First Read

US options market to slam trading reforms
Futures & Options World
The chief exec of US options giant the International Securities Exchange will tell the US government on Thursday its plan to change US trading rules will have a “very unfortunate outcome” if it is not amended to include options. Gary Katz, speaking on behalf of the many US options exchanges, will tell the US Department of Labour in an open hearing in Washington its plan to exempt options from a new definition of the assets that can be traded by pension-holders will hurt investors.

***** There are more threats to our markets’ quality and liquidity from “good intentions” of regulators than I can ever remember.


Trading Investigation Eyes Ex-Chairman of Dean Foods and Golfer Phil Mickelson
Criminal and civil authorities are investigating whether the former chairman of Dean Foods Co. leaked inside information about a corporate spinoff to a professional gambler who in turn is suspected of tipping off golfer Phil Mickelson, according to people familiar with the probe.

***** I always suspect people with the nickname “Lefty”


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Thirty years on, treasury bond with 10 percent coupon bows out a star
Few things from 1985 achieved lasting fame and universal acclaim. One of them is the highest-paying U.S. government bond, which easily outlasted ‘new Coke,” Commodore’s Amiga computer, power suits and big hair.

***** The Long Bond with the biggest coupon goes down in history.


Beyond the Internet, Innovation Struggles; Alphabet (née Google) shows the limits of technological advances in moving the needle on productivity
Google’s decision to separate its profitable businesses from its money-losing “moonshot” ventures has offered a window into why American productivity is struggling despite so much exciting technological innovation.

***** Never underestimate the potential of innovation.


FIA Releases SEF Tracker Report for May
FIA today published the latest issue of FIA SEF Tracker, a periodic report on trading activity taking place on swap execution facilities. This issue of FIA SEF Tracker shows volume trends from…

****** Why do these SEFs keep getting away and why does the FIA have to track them down?


Lead Stories

Bernanke, Paulson and Geithner Join Yale Effort to Update Crisis-Response Playbook; Former Treasury Secretary Geithner calls gathering ‘a master class in financial crises for the firefighter’
Former Federal Reserve Chairman Ben Bernanke and former Treasury Secretaries Henry Paulson and Timothy Geithner gathered last week in an auditorium to reflect on their response to the 2008 financial crisis.

ITG pays $20m fine to settle ‘secret trading desk’ claims
By Nicole Bullock in New York and Gina Chon in Washington, FT
The Securities and Exchange Commission (SEC) headquarters building stands in Washington, D.C. Photographer: Joshua Roberts/Bloomberg©Bloomberg
ITG, the US agency brokerage, will pay a record fine to settle charges it operated a “secret trading desk” and misused information of its dark pool customers, in the latest example of improprieties by an off-exchange trading venue.

Federal Judge Rules SEC In-House Judges ‘Likely Unconstitutional’; Federal judge in New York halts SEC case against former S&P executive
The Securities and Exchange Commission suffered a fresh setback to its controversial use of in-house judges, when a Manhattan federal judge ruled Wednesday the tribunal was likely unconstitutional.

China defends new currency regime
Jamil Anderlini in Beijing, FT
China’s central bank has publicly defended its currency policy and assured jittery global markets that it does not want to see a collapse in the value of the renminbi following Tuesday’s shock devaluation.

Renminbi devaluation tests China’s commitment to free markets
Gabriel Wildau in Shanghai, FT
Depending on who you ask, China’s move to let its currency depreciate is either a milestone for market reform or a sharp escalation of a currency war waged by government planners desperate to rescue a sputtering economy.

AQR trading head fired after SEC case against former employer
By Bradley Hope, The Wall Street Journal
Hitesh Mittal has been terminated from his position as head of trading at AQR Capital Management in a move related to an enforcement action the Securities and Exchange Commission brought against a former employer.

SunGard Sale Has a Bright Side for Owners
By MICHAEL J. de la MERCED, NY Times
At first glance, it would appear that the $9.1 billion sale, including debt, of the financial software maker SunGard to Fidelity National Information Services would be a disappointment to the private equity firms that paid nearly $11 billion for Sungard.

CME flash crash suit on hold as feds seek extradition
Bloomberg via Crain’s Chicago Business
The Commodity Futures Trading Commission’s lawsuit against the British trader accused of contributing to the 2010 flash crash was put on hold while U.S. prosecutors seek his extradition to face related charges.

Pastor saved souls by day, stole millions at night: feds
By Michelle Celarier, NY Post
The Pennsylvania pastor arrested on Tuesday for pocketing profits of $17.5 million using illegal inside information won’t be tending his flock this Sunday — because he’s in jail.


?Iosco urges mandatory after-trade postings for credit default swaps
Neil Roland, MLex
Securities regulators across the world should require dissemination of post-trade data in the $16 trillion credit default swaps market after a study of US practices showed net benefits, a global authority said.

U.S. government appeals judge’s ruling over 2008 AIG bailout
The United States filed an appeal on Wednesday against a U.S. judge’s ruling in June that sided with former American International Group chief executive Maurice “Hank” Greenberg on a legal claim over the company’s 2008 bailout.

Don’t Ban HFT Strategies, But Put Safeguards in Place Instead
Traders Magazine Online News
In a recent editorial in the Hindu Business Line, the editor said that the Securities and Exchange Board of India seems to be caught between a rock and a hard place on the issue of regulating algorithmic and high frequency trading (HFT) on Indian bourses. The piece pointed to a recent Reserve Bank of India report that flagged the systemic risks from such trades and that a few market participants have alleged that it has allowed large players to manipulate stock prices.

FCA gains high court injunction against fund manager and traders
Lindsay Fortado, FT
The UK finance regulator has secured a High Court ruling of £7.6m against a Swiss-based fund manager and several Hungarian traders for committing market abuse through a “layering” trading strategy.

Exchanges & Trading Facilities

Gary Katz to Appear Before U.S. Department of Labor to Discuss the Proposed Conflict of Interest Rule
Gary Katz, President and Chief Executive Officer of the International Securities Exchange, tomorrow will participate in a public hearing hosted by the U.S. Department of Labor to collect feedback on the agency’s proposed Conflict of Interest Rule. Mr. Katz will deliver remarks on behalf of the U.S. Securities Market Coalition, which represents the twelve U.S. options exchanges and OCC (The Options Clearing Corporation). The Coalition previously submitted a comment letter on the proposed rule, which is available here.

CME’s global business head O’Connell departs
Futures & Options World
Derivatives marketplace CME Group has parted ways with its global business development head, after the exchange group commits to further restructure the business, confirming the latest in a wave of job cuts. Chicago-based Michael O’Connell, managing director and global business development for CME Group, has left the business.

Korea Exchange: Analysis Of Single Stock Futures Market For KOSDAQ-listed Stocks One Week After Market Opening
Korea Exchange (KRX) has analyzed the trading activity of single stock futures market for KOSDAQ-listed stocks* for the 1st week after its listing (from August 3 to August 7, 2015.)

SGX welcomes CMC Infocomm Limited to Catalist
Singapore Exchange (SGX) today welcomed CMC Infocomm Limited (CMC Infocomm) to Catalist under the stock code “42F”.

Hong Kong exchange operator’s profit jumps as trading hits record
By Gregory Stuart Hunter, The Wall Street Journal
A bull market in Chinese stocks helped propel trading activity on Hong Kong’s stock exchange to the highest level in its history during the first half of the year, boosting the exchange operator’s bottom line even as its metals trading business had a slight decrease in turnover.

Open Interest of TOCOM Crude Oil Hit All-Time Record
Open interest of TOCOM Dubai Crude Oil Futures reached 53,117 contracts today recording the all-time high since its launch on September 1, 2001. The old mark was 52,418 contracts recorded on January 7, 2002.

Hedge Funds & Managed Futures

Gold demand falls to six-year low
By Henry Sanderson, FT
Demand for gold fell to its lowest in six years in the second quarter, in a further sign the world’s largest buyers are staying away with the price near its lowest levels in five years. The world’s two largest consumers, China and India, accounted for half of the fall in global demand to 914.9 tonnes, according to a report from the World Gold Council, an industry body.

Hedge fund inflows hit 15-month high – data
Investors raised their bets on hedge funds at the fastest pace for 15 months in August, new data showed.

Fed Funds Future Nearer Than You Think; September is looking more certain as liftoff date for rates
When it starts tightening monetary policy, the Federal Reserve will likely raise its target range on overnight rates by a very modest quarter of a percentage point. But interest rates themselves may rise by even less than that.

No! The Dow Death Cross! (Oh, Never Mind)
Barry Ritholtz – Bloomberg View
One of the themes we like to touch on in this column are heuristics. Myths that become Wall Street rules of thumb have existed for as long as there have been trading desks. They are legion, they pop up regularly and most of the time they are terribly wrong. Woe to the unwary trader who relies on the urban legends to inform an outlook.

Market’s Partying Like It’s 1998, VAR Models Need a Xanax
Michael P Regan, Bloomberg
Take a quick gander at the analysis below and see if you don’t agree it’s a pretty good summary of the recent state of play in financial markets as China launched the latest salvo in the global currency wars by devaluing the yuan.

Banks & Brokers

Citigroup’s ‘Bad Bank’ Isn’t So Bad Anymore; iti Holdings, the ‘bad bank’ Citigroup created to dispose of unwanted assets, has become a surprise success story
Citi Holdings was born to be bad. But it is getting better with age. The “bad-bank” unit of Citigroup Inc., Citi Holdings for more than six years has been the repository for businesses the banking giant wanted to dump: its retail brokerage and life insurance unit, an array of toxic subprime loans, even a stake in a Mexican auto supplier.

EBS BrokerTec Launches BrokerTec European Government Bonds Data Product
EBS BrokerTec, ICAP’s market-leading electronic foreign exchange (FX) and fixed income business, announces today that it has launched the BrokerTec European Government Bonds premium pricing data product, distributed by ICAP Information Services, the information division of ICAP. The product comprises European Government Bond (EGB) market data from BrokerTec Market, EBS BrokerTec’s electronic central limit order book for the fixed income markets, and is available in real-time, end-of-day and historical formats.

Clearing & Settlement

Clearstream’s July 2015 Figures – New Peak In Assets Under Custody At EUR 13.5 Trillion – Continuing Growth In All Business Areas
In July 2015, the overall value of assets under custody held on behalf of customers registered an increase of 10 percent to EUR 13.5 trillion (compared to EUR 12.2 trillion in July 2014).

ICE Trade Vault Europe Approved by ACER as Registered Reporting Mechanism
Intercontinental Exchange, the leading global network of exchanges and clearing houses, announced today that the Agency for the Cooperation of Energy Regulators (ACER) has approved ICE Trade Vault Europe Limited as a Registered Reporting Mechanism (RRM) to meet the reporting requirements of the European wholesale energy markets.

Eurex Clearing continues 2015 with many enhancements
Find out more about our enhanced netting, Zero Coupon Inflation Swaps and more; 2015 is progressing fast and we wanted to take the opportunity to update you on the latest developments at Eurex Clearing.

Indexes & Products

Advantages of a traditional portfolio allocating to a volatility index
Eurex Group
For decades, investors frequently perceived a traditional portfolio allocation in the range of 60 percent equities and 40 percent bonds for proper diversification. Since 2000 investors, both large and small, have experienced several moments of negative returns to their portfolios. This experience has enlightened many investors to seek wider portfolio diversification in attempts to reduce their correlation risk, tail risk and negative volatility.

FTSE Russell expands smart beta range with momentum and yield factor indices
ETF Strategy
FTSE Russell, a leading global index provider, has expanded the FTSE Global Factor Index Series to include coverage of two additional factors: Momentum and Dividend Yield.
FTSE Russell expand smart beta range with momentum and yield indices The new equity indices are a natural extension of the FTSE series, which is available in developed market and emerging market versions, and track theoretically sound and academically supported factors.

FTSE Russell Launches All-World ex Coal Index Series
The global index provider FTSE Russell has launched a new entry in the FTSE All-World ex Fossil Fuels Index Series — the new FTSE All-World ex Coal Index Series. The new benchmark index will feature only companies that are not known to have exposure to coal energy, or companies with links to proved or probable coal reserves. In other words, the index will omit those that have definite links to either. The index is intended as a means of helping investors limit their portfolio’s exposure to fossil fuels (coal energy in particular here) if they so choose.

Trying To Say Something Nice About Brazil ETFs
Positive musings about the exchange traded funds tracking Brazil, Latin America’s largest economy, are unlikely to appear here. Perhaps that will change in the future, but it is also highly likely that the future is measured in months or years rather than days or weeks.
On Tuesday, Moody’s Investor’s Service downgraded Brazil’s sovereign credit rating to Baa3, the ratings agency’s lowest investment.


OCC may create innovation unit to help banks compete with fintech firms
The US Office of the Comptroller of the Currency is contemplating setting up a fintech innovation unit to help regulated financial institutions compete on an equal footing with non-bank providers of financial services.

Options Names Former NYSE Technologies Executive Helen Viccars as VP Sales and Account Management
Press Release
Options, the leading managed service and IT infrastructure provider to the global capital markets industry, has today announced the appointment of the former NYSE Technologies sales executive, Helen Viccars, to the firm’s global sales team. Ms. Viccars, who was responsible for EMEA sales and account management at NYSE Technologies, joins Options as VP Sales and Account Management.

News Corp posts loss after $371m education writedown
Shannon Bond in New York, FT
News Corp has made a hefty writedown on the value of its digital education unit and signalled a potential exit from a business Rupert Murdoch once hoped would shake up the textbook-heavy US education industry.

Neo & Partners
Blackwell Global and Neo & Partners Global collaborate to establish award-winning Prime of Prime (Pop) services within the Trading-Atrium.
Neo & Partners Global offers unique 360° Business Eco-system design for Algorithmic and Quantitative e-FX trading under one roof.
Neo & Partners Global (NPG), a Singapore enterprise that specializes in offering smart electronic trading solutions and creator of Asia’s first Trading-Atrium, announces the collaboration with Blackwell Global to establish its award winning Prime of Prime FX Liquidity Pool market access capability as part of NPG’s unique 360° Business Eco-system.

With iPad Sales Falling, Apple Pushes Into Businesses; Tech giant is working with more than 40 companies to make the iPad a more appealing work tool
Apple Inc., grappling with swooning sales of the once-blockbuster iPad and sensing an opening in the changing ways of work, is making its broadest assault to date on business computing.

UBS is admitting banks needs help from fintech startups
Business Insider
UBS is giving away thousands of dollars and hundreds of hours of coaching to fintech entrepreneurs and startups to help the bank deal with the impact of new technology on its business. The Swiss bank has launched a competition dubbed “The Future of Finance Challenge”, a global search for startups that can help it improve key areas.


SEC Charges ITG With Operating Secret Trading Desk and Misusing Dark Pool Subscriber Trading Information
The Securities and Exchange Commission today announced that ITG Inc. and its affiliate AlterNet Securities have agreed to pay $20.3 million to settle charges that they operated a secret trading desk and misused the confidential trading information of dark pool subscribers.

SEC Charges Former Software Executive With FCPA Violations
An SEC investigation found that Vicente E. Garcia, the former vice president of global and strategic accounts for SAP SE, orchestrated a scheme to pay $145,000 in bribes to one government official and promised to pay two others in order to obtain four contracts to sell SAP software to the Panamanian government. He essentially caused SAP, which is headquartered in Germany and executes most of its sales through a network of worldwide corporate partners, to sell software to a partner in Panama at discounts of up to 82 percent. The excessive discounts enabled the partner to create a slush fund from its excessive earnings on the other end of the sales and tap that money to pay the bribes to Panamanian government officials so SAP could sell the software. Garcia, who lives in Miami, also received kickbacks from the slush fund into his bank account.

Deutsche Bank employees charged in emissions trading case
By Eyk Henning, The Wall Street Journal
Frankfurt’s public prosecutor’s office has filed charges against eight current and former employees of Deutsche Bank for the alleged evasion of taxes on trading carbon-emission certificates that has cost Germany hundreds of millions of euros.

FCA bans and fines Robert Shaw, of TailorMade Independent Ltd, for SIPP advisory failings
Robert Shaw, former director of advisory firm TailorMade Independent Ltd (TMI), has been banned from senior positions in financial services and fined £165,900 by the Financial Conduct Authority (FCA)

FINRA Fines StockCross Financial Services, Inc. $800,000 for Regulation SHO Violations
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined StockCross Financial Services, Inc. $800,000 for Regulation SHO violations and for related supervisory violations that spanned more than three years. As part of the sanctions, StockCross is ordered to provide a report to FINRA regarding the effectiveness of its Reg SHO supervisory system within six months.

Environmental & Energy

Tree loophole casts shadow over EU carbon action; Commission expected to outline new policy 2016-17; Campaigners see discrepancy ‘the size of Portugal’; Big generators say they are behaving sustainably
By Barbara Lewis and Nina Chestney, Reuters
European environment law provides more financial incentives to fell a tree than to plant one, campaigners say.

The world’s producers are boiling in cheap oil
Financial pressures on petro-states continue to increase
For oil producing companies and states struggling under the burden of low prices, it is hard to think of any news that could have been worse. Early last month, the number of rigs drilling for oil in America started to increase.

Tax or trade, the war on carbon pricing has been raging for decades
The Conversation
For the past eight years the Australian political elite has torn itself apart over whether and how to put a price on carbon. But carbon tax debates have been happening ever since the late 1980s, when policy-makers first started taking the “greenhouse effect” seriously.


China’s Central Bank Defends Handling of Yuan Plunge; In rare news conference, People’s Bank of China reiterates it sees no reason for further fall
Chinese central bank officials on Thursday offered a rare public defense after this week’s unexpected devaluation, saying the yuan will stabilize and eventually resume its climb.

Deflation Ice Age Looms After Yuan Move, Albert Edwards Says
Adam Haigh, Jason Clenfield, Bloomberg
China’s currency devaluation took Albert Edwards a step closer to realizing his doomsday prediction: deflation spreading from Asia to the U.S. and Europe and sending economies crashing.

South Korea’s Next Growth Frontier: Fintech
The Diplomat
The devaluation of the Chinese yuan and Japanese yen may spell trouble for South Korean exporters, but another growth industry may provide a new frontier for growth. Financial technology, or fintech, is an emerging industry with serious growth potential.

Hong Kong Exchanges profit surges, but falls short of market expectations
South China Morning Post
Mainland Chinese market uncertainty may lead to a delay in major projects, said the head of the Hong Kong stock exchange, even as he refrained from specifying if the proposed stocks through-train scheme between Hong Kong and Shenzhen would be affected.

Chinese stock market: Expect more shocks says Red Capitalism author Fraser Howie
Financial Review
Investors should prepare for more surprises out of China after the yuan’s devaluation became the country’s latest unexpected policy move to roil global markets. That’s the advice from Fraser Howie, co-author of Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. He says Chinese policy decisions are becoming “erratic” as authorities struggle to combat the nation’s deepest economic slowdown in more than two decades.

Frontier Markets

Cross Listing Of Exchange Traded Funds On African Exchanges – Investors To Gain Exposure To Shares Listed On Johannesburg, Kenyan And Nigerian Stock Exchanges
There is a move afoot that will lead to improved liquidity on Africa’s exchanges. This move will see increased cross listings of Exchange Traded Funds (ETF’s) on the larger exchanges on the continent. There is a concerted effort from ETF issuers in various markets to cross list new and existing ETF’s on to other exchanges, and the exchanges themselves are working to ensure that the right frameworks are in place to enable this.

Brokerages see no major trade hit on yuan fall; Relative out-performance of the rupee looks most likely to continue, said BNP Paribas
Press Trust of India
Even though the rupee has been under pressure for past two trading sessions, French brokerage BNP Paribas said yuan devaluation will not have a major impact as the country’s trade exposure to China is comparatively small and also due to strong balance of payments situation.

Beware Bank of China Hong Kong’s Foray into Southeast Asia
It’s easy to see why Bank of China (Hong Kong) is at the center of so much buzz lately. An ambitious plan to sell commercial lender Nanyang Commercial Bank could produce the largest bank deal in Hong Kong, and BOC Hong Kong shares had jumped 8% toward an all-time high late-May after the long-anticipated plan to dispose of NCB was made public.


Pearson investors wary of acquisitions
Henry Mance, Media Correspondent, FT
The Château Latour vineyard went in 1989, the waxworks of Madame Tussauds were sold nine years later, followed by investments in Lazard and the TV production company that made Baywatch.

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