First Read

Stockholm or Bust
By John J. Lothian

Doug Ashburn and I are off to Stockholm and London next week to scout out locations for upcoming MarketsWiki Education World of Opportunity events and to whip up some interest among interns, students and younger employees interested in careers in the financial markets.

It will be the first trip to Stockholm for both of us, and a quick one at that. Stockholm holds a lot of potential for a great MWE WOO event, including introducing to the world the one and only Jon Matte.

I have asked Jon to leave his home near the north pole in Norway to travel to Stockholm in late October and participate in the series as one of our speakers. Jon is a co-founder of MarketsWiki, a former Commodity Trading Advisor and futures broker. He is also a non-conformist and outside the box thinker. I can’t wait to see his presentation and share the video of it with the world.

If you have some suggestions for other potential speakers for the Stockholm event, please let us know.

In London, we have our speaker lineup headlined by BATS’ Mark Hemsley and ISDA’s Scott O’Malia. We also are featuring Perseus’s Jock Percy, Paul Christensen of Green Key Technologies, Object Trading CEO Steve Woodyatt, Anthony Pereira of Percentile, Matt McFarland of CBOE, Robert Russell of Divento and Andrew Gibbins of Trading Technologies.

We are still working on our speakers for Frankfurt and welcome suggestions. We are somewhat limited in Frankfurt due to the Deutsche Boerse deal with LSE and their desire to be quiet when they are supposed to be quiet. But we will find a great list of speakers there anyway. At least they gave us a spectacular venue – the Alte Boerse, the old Frankfurt Stock Exchange in the heart of the city.

We return to Chicago on September 11. For some reason, I always seem to be flying on that date.

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UBS hires psychologists to help revamp research reports
Laura Noonan – Financial Times
UBS has brought in psychologists, data scientists, shipments specialists and pricing experts to overhaul how it generates investment ideas and recommendations for clients. The bank says the move — which some investors have viewed with scepticism — has more than doubled readership of its research output in the past two years. The revamp — under Juan-Luis Perez, the global head of research who UBS poached from Morgan Stanley in late 2013 — comes at a time of existential crisis for the City of London’s sprawling research departments.
goo.gl/zVtzah

***** Can you imagine the therapy sessions with the market? So Mr. Market, how long have you been paranoid?

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Hong Kong negative research crackdown fuels free speech fears; Investors fear SFC ruling will erode public debate
by: Ben Bland in Hong Kong
A crackdown by Hong Kong’s securities regulator on negative research into mainland Chinese companies has stirred fears of a chilling effect at a time when freedom of speech in the city is already under threat.
/goo.gl/SFqTmO

***** Free markets need free speech. They demand it. They crave it. And they find a way to make it happen one way or another.

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How Bitcoin was brought down by its own potential—and the banks
Luke Ryan – Quartz
The best that can be said about Bitcoin right now is that it still exists.
Split by internal divisions while its most useful aspects are harvested by the very financial behemoths it once hoped to destroy, Bitcoin is fast becoming the tech world’s version of Waiting for Godot, wherein a hermetically sealed community squabbles and bickers over arcane points of code and law as their world slowly crumbles around them. In the last 12 months, attempts made to produce a road map for the cryptocurrency’s future have come to naught, all while core developers abandon the project and opaque Chinese mining concerns wield outlandish power.
goo.gl/bhTy4j

***** Speaking of paranoid.

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Twitter’s New Followers — CBOE and Social Market Analytics Team Up for New Sentiment Index Based on Social Media Data
Spencer Doar – JLN
Can you trade off of Twitter? The Chicago Board Options Exchange and its partner Social Market Analytics (SMA) believe so.
The two firms are partnering on a suite of sentiment-based indexes that use tweet data to generate alpha. The first of the suite, the CBOE-SMA Large-Cap Index (SMLC Index), debuted on July 29. The index is simply published by CBOE at this point, but a tradeable contract may be coming.
goo.gl/xTEOce

***** Don’t short the “Tilly”

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“Deutsche Börse Photography Foundation Prize 2016” exhibition opens; Works of the four finalists in The Cube, Eschborn from 2 September to 28 October 2016
Deutsche Börse
The Deutsche Börse Photography Foundation is opening the “Deutsche Börse Photography Foundation Prize 2016” exhibition on Thursday, 1 September. The exhibition will display the works of the four finalists Laura El-Tantawy, Erik Kessels, Trevor Paglen and Tobias Zielony. It will run from 2 September to 28 October 2016 at Deutsche Börse’s headquarters, The Cube, in Eschborn.
goo.gl/ETyjsH

***** I was mesmerized by the Deutsche Börse photography collection when I visited the Cube a couple of years ago.

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Lanre Sarumi, RiskBone – Your Heart vs. Your Talents: Success Mindset for the Financial Industry
MarketsWikiEducation.com

“It turned out that what I was good at became what I was doing.”

Lanre Sarumi entered the financial markets for one reason alone – he wanted to be a trader – yet he struggled to find a bank or trading group willing to hire him as one. He eventually took a job as a systems developer at Citadel Investment Group, where he led teams that designed risk solutions for the back and middle office. Though was great at building risk solutions, his heart was in trading, so every time there was an opportunity to move into a trading position, he would take it.

Unfortunately, trading was not Sarumi’s strong suit. Though he had some successes, he also had a number of setbacks. On more than one occasion, his manager would call him into the office and say, “I know you want to be a trader, but what we really need is for you to take a look at our risk management software.”

Eventually, Sarumi got the message. He now runs his own risk management and quantitative analytics firm. The message? While there is nothing wrong with following your heart, sometimes your best opportunities in life lie with your greatest proficiencies.

Watch the video »

Chicago 2016 Video Releases to Date
Lisa Dunsky, OCC – Hit By A Brick: How Setbacks Shape Your Career
Kate Maehr, Greater Chicago Food Depository – Volunteerism: Good for the community and good for you!
Christian Domin, GlenStar Properties – Value Investing: Office Space and Associated Risks
Rob D’Arco, Rival Systems – Technology: the Center of the (Financial) World
Jeff Levoff, Partner, DRW – Make a Market: Proprietary Trading in the Modern Era
Walt Lukken, FIA – The New Normal and the Five Tips
Rumi Morales, CME Ventures – Investing in the Future of Fintech
Drew Shields, Trading Technologies – Next-Generation Product Development
Karen Wuertz, National Futures Association – Opportunity Behind Many Doors
Maureen Downs, Rosenthal Collins Group – Brutally Honest: The Role of the Mentor

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Tuesday’s Top Three
We had a two-way battle for first place in yesterday’s click count, but the edge went to Demise of Direct Match Shows Bank Death-Grip on Treasury Market from Bloomberg. In second place, also from Bloomberg, was Why They Did It: Madoff and Enron’s Fastow Explain the Biggest Frauds in U.S. History. In third place, from the Wall Street Journal, is a cautionary tale about the shortage of critical thinking and other “soft skills.” This is the latest in an ongoing argument about how to educate the next generation. With today’s focus on STEM, and with many firms expecting at least some specific proficiency on day one, are arts and humanities getting lost in the shuffle? How do we strike the right balance?

Lead Stories

Chicago Stock Exchange Targets Latency Arbitrage With Speed Bump
Brian Louis and Nick Baker – Bloomberg
Speed bumps are catching on in U.S. markets. The Chicago Stock Exchange just revealed plans for a 350-microsecond speed bump, similar to the famous delay on IEX Group Inc.’s Investors Exchange, which started trading last week as the 13th official U.S. stock exchange. The idea is to make trading more fair by blunting the advantage of some of the fastest traders.
/goo.gl/r2PY06

Google and Amazon Vie for Big Inroad Into Wall Street Data Trove
Benjamin Bain, Elizabeth Dexheimer – Bloomberg
Tech firms are bidding to help SEC with data storage in clouds; Repository of securities transactions could be world’s largest
Trying to understand what causes flash crashes is no longer just for financial regulators and Wall Street. It’s a big deal in Silicon Valley too.
goo.gl/tj5qot

Traders Discuss Data Superhighway From Chicago to Japan
Brian Louis and Annie Massa – Bloomberg
Rival high-frequency trading firms are in talks to jointly build a Chicago-to-Japan communications link that would accelerate trading across the Pacific Ocean, according to people familiar with the discussions. The project, dubbed “Go West,” would install a line of microwave towers from the Chicago area to the U.S. west coast, possibly ending near Seattle, and then connect to an undersea cable that stretches to Asia, according to the people, who asked not to be identified because the talks, which started months ago, are confidential. The cast of companies involved in the talks has included Citadel LLC, Virtu Financial Inc. and Jump Trading LLC, though the final roster isn’t set and the talks aren’t final, the people said.
goo.gl/pAEjHe

The Index Fund Turns 40—and Gets Its Revenge; “They said, ‘You want to buy all the dogs?’ They thought we were crazy.” Critics of indexing aren’t laughing anymore.
Ben Steverman – Bloomberg
The idea of an index fund seemed a bit of a joke at first. Indiscriminately buying hundreds of stocks, then accepting whatever return the market provided?
goo.gl/3NgfsI

Bats Offers Up to $400,000 Rebate to Traders Who Lift ETF Volume
Rachel Evans – Bloomberg
Payment offers incentive to provide liquidity in all markets; Traders need to ‘support the market on the most volatile days’
When it comes to exchange-traded funds, Bats Global Markets Inc. has decided it’s the trading volume, not the listing, that pays.
goo.gl/ahcNtm

Treasury trading start-ups in uphill struggle; Challenger stumbles in attempt to reshape the way the $13tn US govermment bond market functions
by: Joe Rennison and Robin Wigglesworth – FT
Anyone who believes trading in the $13tn US government bond market is ripe for change has had a sobering few days.
/goo.gl/Kn2amr

Goldman takes spoken word out of bond deal with automated trading; Algorithm underlines push for computerised trading in $8.4tn US fixed-income market
by: Robin Wigglesworth and Eric Platt in New York – FT
Goldman Sachs has begun quietly pushing a computer program that allows investors to trade in the $8.4tn US corporate bond market without ever having to communicate with a person at the investment bank.
/goo.gl/IHXXwa

Exclusive: SWIFT discloses more cyber thefts, pressures banks on security
By Jim Finkle – Reuters
SWIFT, the global financial messaging system, on Tuesday disclosed new hacking attacks on its member banks as it pressured them to comply with security procedures instituted after February’s high-profile $81 million heist at Bangladesh Bank.
goo.gl/jzUt7V

Quant Fund Gives Robots 364 Days Off to Best Currency Rivals
Rebecca Spalding – Bloomberg
Systematic models make calls only once a year each January
PGI’s Global Time Diversified Strategy returns 13.8% in 2016
Like a lot of hedge funds, Principal Global Investors’ Macro Currency Group uses computer-driven models to devise trading strategies. What sets it apart is that its machines only make calls once a year.
goo.gl/tGxEuT

How distinct are financial cycles from business cycles?
By Gerhard Rünstler – ECB
One foundation for developing new macroprudential policy in addition to traditional macroeconomic stabilisation policy is that financial cycles differ from business cycles. This article identifies properties of credit and housing cycles, shows how they relate to GDP cycles, and compares the reliability of real-time estimates.
/goo.gl/m0F7BB

The $8 Trillion Fight Over How to Rid America of Fossil Fuel
Eric Roston – Bloomberg
For every economist, there exists an equal and opposite economist, and they’re both wrong.
Like many jokes, this one is funny (to economists, anyway) because it’s true. What isn’t so funny is its application to the biggest challenge of the 21st century: How to shed a fossil-fuel energy infrastructure that seems hell-bent on destroying us. There are several camps trying to decide how much we must spend to avoid environmental disaster. Consensus on a grand total is a matter of degree, with estimates varying by as much as $8 trillion.
goo.gl/otLzF0

Insurers worth $1.2tn tell G20 to stop funding fossil fuels by 2020
Karl Mathiesen – Climate Home
Three of the world’s biggest insurers have called on G20 leaders to implement a timeframe for the end of fossil fuel subsidies when they meet in China this week.
The G20 has already committed to phase out “inefficient fossil fuel subsidies that encourage wasteful consumption” over the “medium term”. In May, the G7 nations pledged to achieve this by 2025.
goo.gl/CVjAgh

Is Fischer ‘Stan the Man’ or the ‘Odd Stan Out’ on Rate Hikes?
Luke Kawa – Bloomberg
At Jackson Hole, Stan was the man. Federal Reserve Chair Janet Yellen’s long-awaited speech on Friday was interpreted by the markets as somewhat dovish on future interest rate hikes, with five-year real yields lower after investors digested her commentary. But shortly thereafter, Vice Chair Stanley Fischer indicated in his own remarks that a potential interest rate increase in September and a total of two hikes in 2016 were consistent with Yellen’s published remarks, which helped fuel a sell-off in Treasuries.
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Economists Discuss the Predictions That Divide Them
Nelson D. Schwartz – NY Times
What’s ahead for the American economy? That question is dividing experts, given that the economy has advanced at a slow pace since last winter even as the job market has recorded impressive gains. Well, we have some one-handed economists. On the one hand, Michael Gapen, chief United States economist at Barclays, sees growth picking up smartly in the third and fourth quarter, powered by a still-strong consumer and fading headwinds for the business sector. Indeed, he believes the Federal Reserve might well raise interest rates when policy makers meet next month.
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Stock Rout to Cost European Bankers $2.5 Billion in Bonuses
Stephen Morris – Bloomberg
Credit Suisse staff have lost $1.2 billion on deferred shares; Deutsche Bank’s 43% decline costs bankers $590 million in pay
Investment bankers at Europe’s biggest securities firms are watching their bonuses melt.
goo.gl/Xs5TtD

Traders love big round numbers; It is a popular idea that the ultimate Brexit fallout will deliver a euro to pound exchange rate of 1
by: Jamie Chisholm
Traders love big round numbers. They provide a talking point, and just by dint of their huge fat simplicity can sometimes seem to display a gravitational pull on the market.
/goo.gl/Cw7aKr

Winners From Shenzhen-Hong Kong Stock Connect; Shenzhen-listed stocks are pricey but there’s opportunities in technology, automotive and airport sectors.
By MANISHI RAYCHAUDHURI – Barron’s
Last week’s announcement by CSRC and Hong Kong Exchange of the long-awaited Shenzhen-Hong Kong Stock Connect came as a shot in the arm for several longterm macro-economic targets of HK and Chinese authorities. RMB internationalization, smoother access of offshore investors to onshore mainland equities and vice-versa, and eventual inclusion of A-shares in the global equity indices are a few of these targets.
goo.gl/XwtFE3

Exchanges, OTC and Clearing

Exchange operator Bats shifts payments to market makers for ETFs
John McCrank – Reuters
Bats Global Markets Inc will stop paying issuers of exchange-traded funds to list their high-volume securities on its exchange and instead will compensate the firms that support trading in those ETFs, the company said on Tuesday.
goo.gl/Q1IFEu

QuickTake Q&A: Saudi Stock Market Steps Up Bid for Foreign Cash
Deema Almashabi – Bloomberg
For the second time in 15 months, Saudi Arabia is loosening rules on foreigners investing in its almost $400 billion Tadawul Stock Exchange. The goal is to lure funds from overseas as the kingdom overhauls its economy to cut its dependence on oil revenue. Greater access for international investors may boost the chances of Saudi stocks being included in major emerging-markets equity indexes, potentially luring billions of dollars more.
/goo.gl/t86gZI

SGX Chases a Tech Mirage
Christopher Langner – Bloomberg Gadfly
Since it became easier for investors to buy stocks overseas, it’s become more challenging for the Singapore Exchange to attract international listings. The bourse operator is looking to fight the disruption by becoming the venue of choice for technology companies. While that may boost initial public offerings, it’s hard to see the golden days returning.
/goo.gl/W4B7DX

Arrangements for Adjustment of BOC HK Structured Products, Futures and Options
HKEx
Hong Kong Exchanges and Clearing Limited (HKEX) has announced the arrangements for the adjustment to BOC Hong Kong (Holdings) Ltd (BOC HK) structured products, futures and options to account for BOC HK’s special dividend.
goo.gl/Nq9YGw

Nasdaq Dubai Futures is a bold venture
Frank Kane – The National
September 1 is a red letter day for all who believe in the cult of equities. That is the launch date of Nasdaq Dubai Futures, a new development in UAE markets and a bold attempt to seize an opportunity in securities that has been misunderstood and underexploited in the past.
goo.gl/EoWQfK

Politics

Market Doesn’t Have to Fear Hillary or Donald, Ken Fisher Says
Paul Vigna – WSJ
Who will be better or worse for the markets, Hillary Clinton or Donald Trump? The surprising answer is that, eventually, the market is likely to perform the same no matter which one wins the election, says Ken Fisher said. Mr. Fisher, the founder and chairman of Fisher Investments, joined the MoneyBeat podcast to discuss how the election will effect the market, what the Federal Reserve has done wrong, and what makes a company a good investment (and when it’s a good investment, too.)
goo.gl/8fV5Lw

Trump team vows ‘disruptive’ economic plan
Barney Jopson, Stephen Foley and Gillian Tett – Financial Times
Donald Trump’s advisers are developing detailed plans to rebuild infrastructure, overhaul the tax system and deregulate sectors such as energy as they move to counteract criticism that the Republicans’ policies lack substance. Tom Barrack, head of the Colony Capital real estate fund and a Trump economic adviser, told the Financial Times: “The debate is going to become more substantive. This election is a choice between status quo and disruption, and we want to put out ideas that challenge the status quo.”
goo.gl/nf3LXG

In Donald Trump, Gold Bugs See One of Their Own
Stephanie Yang – WSJ
A Donald Trump presidency could be a big win for gold. The controversial candidate has Wall Street speculating on another surge in gold prices, as the prospect of a Trump presidency adds uncertainty to a shaky global economic picture. But the Republican presidential nominee has gained favor with some gold bugs for another reason too: He appears to understand their cause.
goo.gl/X2uwJF

The stock market has some very bad news for Donald Trump
By Sue Chang, Marketwatch
The GOP is traditionally known as the party of Wall Street, but this year investors, for the most part, are betting against the Republican standard-bearer. “The market appears to have decided not only that [Hillary] Clinton will win, but that it won’t be close,” David Woo, a strategist at Bank of America Merrill Lynch, said in a report distributed Monday. “Investors like landslide victories.”
goo.gl/QTB6o1

Investing and Trading

Disadvantage Gives Fund Managers an Advantage
By Tyler Cowen – Bloomberg
We all know that family background matters, but the connections are sometimes surprising.
/goo.gl/hwNRLw

This Is the Quietest Stock Market in Decades
Ben Eisen – WSJ
The stock market remains out for summer vacation. By some measures, the S&P 500 has been trading in its narrowest range in decades, a sign of just how muted market activity has been. In the 17 trading days through last Thursday, the S&P 500 moved less than 0.75% between its daily high and low. That is the most consecutive days with such a narrow trading range in records that go back to 1970, according to Ryan Detrick, senior market strategist at LPL Financial.
goo.gl/amx42s

How the Vanguard Effect Adds Up to $1 Trillion
Eric Balchunas – Bloomberg
In the usually bleak debate over the economic health of average Americans and the utility of the finance industry, here’s a happy statistic: A private-sector wealth-transfer machine has saved average investors $1 trillion. That machine is Vanguard, and its model is worth highlighting — and maybe even emulating. Let me explain the math. Vanguard has saved investors $175 billion in fees since it was founded in 1974. This is based on the historical difference between the asset-weighted average expense ratio of an active mutual fund versus that of a Vanguard fund, as seen in the chart below. The difference is multiplied by the firm’s assets each year — in other words, the amount an investor would have paid if Vanguard didn’t exist.
/goo.gl/1PtKiy

Kiss it goodbye, the great buyback boom is on the wane
James Saft – Reuters
The great stock buyback boom may be on the wane, undermined by falling company earnings.
U.S. company stock buybacks are down 21 percent in the first seven months of 2016 compared to the same period a year earlier, according to TrimTabs Investment Research, a fall driven in part by five consecutive quarters of year-over-year earnings declines among S&P 500 stocks. Buybacks, which cancel shares and thus increase per-share earnings, have played a crucial role in supporting the stock market since the financial crisis, flattering earnings even for companies with static or falling revenues.
goo.gl/PDDqKE

The Case for Gold at $1,700
Stephanie Yang – WSJ
Gold has been under pressure in recent weeks, but one bank is making the case that the precious metal is actually extremely under-priced. Deutsche Bank analysts Michael Hsueh and Grant Sporre wrote in a note to clients Friday that if measured as a currency, gold’s worth is close to $1,700 per ounce. This is a steep 29% climb from gold’s current price, which has traded near a five-week low this week. The most active gold futures contract fell 0.5% on Tuesday to $1,321 an ounce.
goo.gl/hdXpRA

Defensive indexes: steady as she goes
Catherine Yoshimoto – FTSE Russell Blog
The first six months of 2016 was a wild ride that left market participants looking for any means to steady themselves as the world shook around them. In times like this, I find myself thinking of the song “Steady, As She Goes” by the Raconteurs. The lyrics, “No matter what you do you’ll always feel as though you tripped and fell,” sum up how I feel after yet another volatile day in the markets. This got me thinking about the types of indexes that may help to understand markets in more turbulent times and led me to take a closer look at the Russell Defensive Indexes, which are part of the Russell Stability Index Series.
goo.gl/opiZlu

Reports Assets Invested In ETFs/ETPs Listed In Europe Reached A New Record Of 539 Billion US Dollars At The End Of July 2016
Press Release
ETFGI, the leading independent research and consultancy firm on trends in the global ETF/ETP ecosystem, reported assets invested in ETFs/ETPs listed in Europe reached a new record of US$539 billion at the end of July 2016. The European ETF/ETP industry ended the month with 2,220 ETFs/ETPs, with 6,957 listings, assets of US$539 billion, from 54 providers listed on 25 exchanges in 21 countries according to ETFGI’s July 2016 global ETF and ETP industry insights report (click here to view the ETFGI asset growth chart for Europe listed ETFs/ETPs).
goo.gl/F6zwrF

Why Euro Looks Stuck Even as Fed Gears Up to Move
Richard Barley – WSJ
Once upon a time, signs the Federal Reserve was gearing up to increase rates would have been big news for the euro. Policy divergence was a key focus for foreign-exchange traders. But times have changed. True, the euro declined against the dollar in the wake of the Jackson Hole conference, but it was far from an extraordinary move. And the bigger picture is that at $1.117, the single currency is in the middle of a relatively narrow range that has held since February.
goo.gl/7yG4PF

How Bitcoin was brought down by its own potential—and the banks
Luke Ryan – Quartz
The best that can be said about Bitcoin right now is that it still exists. Split by internal divisions while its most useful aspects are harvested by the very financial behemoths it once hoped to destroy, Bitcoin is fast becoming the tech world’s version of Waiting for Godot, wherein a hermetically sealed community squabbles and bickers over arcane points of code and law as their world slowly crumbles around them. In the last 12 months, attempts made to produce a road map for the cryptocurrency’s future have come to naught, all while core developers abandon the project and opaque Chinese mining concerns wield outlandish power.
goo.gl/bhTy4j

Institutions

Deutsche’s Cryan denies merger but backs banking consolidation; Bank chief shoots down report of tie-up with local rival Commerzbank
by: James Shotter in Frankfurt
Deutsche Bank chief John Cryan said that Germany’s banking sector needed consolidation but dismissed a report that his bank had considered a merger with local rival Commerzbank.
/goo.gl/Y9CLDf

Markets Believe the ECB Will Relax Rules on Bond-Buying
Jon Sindreu – WSJ
Investors have faith the European Central Bank will soon scrap one of its rules limiting sovereign-bond purchases, derivatives markets suggest. The ECB currently buys about EUR70 billion ($78 billion) of eurozone government bonds a month, but analysts have long believed the central bank will run up against a lack of available bonds for purchase before the program ends—in theory—in March of next year. This is because the central bank has imposed several limits on itself, including the requirement to only buy bonds that yield more than the deposit facility it offers banks, currently at a minus 0.4%.
goo.gl/jHZJs8

Unloved Banks Might Get a Profit Boost
Aaron Back – WSJ
America’s banks are lending their way to growth. With interest rates stuck at ultralow levels, pushing more loans out the door is one of the few ways that banks can grow earnings. They are doing so with gusto. Institutions insured by the Federal Deposit Insurance Corp. had nearly $9 trillion of net loans and leases outstanding at the end of the second quarter, up 6.8% from a year earlier, according to the FDIC’s quarterly banking profile. That was a slight deceleration from 7% growth in the first quarter.
goo.gl/BH91vx

Swiss Central Bank Steps Up Stock Buying Spree
New York Times
Switzerland’s central bank now owns more publicly-traded shares in Facebook than Mark Zuckerberg, part of a mushrooming stock portfolio that is likely to grow yet further. The tech giant’s founder and CEO has other ways to control his company: Zuckerberg holds most of his stake in a different class of stock. Nevertheless this example illustrates how the Swiss National Bank has become a multi-billion-dollar equity investor due to its campaign to hold down the Swiss franc.
goo.gl/hZbFeg

Emerging markets won’t escape Fed’s grip
Henny Sender – Financial Times
Investors are increasingly disillusioned with extreme monetary policies, the pace of economic growth and the performance of equities in developed markets. In virtually every country where central banks have moved interest rates into negative territory, equities have suffered. The most dramatic example is Japan’s Topix index, which is down over 15 per cent this year. At the same time, cheap funding is not enticing companies in developed economies to invest. Capex in developed economies is currently contracting at an estimated 3 per cent rate, according to data from JPMorgan.
goo.gl/OydHFf

Why Chinese Banks Are Moving Deeper Into Property
Anjani Trivedi – WSJ
In China, property prices and bank lending seem to go together like hand and glove.
Take the latest batch of earnings from China’s big state lenders. They show a substantial shift in lending toward the property market and away from companies. China Construction Bank this week reported residential mortgage lending rose almost 30% in the first half of this year compared with the same period last year.
goo.gl/tKEiQy

Italy’s Monte Paschi may swap bonds for shares to ease cash call: sources
Francesca Landini and Stephen Jewkes – Reuters
Monte dei Paschi di Siena (BMPS.MI) may convert the bulk of its subordinated debt into equity to cut back a planned five billion euro ($5.6 billion) capital increase and make it more attractive for investors, three sources said on Tuesday.
Italy’s third largest bank announced the share sale in July as part of a wider bailout plan to prevent it being wound down.
goo.gl/M7j70G

Ex-Soc Gen broker to run futures execution at GH Financials; Wilkins will run GH Financials listed derivatives sales and execution desk following the departure of its head of brokering.
By Joe Parsons – The Trade
GH Financials has appointed a former senior Societe Generale derivatives broker to head its London-based listed derivatives sales and execution desk. Steven Wilkins joined the brokerage and clearing firm in July, following his departure from the French bank in May
goo.gl/4gA7m9

Fintech

The Technancial Company And Associates In Capital Markets Join Forces To Address MiFID II Compliance Challenges
Mondovisione
Leading real-time risk management and trade surveillance solutions firm, The Technancial Company (TTC) and London based specialist advisory firm Associates in Capital Markets (ACAPM) today announce a collaborative partnership to address the challenges in MiFID II compliance, especially in the areas of margin management and trade surveillance. MiFID II is a mammoth regulatory exercise aimed at enhancing investor protection and affects financial institutions on a varied scale in Europe and the UK. The collaboration between the two companies is a timely synergy in combining specialist experience and powerful tools for capital markets regulations and compliance.
goo.gl/h0QXl3

Brokerage API Provider Tradier Moves Its Trade Execution To Apex Clearing
Press Release
Tradier, Inc., a next generation brokerage solution that provides a bundled API for platform providers and developers, today announced that it is migrating its core equity and options clearing relationship to Apex Clearing Corporation. This relationship is expected to serve the overall needs for the distributed trading communities and particularly benefit the large and rapidly growing partner ecosystem of Tradier Brokerage. As a part of this relationship investors and traders will be able to leverage enhanced features around account opening, money movement, global access and execution.
goo.gl/Ql0Mnx

Regulation

Cross Currency Swaps – how much margin will they need?
Chris Barnes – Clarus Financial Technology
The Basel Committee on Banking Supervision, in conjunction with the board of IOSCO, published this paper in March 2015. I will use the section on Cross Currency Swaps to estimate how much Initial Margin may be posted over time.
/goo.gl/q4B28R

Buy-side forex trading curbed as margin rules take effect
Robert Mackenzie Smith – Risk.net
Buy-side firms will be unable to trade foreign exchange derivatives with scores of dealers when new non-cleared margin rules take effect in the US and Japan on September 1. Foreign exchange prime brokers have been racing to finalise collateral agreements and other documentation necessary to continue trading with executing dealers under the non-cleared margin regime. Those efforts have yielded mixed results.
goo.gl/gRFuJi

Ex-Monsanto Employee Gets $22 Million From SEC, Lawyer Says
Benjamin Bain – Bloomberg
The U.S. Securities and Exchange Commission awarded $22 million to a former Monsanto Co. employee who tipped the regulator off to improper accounting. The seed maker agreed in February to pay $80 million to settle a case with the regulator over revenue tied to its weed-killer Roundup. The Monsanto whistleblower was a financial executive, according to Stuart Meissner, the ex-employee’s attorney. Meissner didn’t identify the tipster by name in a statement released Tuesday.
/goo.gl/zZ9FWw

Banking Regulators, Facing Criticism, Seek to Dispel Myths on Money-Laundering Rules
By EMILY GLAZER and ARUNA VISWANATHA – WSJ
U.S. banking regulators sought Tuesday to “dispel certain myths” around anti-money-laundering rules that critics contend have inadvertently cut off access to the U.S. financial system for some countries, businesses and individuals.
goo.gl/qzBt9z

G20 watchdog says bank rules working well, digs deeper into markets
By Huw Jones – Reuters
The financial system’s ability to cope with Britain’s vote to leave the European Union and with doubts over growth prospects show the benefits of rules introduced since the 2008 collapse of Lehman Brothers bank, a global watchdog said on Wednesday.
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ESMA Sees Risk Outlook Deteriorate For EU Securities
Press Release
The European Securities and Markets Authority (ESMA) latest risk report has found that the overall assessment of risk levels in EU markets under its remit remains unchanged. Market and credit risks remain very high – the highest level – while liquidity and contagion risk remain high.
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SEC Whistleblower Program Surpasses $100 Million in Awards
SEC
The Securities and Exchange Commission’s awards to whistleblowers have surpassed the $100 million mark with the program’s second-largest award of more than $22 million announced earlier today.
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CFTC Extends Comment Period on Proposed Amendments to Regulation 4.22 Regarding CPO Annual Reports
Press Release
The Commodity Futures Trading Commission (CFTC) has extended the comment period on its proposed amendments to Regulation 4.22, which concerns the Annual Report that each commodity pool operator registered or required to be registered with the CFTC must distribute for each commodity pool that it operates. The original comment period was set to expire September 6, 2016. See 81 Fed. Reg. 51828 (Aug. 5, 2016). With this extension, the comment period will expire September 20, 2016.
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BNP Paribas fined $4m for overcharging clients in Hong Kong; BNP Paribas made $9.5 million by marking up fees on client transactions between 2011 and 2013.
By Hayley McDwowell – The Trade
BNP Paribas Wealth Management has been slapped with a $4 million fine in Hong Kong for overcharging clients.
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Regions

Toronto’s Equity Markets Are The Best Performing In The World So Far In 2016
Press Release
Toronto’s equity markets are the best performing in the world, so far in 2016. As at the end of July the S&P/TSX Composite Index was up 12%, far outstripping S&P 500, the FTSE 100, the NASDAQ Composite and all other major indices.
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Asia leads emerging market recovery
Financial Times
Not every corner of the global economy is mired in gloom. Asia is leading a gentle recovery in gross domestic product growth rates in emerging markets as India and some countries in Southeast Asia enjoy an upsurge in economic expansion. Indonesia’s economy, the largest in the region, grew by 5.2 per cent in the second quarter of the year, recording the fastest year-on-year expansion for 10 quarters. The Philippines also delivered a better than expected performance, growing by 7 per cent in the second quarter, the fastest pace for three years. India, which ranks seventh after France in global GDP rankings, posted an official 7.9 per cent growth rate in the first quarter of the year, a sharp improvement on the previous quarter.
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London financial groups open line to Dublin after Brexit
John O’Donnell and Padraic Halpin – Reuters
Ireland says the Brexit vote has led to a jump in enquiries from London firms considering opening offices in Dublin, one of a handful of European cities trying to draw business away from Britain’s financial centre. Irish officials say they have had more than 35 concrete enquiries from financial groups looking at setting up a base or expanding in Ireland, which is recovering after near bankruptcy in the financial crash.
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World’s Top Performing Fund Is Running Out of Good Stocks to Buy
Santanu Chakraborty and Rajhkumar K Shaaw – Bloomberg
The world’s best-performing stock fund is discovering the downside of success. After producing a three-year return of 275 percent, more than any other equity fund with at least $500 million, managers of the DSP BlackRock Micro Cap Fund say bargains are disappearing in their market niche of Indian small-caps. The dearth of cheap shares has become so severe that the fund took the unusual step of limiting client inflows as India’s benchmark small-cap index jumped to an all-time high this month.
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Copper flashing red signals on China
Henry Sanderson – Financial Times
Copper prices are signalling that demand may be weakening in China, the world’s largest consumer, as stocks of the metal flow out of the country to warehouses elsewhere in Asia. The red metal, which is often seen as a gauge of global economic activity due to its ubiquitous use in wiring, has relinquished its gains for the year, falling 2 per cent. That is in contrast to other metals also heavily tied to Chinese demand such as zinc, tin and nickel, which have all staged rallies.
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If Singapore Wants a Facebook, Dual-Class Stock Isn’t Enough
Andrea Tan, Yoolim Lee, Joyce Koh – Bloomberg
More needs to happen before city is first choice for companies; Some say change is positive step to luring more businesses
Singapore’s move to allow more than one class of shares for its public companies won’t be enough on its own to lure international businesses, according to executives and asset managers.
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Mystery of Oil Held on Chinese Islands Puzzles Crude Markets
Bloomberg News
Analyst opinion divided over level of China strategic reserves; Purchases for SPR have lifted crude imports, helping prices
China’s got the world puzzling over its oil hoard.
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Miscellaneous

The CIA’s Venture-Capital Firm, Like Its Sponsor, Operates in the Shadows
Damian Paletta – WSJ
Forterra Systems Inc., a California startup focused on virtual reality, was in need of money and its products didn’t have much commercial appeal. Then funds came in from a source based far from Silicon Valley: In-Q-Tel Inc., a venture-capital firm in Virginia funded by the Central Intelligence Agency. One catalyst for the 2007 infusion, according to a former Forterra executive and others familiar with it, was a recommendation by a man who sat on the board of the venture-capital firm—and also on the board of Forterra.
goo.gl/TEZNW4

Cargill celebrates expansion of canola research facility
Press Release
Cargill’s newly expanded canola research facility in Aberdeen, Saskatchewan is poised to lead the way in specialty canola seed breeding, thanks to a $3.5 million investment in new equipment and technology.
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