flight to safer assets
Yields on the 10-year government debt of Germany dipped below zero on Tuesday for the first time on record, in a dramatic sign of the outsize effect of central-bank policy and investors’ search for safe havens.

Goldman Sachs exploited Libya fund, court told; Bank denies it forced unsophisticated officials into risky trades
Jane Croft – FT
A Goldman Sachs banker described officials at Libya’s sovereign wealth fund as so unsophisticated that “anyone could ‘rape’ them”, it was claimed in the London’s High Court, on the first day of a $1bn legal case being brought against the financial group.

OTC derivatives market rethinks its resistance to the future; Fresh capital requirements and futures trading exert pressure for change
by: Philip Stafford – FT
Battered by falling trading revenues, big global banks are taking a harder look at reforming their once booming backyard of privately negotiated deals with clients.


FINRA Announces CEO Transition
The Financial Industry Regulatory Authority (FINRA) today announced that its Board of Governors has concluded the CEO search, and appointed Robert W. Cook as President and Chief Executive Officer, effective the second half of 2016. Mr. Cook will succeed Richard G. Ketchum, who has served as Chairman and CEO since 2009. The Board intends to name a new Chairman in the coming months.

Mary Jo White Statement on FINRA’s Appointment of Robert Cook as CEO
Chair Mary Jo White – SEC
I want to congratulate FINRA and Robert Cook on his selection as President and Chief Executive Officer. Robert served the Securities and Exchange Commission with great distinction, advancing a wide range of important initiatives that included significant enhancements to U.S. equity market structure. I have no doubt that Robert will be a tremendous leader for FINRA, and I look forward to working with him to further strengthen our markets and protect investors.

Isda support makes ISIN adoption all but certain; Future of alternatives in doubt as ISINs integrate Isda taxonomy
Luke Clancy –
International Securities Identification Numbers (ISINs) that will be required to identify derivatives in trades for reporting under the Markets in Financial Instruments Regulation (Mifir) are being upgraded to integrate the International Swaps and Derivatives Association product taxonomy. When the European Securities and Markets Authority (Esma) mandated the use of ISINs for identification of exchange-traded and over-the-counter derivatives, the move was questioned by some market participants,…

Sebi begins proceedings to recover Rs 55,000 crore from defaulters; An amount of Rs 250 crore has been recovered in 207 cases; 2,500 attachment notices have been issued
Business Standard
Markets regulator Sebi has initiated recovery proceedings against defaulters to collect more than Rs 55,000 crore, largely on account of its clampdown on illicit money-pooling schemes.

PwC Independence Questioned in Dispute With Regulators; Issue could upend some relationships between auditors and money managers
PricewaterhouseCoopers LLP is in talks with regulators to resolve a dispute about whether the accounting giant is too close to some of its mutual-fund clients, highlighting an issue that could upend some relationships between auditors and money managers.

Verena Ross, Executive Director of the European Securities and Markets Authority (ESMA), today gave a statement to the European Parliament’s Economic and Monetary Affairs Committee (ECON) at its Public Hearing on Securitisation.

SEC to Permit Voluntary Filing Using Inline XBRL
The Securities and Exchange Commission today announced that it will allow companies to voluntarily file structured financial statement data in a format known as Inline XBRL. This initiative represents another step in the SEC’s continuing efforts to modernize and enhance its requirements to facilitate transparency of, and access to, companies’ disclosures.

Exchanges & Trading Facilities

Hong Kong bourse aims to launch gold contract in Sept
Hong Kong Exchanges and Clearing Ltd is aiming to launch its planned physically-delivered gold futures contract in September, its head said on Tuesday.

Former Nasdaq NLX director joins consultancy; Stuart Deel-Smith previously served as head of market structure and product development at NLX.
By Joe Parsons – The Trade
Stuart Deel-Smith, a former director at Nasdaq NLX, has joined derivatives consultancy firm Vanna Consulting.

CME Group’s Terry Duffy to Testify at House Agriculture Subcommittee Hearing on Impact of G-20 Clearing & Trading Execution Requirements
CME Group
CME Group Executive Chairman and President Terry Duffy will appear before a hearing of the U.S. House Agriculture Committee’s Subcommittee on Commodity Exchanges, Energy & Credit today to testify about the global implementation of G-20 Clearing and Trading Execution Requirements and their impact on derivatives markets.


Banks Vs. Nerds: Thinking About Fintech.
Seeking Alpha
FinTech is, ultimately, the process by which changes in the means of conducting financial transactions are effected. There is a war for the control of FinTech, between the nerds and the banks.

NRI launches ASP management system for bonds, OTC derivatives and c…
Nomura Research Institute, Ltd. (NRI), a leading provider of consulting services and system solutions, today announced the launch of VOLCS, an ASP (Application Service Provider) multipurpose management system for financial institutions.


As Wall Street Frets Over Trump, a Sure-Fire Short Trade Emerges
Isabella Cota, Benjamin Bain – Bloomberg
Citigroup and Barclays say shorting the peso would be a hedge; Mexican peso volatility has increased as short interest climbs
How do you hedge against a Donald Trump presidency? It’s a question Wall Street traders are increasingly asking.

Hedge Funds & Managed Futures

Bond Market Bets On Beating the Fed. Again.
Bond investors are violating one of Wall Street’s cardinal rules: Don’t fight the Fed.

The Most Pessimistic Bull Market in History; Instead of chasing growth and profits, investors this year have bought into safety
Could this be the most pessimistic bull market in history? The S&P 500 is just one good day’s trading away from a new record, yet the usual rush into go-go stocks is nowhere to be seen.

Bitcoin Price Hits Two-Year High; Digital currency jumps ahead of move that will curb production of new units
The price of the digital currency bitcoin hit a two-year high Monday, trading above $700 for the first time since 2014, after it jumped 21% over the weekend. The surge came days before an unusual event called the “halving,” an adjustment to bitcoin’s protocol designed to control the creation of new coins.

Banks & Brokers

Your banker will see you now: The changing face of broking
By Bernard Goyder and Lucy Burton – Financial News
It should be the perfect corporate broking client. It is the largest company in the FTSE 100 by market capitalisation and has bought and sold around £190 billion of assets over the past decade, according to data provider Dealogic. Last year it acquired BG Group in a $50 billion deal. The problem is Royal Dutch Shell does not “see the need for a corporate broker”.

Dana Giacchetto, Former “Stockbroker to the Stars,” Found Dead at 53
by Gary Baum – Hollywood Reporter
The ex-convict Manhattan stockbroker, whose former clients included friends Leonardo DiCaprio and Mike Ovitz, died early Sunday after a bender of hard-partying, according to reports.

British Banks Brace for Brexit by Borrowing; Bank of England is offering British lenders extra liquidity
British lenders on Tuesday tapped the Bank of England for £2.46 billion ($3.47 billion) of extra cash, as they brace for a U.K. vote over whether to stay in the European Union.

Libyan Fund Alleges Goldman Sachs Took Advantage of Its Inexperience; Lawsuit claims the bank exerted ‘undue influence’ over officials at the sovereign-wealth fund
Libya’s sovereign-wealth fund, in a long-awaited trial that started Monday, alleged Goldman Sachs Group Inc. took advantage of its lack of financial sophistication to draw it into losing trades.

The Big Question: How to Select an FCM?
By Dana Comolli
With the shrinking number of FCMs, it might seem a CTA has little choice, or in some cases, too many. Either way, you need to know the questions to ask, and if you’re not happy with the answers, move on.

Clearing & Settlement

OCC: Order Instituting Proceedings to Determine Whether to Approve or Disapprove a Proposed Rule Change Related to the Adoption of an Options Exchange Risk Control Standards Policy (Release No. 34-78056; File No. SR-OCC-2016-004)

ICEEU: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Clearance of Containerised White Sugar Futures Contracts (Release No. 34-78045; File No. SR-ICEEU-2016-008)

ICC: Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to Revise the ICC Clearing Rules (Release No. 34-78055; File No. SR-ICC-2016-008)

Indexes & Products

China Stocks: Investors Appear Ready to Open Door to MSCI Indexes
It looks like the third time might be the charm for Chinese stocks.
Investor confidence is growing that Morgan Stanley Capital International will include mainland-listed stocks—known as A-shares—in its key Emerging Markets Index, tracked by roughly $1.5 trillion worth of global funds. The decision, which follows its third consultation since 2013, is due Tuesday afternoon in the U.S.


Former equities trader at Schroders Investment Management sentenced for insider dealing
Damian Clarke, a former equities trader at Schroders Investment Management has today been sentenced to two years imprisonment having pleaded guilty to nine counts of insider dealing.

SEC can resume case against ex-S&P executive -U.S. appeals court
A federal appeals court on Monday cleared the U.S. Securities and Exchange Commission to resume civil proceedings against a former Standard & Poor’s executive over an alleged fraud involving mortgage debt ratings.

Prompting gasps, judge spares NY hedge fund executive prison for fraud
A New York hedge fund manager who at age 28 lost nearly all $57 million he oversaw in less than three weeks was spared prison on Monday, as the judge recognized how quickly and thoroughly the defendant owned up to his crimes.

SEC: Muni Advisors Acted Deceptively With California School Districts
The Securities and Exchange Commission today announced that two California-based municipal advisory firms and their executives have agreed to settle charges that they used deceptive practices when soliciting the business of five California school districts.

Environmental & Energy

Global Oil Markets to Balance Out, IEA Says; Oil watchdog adjusts expected oversupply to 800,000 barrels a day, from 1.5 million barrels
Global oil markets are moving close to balance in the second half of this year on a significantly stronger than expected oil demand and unexpected supply disruptions, the International Energy Agency said Tuesday.


Hong Kong Stock Market: Losing Glitter To Mainland Bourses
Hong Kong, renowned as a leading financial center is fast losing its sheen. The semi-autonomous former British colony was handed over to China in 1997. Among Hong Kong’s recent setbacks include the decision of some top companies to pull out of the Hong Kong stock market. In April, one of the world’s biggest real estate developers, Dalian Wanda Commercial Properties. decided to delist from Hong Kong stock exchange.

Roaring demand for pigs in China fires up rally in Chicago hog futures market
South China Morning Post
A robust appetite for cuts like pig feet, ears and snouts in the world’s biggest pork-consuming nation is fueling a rally for hogs in Chicago. Investors last week increased their bets on a hog rally by the most since January, and the number of contracts outstanding has jumped to the highest in two years.

MSCI is about to make its big call on world’s worst stock market
Hong Kong: Index-tracking global investors are about to find out whether they will be compelled to start buying shares in the world’s worst-performing stock market.

Frontier Markets

Abu Dhabi Fund to Pursue 1MDB Claims in London Arbitration Court; IPIC says it is owed about $6.5 billion as a result of a dispute with Malaysian state investment fund
Abu Dhabi sovereign-wealth fund International Petroleum Investment Co. said it is pursuing arbitration in a London court for approximately $6.5 billion it says it is owed as a result of a dispute with Malaysian state investment fund 1Malaysia Development Bhd.


LinkedIn Deal Is No Twitter Endorsement; Shares of Twitter popped on Microsoft’s deal to buy LinkedIn. But investors shouldn’t read too much into it
Microsoft saw value in one social network. Investors are hoping that means good things for another.

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