First Read

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.

Joe Gits, CEO and co-founder of SMA, has been watching and monitoring Twitter for years. Gits has a background in quantitative analytics, and soon after Twitter debuted in 2006, he was fielding queries about harnessing the power of the little blue bird. In early 2009, there were some 2.5 million tweets per day. Today, total daily tweets number half a billion, plenty of which are focused on the markets and current economic landscape. In Gits’ research and efforts to build a company that filters and gleans information from the social media giant, it has become clear Twitter matters to those who trade the markets.

Read the rest here

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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 he 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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Why They Did It: Madoff and Enron’s Fastow Explain the Biggest Frauds in U.S. History
Paul Barrett – Bloomberg
Why do business executives—people who already possess status and wealth—commit financial crimes? Eugene Soltes offers some interesting theories in his new book, Why They Do It: Inside the Mind of the White-Collar Criminal, including the notion that many senior business people operate in a moral “gray zone.” An associate professor at Harvard Business School, Soltes posits that they step over the line—breaking accounting rules or making illegal insider trades—in part because they rely on intuition. And, it turns out, their instincts stink.
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***** The distance between insanity and genius is measured only by success. ~Bruce Feirstein

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Employers Find ‘Soft Skills’ Like Critical Thinking in Short Supply; Companies put more time and money into teasing out job applicants’ personality traits
By KATE DAVIDSON – WSJ
The job market’s most sought-after skills can be tough to spot on a résumé. Companies across the U.S. say it is becoming increasingly difficult to find applicants who can communicate clearly, take initiative, problem-solve and get along with co-workers. Those traits, often called soft skills, can make the difference between a standout employee and one who just gets by.
goo.gl/OnpSsO

***** Take initiative, problem-solve and get along with co-workers? The bar has been raised.

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Strategy away days are an absurd but useful ritual; Teams can bond over geese-herding or at safari parks but the challenge is to maintain momentum
by: Andrew Hill – FT
I have erected spaghetti and marshmallow towers with colleagues and assembled imaginary rafts. I have brainstormed, flipcharted and Post-it-noted mission statements with executives from one of Europe’s largest financial institutions and helped blindfolded managers of a big US aerospace group build with toy bricks.
/goo.gl/miSnLw

***** Someone needs less initiative.

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German Savers Lose Faith in Banks, Stash Cash at Home; Low interest rates and the prospect of fees on bank deposits are helping drive a boom in home-safe sales
By ULRIKE DAUER – WSJ
German savers are leaving the security of savings banks for what many now consider an even safer place to park their cash: home safes.
goo.gl/AwNiYI

***** Der bunker!

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ICE Clear Europe COO Gibson to retire
Futures & Options World
The Intercontinental Exchange is to lose a founder of its European clearing unit and one of its most experienced clearing experts when Mike Gibson retires as chief operating officer of ICE Clear Europe in the coming months.
Gibson, who joined ICE in 2007 and helped launched ICE Clear Europe in late 2008, is to step down from his current role and retire in the coming months, according to sources, though the timing of the move is uncertain.
goo.gl/cLGpcV

***** Expected retirement gifts: a signed baseball, guitar and gift card to a Chicago steakhouse.

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Buffett’s 167-Year-Old Railroad Tests Skies for the Drone Age
Thomas Black – Bloomberg
Desert flights by BNSF help regulators develop broad rules; FAA is eating the elephant ‘one bite at a time,’ official says
Before some cutting-edge online retailer can use a drone to drop granola bars on your doorstep, a railroad born when Abe Lincoln was in Congress will first have to iron out the kinks.
goo.gl/ILhhxn

***** There are so many uses for drones. It is not just in the movies that the good guys use drones to watch the bad guys.

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Gene Wilder Dies at 83; Star of ‘Willy Wonka’ and ‘Young Frankenstein’
by DANIEL LEWIS – NY Times
Mr. Wilder’s neurotic comic persona added a special edge to numerous hits, like “Blazing Saddles,” “Stir Crazy” and “High Anxiety.”
goo.gl/VWldEG

***** A sweet part of my childhood was just lost.

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Monday’s Top Three
Doug Ashburn, JLN
Congratulations to OCC executive chairman Craig Donohue. His message on gender and pay equality smoked the field in yesterday’s click count. His recommendations – board diversity, temporal flexibility arrangements and a smoother re-entry to the workforce after taking a “family timeout” – should become standard practice, not just because of mandates, but because they are industry best practices.
Bitcoin took second place, in the Reuters article Cyber threat grows for bitcoin exchanges, a reminder that, in the race to build robust distributed ledger platforms among the financial system, we still have a ways to go.
Rounding out the top three was a repeat of Friday’s top story, Teen hedge fund manager’s father accuses regulator of ‘thuggery’, which tells one side of the story regarding NFA investigations. For another side of the story, have a look at this recent MarketsWiki Education presentation, Karen Wuertz, National Futures Association – Opportunity Behind Many Doors. Really, after numerous unsuccessful attempts to reach someone making outlandish claims, and numbers that don’t add up, the SRO says, “No more Mr. Nice Guy.” Is that such a bad thing?

Lead Stories

Demise of Direct Match Shows Bank Death-Grip on Treasury Market
Matthew Leising and John Detrixhe – Bloomberg
Direct Match Holdings Inc., which aimed to be an alternative to bank dominance in the $13 trillion U.S. Treasury market, died before it arranged even one trade. The New York-based startup wanted to give hedge funds and asset managers the same type of anonymous, exchange-style trading that banks and sophisticated electronic firms have enjoyed for years. The problem: Direct Match needed to partner with one of those banks to access the Treasury market’s clearing-and-settlement plumbing. State Street Corp. initially agreed to such a deal, then canceled it, dooming Direct Match.
goo.gl/RwlD0s

CurveGlobal to kick off tech testing
Futures & Options World
The London Stock Exchange is forging ahead with final preparation work for the launch of its new interest rate futures trading venue, with a period of testing to commence in ‘mid-September,’ in the final weeks before CurveGlobal goes live.
“As with all new exchanges… We will undertake a period of testing to ensure the robustness of the technology and infrastructure that will support trading on CurveGlobal. We will run a background technology ‘dress rehearsal’ on the exchange in mid-September,” a spokesperson told FOW.
goo.gl/FvyRPR

Rollout of final derivatives rules leaves patchy picture of risks
Huw Jones – Reuters
Eight years since Lehman Brothers’ collapse sent the financial system into a tailspin, a remaining reform to make derivatives safer will be rolled out from next week, though regulators still won’t have a full snapshot of risks in the $493 trillion sector. When the U.S. bank went bust, regulators were unable to see at a glance who was on the other side of Lehman’s derivatives trades to check if they had enough cash to cover defaults.
goo.gl/Iv6QMA

Oil market rebalancing could take until end 2017: Shell
Karolin Schaps – Reuters
The huge global oil oversupply that has weighed on prices for the past two years may not clear until the second half of 2017, Shell’s chief energy adviser Wim Thomas told Reuters. The potential return to the market of some 1.5 million barrels per day of supply from Libya and Nigeria and uncertainty about Iranian and Iraqi production levels could push a rebalancing further away than many in the oil industry are hoping.
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Deutsche Boerse Said Unlikely to Increase BSE Stake Before IPO
Santanu Chakraborty, Will Hadfield – Bloomberg
German exchange can raise holding to 15% after rule change; India’s government allows foreign firms to take bigger role
Deutsche Boerse AG is unlikely to increase its stake in BSE Ltd. before the Indian stock exchange holds its initial public offering next year, according to two people familiar with the matter.
goo.gl/iTbk2J

There are going to be fewer Wall Street stock analysts in the future, according to some Wall Street stock analysts
Matt Turner – Business Insider
There are going to be fewer Wall Street stock analysts in the future, according to some Wall Street stock analysts. That’s right. Research analysts who do deep dives on the future of various industries and provide stock-specific calls to investors have taken a look at their own employers and decided that their profession is at risk.
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Bats Boosts ETP Market Incentive Schemes; Largest Exchange for ETP Trading Globally Creates Market Making Rewards Program
BATS
Bats Global Markets, Inc. (Bats: BATS), the #1 market globally for trading in exchange-traded products (ETPs) today announced changes to its incentive schemes for market makers who play a pivotal role throughout the life cycle of ETPs.
goo.gl/SyBJBG

Former FX trader at Barclays faces $1.2 million fine
By Hayley McDowell – TheTrade
A former foreign exchange (FX) trader at Barclays is facing a fine worth $1.2 million for using online chat rooms to manipulate FX benchmarks. Christopher Ashton created a chat room with FX traders at competitor banks to share confidential and ‘commercially sensitive’ information on clients.
bit.ly/2bOgGp7

SGX’s Baltic Exchange bid seeks a new path to growth
Euromoney Capital Markets
Singapore’s stock exchange isn’t going to get much more growth from domestic listings, so – like its equivalent in Hong Kong – it is seeking different asset classes and markets. Will Baltic Exchange make any difference?
goo.gl/m2mLqn

FSB cautions over further margin rules delays; Only the US, Canada and Japan are ready to implement initial margin requirements on 1 September.
By Joe Parsons – The Trade
The Financial Stability Board (FSB) has fired a warning shot to countries behind schedule on adopting incoming margin requirements for non-cleared OTC derivatives.
goo.gl/0AYtEi

Virtually No Institutional Investors Are Happy With Activist Hedge Funds Right Now; Billionaires bicker as sentiment burns.
Luke Kawa – Bloomberg
The ongoing squabble between billionaire hedge fund luminaries William Ackman and Carl Icahn over Herbalife Ltd. distracts from a large warning sign for activist managers: they’re failing to live up to the expectations of institutional investors.
goo.gl/T4PzP3

Bundesbank Sees Need to Re-Calibrate Basel Reform Proposals
Arabile Gumede, Boris Groendahl – Bloomberg
Dombret says risky banks will see capital requirements rising; Bundesbank to work with industry on Basel rule reform
Global regulators’ plans for changes of banking rules will need tweaking to have the desired effect on lenders’ balance sheets, according to the Bundesbank’s top official for bank regulation, Andreas Dombret.
goo.gl/lH7aWo

Food Price Deflation Cheers Consumers, Hurts Farmers, Grocers and Restaurants; Farm Belt cutbacks hit more businesses even as consumers save big at the grocery store
By HEATHER HADDON and JULIE JARGON – WSJ
The U.S. is on track this year to post the longest stretch of falling food prices in more than 50 years, a streak that is cheering shoppers at the checkout line but putting a financial strain on farmers and grocery stores.
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Brexit

Brexit Blows Up Currency Derivatives Sold to U.K. Companies
Liam Vaughan – Bloomberg
Sterling crash turned some currency derivatives toxic; Losses prompted jump in misselling claims, lawyers say
For eight years, TTT Moneycorp Ltd. regularly took Dariusz Suchicki to dinner and soccer matches, all while selling him, as the head of finance of a U.K.-based importer of Polish foods, a series of complex currency derivatives.
goo.gl/MMfDfV

Brexit requires more than political will — it needs to be capable of happening
by: David Allen Green – FT
Wanting something to happen is never enough. More than mere desire is needed. This simple truth is obvious in the current state of Brexit policy in the UK.
/goo.gl/jJbBlG

Warsaw joins charm offensive to woo London bankers
Henry Foy – Financial Times
Poland has become the latest European country to woo some of Britain’s biggest banks in the wake of the Brexit vote with a charm offensive in London this week to lure City institutions to Warsaw. The Polish deputy prime minister will arrive on Thursday armed with a package of incentives to offer senior executives at some of the biggest banks in the City that have shown an interest in shifting jobs to the continent.
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May Plans to Let U.K. Parliament ‘Have a Say’ on Brexit Trigger
Robert Hutton, Alex Morales – Bloomberg
U.K. Prime Minister Theresa May plans to give Parliament “a say” on starting the formal process for withdrawing from the European Union, her spokesman said, though he declined to say whether lawmakers would be able to vote on the issue or simply ask questions.
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London and New York must cement their bond after Brexit; The world’s leading financial markets have a special relationship, writes Dan Glaser
by: Dan Glaser
More than 70 years ago, Winston Churchill coined the phrase “special relationship” to describe the bond between Britain and the US. But this relationship has existed, endured and strengthened for more than 200 years because of all that we share in common: a love of freedom, values, language, democratic government, corporate standards and a commitment to transparency, to name a few.
/goo.gl/bepI43

Exchanges, OTC and Clearing

The Frozen Concentrated Orange-Juice Market Has Virtually Disappeared
Julie Wernau – WSJ
The once-thriving market for frozen orange-juice concentrate is getting squeezed. Traders have been dropping out for years because of waning consumer demand for juice and a rampant disease that has producers abandoning groves. Now, entering hurricane season, those who remain must confront the possibility that a storm could wreak havoc on what is left of Florida’s orange crop, already on track for the smallest harvest in 52 years. “You’re witnessing gut-wrenching decisions where multigenerational family citrus growers have reached a point where their risk tolerance isn’t there to continue,” said Adam Putnam, commissioner of the Florida Agriculture Department and Consumer Services.
goo.gl/zNCAoi

***DA: Why is the market going down? And where’s Beeks?!? Turn those machines back on!!!

BATS Seeks Consensus on MiFID 2 Trade Data Collection, Reporting Process
Joanne Faulkner – WatersTechnology
BATS Europe officials say the exchange expects other trading venues to adopt the process it began testing last week to provide MiFID 2-compliant order data record keeping, which eliminates sensitive data flowing through its core trading system, and minimizes any potential latency impact due to large message sizes.
goo.gl/u9O6mr

Treasuries Hit Roadblock on Way to Trading Like Stocks
Lisa Abramowicz – Bloomberg Gadfly
The $13.4 trillion Treasury market is the deepest, most active debt market in the world. Yet it has some surprisingly dysfunctional corners, especially when it comes to the most pedestrian part of trading: processing paperwork in back offices. According to estimates from various market participants, about half of Treasury trades are cleared centrally through the Fixed Income Clearing Corporation, whose members — about 150 banks and brokers — post collateral to compensate for losses if a party fails to live up to its end of the deal. The other half is cleared bilaterally, meaning that the parties come up with their own ways of assessing and protecting against such risk.
/goo.gl/pXpi88

Bloomberg Vows to Expand Barclays Index Unit Post-Acquisition, Keep Index Data Free; The vendor says it has been talking with clients to address any concerns about the transition of the index assets acquired from Barclays.
Joanne Faulkner – Waters Technology
The vendor says it has been talking with clients to address any concerns about the transition of the index assets acquired from Barclays. Bloomberg has said it will expand the breadth and exposure of Barclays’ Risk Analytics and Index Solutions (BRAIS), and is reassuring end-users concerned about potential changes to its licensing model, after completing the acquisition of the BRAIS business for £520 million ($683 million) earlier this week.
goo.gl/ryKTGv

Publication Of JPX Working Paper, Vol.15 “Applicability Of Distributed Ledger Technology To Capital Market Infrastructure”
MondoVisione
Japan Exchange Group, Inc. (JPX) today published JPX Working Paper, Vol.15 “Applicability of Distributed Ledger Technology to Capital Market Infrastructure”.
goo.gl/6HpUEc

***DA: Spoiler alert – JPX sees a few issues, such as data privacy and throughput capacity, but there is tremendous potential for innovation. The PDF can be found HERE.

STOXX Limited Launches Euro STOXX 50 Multi-Asset Momentum Risk Cap Indices
MondoVisione
STOXX Ltd., the operator of Deutsche Boerse Group’s index business, and a global provider of innovative and tradable index concepts, today introduced the EURO STOXX 50 Multi-Asset Momentum Risk Cap Indices. These indices implement a cross-asset strategy concept that is based on the EURO STOXX 50 and the EURO STOXX 50 Corporate Bond Indices, using the momentum factor for dynamic asset allocation to enhance returns, while maintaining the risk at pre-defined maximum volatility levels.
goo.gl/30Vcpr

BSE launches single message window to place multiple quotes; The exchange said that trading members can place up to 99 quotes through a single request message
Press Trust of India
Leading stock exchange BSE has introduced a new facility to place multiple quotes in equity and currency derivatives segments through a single request message.
goo.gl/Pc5Vv0

Trading Hours/Trading Holidays on Commodity Derivatives Exchanges
SEBI
goo.gl/34h0Ui

SGX elects new chairman of board; Directors at SGX have chosen Kwa Chong Seng as its new chairman of the board.
By Hayley McDowell – The Trade
Singapore Exchange (SGX) has announced the appointment of Kwa Chong Seng as the new chairman of its board.
goo.gl/nb2biy

Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead
Mikael Holter – Bloomberg
New finds at lowest since 1947 and headed even lower: WoodMac; Explorers replacing just 6% of resources they drill: Rystad
Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.
goo.gl/VGIVZs

Politics

The stock market has already picked the next U.S. president
By Sue Chang – MarketWatch
Market strategist says history favors Clinton; ‘investors like landslide victories’
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.
goo.gl/a62NbY

Strategist: I Can’t Remember the Last Time the Election Meant This Much for Markets; Everyone’s pricing in political gridlock.
Luke Kawa – Bloomberg
Meet the new boss, same as the old boss.
That’s what financial markets are predicting for the world’s largest economy ahead of the November election, according to Bank of America Merrill Lynch Head of Global Rates and Currencies Research David Woo. If those predictions turn out to be wrong, however, the fallout could be extraordinary.
goo.gl/Lnq2Nt

A Pity About Gary Johnson – He Was Right First Time About A Tax Being the Free Market Solution
Tim Worstall – Forbes
Whether or not climate change is happening is not something for me to describe or discuss – go talk to my colleagues over on the environmental desks. When it comes to the economic policy of what should happen if it does then that is me. And the answer here is simple, as I’ve said a number of times before – a carbon tax. Work out what the cost of a tonne of CO2 is (better, CO2-e), stick a tax of that amount on emissions, lower other taxes to compensate (by preference, employers’ social security) and we’re done. Problem all solved, done and dusted.
goo.gl/Yo10zv

A Powerful Russian Weapon: The Spread of False Stories
By NEIL MacFARQUHAR – NY Times
With a vigorous national debate underway on whether Sweden should enter a military partnership with NATO, officials in Stockholm suddenly encountered an unsettling problem: a flood of distorted and outright false information on social media, confusing public perceptions of the issue.
goo.gl/3JpjOP

Clinton Economist Trusts Government Too Much
By Tyler Cowen – Bloomberg
Few candidates spell out their policy proposals in as much detail as Hillary Clinton, but there’s still room to wonder about how a President Clinton would set her agenda for 2017 and beyond.
/goo.gl/j6cZK3

Investing and Trading

Smart Money Going to War With VIX-Obsessed Stock Market Bears
Lu Wang and Joseph Ciolli – Bloomberg
They can’t both be right. Below the surface of the calmest stock market in five decades, a divergence in sentiment has opened in which institutional investors are surrendering hedges and diving deeper into stocks, while individuals load up on protective options and sell equity funds. Bets are piling up at the fastest rate ever as stocks meander, setting the stage for pain when the sleepy spell resolves.
goo.gl/7Z32ww

Worse Than Marxism?
Craig Lazzara – S&P Indexology
The investment community was bombarded last week with a paper arguing that passive investing is “worse than Marxism.” That any putatively-serious observer can compare an investment strategy, even one he doesn’t like, with a political ideology responsible for the deaths of millions boggles the imagination, but maybe I’m just too sensitive. The paper’s argument seems to be that the macroeconomic function of financial markets is to direct capital to its most efficient use, and that only active management contributes to this effort. In reply we offer several observations:
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Treasury Two-Year Debt Set for Worst Month Since November on Fed
Andrea Wong – Bloomberg
Two-year Treasury notes are on pace for their worst monthly performance since November as traders add to bets that the Federal Reserve will increase interest rates as soon as next month.
goo.gl/mJrzyX

New Digital Currency Spikes After Giving Criminals More Secrecy
Yuji Nakamura – Bloomberg
Forget Bitcoin. There’s a new digital currency that is surging as online drug-dealers begin adopting it to conduct business with more anonymity. The two-year-old currency Monero has more than quadrupled this month after gaining support from prominent websites that anonymously peddle drugs. It spiked to as much as $10 on Sunday after AlphaBay, one of the most popular sites for buying drugs like liquid LSD and hybrid cannabis, said last week it will begin accepting the currency on Sept. 1. The total value of all Monero in circulation pushed past $100 million on Monday, up from about $25 million at the end of last month, according to coincap.io.
goo.gl/ATD83J

Institutions

JPMorgan Index Move Puts $370 Billion Islamic Debt on Fund Radar
Y-Sing Liau and Elffie Chew – Bloomberg
JPMorgan Chase & Co.’s decision to include Islamic bonds in its indexes will draw more global investors to the $370 billion sukuk market and boost trading of the debt. Shariah-compliant notes will be eligible for inclusion in five JPMorgan gauges from Oct. 31 and will account for between 0.35 percent to 0.99 percent of total assets on the benchmarks, according to an Aug. 18 statement by the bank. Sukuk will be assessed on the same criteria as non-Islamic bonds, the index compiler said.
goo.gl/TqZ3aJ

Barclays Names JPMorgan’s Venkatakrishnan as Chief Risk Officer
Stephen Morris – Bloomberg
CEO Staley adds another executive from U.S. bank to top team; Incumbent Le Blanc to become vice chairman of risk, strategy
Barclays Plc named C.S. “Venkat” Venkatakrishnan chief risk officer, adding to the ranks of former JPMorgan Chase & Co. executives on the bank’s senior management team.
goo.gl/ZqI0S1

Barroso’s Goldman job runs into petition protest
Laura Noonan – Financial Times
A petition against the appointment by Goldman Sachs of former European Commission president José Manuel Barroso has attracted more than 76,000 signatures. The change.org petition — which claims to have been started by a group of EU civil servants — is asking for punitive measures to be taken against Mr Barroso, including the suspension of his EU pension, over his decision to work for the Wall Street giant.
goo.gl/NIcC73

Fed Is Headed for Shallow Rate Path This Decade, Study Shows
Bloomberg
Some at the U.S. central bank may still be too optimistic about how high interest rates can rise in the longer run, based on new Federal Reserve Bank of San Francisco research. San Francisco Fed economist Kevin Lansing started with a simple premise: estimates of the inflation-adjusted neutral interest rate — the one that neither stokes nor slows growth — track pretty well with the U.S. Congressional Budget Office’s four-quarter growth rate of potential GDP estimates.
goo.gl/BMDn2z

Biggest Wealth Fund Warns Outflows Are Affecting Risk Strategy
Jeff Black – Bloomberg
Norway’s $890 billion sovereign wealth fund is acknowledging that rising withdrawals by the government could hamper its quest to manage more risk and generate greater returns as it takes on more and more negative yielding securities.
The net outflows are “relevant for how we think about the risk-bearing capacity of the fund,” Egil Matsen, the deputy governor at Norway’s central bank who’s in charge of oversight of the fund, said in an interview Friday while attending a central banking conference in Jackson Hole, Wyoming.
goo.gl/LwdVn6

Activist funds set their sights on microcaps
Stephen Foley – Financial Times
Famous activists such as Daniel Loeb and Bill Ackman may be retrenching and mounting fewer campaigns against large-cap companies, but there is one area where hedge fund managers are still finding lucrative opportunities: microactivism. Since the start of the year, 61 micro-cap companies, those with a market capitalisation of $50m to $250m, have found themselves on the receiving end of attention from activist funds — companies ranging from a Canadian software vendor to a US luxury hotels group to a British tool hire business.
goo.gl/o0Mt7U

Bazookas! Sinks! Aggressive Doves! Nobody Loves Silly Metaphors More Than Central Bankers
Jon Sindreu and Riva Gold – WSJ
When the Bank of England cut interest rates and announced a big bond-buying program this month, no kitchen sink was left standing. Ahead of the decision, Bank of America Merrill Lynch issued a research note arguing “Bank of England Should Kitchen Sink It.” As the pound sank and British shares jumped, it followed up with “BOE: ‘Kitchen Sink’ Thrown,” which is to say, it used every measure possible to protect the U.K. economy from the Brexit vote’s aftershocks.
goo.gl/pjSXrE

US banks in activists’ sights as lenders struggle to hit targets
Ben McLannahan – Financial Times
It was all very civilised. When ValueAct, the activist investor, announced that it had taken a 2 per cent stake in Morgan Stanley earlier this month, it said it had every respect for the strategy set out by James Gorman, chairman and chief executive of the Wall Street bank. The San Francisco-based fund manager said in a letter to its own investors that it looked forward to “developing [its] relationship with management to work towards a long, successful investment”. Morgan Stanley, for its part, said it welcomed ValueAct as a shareholder, like it would any investor.
goo.gl/xAPBHW

World Bank shake-up yields only half Kim’s target of $400m savings
Shawn Donnan – Financial Times
The World Bank is set to make net savings that are half the size of a much-touted $400m target as administrative costs rise on a surge in lending, despite a contentious reorganisation pushed through by Jim Yong Kim, its president. The World Bank’s revenues are coming under pressure from low interest rates and a slowdown in emerging economies, with leading parts of the bank this month reporting their weakest results since the 2008 global financial crisis.
goo.gl/FvYThI

Cargill sees growth in plastics hedging
Stella Farrington – Risk.net
Swaps unit of commodity trading giant describes increasing need for derivatives on resins prices.
Stella Farrington – Risk.net
US-based commodity trading firm Cargill has high hopes for over-the-counter derivatives linked to plastics prices. The hedging tools are part of the product slate at Cargill Risk Management (CRM), the company’s US swap-dealer unit, which is aiming to build market share in commodity derivatives as banks retreat from the business. Cargill says plastics are a natural extension of its traditional focus area, agricultural commodities, since food-company clients often buy large volumes of plastics for…
goo.gl/obcJ2p

Fintech

FX Algo Usage Rises as Buy Side Takes Charge
Ivy Schmerken, FlexTrade – TABB Forum
Algorithmic trading is gaining ground in foreign exchange among asset managers and pension funds that have been traditionally slower than hedge funds and CTAs in adopting these tools. Nearly one-third of 2015 institutional FX volume was executed through algorithmic trading models.
goo.gl/PUKvpT

Blockchain’s Backers Embark on Campaign to Improve Its Image
Olga Kharif – Bloomberg
Muskoka group focused on expanding the use of blockchain; Research is to help government decision makers, explore uses
Blockchain experts who convened for a three-day conference plan a campaign to fight misconceptions about the technology, which they say is unfairly perceived as insecure and susceptible to criminal activity.
goo.gl/nup6kT

Want a Hedge Fund Job? Knowing About Wavelets Improves Your Odds
Saijel Kishan – Bloomberg
Job seekers with MBAs or experience as securities analysts no longer jump to the front of the hiring line. But if you’re nimble with partial differential equations or wavelets, hedge funds want you.
goo.gl/vISZVp

Global Intuit Study: Small Businesses Using Apps in Record Numbers
By Business Wire
70% Small Business Owners Realize Value of Connecting Data From Different Apps and Existing Technology Solutions
Most small businesses around the world are using the cloud and relying on apps to run their business.
goo.gl/Mvi9ln

Regulation

Prosecution of Financial Crisis Fraud Ends With a Whimper
Peter J. Henning – NY Times
One source of great frustration from the financial crisis has been the dearth of cases against individuals over subprime lending practices and the related securitization of bad loans that caused so much financial havoc. To heighten the frustration, I offer Aug. 22, 2016, as the day on which efforts to pursue cases related to subprime mortgages were put to rest with no individuals — save perhaps the unfortunate former Goldman Sachs trader Fabrice Tourre — held accountable.
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Congresswoman Presses Regulators on Volcker Rule Data
Victoria Finkle – NY Times
A senior Democrat on the House Financial Services Committee is pressing regulators to share two years of market data they have collected in connection with the Volcker Rule, a provision of the Dodd-Frank Act intended to rein in banks’ risky trading and investments.
Representative Carolyn B. Maloney, Democrat of New York, sent a letter to regulators on Monday requesting information about certain quantitative trading metrics that the agencies had been collecting since before regulators prohibited banks from making risky bets with their own money last July.
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HSBC executive pleads not guilty in U.S. over forex scheme
Nate Raymond – Reuters
A senior HSBC Holdings Plc executive pleaded not guilty on Monday to charges that he participated in a fraudulent scheme to front-run a $3.5 billion currency transaction by one of the bank’s clients. The plea on wire fraud and conspiracy charges by Mark Johnson, a British citizen who at the time of his arrest last month was HSBC’s global head of foreign exchange cash trading, was entered by his lawyer in federal court in Brooklyn.
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Fed Bans and Fines Former Barclays Trader in FX Manipulation
Jesse Hamilton – Bloomberg
Former Barclays Plc trader Christopher Ashton, a member of “The Cartel” chat room where bank traders allegedly manipulated foreign-exchange rates, is being fined $1.2 million by the Federal Reserve and permanently banned from U.S. banking.
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Bundesbank Sees Need to Re-Calibrate Basel’s Reform Proposals
Arabile Gumede and Boris Groendahl – Bloomberg
Global regulators’ plans for changes of banking rules will need tweaking to have the desired effect on lenders’ balance sheets, according to the Bundesbank’s top official for bank regulation, Andreas Dombret. Work on the Basel Committee on Banking Supervision’s plans for completing the post-crisis reform package known as Basel III will be a priority for the Bundesbank in the second half of the year, Dombret told journalists Monday in the South African capital, Pretoria.
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Basel III Progress Report: Some Jurisdictions’ Banks Struggling to Adjust IT Systems to Meet Requirements
Dan DeFrancesco – WatersTechnology
The Basel Committee on Banking Supervision says some of the 27 Basel Committee member jurisdictions are facing difficulties meeting Basel III implementation deadlines due to the banks struggling to alter their information systems to meet new requirements, according to a recently published report by the group.
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Morningstar Wins U.S. Approval to Rate Corporates, Financials
Matt Scully – Bloomberg
Morningstar Credit Ratings has been approved by the Securities and Exchange Commission to expand its grading capabilities beyond asset-backed securities into corporate debt and financial institutions.
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SEC Adopts Amendments Providing Authorities Access to Data Obtained by Security-Based Swap Data Repositories
SEC
The Securities and Exchange Commission today adopted amendments to a rule that would require security-based swap data repositories to make data available to regulators and other authorities, allowing them to share information and more effectively oversee the security-based swap market.
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Maintenance and Preservation of Records
SEBI
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Regions

Iceland Raises Alarm After Largest Volcano Starts to Rumble
Omar Valdimarsson – Bloomberg
Iceland raised the alarm after its largest volcano was hit by the biggest tremors since 1977.
Two quakes larger than 4 in magnitude early Monday rocked the crater of Katla, the country’s Met Office said in a statement. That was followed by at least 10 more tremors at the volcano, which rises 1,450 meters (4,757 feet) into the air on the North Atlantic island’s southern coast.
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***DA: Great. John and I are supposed to fly to Stockholm next week.

Mexico says 2017 oil hedge guarantees $42 per barrel
Reuters
Mexico’s Finance Ministry on Monday said it had wrapped up what traders consider the world’s biggest sovereign derivatives trade, guaranteeing an average price of $42 per barrel for crude oil exports in 2017. Due to the government’s dependence on oil income, Mexico hedges its crude every year and the deals are closely watched by the market since the trades are big enough to affect prices. The ministry said in a statement that it had bought put options at an average price of $38 per barrel to cover 250 million barrels of crude at a cost of $1.03 billion, or just over 19 billion pesos.
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Miscellaneous

The Toughest Question in Climate Change: Who Gets Saved?
By Christopher Flavelle – Bloomberg
Last fall, two towns at opposite ends of the country entered a new kind of contest run by the federal government. At stake was their survival: Each is being consumed by the rising ocean, and winning money from Washington would mean the chance to move to higher ground.
/goo.gl/n50b26

FBI says foreign hackers penetrated state election systems
Michael Isikoff – Yahoo
The FBI has uncovered evidence that foreign hackers penetrated two state election databases in recent weeks, prompting the bureau to warn election officials across the country to take new steps to enhance the security of their computer systems, according to federal and state law enforcement officials.
/goo.gl/oKXsy4

California farmers are using drones to fight the persistent drought
AP via Business Insider
A drone whirred to life in a cloud of dust, then shot hundreds of feet skyward for a bird’s-eye view of a vast tomato field in California’s Central Valley, the nation’s most productive farming region.
Equipped with a state-of-the-art thermal camera, the drone crisscrossed the field, scanning it for cool, soggy patches where a gopher may have chewed through the buried drip irrigation line and caused a leak.
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