First Read

CBOE Hits Home Run In Bats Acquisition
By JLN Staff

“This is a great fit culturally,” said CBOE CEO Ed Tilly, who is trying to pull off the biggest deal of his career, with the $3.2 billion acquisition of Bats Global Markets

Tilly and his team was also looking for a deal that would create cost synergies for the firm, and of course, growth. The combined offering will push CBOE well beyond its equity options and niche futures business. On the options side, Bats offers a maker-taker options exchange with price-time allocations. Bats also extends CBOE into the stock, FX and trade reporting services in Europe. Ultimately, CBOE gets dramatically more diversified, but will still keep its trading floor open. The deal is expected to close in the first half of 2017.

Perhaps the most compelling reason for CBOE is technology. CBOE says it will migrate its systems to Bats’ platform. CBOE, which has been rolling out a multi-year technology upgrade, said it plans to fully migrate into a single Bats-technology platform by 2020. Though CBOE says they will continue as planned until the deal closes, the exchange is eager to migrate to what Tilly calls a “proven, high-speed, low cost platform” at Bats. He says the CBOE Futures Exchange will migrate first, and the options markets will follow as soon as all of the order types and other functionality is bolted onto Bats’ architecture.

Now CBOE gets new technology, new asset classes to offer on a platform that is considered superior to its own. With estimated annual revenues of more than $1 billion, CBOE will be considered a formidable competitor to the likes of ICE and Nasdaq, not to mention extend its European reach.

The management team would be considered strong by anyone’s measure as well, with Tilly remaining CEO, Chris Concannon as president and chief operating officer, Alan Dean as chief financial officer and Chris Isaacson as chief information officer. Ed Provost, who currently serves as CBOE’s president and COO, will be retiring.

For Tilly, this is the deal that will propel the CBOE forward for years to come. He called it, “A great fit, one that’s consistent with what we’ve been looking for.”


CBOE Holdings Agrees to Acquire Bats Global Markets to Strengthen CBOE Holdings’ Global Position in Innovative Tradable Products and Services, and Achieve Meaningful Cost and Operational Efficiencies
CBOE Holdings, Inc. and Bats Global Markets, Inc. today announced that they have entered into a definitive agreement, which has been approved by the Board of Directors of each company by unanimous votes of the members of the boards present, under which CBOE Holdings has agreed to acquire Bats in a cash and stock transaction valued at approximately $32.50 per Bats share, or a total of approximately $3.2 billion, consisting of 31% cash and 69% CBOE Holdings stock, based on CBOE Holdings’ closing stock price of $70.30 per share on September 23, 2016.

***DA: Also see today’s presentation slides, from CBOE Investor Relations.


Bill Harts, Modern Markets Initiative – How a Small Group of Traders Improved Markets for All

“The most liquid stocks in the world used to trade at a minimum spread of one-eighth, but was quite often trading at a quarter spread. If you were an average retail investor buying 100 shares, you would have been paying an extra $25 for that stock, just in terms of the spread costs (putting commission aside). Today, that quarter spread is less than a penny.”

The 2014 release of Michael Lewis’ book “Flash Boys” unleashed widespread criticism of the automated trading community amid Lewis’ assertion that markets are “rigged” against small investors. According to Bill Harts, CEO of the Modern Markets Initiative, nothing could be further from the truth.

He says retail investors have never had it so good. Just as Amazon drove down the cost of books, so too did electronic trading drive down the costs associated with investments.

He says, yeah, the automated trading community is mad about the Flash Boys controversy, but the general public should be mad, too. Those who fled the market in the aftermath of the book’s release left tremendous opportunity on the table.

Watch the video »


Pinching Pennies in the Hedge-Fund Capital of America
Oshrat Carmiel, Katia Porzecanski – Bloomberg
Tastes and risk levels have gone through the wringer; ‘One doesn’t want to become the next episode of “Billions”‘
The lonely $250,000 S-Class coupe at Mercedes-Benz of Greenwich says it all. For six months, it’s been sitting in the showroom, shimmering in vain while models priced at only $70,000 fly out the door.

***DA: Though the ostentatious, public displays of wealth are out of favor, much of the concentrated wealth is still there.


Edward Davis, ‘World’s Grumpiest Boss,’ Dies at 85
“There will be no more birthday celebrations, birthday cakes, levity or celebrations of any kind within the office,” the boss wrote on Feb. 8, 1978. “This is a business office. If you have to celebrate, do it after office hours on your own time.”

***** Good to know this position is open.


Supervision; Block Trades; EFRPs; Independence; Tag 50s; Insider Trading
Gary DeWaal – Bridging the Week
A futures commission merchant and its chief executive and chief risk officers were sued by the Commodity Futures Trading Commission for the firm’s alleged failure to adequately respond to three exchanges’ inquiries related to a customer’s purported spoofing activities, as well as its failure to follow its own risk management policies. Additionally, a Russia-based bank and its UK subsidiary were charged by the CFTC with engaging in illicit futures block trades because their prices were purportedly not fair and reasonable. However, the prices of the block trades were mostly chosen at the midpoint of the prevailing bid-ask spread of the corresponding swaps contract at a time when the relevant futures market was apparently illiquid. Huh? As a result, the following matters are covered in this week’s edition of Bridging the Week


Derivatives Documentation Digitalization: CSAs, MCAs, IMAs and ISDAs Apply!
A Webcast Sept 29th at 10am NY/ 3pm UK / 4pm Paris (Register below)
Are your CSAs in order and ready to comply with non-cleared margin requirements? In a DerivSource webinar, industry experts will explore how ongoing OTC derivatives market reform and new industry developments are impacting how financial institutions manage their derivatives documentation (CSAs, MCAs, and ISDAs) and what firms can do to meet new requirements efficiently and cost-effectively.


Friday’s Top Three
Friday’s top clicked story was an update on two big test cases for the CFTC and its new market manipulation rules. We thank Incisive Media for unlocking the usually heavily paywalled site to make the article, CFTC flexes muscles in Kraft, DRW cases, accessible to our readers. In second place was OCC CEO Craig Donohue’s missive, Blockchain could create efficiencies for markets. Third place goes to MarketsWiki Education and its latest release from this summer’s New York event, Bill Harts, Modern Markets Initiative – How a Small Group of Traders Improved Markets for All.

Lead Stories

CBOE Agrees to Buy Market Operator Bats for $3.2 Billion
John Detrixhe
Tilly to become CEO, Concannon to be president and COO; Deal is expected to be completed in the first half of 2017
CBOE Holdings Inc. said it agreed to buy Bats Global Markets Inc. for about $3.2 billion in a deal that would tie an electronic upstart together with the owner of the Chicago Board Options Exchange.

LSE and banks set to launch new derivatives exchange; Venue will compete in interest rate futures markets dominated by Deutsche Börse and ICE
by: Philip Stafford – FT
London’s newest derivatives trading venue is set to debut on Monday with its performance closely watched as Brussels examines whether to sanction Europe’s largest exchange.

CME Seeks Clearing Shift as Rules Reshape Derivatives
Matthew Leising, Benjamin Bain – Bloomberg
Direct funding participants to access clearing without banks; Banks to benefit as customer margin won’t affect capital rules
CME Group Inc. is seeking to broaden access to its clearinghouse, letting investors bypass banks in what could be a major step toward reshaping how the derivatives industry works.

U.S. Bond Market’s Biggest Buyers Are Selling Like Never Before
Liz McCormick, Andrea Wong, Wes Goodman – Bloomberg
Central banks have cut Treasuries for three straight quarters; Pullback may be a sign the bond market is at a tipping point
They’ve long been one of the most reliable sources of demand for U.S. government debt.

CBOE and Bats Global Markets: A Q&A
Philip Stafford – Financial Times
Pitching to investors for its April share listing, Bats Global Markets offered a semi-playful critique of its main rivals in the US options market. “CBOE is petrified about what we’re about to do in their space,” said Chris Concannon, chief executive. The Chicago Board Options Exchange’s response to this competitive threat appears straightforward: buy Bats.

HSBC top lawyer calls for new global anti-financial crime measures
Governments worldwide should pass new laws to facilitate the sharing of information between themselves and the private sector in order to better combat financial crime, HSBC’s top lawyer told a banking conference in Geneva on Monday.

City looks to new passporting rules to weather the Brexit storm
by Ben Martin – Telegraph
Philip Hammond was still a day away from being handed the keys to Number 11 Downing Street, but George Osborne’s successor was already getting on with the job of calming City fears about Brexit.

Monetarists Are Out of Ideas
Noah Smith – Bloomberg View
Steve Williamson of the Federal Reserve Bank of St. Louis for the past three years or so has been trying to convince the macroeconomics world to consider a bold new theory — that central bank policy works in reverse, and that low interest rates cause low inflation. This is an idea sometime referred to as Neo-Fisherism. Recently, Williamson has challenged my Bloomberg View colleague Narayana Kocherlakota, formerly of the Federal Reserve Bank of Minneapolis, in an extended blog and Twitter debate on the subject. The result has been the deepest, most illuminating exchange about monetary policy ever posted on the internet.

Harvard Does a Trade You Should Never Make
Barry Ritholtz – Bloomberg View
The Harvard Management Co., which oversees Harvard University’s endowment and other investments, just released its 2016 annual report. It’s grim reading: The fund had a negative return of 2 percent and was worth about $2 billion less than a year earlier, underperforming its benchmarks by a significant margin.

Goldman May Regret Those Asia Cuts
By Nisha Gopalan – Reuters
When Goldman Sachs, one of the earliest Wall Street entrants to China, takes a knife to its investment-banking activities in Asia, you could be forgiven for believing the region is in really bad shape.

Most U.K. CEOs Say They Would Consider Moving After Brexit
Alex Morales – Bloomberg
Survey of 100 company chiefs shows 72 percent voted ‘Remain’; CEOs confident about growth of economy, their companies
The U.K.’s vote to leave the European Union has left more than three-quarters of chief executive officers saying they would consider moving their headquarters or operations outside Britain, according to a survey of 100 business leaders by the accountancy firm KPMG.

Plastics hedging rising amid US chemical industry boom; Several obstacles limiting potential growth, say plastics market participants
Stella Farrington – Bloomberg
A market in plastics derivatives has been around for the best part of a decade, but many corporations, even those with significant exposure to plastic resins, remain unaware of its existence, say banks and commodity houses. Despite almost 10 years of trading, demand for these hedging instruments is still relatively low and liquidity, although growing in some contracts, remains thin overall, say market participants. However, changing market dynamics in both the energy and petrochemicals industries…

Banks struggle to make blockchain fast and secure; Technology must be designed differently for financial institutions
by: Philip Stafford – FT
Blockchain has become the financial markets’ biggest buzzword as banks seek modern ways to resolve old problems. But the technology is overshadowed by questions about how it can be made both secure and fast enough for large financial institutions.

Exchanges, OTC and Clearing

Exchanges defeat appeal of U.S. high-frequency trading lawsuits
Jonathan Stempel – Reuters
A federal appeals court on Friday rejected an investor’s attempt to revive lawsuits accusing major U.S. exchanges of selling early access to market data to high-frequency traders, the subject of Michael Lewis’ 2014 best-seller “Flash Boys.” The 2nd U.S. Circuit Court of Appeals in Manhattan agreed with the New York Stock Exchange, The Nasdaq Stock Market, BATS Exchange, the Chicago Board Options Exchange and others that it is for the U.S. Securities and Exchange Commission rather than courts to regulate how market data is disseminated.

CME Europe plans second wave of currency futures
Futures & Options World – Let’s Talk Derivatives

Euronext hosts first first pan-European Investor conference in China
In partnership with Bank of China
Euronext announced today its first pan-European Investor conference in China, aimed at raising the profile of its listed companies among Chinese investors. The event will take place in Beijing on 27th September 2016. It will be attended by 20 large issuers from across all the Euronext countries (Belgium, France, the Netherlands and Portugal) and over 80 Chinese investment firms represented by around 140 individuals.

SGX to launch more LNG derivative products in Q2 2017
Andrea Soh – The Business Times
The Singapore Exchange (SGX), in its bid to gain pricing dominance in liquefied natural gas (LNG), is set to launch more derivative products for the commodity in the second quarter of next year. More transparent pricing for the commodity is critical, to encourage higher demand amid a supply glut, it says.

Qatar Stock Exchange Conducts Successful Industry-Wide BCP Test
As part of its regular BCP procedures, Qatar Stock Exchange in cooperation with QFMA, brokers and business partners successfully conducted an industry-wide BCP exercise on Friday 23rd September. The proposed scenario involved a major disaster striking QSE primary data centre during the continuous trading phase of the trading session.

BSE may launch IPO by fourth quarter of this financial year
Business Standard
Leading stock exchange BSE may launch its initial public offer (IPO) by the fourth quarter of this financial year as it does not anticipate any major hurdles to the issue, sources said.

Deutsche Boerse to set IT infra for BSE International Exchange
Business Standard
Leading stock exchange BSE has roped in markets operator Deutsche Boerse to set up trading infrastructure for BSE International Exchange at Gujarat International Finance Tec-City (GIFT) city.

DGCX’s Indian Rupee Quanto Futures Named Most Innovative New Contract In Asia
DGCX’s Indian Rupee Quanto futures contract has been recognised as the Most Innovative New Contract in the Currency category at this year’s Futures and Options World (FOW) Awards Asia, the derivatives industry’s leading awards.

Global bourses eye Indian equity and commodity exchanges
Rajesh Bhayani, Ashley Coutinho & Hamsini Karthik – Business Standard
With the Securities and Exchange Board of India (Sebi) increasing the limit of a foreign entity in Indian stock exchanges from five per cent to 15 per cent, bankers expect global exchanges to raise their stake or buy stakes in the existing equity and commodity exchanges.


Trump, Clinton Deadlocked in Bloomberg Poll Before Key Debate; The Republican nominee erased the Democrat’s advantage in August’s two-way contest.
John McCormickJohn – Bloomberg
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Donald Trump and Hillary Clinton are locked in a tied two-way race for the presidency as they head to Hofstra University in New York on Monday night for one of the most highly anticipated debates in modern politics.

2008 Crisis Deepened the Ties Between Clintons and Goldman Sachs
A blue-ribbon commission had just excoriated Goldman Sachs and other Wall Street banks for fueling the financial crisis. Prosecutors were investigating whether Goldman had misled investors. The company was a whipping boy for politicians looking to lay blame for the crash.

The art of defrauding America; Reality TV star turns liberal media values and voter cynicism to his advantage
by: Edward Luce – FT
In the Art of the Deal, Donald Trump’s get rich quick guide, he explains how to seduce the customer. “People want to believe that something is the biggest and the greatest and the most spectacular,” he wrote. “I call it truthful hyperbole.”

Investing and Trading

Soros Helping to Turn Back Tide of Hedge-Fund Outflows in Europe
Nishant Kumar – Blomberg
Former Highbridge, BlueCrest money managers start funds; Soros, Paloma Partners among backers of European managers
As hedge funds hemorrhage cash at the fastest pace since the financial crisis, a new crop of money managers is starting to buck the trend in Europe with backing from some of the industry’s biggest names, including George Soros and Donald Sussman at Paloma Partners LLC.

A Weaker Currency Is No Longer Economic Elixir It Once Was
Susanne Barton, Chikako Mogi – Bloomberg
Goldman says trade volumes less sensitive to exchange rates; Japan, U.K. show limits of weaker currency on boosting growth
A weaker currency, once the cure-all for ailing economies around the world, isn’t the panacea it once was.

Tudor Said to Close Singapore Trading Desk Amid Global Cuts
Klaus Wille – Bloomberg
Shutdown is part of hedge fund’s shakeup announced in August; Tudor trimmed fees this year following lackluster returns
Tudor Investment Corp., the $11 billion hedge fund founded by billionaire Paul Tudor Jones, has closed its Singapore trading desk as part of a global shakeup, according to people familiar with the matter.

Swiss financials find lucrative opportunities at home; The country’s big financial institutions are looking again at their domestic market
by: Ralph Atkins in Zürich
When he scoured the world last year for countries Credit Suisse should prioritise, Tidjane Thiam, the Swiss bank’s new globetrotting chief executive, spotted one offering particularly lucrative opportunities — Switzerland.

City’s special relationship with EU finance system revealed; Banks that use UK as gateway to Europe make profits of £50bn and have more than £7.5tn of assets
by: Laura Noonan, Patrick Jenkins and Harriet Agnew – FT
Anyone in any doubt about the source of banks’ vociferous opposition to Brexit got their answer last week, as regulators published new figures showing how bound together the EU and UK’s financial services systems are.

Currency Volatility Poised to Surge as U.S. Election, Fed Loom
Lananh Nguyen and Yun Li – Bloomberg
Volatility in the $5.1-trillion-a-day foreign-exchange market is down, but not out, according to UBS AG. Currency swings will increase later this year as investors weigh the potential outcome of the U.S. presidential election and the likelihood of a Federal Reserve year-end interest-rate increase. The predicted volatility resurgence follows a period of calm that started in July, after traders absorbed the initial shock of the U.K.’s Brexit vote. A JPMorgan Chase & Co. gauge of currency volatility fell to a two-week low this week.

BOE Easing Makes Gilts Best Place to Be for Frankfurt Investor
Charlotte Ryan and Anooja Debnath – Bloomberg
For Frankfurt Trust’s head of asset allocation, U.K. government bonds are the place to be. While some investors question whether the Bank of Japan and the European Central Bank are looking to reduce their stimulus measures, Frankfurt-based Christoph Kind, whose company oversees $20 billion in assets, predicts the Bank of England will cut interest rates, diverging further away from the Federal Reserve which is set to tighten policy this year. This means gilts will outshine their U.S. peers, he said.

Carbon Prices About 80% Too Low to Protect Climate, OECD Says
Mathew Carr – Bloomberg
OECD urges nations to adopt policies to at least match median; EU carbon price is about 88% below where levels need to be
Carbon prices are about 80 percent lower than where they need to be to protect the climate, according to the Organisation for Economic Cooperation & Development.


Deutsche Bank seeks to reassure investors as shares slide; Stock drops as much as 7% sparking sell-off in European banks
by: FT reporters
Deutsche Bank sought to convince investors that it did not need a government bailout and had no plans for a capital increase on Monday morning, even as its shares fell to their lowest level in more than 20 years.

Japan banks target fintech start-ups after law change
Tom Braithwaite and Robin Harding – Financial Times
Japan’s biggest banks are looking to pour hundreds of millions of dollars into fintech start-ups after the abolition of a law that prevented them from owning more than 5 per cent of a technology company. The changes are part of a national effort to push financial technology, highlighting fears in Tokyo that Silicon Valley could decimate Japan’s banking sector as it did the country’s mobile phone industry.

John Stumpf’s Elizabethan Drama
Michael P. Regan – Bloomberg Gadfly
The two most important financial news stories of the week shared a strange common theme: older people getting hurt while playing with their grandkids. If only I could find a third example, I could write a trend piece warning all of America’s grandparents of the grave personal risk they face when interacting with grandkids! But alas, only two. The first was John Stumpf, chairman and chief executive of Wells Fargo and No. 23 on Bloomberg’s latest 50 Most Influential list.

Goldman, Morgan, Blackrock, Threaten To Move Out Of City Without Clarity On Brexit
Tim Worstall – Forbes
The demand being made here by the American financial companies, Goldman Sachs, Morgan Stanley MS -1.02%, Blackrock BLK -2.20%, seems entirely reasonable. Given that they don’t know how the Brexit negotiations are going to turn out they want some clarity. That clarity will aid in reducing the uncertainty they face and thus make their investment decisions easier. Given that they don’t know about such things as passporting they will, they say, err in favour of making new investments in Europe rather than in the City of London.

Contagion Risks Rise as Chinese Banks Fund Each Others’ Lending
China’s smaller banks have never been more reliant on each other for funding, prompting rating companies to warn of contagion risks in any crisis. Wholesale funds, including those raised in the interbank market, accounted for a record 34 percent of small- and medium-sized bank financing as of June 30, compared with 29 percent on Jan. 31 last year, Moody’s Investors Service estimated in an Aug. 29 note that analyzed central bank data.

Goldman Sachs Said to Plan 25% Cut to Asia Investment Bank Jobs
Cathy Chan – Bloomberg
Goldman Sachs Group Inc. plans to cut about a quarter of its investment-banking jobs in Asia, excluding Japan, because of a slump in deal-making in the region, according to a person with knowledge of the matter.

Swiss financials find lucrative opportunities at home
Ralph Atkins – Financial TImes
When he scoured the world last year for countries Credit Suisse should prioritise, Tidjane Thiam, the Swiss bank’s new globetrotting chief executive, spotted one offering particularly lucrative opportunities — Switzerland. Mr Thiam has since grabbed attention with an ambitious restructuring plan focused on attracting wealthy clients across China and emerging markets and cutting back Credit Suisse’s investment bank in New York and London. Less noticed, he is overhauling its Switzerland operations.

UK fund houses question Alphabet tax
Aliya Ram – Financial Times
Four UK fund houses representing almost £1tn of assets have written to the board of Alphabet, Google’s parent company, to raise concerns about its tax arrangements. The group, which owns billions of dollars worth of shares in Alphabet, will add to pressure on the US technology giant after Indonesia’s regulator last week said it could hit the company with a bill for more than $400m in back taxes on advertising revenues booked outside the country.


Fidessa voted Trading System of the Year in FOW’s Asia Awards; Asia Awards Scoops the award for the fourth successive year
Fidessa group plc (LSE: FDSA) has today announced that its derivatives trading platform has been named Sell-side Trading System of the Year at the FOW Awards for Asia 2016. Judged by an independent panel of industry experts from a range of disciplines across the region, these awards recognise leadership, growth and achievement in the Asian derivatives marketplace. This is the fourth year running that Fidessa’s platform has been recognised in these awards as the leading trading system in Asia.

Tough times for the real masters of the universe; Rules tie the hands of bank strategic investing units as fintech opportunities grow
Luke Clancy – Bloomberg
Investment bankers used to be known as masters of the universe, but while they span from deal to deal, and client to client, other hands were shaping the cosmos. Secretive strategic investing teams sank the banks’ money into companies such as AcadiaSoft, Markit, SwapClear and Tradeweb, enabling them to influence the speed and direction of change in the markets where they made a fat slice of their revenues. No longer. Innovation is now driven by a fast-expanding galaxy of fintech firms, and banks…

Thomson Reuters Intends To Purchase Up To 6.5 Million Shares Through Private Agreements – Purchases Will Be Part Of Previously Announced Buyback Program
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced that it intends to purchase up to 6.5 million of its common shares through private agreements with two arm’s-length third-party sellers. Any shares purchased under these agreements will count towards the company’s existing normal course issuer bid (NCIB), which allows it to buy back up to 37.5 million common shares between May 30, 2016 and May 29, 2017. The Ontario Securities Commission (OSC) has issued issuer bid exemption orders permitting the company to make such private agreement purchases.

Japan banks target fintech start-ups after law change; Change to 5% ownership cap part of national effort to push financial technology
by: Tom Braithwaite and Robin Harding in Tokyo – FT
Japan’s biggest banks are looking to pour hundreds of millions of dollars into fintech start-ups after the abolition of a law that prevented them from owning more than 5 per cent of a technology company.


Fed Seeks Aggressive Limit on Wall Street Commodity Holdings
Jesse Hamilton – Bloomberg
Goldman Sachs Group Inc.’s and Morgan Stanley’s sometimes lucrative romance with metals, coal and oil could become prohibitively expensive under a proposed rule released Friday by the Federal Reserve. The long-awaited regulation would require banks to put up much more capital to support investments in physical commodities, restrict involvement with power plants and limit the amount of trading banks can do.

Speech of Commissioner Sharon Y. Bowen before the CFTC Annual Symposium for International Market Authorities
In passing the Dodd-Frank Act, Congress understood that the swaps market is global, and as such, provided for the extraterritorial application of the CFTC’s swaps regulatory regime. Specifically, the Dodd-Frank Act holds that the CFTC’s regulatory authority over swaps “shall not apply to activities outside of the [U.S.] unless those activities – have a direct and significant connection with activities in, or effect on, commerce of the [U.S. or]; or contravene such rules or regulations the [CFTC] may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision … that was enacted by the [Dodd-Frank Act].”

Sebi to beef up cyber security framework for markets
Business Standard
To protect securities markets from cyber threats, regulator Sebi is looking to further beef up its policy framework on this front and plans to appoint a chief IT security officer to head these initiatives.

ASIC bans former Westpac financial adviser
ASIC has banned Adelaide financial adviser Michael Mahoney from providing financial services for a period of four years.


Contagion Risks Rise as China Banks Fund Each Others’ Loans
Bloomberg News
‘The pace of the development is concerning,’ S&P’s Liao says; Wholesale funding 34% of smaller banks financing, Moody’s says
China’s smaller banks have never been more reliant on each other for funding, prompting rating companies to warn of contagion risks in any crisis.

City looks to new passporting rules to weather the Brexit storm
Ben Martin – The Telegraph
Philip Hammond was still a day away from being handed the keys to Number 11 Downing Street, but George Osborne’s successor was already getting on with the job of calming City fears about Brexit.

City’s special relationship with EU finance system
Laura Noonan, Patrick Jenkins and Harriet Agnew – Financial Times
Anyone in any doubt about the source of banks’ vociferous opposition to Brexit got their answer last week, as regulators published new figures showing how bound together the EU and UK’s financial services systems are. The headline numbers of 5,500 financial services companies who “passport” their services out of the UK across the EU, and more than 8,000 passport in, hammer home how much is at stake for global finance as the UK and EU part ways.

How America became a global cheese power
Patrick McGuigan – Financial Times
It’s early on a quiet Monday night in the Hell’s Kitchen neighbourhood of Manhattan, but hip bar Casellula already has a queue forming at the door. The space inside — all bare brick and flickering candles — is full of young professionals tackling the eclectic wine list. But it’s the vintage cabinet at the back of the room that is the centre of everyone’s attention. Laden with about 40 artisan cheeses from France, Italy and the US, the glass-fronted display is tended by a team of young cheesemongers, who deliver a procession of beautifully presented cheese flights to the tables. Every plate is artfully arranged with each cheese matched to a home-made condiment, from a shiitake mushroom salad paired with a smoky cheese from North Carolina, Campo, to a super-sweet fudge for tasting with salty Buttermilk Blue from Wisconsin. There’s barely anyone in the room over 40 and everyone is eating cheese. Lots and lots of cheese.

Who Knew This? Markets Work – India’s Pulse Crop Up 57%
Tim Worstall – Forbes
One of the little stories that you may or may not have been paying attention to was the manner in which pulse prices – peas, lentils and so on – were rising strongly in India. This caused some consternation and became a political problem given the portion of the population which lives close to the subsistence diet line. There have been negotiations with Mozambique that that country should grow the India specific cultivars for example, there have been talks of subsidies, of import arrangements, of export bans and all the usual plethora of bureaucratic intervention.

BOJ Policy Exhaustion Means Yen Will Rise to 90, Sakakibara Says
Kevin Buckland, Shigeki Nozawa – Bloomberg
Currency could strengthen beyond 100 per dollar ‘at any time’;’Effectiveness of monetary stimulus ‘getting weaker and weaker’
Japan’s former top currency official Eisuke Sakakibara says the the nation’s central bank stimulus is nearing its limit, and the yen will gradually strengthen toward 90 per dollar next year.

Kuroda Says BOJ to Make Utmost Effort for Currency Stability
Keiko Ujikane – Bloomberg
Desirable that exchange rates reflect fundamentals, he says; BOJ will closely monitor FX rate’s impact on economy, he says
The Bank of Japan will make the utmost effort to achieve stability in exchange rates, Governor Haruhiko Kuroda said during a speech in Osaka on Monday.

Russia Close to Debuting China Market Link, Bourse Chief Says
Ksenia Galouchko – Bloomberg
Russia may sell debut OFZs in yuan this year: Vyshkovsky; Bank of Russia started yuan clearing center on Friday
Russia and China are close to completing a system for clearing trades that will boost funding options for their companies and governments, according to the head of Russia’s biggest bourse.
/ and Shaming Palm-Oil Buyers to Stop Rainforest Burning; Indonesian farmers burn ancient rainforest to expand plantations.

Bruce Einhorn – Bloomberg
Singaporeans who choke on haze floating over from Indonesia can blame the world’s desire for palm oil. The edible oil is an important ingredient in cookies, noodles and other packaged foods as well as soaps, shampoos, lipsticks and many other consumer goods. Farmers in Indonesia, the world’s biggest supplier of the commodity, often illegally burn the world’s oldest rainforest or use fire to clear old oil palms on existing plantations, and the smoke from the flames drifts across Singapore and Malaysia.

Saudi Arabia Injects $5.3 Billion Into Banks to Ease Crunch
Alaa Shahine, Stefania Bianchi, Zainab Fattah
Funds are in the form of time deposits, central bank says; Central bank also introducing 7-day, 28-day repo agreements
Saudi Arabia’s central bank stepped up efforts to support lenders in the Arab world’s biggest economy as they grapple with the effects of low oil prices. Banks’ shares advanced.

Another $10 Billion Hong Kong Stock Market Mystery; Property developer Fullshare is the city’s latest hard-to-explain highflier
By Jacky Wong – WSJ
Hong Kong’s stock market is minting another overnight billionaire. Unfortunately, it is once again a curious sort of tale.


Bountiful U.S. 2016 pumpkin crop overcomes last year’s shortfall
Theopolis Waters – Reuters
Halloween enthusiasts need not take fright over the state of this year’s U.S. pumpkin crop. Supplies of the orange-yellow fruit are much more plentiful than last year, easing concerns of a possible shortage for carving jack-o’-lanterns and buying filling for pumpkin pies.

How America became a global cheese power; Forget about orange plastic slices. A new breed of young, edgy cheesemonger is transforming the way that Americans eat their cheese
by: Patrick McGuigan – FT
It’s early on a quiet Monday night in the Hell’s Kitchen neighbourhood of Manhattan, but hip bar Casellula already has a queue forming at the door. The space inside — all bare brick and flickering candles — is full of young professionals tackling the eclectic wine list. But it’s the vintage cabinet at the back of the room that is the centre of everyone’s attention.

Brexit Lessons From Henry VIII, Or, A Tale of Two Divorces
Isobel Finkel – Bloomberg
As the ugly divorce proceedings of a certain Hollywood couple help a different B-word vie for the title of this week’s most irritating portmanteau, thanks are due to currency strategist Bilal Hafeez for shifting the conversation back onto the matter of Brexit.

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