First Read

Bits & Pieces
By John J. Lothian

It was good to see Harlan Ten Pas of McGladrey, LLP at yesterday’s Chicago Cubs game corporate outing for the accounting firm. As was shared in this newsletter in March, Harlan suffered a stroke last fall and has been working hard to rehabilitate himself.

Yesterday was the second time in July I have seen Harlan. He also attended a McGladrey event at the Ravinia, North America’s oldest music festival.

McGladrey had a good turnout for yesterday’s event, which has grown over the years from 30 to 460 people .

Oh, and by the way, McGladrey is rebranding under the name RSM. which they announced in June.

On the way to the Cubs game we took the CTA Brown Line elevated train from the Van Buren stop. Doug shared with me the window that Wikipedia founder Jimmy Wales used to sit in front of and trade Fed Funds 18 years ago as fellow traders at Chicago Options Associates, right next to the Brown Line platform.

When Jimmy Wales offered his MediaWiki software for free, the same stuff that powers Wikipedia, I said “sold,” and used it to build MarketsWiki, MarketsReformWiki and

In Japan, the opening ceremonies of the World Scout Jamboree were held and this picture was shared by my daughter’s Scoutmaster. It was taken from a drone above the crowd.


We are expecting a smaller crowd than at the jamboree, but don’t forget to sign up your interns and newer employees for our Chicago Summer Intern Education series.

Today is the last day of work for our intern Erik Donelson, who has contributed to MarketsReformWiki for the last 3 months. Erik has been boning up on the European regulations coming into effect as he built up MarketsReformWiki. We wish Erik well in his next endeavor and thank him for his contributions to John Lothian News.


Millennials Less Likely to Leave the Nest, a Pew Study Finds
During the recession near the end of the last decade, many young adults facing a dreadful job market moved in with their parents to save money.

***** This is why I am building a new house.


Candle power to charge smartphones
By Ben Gruber – Reuters
A power outage – it’s an experience all are familiar with and everyone dreads. The lights go out, the TV goes black, the computers shut down as their batteries drain. And worst of all – your smartphone dies.

***DA: I know what John wants for Christmas.


MarketsWiki Education Intern Series 2015

CBOE And SGX to Launch CBOE Options Institute at SGX
The Chicago Board Options Exchange® (CBOE®) today announced it is collaborating with the Singapore Exchange (SGX) to launch the first international extension of the world-renowned CBOE Options Institute. The “CBOE Options Institute at SGX” is expected to launch in the fourth quarter of 2015.

**The Options Institute turns 30 this year, and still planting seeds.


Lead Stories

House Ag Chairman: No CFTC funding without reauthorization
A House lawmaker said Wednesday that a key financial regulator’s funding should be frozen until legislation overseeing it is passed. House Agriculture Committee Chairman Michael Conaway (R-Texas) said that until legislation reauthorizing the Commodity Futures Trading Commission (CFTC) is enacted, Congress should not approve any additional funding for the derivatives regulator.

CBOE Introduces 10 Options-Based Strategy Performance Benchmark Indexes; Designed to Highlight Use of Options as Risk Management and Yield Enhancement Investment Tools
Intra-Day Values for New Benchmarks Available Beginning August 3
The Chicago Board Options Exchange (CBOE) announced that it has created 10 new options-based strategy performance benchmark indexes that are designed to highlight the long-term utility of options as risk management and yield enhancing investment tools. CBOE will disseminate intra-day values for the new benchmarks beginning Monday, August 3, 2015.

ITG may pay record $20.3m penalty to SEC
Nicole Bullock in New York, FT
ITG, a brokerage that runs an off-exchange trading platform for equities, on Wednesday said it may pay a record penalty of $20.3m to the Securities and Exchange Commission for violations at a proprietary trading pilot ITG ran in 2010 and 2011.

Banks pitch swaps as alternative to buying stock
By Juliet Chung and Katy Burne, WSJ
Banks are nudging certain hedge fund clients to use derivatives instead of actual stocks when placing some bets, an effort aimed at lessening the impact of new capital rules on the banks’ businesses.

Why summer storms loom for investors
Michael Mackenzie, FT
A summer break for investors looks highly unlikely this year. While many of us are already enjoying or planning some welcome down time away from the shackles of the office, asset prices appear vulnerable in the coming weeks against a backdrop of uncertainty driven by China and the US Federal Reserve.

Singapore Exchange Open to Making Acquisitions, New CEO Loh Says
Jonathan Burgos, Chanyaporn Chanjaroen, Bloomberg
Singapore Exchange Ltd. is open to making acquisitions, its new chief executive officer Loh Boon Chye said in his first public appearance since starting the role.

Regulation is creating ‘fractured markets’, says ISDA
The Trade News
The leading voice in lobbying for improvements in OTC derivatives reforms has warned against new regulations resulting in fractured rules, markets and liquidity.

Ex-Rabobank Libor Trader Banned in U.K. After U.S. Plea
Suzi Ring, Bloomberg
The U.K. Financial Conduct Authority banned a former Rabobank Groep trader from working in the financial industry following a criminal conviction for fraud in the U.S.

See also: [[ Times]]

China markets regulator warns media on ‘market disturbance’
Tom Mitchell in Beijing, FT
China’s stock market regulator began its most recent press briefing with a telling instruction for the mostly local journalists in attendance. “We have a requirement concerning speculative reports,” said the China Securities Regulatory Commission. “They must first be confirmed by the CSRC in order to prevent the spread of false information and market disturbance.”

China regulator probes Avic shares sales
Jamil Anderlini in Beijing, FT
China’s securities regulator is investigating allegedly illegal share sales at the country’s biggest state-owned aerospace company, which is led by a man who blames China’s stock market woes on “malicious” foreigners and a plot by the US to destabilise his country.

The Market Intervention China Needs
By The Editors, Bloomberg
Having put their credibility on the line by propping up the stock market, Chinese officials may now think they have little choice but to keep pouring resources into equities: Fears that the government might ease up are what seem to have sparked the rout earlier this week.

July robusta coffee ‘squeeze’ takes traders by surprise
Emiko Terazono, FT
Trade comes as US and EU regulators mull tighter oversight
It’s become known in the coffee market as the “July squeeze”.
A group of traders and coffee roasters stand to lose millions of dollars at the end of this week as a rival dealer has amassed a huge position in the August Robusta coffee contract pushing the market, they say, out of whack.


Legislation is the route to transparency, says DTCC
Asset Servicing Times
DTCC has publicly supported legislative action to tackle obstacles that hinder the transparency goals of the G20 summit, naming a lack of coordination in global derivative reporting and data standards, and legal barriers to data sharing as significant issues. The G20 laid out its goals on global transparency in the aftermath of the 2008 financial crisis. However, Larry Thompson, vice chairman and general counsel at DTCC, speaking at a US House of Representatives Committee on Agriculture hearing, suggested that although progress has been made, global transparency has not yet been achieved.

Daniel M. Hawke, Chief of Market Abuse Unit, to Leave SEC After 16 Years of Service
The Securities and Exchange Commission today announced that Daniel M. Hawke, chief of the Division of Enforcement’s Market Abuse Unit and former Director of the Philadelphia Regional Office, is leaving the agency after 16 years of service. He will step down in August to return to the private sector.

Central clearing lags for non-interest-rate swaps, FSB says
Neil Roland, MLex
Central clearing is used for only a limited number of transactions involving commodity, credit, equity and foreign exchange derivatives, an international report said.

?CFTC told it’s weaker than other regulators in picking swaps to be traded
Neil Roland, MLex
European, Japanese and US securities regulators all indicated they play a stronger role in determining which derivatives must be traded on exchanges than does the US Commodity Futures Trading Commission.

Exchanges & Trading Facilities

Euronext today announced its results for the second quarter and for the first six months of 2015.

Taiwan Futures Exchange: Extension Of Trading Hours On ETF Futures Linked To China Stock Indices
The Taiwan Futures Exchange (TAIFEX) extended the trading hours of its 6 ETF Futures linked to China stock indices since July 20, 2015. Trading hours of the said ETF Futures are from 8:45am to 4:15pm.

Greek stock market unlikely to reopen this week due to IT glitch
Greece’s stock market will not reopen on Thursday and may not open on Friday either due to technical issues at local banks, a spokeswoman for the Athens Stock Exchange said on Wednesday.

FXCM Stock Trading set to be sold to AS Expobank – LeapRate Exclusive
By LeapRate Staff
LeapRate Exclusive… LeapRate has learned from industry sources that FXCM’s next asset sale will be that of its regulated UK CFD arm FXCM Stock Trading. Apparently FXCM is in advanced negotiations to sell FXCM Stock Trading to AS Expobank.

Improvement of GPW Group Financial Results in Q2 2015 Year on Year
The GPW Group earned a revenue of PLN 77.2 million in Q2 2015. Maintaining its expenses at PLN 45.0 million, the Group generated a net profit of PLN 27.0 million and an EBITDA of PLN 37.8 million, thus improving its profitability measures year on year.
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Hedge Funds & Managed Futures

September? December? Fed’s Not Saying and Traders Don’t Care
by Daniel Kruger, Bloomberg
The Federal Reserve needs a little longer to decide when to raise interest rates for the first time in nine years. The bond market is more interested in when the second increase will be.

Banks & Brokers

Deutsche Bank says legal charges threaten its recovery; Shares up more than 3 percent; Investment bank results flattered by non-cash gain; Quarterly results largely in line with expectations
By Thomas Atkins, Reuters
Deutsche Bank’s new boss hit out at staff in a memo on Thursday saying performance was “nowhere good enough” after Germany’s largest bank warned that its turnaround was at risk from heavy legal charges.

Deutsche Bank Legal Tab Passes $12 Billion With Bills to Follow
by Nicholas Comfort, Bloomberg
Deutsche Bank AG’s bill for fines and legal settlements since the financial crisis has surpassed 11 billion euros ($12.1 billion) and the company said costs probably won’t let up in coming quarters.

Deutsche Bank Profit Beats Forecasts, Driven by Investment Bank; The German lender’s shareholders await a strategy update from its new co-CEO
Deutsche Bank AG on Thursday reported a sharp rise in second-quarter profit driven by unexpectedly strong investment banking revenues and lower overall taxes, but warned challenges remain.

New Deutsche Bank chief says results are not ‘good enough’
James Shotter in Frankfurt, FT
Deutsche Bank’s new chief executive described its latest results as “nowhere near good enough” as he delivered a blunt assessment of the array of challenges facing Germany’s biggest lender.

UBS Deal Shows Clinton’s Complicated Ties; Donations to family foundation increased after secretary of state’s involvement in tax case
A few weeks after Hillary Clinton was sworn in as secretary of state in early 2009, she was summoned to Geneva by her Swiss counterpart to discuss an urgent matter. The Internal Revenue Service was suing UBS AG to get the identities of Americans with secret accounts.

RBS posts surprise profit in second quarter; The banking group, part-owned by the UK taxpayer, reversed a loss in the first quarter
By Tim Wallace, The Telegraph
RBS made a profit of £293m in the second quarter of the year, up from £230m in the same period of 2014, and up from a loss of £446m in the first quarter of 2015.

BGC Partners Reports Second Quarter 2015 Financial Results
BGC Partners
BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets, today reported its financial results for the quarter ended June 30, 2015. Unless otherwise stated, the financial results and other metrics for the Company’s majority-owned division, GFI Group Inc., a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets, are consolidated with those of BGC for all periods from March 2, 2015 onward.

EBS BrokerTec introduces combined Executive Management Team; The EBS BrokerTec Executive Management Team is formed; Dan Cleaves and Darryl Hooker to Co-Head EBS BrokerTec Markets; Phil Harris joins EBS BrokerTec from NASDAQ as Head of EBS Market
EBS BrokerTec, ICAP’s market-leading electronic foreign exchange (FX) and fixed income business, announces today that in the next phase of its integration, it has formed an EBS BrokerTec Executive Management Team. This will allow the business to leverage key functions across the division, including combined product, technology and sales groups. As a result, the central limit order book (CLOB) businesses of EBS Market and BrokerTec have been combined into a single business division now referred to as EBS BrokerTec Markets. In addition, the BrokerTec CLOB business will now be referred to as BrokerTec Market.
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Clearing & Settlement

Three steps to realizing the G-20 transparency goals
Larry Thompson, vice chairman and general counsel at DTCC, in The Hill
Since the 2009 Group of 20 (G-20) Pittsburgh Summit, the over-the-counter (OTC) derivatives market has undergone a dramatic transformation, with trade repositories now operational in all major derivatives markets. However, progress on global derivatives reform stands at a critical junction — while macroprudential regulators now have access to more derivatives data than ever before, they are challenged to turn this information into actionable intelligence to effectively assess and mitigate systemic risk.

BME gets nod for new clearing divisions
Futures & Options World
Spanish clearing house, BME Clear, has won regulatory approval to launch interest rate over-the-counter (OTC) derivatives and cash equities divisions, ahead of the introduction of Emir’s clearing mandate next year. The authorisation from the CNMV – the Spanish competent authority – came after the clearing house has spent recent months ramping up preparations ahead of its launch later this year.

BME to offer swaps clearing service for small Spanish banks
Joe Rennison in New York, FT
BME, an exchange operator in Spain, is set to launch a new service aimed at helping small Spanish banks comply with new rules governing derivatives transactions, amid growing concern that some will be unable to comply.

Indexes & Products

The Amount of ETF Shares Being Traded Has Eclipsed U.S. GDP
And Wall Street loves it
by Eric Balchunas, Bloomberg
Everyone is talking about how exchange-traded funds have now overtaken hedge funds in terms of total assets.

FTSE Russell Starts Coal-Free Equity Indexes as Divestments Rise
Bloomberg Business
FTSE Russell is creating coal-free equity benchmarks as a campaign to encourage divestment from the fuel gathers pace. The company will add the all-world and North American ex-coal indexes, which exclude companies with exposure to coal or miners with proved reserves of the fuel, to its existing ex-fossil fuel benchmark that was started in 2014, it said Tuesday on its website.

S&P Dow Jones Indices Broadens Family of Global Infrastructure Indices Into Bonds
PR Newswire
S&P Dow Jones Indices (S&P DJI), one of the world’s leading index providers, today announced the launch of a robust suite of global infrastructure bond indices to effectively measure corporate, municipal and preferred debt issued by infrastructure companies throughout the world.

Greater Stock ETF Usage Influences Underlying Components
ETF Trends
Exchange traded funds track the performance of their underlying components. However, as the popularity of the investment vehicle grows, some ETFs are beginning to affect the performance of individual stocks. According to S&P Capital IQ, ETFs may pose systemic risks, especially as investors pour more money into the investment vehicle than the individual stocks that the ETFs hold.


Hackers Trick Email Systems Into Wiring Them Large Sums; Scra processor thought it paid $100,000 to its vendor: ‘We in fact had sent a wire to who knows where’
Cybercriminals are exploiting publicly available information and weaknesses in corporate email systems to trick small businesses into transferring large sums of money into fraudulent bank accounts, in schemes known as “corporate account takeover” or “business email fraud.”

Zuckerberg to Wall Street: Be Patient, Big Things Take Time
by Sarah Frier, Bloomberg
Patience is a rare investor virtue. Mark Zuckerberg thinks he has the track record to ask for it.

Blockchain, Wealth Management the future of FinTech
DealStreet Asia
Startupbootcamp (SBC) FinTech, a seed accelerator focused on financial innovation, hosted its first Demo Day in Singapore on 29 July 2015, where its cohort of 11 fintech ventures presented their products and services after three months of acceleration, with a focus on blockchain technologies and wealth management.

David Cameron backs Innovate Finance fintech manifesto
Business Insider
David Cameron is on a trade mission to South East Asia right now, and he’s banging the drum for Britain’s fintech industry. The Prime Minister is throwing his weight behind a new fintech manifesto from trade body Innovate Finance, published on Thursday, and is holding a roundtable in Indonesia to coincide with the manifesto’s release.


FCA bans former Rabobank trader, Lee Stewart, following LIBOR fraud
The Financial Conduct Authority (FCA) has banned Lee Stewart, a former trader at Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) from the UK financial services industry for lacking honesty and integrity following a criminal conviction for fraud in the US. In March 2015 Mr Stewart pleaded guilty in the US for his role in a conspiracy to manipulate Rabobank’s US Dollar LIBOR submissions.

Ex-Silicon Valley law firm worker gets 2 years prison for insider trading
A former employee of a major Silicon Valley law firm was sentenced to two years in prison on Wednesday for illegally trading ahead of mergers that were underway at the firm. Lawyers for Dimitry Braverman, 42, had sought a sentence of home confinement in light of his November guilty plea to securities fraud. But U.S. District Judge Paul Engelmayer in Manhattan said his insider trading was too prolonged to deserve a light sentence.

Environmental & Energy

UPS Agrees to Buy 46 Million Gallons of Renewable Diesel
By Diane Cardwell – The New York Times
For years, companies that rely heavily on fuel have experimented with substitutes for conventional gasoline and diesel, including natural gas, electricity and biofuels.

Carbon Trading Part of Late Push for Obama Power Plant Limits
By Mark Drajem – Bloomberg News
Some businesses that back President Barack Obama’s plan to curb greenhouse gases are making a late lobbying push to add an element similar to a cap-and-trade program.

German prosecutor to charge eight Deutsche Bank staff in carbon tax case -Spiegel
A German prosecutor is set to charge eight Deutsche Bank employees following an investigation into tax fraud linked to trading of carbon certificates, Der Spiegel magazine reported on Saturday, without disclosing any sources.


Hong Kong’s Hang Seng Repeats as World’s Strongest Bank
The Hong Kong-based lender is one of six Asian banks in the top 20—five of them in the top 10.

China stocks fall as banks check equities exposure
China stocks fell on Thursday after state media reported that banks were investigating their exposure to the stock market through wealth management products and loans collateralised with stocks.

China’s Baidu to buy back $1 bln shares after investor selldown
By Paul Carsten, Reuters
Baidu Inc, China’s biggest internet search engine company, said on Thursday it will buy back shares worth $1 billion after the company’s stock price slid following a weak earnings report earlier this week.

China’s Great Short Seller Suddenly Turns Bullish
by Trista Kelley, Bloomberg
Jon Carnes is about the last person on Earth you’d expect to turn bullish on China’s stock market.

The Confusion Over China’s Stock Market
by Nathan Vardi, Forbes
Last week billionaire Ray Dalio, who runs the world’s biggest hedge fund, told his clients that his views on China had changed. Dalio’s Bridgewater Associates sent a note to its investors saying that China’s recent stock market sell-off meant there were “no safe places to invest” in China.

Frontier Markets

Russia Can’t Help Being a Gold Bug
By Leonid Bershidsky, Bloomberg
The dramatic drop in the price of gold makes Russia look like a classic sucker: As the price went down, it expanded its gold reserves. The Russian central bank is getting punished for betting on gold rather than U.S. assets as the Cold War seemed to restart last year. But it’s not that simple — the gold that Russia’s buying is domestically produced and paid for with devalued rubles.

Nairobi bourse postpones derivatives market launch
Standard Digital News
The Nairobi Securities Exchange (NSE) has delayed commencement of trading in derivatives, which enables investors to hedge against risk, to this quarter from the earlier target date of the second quarter to adequately prepare the market for the launch, it said Wednesday.

NSEL-FTIL merger issue: Govt to seek more time from Bombay High Court
By Rajat Arora, ET Bureau
The government is likely to seek more time from the Bombay High Court to issue the final order on merger of scam-hit National Spot Exchange (NSEL) with its parent Financial Technologies India (FTIL).


Failed FT bid shows Axel Springer caught between tradition and ambition
Axel Springer’s (SPRGn.DE) failure to clinch a deal to buy the Financial Times lengthens a line of setbacks in a decade-old quest by Germany’s biggest news publisher to expand abroad.

Nikkei Vies for Global Clout With Splurge on The Financial Times
Not long after he took over as president of Japan’s dominant business newspaper in April, Naotoshi Okada delivered a message to his 1,300 reporters and editors. It was time, he said, for Nikkei, the muscular but domestically focused broadsheet, to attain the global influence it had long craved.

Sugar Industry Sour on Trade Talks; Maui’s sugar-cane farmers are concerned that U.S. concessions to growers in other countries could hurt their business
High-level talks to wrap up a 12-nation Pacific trade pact here have put one set of locals on edge: Maui’s sugar-cane operation, which is concerned that U.S. concessions to growers in other countries could hurt its business model.

Thomson Reuters Reports Second-Quarter 2015 Results
Second-quarter performance consistent with full-year expectations
Thomson Reuters
Thomson Reuters (TSX / NYSE: TRI) today reported results for the second quarter ended June 30, 2015. The company also re-affirmed its full-year 2015 outlook.

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