First Read

Bits & Pieces
By John J. Lothian

First things first. Have you signed up your interns yet for our Chicago or New York MarketsWiki Education World of Opportunity series? Today is the day. Go here to sign them up.

We have added John Rapa, chief executive officer at Tellefsen and Company, as a speaker for our MarketsWiki Education World of Opportunity New York events. He joins Nasdaq president and COO Adena Friedman, veteran equity strategist and CNBC personality Kenny Polcari, Gary DeWaal, arguably the most entertaining derivatives lawyer on the planet, and an additional half dozen financial luminaries in a one-day, two-session event July 19 at the Nasdaq MarketSite in Times Square. Doug and I toured the facility last week, and it is going to be great.

The Chicago events will take place next Tuesday, Thursday and Friday, July 12, 14 and 15. We have just added Maureen Downs, president of RCG and vice chair of the NFA to the list of presenters. She will deliver an important and timely message on mentoring. Click over HERE to see a list of all of the Chicago speakers and their topics. You will be amazed as to the number of high-powered executives and entrepreneurs presenting, as well as the breadth and variety of topics. And, PLEASE, forward the information to anyone who may be interested in attending. Does your HR department/intern coordinator know about us?

One final education note: thanks again to CME Group, the Global Premier sponsor of MarketsWiki Education. The exchange also acts as host of the first two sessions in Chicago. On Friday, we return to Trading Technologies for a session and a networking event at the increasingly famous Tech Tap. Event partners include OCC, CBOE, the IFM and Barchart. We could not do it without you.

It was a big day in the world of business media, with one magazine sold and a news service sold by an exchange that just unloaded an options exchange.

MarketsMedia picked up Traders Magazine from SourceMedia and Deutsche Boerse announced they sold Markets News International, Inc. to Hale Global, a technology holding company based in Boston, MA.

Also, at John Lothian News, after the big news of our consolidating newsletters in the John Lothian Newsletter, the best news we can come up with this week is that enterprising young journalist Spencer Doar has been promoted to full time (up from full-ish time). He has also moved to a desk in the editorial room.

Two new Trading Tech 300 merit badge workshops are being offered in the coming weeks for interested Boy Scouts. XR Trading is offering the Digital Technology merit badge class on July 15. CME Group also joins the fun, offering the Law and Electricity merit badges on August 5. If any firms are interested in learning more about the Trading Tech 300 program and hosting a merit badge workshop, please contact me at

The OCC was named Clearinghouse of the Year by Global Investor/ISF Magazine. There was no word on whether the trophy was vertically or horizontally oriented.

Do you follow me on Twitter @JohnLothian? You can also follow our options newsletter Twitter feed at @JLNOptions

Did you know we have a LinkedIn Group for MarketsWiki Education? The group is aimed at young people and others interested in our MarketsWiki Education programs.


MWE 2016


Abner Mikva, Presidential Medal Of Freedom Recipient And Former Congressman, Dies; “Like so many admirers, I’ve lost a mentor and a friend,” President Barack Obama said.
Dave McKinney – Reuters/HuffPost
Abner Mikva, who served as a White House adviser, federal judge, congressman and mentor to President Barack Obama, has died at age 90, his Chicago nonprofit organization said on Tuesday.

***** Mikva was my Congressman as I grew up. He would swap the position with a Republican named Samuel Young.


Tuesday’s Top Three
Uh, oh. Here we go again. Democrats Back a Trading Tax, Say Speediest Traders a Threat, according to this Bloomberg article, yesterday’s top click-getter. Why, oh why, must we revisit this issue time and time again? In second place by a narrow margin, our friend, Fidessa’s Steve Grob, writing in the FT, seeks a win-win outcome after Brexit for financial services. In third place, also from the FT, spotlights the data battle heating up between traders and equity exchanges.
Algo Trading

Lead Stories

Deutsche Börse suggests dual holding company after LSE merger; German exchange seeks to allay political fears over post-Brexit London HQ
by: James Shotter in Frankfurt and Philip Stafford in London – FT
Deutsche Börse has floated the idea of setting up a dual holding company after its merger with the London Stock Exchange Group as a way of assuaging German regulatory concerns about the deal.

German stock market sold Market News International
Deutsche Boerse
The German Börse AG and Hale Global have signed an agreement for the sale of Market News International, Inc. (MNI) closed, one of the leading providers of macroeconomic background information and market news for players on the global foreign exchange and bond markets. Details of the transaction confidentiality has been agreed.

London’s financial district urges fast action on EU trade terms
BY HUW JONES – Reuters
Britain should move quickly to keep investment flowing and preserve the City of London’s dominance in financial services after last month’s vote to leave the European Union, the head of London’s financial district said on Wednesday.

Italy Could Spark European Bank Crisis, SocGen Chairman Says Ross Larsen, Guy Johnson, Caroline Hyde – Bloomberg
State aid to banks should be reviewed, Bini Smaghi says; Governments need to accept idea of taxpayer as backstop
Italy’s banking crisis could spread to the rest of Europe and rules limiting state aid to lenders should be reconsidered, Societe Generale SA Chairman Lorenzo Bini Smaghi said.

There’s a $3 Trillion Pool of Money Set to Extend Treasury Surge
Brian Chappatta – Bloomberg
U.S. corporate pensions capitulate to lower interest rates; Ten-year Treasury yields to fall to 1.25% this quarter: BofA
Bank of America Corp. sees the $3 trillion U.S. corporate pension industry throwing its interest-rate assumptions out the window. And that means the retirement plans will probably throw more money into Treasuries.

The Real Libor Scandal May Be Who Isn’t in Court
By Mark Gilbert
A London court has just convicted three former Barclays traders of rigging Libor, with sentencing expected later this week. Jonathan Mathew, 35, Jay Merchant, 45, and Alex Pabon, 38, were found guilty of conspiracy with other Barclays employees between June 1, 2005 and August 31, 2007. The real scandal, though, may be the long list of senior bankers and officials who haven’t been hauled before a judge to account for their roles — starting at the very top of U.K. financial markets.

Barclays Traders Face Unwanted Benchmark on Prison Sentences
Suzi Ring – Bloomberg
Four convicted ex-Barclays traders will be sentenced Thursday; Ex-trader Tom Hayes was jailed for 11 years over Libor-rigging
As the four former Barclays Plc traders convicted of rigging Libor await sentencing this week, a new type of benchmark set by Tom Hayes may haunt them.

Liquidnet returns to Tabb for second market structure hire
By Samuel Agini – Financial News
Liquidnet, the buyside-focused platform operator, has made a second senior hire from Tabb Group in roughly two years by recruiting a well-known European capital markets consultant from the research firm at a “pivotal time” for the trading community as it preps for major change in the form of Mifid II and Brexit.

Virtu Financial Enters into a Strategic Minority Investment with SBI Japannext
Virtu Financial (VIRT) announced today it is making a strategic minority investment in SBI Japannext, Co., Ltd., a leading Proprietary Trading System (‘PTS’) based in Tokyo. The investment is part of Virtu’s strategic long-term commitment to the Japanese marketplace. Japannext operates a round-the-clock venue with 29 active members (local and global brokerage houses) and is the oldest thriving PTS venue in Japan.

Education struggles to provide millennials with right tech skills; Millennials in emerging markets face steep learning curve
by: Simon Mundy in Mumbai – FT
Workplace automation in the developed world is adding to career anxiety among young people, many of whom seem to feel they will be worse off than their parents as a result of technological change.


Brexit: Winners and Losers
Galen Stops – Deputy Editor at Profit & Loss Magazine
With the dust having settled somewhat following the UK’s historical referendum decision to leave the European Union, there are some clear winners and – unfortunately – some losers emerging in the aftermath.

EU budget: the post-Brexit challenges for London and Brussels; Officials are scrambling to engineer a break-up settlement
Jim Brunsden and Duncan Robinson – FT
As the EU and the UK prepare for divorce, it is the £47.5bn question. How will Britain settle its budget affairs with Europe? And what will the EU do to fill the black hole if Britain’s contributions to the club stop in years to come?

London may lose, or share, merged stock exchange HQ after Brexit – sources
William Turvill – City AM
The City is at risk of losing, or sharing, the merged headquarters of the London Stock Exchange and Deutsche Boerse in the wake of Brexit, City A.M. understands.

Rivals eye Britain’s EU passport to riches
BY HUW JONES – Reuters
A French president taking an interest in the arcane world of financial plumbing is a sure sign of how Britain’s neighbours plan to exploit its vote to leave the European Union.

Brexit Is Already Making Britain a Lame Duck in Brussels
Jonathan Stearns – Bloomberg
Britain’s EU influence wanes long before secession talks start; Lame ducks, empty chairs weaken country’s voice in Europe
Even before its referendum on European Union membership, the U.K. faced warnings that leaving would deprive it of a voice. That scenario is now playing out.

Exchanges, OTC and Clearing

OCC Named Clearinghouse of the Year by Global Investor/ISF
Press Release
OCC, the world’s largest equity derivatives clearing organization said today it was named Clearinghouse of the Year by Global Investor/ISF Magazine. The award was presented to OCC on June 30th in London as part of the publication’s celebration of its 30th anniversary.

OCC Cleared Contract Volume Up 11 Percent in June; Second Highest June for Options Volume and Highest Month Ever for Futures Volume; Securities Lending CCP Activity Up 39 Percent in June and 45 Percent Year-to-Date
OCC, the world’s largest equity derivatives clearing organization, announced today that cleared contract volume in June reached 378,908,938 contracts, an 11 percent increase from the June 2015 volume of 340,826,276 contracts, marking the second highest June for OCC cleared options contracts. OCC’s year-to-date average daily cleared contract volume is up five percent from 2015 with 16,820,655 contracts. Cleared futures volume reached 11,350,745 contracts, making June the highest month ever for OCC cleared futures volume.

High-Frequency Traders Should Open Up, Osaka Bourse CEO Says
Yuko Takeo, Toshiro Hasegawa – Bloomberg
More transparency about strategies and their effects needed; But OSE head Hiromi Yamaji adds HFT “absolutely necessary”
Osaka Exchange Inc.’s chief executive officer has added his voice to the growing chorus in Japan calling for improved transparency around high-frequency trading.

ICEX relaunch stumbles into grey area; Sebi bars shareholders having a trading member as a subsidiary to take a board seat in the same exchange
Dilip Kumar Jha – Business Standard
The relaunch of Indian Commodity Exchange (ICEX), which has Reliance Capital, MMTC and Indiabulls Housing Finance as major shareholders, is likely to face a hurdle on account of a likely conflict of interest between Reliance Capital holding a seat in the governing body of the exchange and being a promoter of a broking subsidiary. The Securities and Exchange Board of India (Sebi) bars shareholders having a trading member as a subsidiary from taking a board seat in an exchange. With an anchor investor’s stake of 26 per cent in ICEX, Reliance Capital confirmed compliance with …

Euronext Announces Volumes for June 2016
Yahoo Finance
The June 2016 average daily transaction value on the Euronext cash order book stood at EUR8,345 million (-9.3% compared with June 2015, which was a record month following the previous one in 2010). The activity on ETFs significantly increased during June 2016 with an average daily transaction value of EUR683 million, up +16.5% compared to June 2015. Meanwhile our ETF offer continued expanding with 6 new listings this month.

Supervisors split over flexibility in CCP resolution; European regulators square off over predictability of spillover losses
Cecile Sourbes –
The level of flexibility regulators would enjoy to deal with spillover losses has emerged as a key battleground as the European Commission hammers out a draft legislative proposal on recovery and resolution for central counterparties (CCPs). The proposal, which has been heavily delayed and is now due in November, was discussed at a meeting of prudential regulators from all European Union member states on June 27. Two sources with knowledge of the talks say a divide emerged between those who want…

ICAP Electronic Markets Volumes – June 2016

Attached is a copy of the ASX Compliance Monthly Activity Report for June 2016.

Attached is a copy of the ASX Group Monthly Activity Report for June 2016.

TMX Group Limited announces release date for Q2 2016 financial results and analyst conference call
TMX Group Limited will announce its financial results for the second quarter ended June 30, 2016 in the evening of Wednesday, August 3, 2016. An analyst conference call to review the results will be held on Thursday, August 4, 2016 at 8:00 a.m. ET.


Donald Trump’s Case for Higher Prices
By James Surowiecki – The New Yorker
Donald Trump has broken the mold for major-party Presidential candidates in more ways than one can count. Certainly no presumptive nominee has ever suggested, as Trump did a few days ago, that a Mexican plane might be about to bomb him. But arguably his most substantive break with conventional American politics, and definitely his most substantive break with traditional Republican ideology, has been his unremitting and unapologetic attack on free trade.

Investing and Trading

Interest Rate Swap Futures a la Carte – Using Single-Sided Swap Futures
Michael Hyland – Stonewyck Investments LLC via TABB Forum
Futures exchanges that want to improve their interest rate swap product offerings would be wise to introduce a deconstructed menu approach. Exchanges that recognize the simplicity and flexibility of these types of futures contracts will not only be able to offer a wider product offering that appeals to a broader client base, they will also be able to use their swap futures products to attract a larger market share of the lucrative OTC swap clearing space by offering intra-product collateral off-sets and OTC portfolio compression.

Active equity ETFs make their case
By Joseph Adinolfi – MarketWatch
Their numbers are shrinking, but some investors still think a fund manager can beat an index. For those believers, actively managed equity ETFs offer a cheaper alternative to their mutual-fund counterparts.

3 Things to Know About Record-Low U.S. Yields
By Mohamed A. El-Erian – Bloomberg
This week, the U.S. became the latest advanced economy to experience a decline to record levels of the yield of its benchmark 10-year government bonds, along with a continued flattening in the yield curve for its Treasury securities.

June Ag Barometer Shows Rebound In Producer Sentiment
CME Group
Producer sentiment surrounding the U.S. agricultural economy rebounded in June after a dip in May, according to the latest survey results from the Purdue/CME Group Ag Economy Barometer.

Yield Curve Shows 60% Chance of Recession, Deutsche Bank Says
The so-called yield curve suggests there’s a 60% chance of a U.S. recession occurring in the next 12 months, according to analysts at Deutsche Bank, led by Dominic Konstam. The calculations attach the highest probability to an economic contraction since the financial crisis.

Sterling hits 31-year low amid resurgent Brexit jitters; Pound touches $1.2798 as government bond yields fall deeper into uncharted territory
by: FT Reporters
The pound plumbed new depths against the dollar and investors rushed for the perceived havens of gold and government bonds as financial turmoil intensified in the wake of the UK’s Brexit vote, with sterling hitting $1.2798 in early Asian trading on Wednesday — its lowest in more than 31 years.

U.S. Holds More Oil Than Saudi Arabia or Russia, Rystad Energy Says; More than 50 percent of the remaining oil reserves is in unconventional shale oil, according to new data from Oslo-based consultant Rystad Energy.
Christopher Sell – Bloomberg
The U.S. holds more recoverable oil reserves than either Saudi Arabia or Russia, according to Oslo-based consultant Rystad Energy.


Goldman took on LIA official’s brother as intern; Court hears Haitem Zarti was given internship despite being ‘unsuitable’ for traditional placement
by: Jane Croft – FT
The brother of a top Libyan official was taken on as an intern at Goldman Sachs despite the fact he was “unsuitable” for a traditional placement, a High Court trial in London heard on Tuesday.

Voodoo Banking Isn’t the Answer
By Michael Schuman – Bloomberg
Desperate times, we’re told, demand desperate measures, and there may be no more desperate country anywhere in the world than Japan. Even as policymakers struggle to boost growth and inflation, post-Brexit turmoil has caused the yen to strengthen, slamming Japanese exporters. Bank of Japan Governor Haruhiko Kuroda is coming under more and more pressure to expand his already crazy-loose monetary policy. With few options available, he might be forced to push key interest rates even deeper into negative territory when the BOJ meets later this month.


SWIFT Daily Messaging Volumes Exceed 30 Million Mark – Two Peak Traffic Days Evidence SWIFT’s Capacity To Meet Market Needs
The end of June peak in Payments traffic, combined with the ongoing Brexit-related surge in Securities and Treasury traffic, triggered two successive FIN traffic peak days on Tuesday 28th and Thursday 30th June 2016

Liquidnet hires TABB Group’s Healey to head up market structure; Rebecca Healey, formerly of TABB Group, is to join Liquidnet as head of market structure and strategy.
By Hayley McDowell – The Trade
Dark pool operator Liquidnet has appointed Rebecca Healey as head of market structure and strategy.


Alert: European Commission deems US DCMs to be equivalent
The European Commission has published its decision to grant equivalence to those designated contract markets (DCMs) in the U.S. that operate under the regulatory oversight of the CFTC, in accordance with the European Markets Infrastructure Regulation (EMIR). The Commission Implementing Decision (EU) 2016/1073 was published in the Official Journal (OJ) of the EU on 1 July and will come into force on 22 July 2016.

Wash Trading isn’t Victimless
Tayloe Draughon – MD of Product Design at Neurensic
Wash trading is defined by the Chicago Mercantile Exchange in rule 534 as trading where the trader knows that no change in beneficial ownership occurs. In wash trading there is no market risk, and no price discovery for the beneficial owner. The Intercontinental Exchange (ICE) definition is very similar in their rule Exchange Rule 4.02(c).

ASIC crackdown on unlicensed retail OTC derivative providers
ASIC has warned of a dramatic increase in the extent of unlicensed conduct by retail OTC derivative providers seeking to expand their market with new customers for their complex and risky products such as binary options.

UK regulator asks prop traders to assess capital levels; The UK’s Financial Conduct Authority (FCA) has written to proprietary trading firms to assess their capital adequacy.
By Joe McGrath – The Trade
The UK’s Financial Conduct Authority (FCA) has written to proprietary trading firms to assess their capital adequacy.

FBI says conducting 30 undisclosed insider trading probes
The FBI in New York City has undisclosed probes into about 30 suspected insider trading schemes, the agency said, in a sign investigators remains focused on building cases despite a court ruling that could curtail such prosecutions.


Hong Kong Still Leads Globally in Volume of IPOs, Funds Raised
CFO innovation ASIA
The volume of IPOs and funds raised in Hong Kong ensured it continued to rank number 1 globally in 1H 2016, according to PwC. Due to pressure from slowing economic growth in China and weak economic recovery globally, combined with uncertainty over the UK referendum to exit the European Union (EU) and the pace of US interest rate hikes, overall market sentiment had been less than ideal.

Sustainability reports boost Singapore’s status as global market
The Straits Times
Under new SGX rules, listed companies must issue annual reports on their sustainability practices and performance. Some company chiefs grumble about the work needed to produce these reports, while supporters say sustainability is key to company performance.

Markets jittery as investors rush to sell U.K. commercial property
The Japan Times
Some investors now appear worried that companies might opt to leave London and move operations to mainland Europe to retain access to the EU market. That would vacate office space and weigh down on real estate values in Britain’s capital. Aviva Investors, Standard Life and M&G Investments said they froze funds to protect other investors who wished to remain in the funds.

Court summons Shah, 67 others in NSEL case
Shrimi Choudhary – Business Standard
The special court of the Prevention of Money Laundering Act (PMLA) has summoned all the 68 accused named in the Enforcement Directorate (ED) chargesheet in the National Spot Exchange (NSEL) scam case.


The first thing you should do when you start at a Wall Street bank
Portia Crowe – Business Insider
Navigating your first Wall Street job is not going to be easy.

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