First Read

Fed Decision-Day Guide: Zero Hour for Moves on Rates, Dot Plot
Steve Matthews, Christopher Condon – Bloomberg
Here’s what to look for when the Federal Open Market Committee releases its policy statement along with quarterly economic projections at 2 p.m. Thursday in Washington, and Federal Reserve Chair Janet Yellen holds a press conference at 2:30 p.m.

***** I fear the interest market is like the muscles in my shoulder, atrophied. We have not traded a robust interest rate market for a long time. In fact, my favorite interest rate trader has mostly stopped trading them, trading energy spreads instead. How much interest rate market liquidity is similarly atrophied? Expect big volatility, no matter what the decision today.


Yale to Be Paid Interest on Dutch Water Authority Bond From 1648
David De Jong, Bloomberg
Some perpetual bonds are more eternal than others.
Yale University will receive 136.20 euros ($153) in interest on a perpetual bond issued in 1648 from Dutch water authority de Stichtse Rijnlanden.

****** I just finished the book “The Island at the Center of the World” on the recommendation of James Gellert of Rapid Ratings. What a fantastic book on the history of the Dutch influence on the culture of the United States during the 1600s.


John Edge, RRVIG – Timing is Everything

“If you rang up a bank and said, ‘Look, I really understand blockchain, I understand bitcoin, I’ve been to these talks and I think it’s very interesting for OTC markets, because OTC markets don’t have a register of securities’ — there aren’t enough people doing this. There are more banks that want people and less people doing it.”

To John Edge, managing partner at RRVIG, the current technological climate represents a chance for young people to jump into financial markets if they can demonstrate mastery of digital innovations, specifically blockchain, “which no one understands in any sense.” As the industry decentralizes, the task for the emerging professional is finding the links between those new technologies and their applications in finance. One cannot be behind in the game if the game is just beginning.

Watch the video at »

FIA Announces First Eight Companies Selected for Innovators Pavilion
FIA Press Release
FIA today announced the first eight companies selected to exhibit in the Innovators Pavilion, a showcase for startup companies providing forward-thinking solutions for the futures, options and cleared swaps industry.
The eight companies that have been selected to participate in the Innovators Pavilion will receive space on the Expo show floor to display their services-at no charge-and they will have the opportunity to give a live presentation to Expo attendees.

***DA: These conferences are more fun now that the focus has shifted from the angst of regulation to the promise of innovation.


Client Advisory: NFA Interpretive Notice on Information Systems Security Programs
Donald L. Horwitz, Oyster Consulting – Special Contribution to John Lothian News
The National Futures Association at its August board meeting approved a proposed Interpretative Notice to NFA Compliance Rules 2-9, 2-36 and 2-49: Information Systems Security Programs (“ISSP”) (hereinafter the “Notice”).

Rather than issue an entirely new set of rules applicable to all NFA Members, the Notice recognizes that current NFA Compliance Rules place a continuing responsibility on Members to “diligently supervise” their employees, agents and the business itself. In short, the NFA’s Board of Directors “believes that Members should have supervisory practices in place reasonably designed to diligently supervise the risks of unauthorized access to or attack of their information technology systems, and to respond appropriately should unauthorized access or attack occur.”

This advisory notice fleshes out how Members can meet that responsibility.

Read the rest of the advisory at


Ex-broker pleads guilty in napkin-eating insider trading scheme
A former Morgan Stanley stockbroker pleaded guilty on Wednesday to insider trading, over a scheme in which an accomplice showed him stolen stock tips on napkins and Post-its in Grand Central Station and then ate the evidence.

***** You put a chocolate Longjohn on a post-it note and that paper is a goner.


MarketsWiki Education London 2015

Lead Stories

ISDA Launches New Industry Initiative for a Derivatives Product Identification Standard
The International Swaps and Derivatives Association, Inc. (ISDA) has launched a new industry data project, aimed at developing an open-source standard derivatives product identification system that can be applied consistently and comprehensively across all derivatives facilities, including trading venues, clearing houses, repositories and other infrastructures.

Vix ETFs contributed to August turmoil
Joe Rennison in New York, FT
The upsurge in stock market turmoil during August was exacerbated by specialised exchange traded funds that track volatility and use leverage to magnify investor returns, according to some analysts.

Bloomberg and Twitter Sign Data Licensing Agreement
Bloomberg adds enhanced custom alerts and tools to its Twitter offering
Today Bloomberg announced it has signed a long-term data agreement with Twitter that will further enhance financially relevant information found on the social media platform for users of the Bloomberg Professional service.

Primary Dealers Rigged Treasury Auctions, Investor Lawsuit Says
Alexandra Scaggs, Matthew Leising, Bloomberg
69% of reissued Treasury auctions were suspicious, suit says
Same type of analysis caught cheating in currencies, Libor
The same analytical technique that uncovered cheating in currency markets and the Libor rates benchmark — resulting in about $20 billion of fines — suggests the dealers who control the U.S. Treasury market rigged bond auctions for years, according to a lawsuit.

IEX applies for full exchange status
Philip Stafford in London and Nicole Bullock in New York, FT
IEX, the US trading venue at the heart of Michael Lewis’s book Flash Boys, has filed its long-awaited application with regulators to become the US newest stock exchange.

Symphony is a real challenge to Bloomberg
John Gapper, FT
It is the virtual equivalent of the old stock exchange, a gathering place for everyone in the business

JP Morgan cuts ten clearers in Chicago
Futures & Options World (Subscription Required)
JP Morgan has parted ways with ten clearing experts in Chicago including its former executive director of derivatives clearing sales Gary Flagler, marking the latest clearing departures from the US investment bank. Flagler and some 10 colleagues have left or are in the process of leaving JP, according to sources who said JP is looking to slim down its derivatives clearing team in Chicago partly in response to tough capital rules that have challenged the business case for client clearing.

In Bond-Market Irony, Inflation Is Lower Now Than When Fed Eased
Daniel Kruger, Bloomberg
Central bank may raise rates even as price gains trail target
Debt-buying helped generate jobs, while wage gains lag behind
In September 2012, Fed policy makers found a bond-market measure predicting a 1.9 percent future inflation rate among the reasons to expand monetary stimulus by adding to their unprecedented bond-buying program.

Renminbi may be risk that wags the tail
Dan McCrum, FT
‘Tail risk’ of China recession would be rattled by big currency losses
Let’s put off the Federal Reserve, for a moment. Instead consider China, its currency and a piece of financial jargon known as “tail risk”.

Options Expands Its Managed Colocation Offering With The Addition Of New European Markets
SWX, Wiener Borse and Nasdaq’s OMX have been added to the firm’s electronic trading platform
Options, the leading managed service and IT infrastructure provider to the global capital markets industry, has today announced the addition of SWX, Wiener Borse and Nasdaq’s OMX to the firm’s high performance connectivity and managed colocation platform, Velocity. The new European feeds will be available for clients leveraging the firm’s Velocity offering which provides a single integrated low latency platform to all major liquidity centers globally.

Why the Rich Are So Much Richer
James Surowiecki, NY Times Books
The fundamental truth about American economic growth today is that while the work is done by many, the real rewards largely go to the few. The numbers are, at this point, woefully familiar: the top one percent of earners take home more than 20 percent of the income, and their share has more than doubled in the last thirty-five years. The gains for people in the top 0.1 percent, meanwhile, have been even greater. Yet over that same period, average wages and household incomes in the US have risen only slightly, and a number of demographic groups (like men with only a high school education) have actually seen their average wages decline.

The Richest Americans Are Winning the Economic Recovery; Their incomes have fully recovered—and then some
Victoria Stilwell, Alexandre Tanzi, Bloomberg
U.S. Census Bureau data out Wednesday underscore just how lousy the recovery has been if you aren’t rich.


SEC Removes References to Credit Ratings in Money Market Fund Rule and Form
The Securities and Exchange Commission adopted amendments to remove credit rating references in the principal rule that governs money market funds and the form that money market funds use to report information to the Commission each month about their portfolio holdings. The Commission also adopted amendments that would subject additional securities to issuer diversification provisions in the money market fund rule.

Senior policymaker says calls for Mifid II delay ‘premature’
Financial News
A senior European politician has described calls from the UK’s Investment Association to delay Mifid II as “premature”, saying that implementing the vast changes to Europe’s trading rulebook was “never going to be easy”.

Forex Investors See Regulation as a Top Issue
Global regulators are tightening rules around trading in financial markets after a series of scandals, which could make currency trading more difficult and expensive, said industry participants at a foreign-exchange conference in London on Wednesday.

SIFMA Statement on Completion of the Quantum Dawn 3 Cybersecurity Exercise
SIFMA today released the following statement from Kenneth E. Bentsen, Jr., president and CEO, upon completion of SIFMA’s Quantum Dawn 3 cybersecurity exercise. Over 650 participants from over 80 financial institutions and government agencies participated in today’s simulation of a large-scale cyber attack. A fact sheet on Quantum Dawn 3 is available here.

Commodity brokers urge Sebi to exempt transaction fee, charges
Business Standard News
With fears emerging among both small and large traders alike, commodity brokers are meeting the market regulator Securities & Exchange Board of India (Sebi) next week seeking relaxation in the newly introduced transaction fee and transaction charges.

IOSCO Publishes Second Implementation Review Of PRA Principles
The International Organization of Securities Commissions today issued its second review of the Implementation of the Principles for Oil Price Reporting Agencies (The ‘IOSCO Oil PRA Principles’), prepared in collaboration with the International Energy Association (IEA), International Energy Forum (IEF) and Organization of Petroleum Exporting Countries (OPEC).

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans

    • CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fees Schedule (Release No. 34-75923; File No. SR-CBOE-2015-075; September 15, 2015); see also Exhibit 3; Exhibit 5


    • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Chapter XV, Section 2 entitled NASDAQ Options Market Fees and Rebates (Release No. 34-75931; File No. SR-NASDAQ-2015-109; September 16, 2015); see also Exhibit 5


    • NYSE Arca: Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Listing and Trading of Shares of the Guggenheim Total Return Bond ETF under NYSE Arca Equities Rule 8.600 (Release No. 34-75930; File No. SR-NYSEArca-2015-73; September 16, 2015)

Exchanges & Trading Facilities

Trade Volumes Rally In August For CME, All Asset Classes Witness Growth
Trading activity has been up of late, as reported by major exchange operators and brokerage firms. CME Group reported a massive 25% year-over-year rise in trade volumes to an average of 16.3 million contracts traded per day in August. The global exchange operator has had a positive year thus far with high average daily volumes through the first half of 2015. As a result, the company’s clearing and transaction fee revenues in the first half of the year have risen by over 10% on a y-o-y basis to $1.4 billion.

Euronext celebrates 350th anniversary of Saint-Gobain, the CAC 40’s oldest company
Euronext, the primary exchange in the Euro zone, today celebrated the 350th anniversary of Saint-Gobain (ticker code SGO), whose Chairman and CEO rang the bell opening trading on Euronext Paris to mark the day. Saint-Gobain is the CAC 40 index’s oldest component stock and has been one of the world’s largest manufacturing companies since its earliest days.

ASX halts trading on derivatives platform, citing technical issue
Sydney Morning Herald
Stock exchange operator ASX has been forced to stop trading on its derivatives platform because of a technical difficulty on the day key futures contracts are expiring. ASX is investigating the matter, and has halted transactions in all markets that use its ASX Trade24 platform, according to an e-mailed statement. That’s everything from interest-rate derivatives to contracts on energy and grains. It also includes equity derivatives, with September futures and options on the S&P/ASX 200 Index expiring today.

BIS publishes “Highlights of global financing flows”
In cooperation with central banks and monetary authorities worldwide, the Bank for International Settlements compiles and disseminates data on activity in international financial markets. It uses these data to compile indicators of global liquidity conditions as well as early warning indicators of financial crisis risks and summarizes the latest data for international banking markets, available up to March 2015.

Hedge Funds & Managed Futures

KKR Marshals Ambitions with Hedge Fund Coup
KKR & Co.’s acquisition of a quarter of Marshall Wace LLP places the firm back in the race to become the world’s leading alternative assets manager.

Banks & Brokers

Bank of America’s Fight to Keep Brian Moynihan’s Dual Roles
Forget the Iowa caucuses or the New Hampshire primary. One of the more intense and dogged campaigns is currently being waged by Bank of America to convince shareholders that Brian T. Moynihan should keep his job as both chairman and chief executive.

Goldman CEO Weighs In on China, Donald Trump, the Fed; Lloyd Blankfein criticizes China’s handling of its stock market and gives his views on Donald Trump and the Fed’s rate decision
Goldman Sachs Group Inc. Chairman and Chief Executive Lloyd Blankfein criticized China’s handling of its stock-market swoon in an interview that also included the Wall Street veteran’s views on Donald Trump and the Federal Reserve’s interest-rate decision.

Clearing & Settlement

SGX mothballs US dollar swap clearing (Subscription Required)
SGX “dormants” US dollar swap clearing due to a lack of demand from member firms Singapore Exchange has said in a circular to its members that its central counterparty (CCP), AsiaClear, will suspend its service for clearing over-the-counter US dollar interest rate swaps due to lack of demand. SGX was the first CCP in Asia to offer OTC derivatives clearing in 2011.

UBS Developing Blockchain-based ‘Settlement Coin’
The new virtual currency will bring blockchain into official financial system. “Settlement coin” will be exchangeable for fiat currency in the ratio of one to one. Thus, users will be able to avoid settlement risks while benefiting from the faster and cheaper technology. UBS also demonstrated the possibility to digitize assets using a distributed registry blockchain.

Ireland creates fintech and payments body
A new trade association intended to provide a single voice for the emerging fintech and payments ecosystem in Ireland has launched, with the aim of establishing the Republic as a leading international financial services hub.

Indexes & Products

Intervention amplified losses for ETFs tracking China mainland
Just as China shows that its domestic stock market can be something of a one-way street — investors can put money in, but not take money out – the biggest mutual fund company, Vanguard Group, is moving ahead with plans to expose more mom-and-pop investors to the country’s heavily restricted exchanges.

Daily ETF Watch: Direxion Debuts 2X Funds
Today Direxion launched two new bull/bear pairs of inverse and leveraged ETFs. The four funds offer geared exposure to the cybersecurity and pharmaceutical spaces. The funds, their tickers and expense ratios are as follow.

Fin Min confident Peru to keep MSCI ranking
Peruvian Minister of Economy and Finance Alonso Segura affirmed there is optimism about Peru’s ability to remain in the emerging-market category and considered as productive the meeting with Morgan Stanley Capital International (MSCI) representatives in New York.


US trading tech start-up to hit Europe in early 2016
Futures & Options World
A US trading tech start-up that span-off Ronin Capital said it plans to start offering its prop trading systems to European clients from early next year, offering a new alternative to the established list of trading system vendors. Rival Systems officially launched its low-latency derivatives trading platform in the US last week and chief executive Robert D’Arco, formerly the director of technology at Ronin Capital, said the immediate focus is that market but the firm is also looking at Europe.

Options Further Expands Its Managed Colocation Offering With The Addition Of New European Markets
Press Release
Options, the leading managed service and IT infrastructure provider to the global capital markets industry, has today announced the addition of SWX, Wiener Borse and Nasdaq’s OMX to the firm’s high performance connectivity and managed colocation platform, Velocity. The new European feeds will be available for clients leveraging the Velocity offering which provides a single integrated low latency platform to all major liquidity centers globally.

Why U.K. Fintech Firms Are Becoming (Not Partnering with) Banks
American Banker
As chief operating officer at Allied Irish Banks, Anne Boden tried to break down internal resistance to change. She enjoyed her work, but hosting hackathons and the like goes only so far. “I could only do something radically different by starting from scratch,” said Boden.

The Disruption Potential of FinTech
The Market Mogul
The rise of mobile technology has brought about a significant transformation to the business models of companies across various industries such as in transportation, media, professional services and the retail segment. In transportation, the likes of Uber, which is now valued at over $50 billion has radically changed the way we go from one place to another by making it easier, cheaper and much more accessible for consumers to travel to and from any location.

China Tries to Extract Pledge of Compliance From U.S. Tech Firms
The Chinese government, which has long used its country’s vast market as leverage over American technology companies, is now asking some of those firms to directly pledge their commitment to contentious policies that could require them to turn user data and intellectual property over to the government.


SEC drops Onyx insider trading lawsuit against Dubai men
The U.S. Securities and Exchange Commission has decided to drop a lawsuit accusing two Dubai men of insider trading in Onyx Pharmaceuticals Inc while the cancer drugmaker was mulling a takeover bid by Amgen Inc .

The Unraveling of Tom Hayes Part Four; THE WAITING GAME
By David Enrich, WSJ
Tom Hayes was sitting at his kitchen table with his father one weekend this March, surrounded by piles of legal documents and sipping from a can of Coke. Nick Hayes usually scolded his son for drinking Coke, but this day he let it slide. He had another point to make.

Environmental & Energy

Falling price hits Norwegian oil capital
Richard Milne in Stavanger, FT
Knut Nesland has worked in Norway’s oil industry for three decades. But the service leader at Halliburton in Stavanger has never experienced a downturn like the one now hitting the country’s oil capital.

Goldman Sees 15 Years of Weak Crude as $20 U.S Oil Looms
Robert Tuttle, Bloomberg
Prices may drop to $20 when refineries shut in October, March
Analyst Currie says bank’s long-term forecast for crude at $50
A glut of crude may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc.

California Fears El Nino’s Dark Side Will Bring More Trouble
Brian K Sullivan, Bloomberg
A winter of both flooding and dryness is one El Nino scenario
Weather-changing phenomenon isn’t a panacea for long drought
A group of drought experts gathered in California this week, and it wasn’t long before the conversation turned to El Nino.

China’s coal consumption higher than thought
Lucy Hornby in Beijing, FT
China’s coal use this century has been significantly underestimated, according to analysis of new Chinese data by the US Energy Information Administration, adding to climate change negotiators’ problems ahead of December’s UN conference in Paris.

House Vote May Signal the Beginning of the End of Oil Export Ban
Brian Wingfield, Catherine Traywick – Bloomberg
House Republicans will test Thursday whether a once-unthinkable goal of U.S. energy producers could become reality: the end of a 40-year ban on exporting oil.


Beijing’s yuan intervention is expedient; maybe too costly to last
Beijing’s decision to continue supporting the yuan after a sharp one-off devaluation has investors wondering how long the government can hold the line as the country burns through its currency reserves at record rates.

Intervention amplified losses for ETFs tracking China mainland
Just as China shows that its domestic stock market can be something of a one-way street — investors can put money in, but not take money out – the biggest mutual fund company, Vanguard Group, is moving ahead with plans to expose more mom-and-pop investors to the country’s heavily restricted exchanges.

Whether Fed Raises Rates or Not, China Will Pour Money Into U.S.
Bloomberg News
China’s investment in U.S. rose 35.9% this year through August
Minister: Fed to have `limited impact’ on outbound investment
Chinese investment into the U.S. will grow strongly regardless of the Federal Reserve’s decision on interest rates, a senior Chinese trade official said.

Frontier Markets

Markets closed on account of Ganesh Chaturthi; Indian equity, forex, money and commodity markets will remain closed today on account of Ganesh Chaturthi
SI Reporter, Business Standard
Indian equity, forex, money and commodity markets will remain closed today on account of Ganesh Chaturthi.

NSE to auction investment limits for Rs 684 cr for govt bonds; Auction will be conducted on NSE’s e-bid platform after the stock market hours on September 21
Press Trust of India, Business Standard
Leading bourse National Stock Exchange (NSE) will on Monday auction investment limits for foreign investors to buy government debt securities worth Rs 684 crore.


French says asked EU to opt out of GMO maize cultivation
France has asked the European Commission for France to be excluded from countries growing genetically modified (GM) maize crops, it said on Thursday.

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