First Read

MarketsWiki Education Chicago 2015
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Chicago Intern Education Series Day 3 Wrap-Up
Sarah Rudolph – John Lothian News

For our final day of the 2015 MarketsWiki Intern Education Series in Chicago, hosted by Trading Technologies, our special guest was the city’s mayor, Rahm Emanuel, who told the audience of summer interns that Chicago is the No. 1 destination for young people looking to start their careers right after graduating from college. Chicago is a great destination for several reasons, he said, including that it has the most diverse economy of any U.S. city., incorporating industries such as healthcare, transportation, professional services, and of course the financial sector and risk management in particular.

“No single sector drives more than 15 percent of the city’s economy,” Emanuel said. “And Chicago is the country’s capital for financial technology. It is also a third of the cost of either New York City or San Francisco.”

He took questions from the audience on the impact of Chicago on the financial sector at large; where crime fits in in the larger picture of the city; and, as floor trading ends, what the city is doing to keep Chicago the center for risk management and finance.

Read about the rest of the Day 3, including talks from CME Group‘s Phupinder Gill, CHX CEO John Kerin, industry veteran Mary McDonnell and CBOE‘s Andrew Lowenthal at JohnLothianNews.com.

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Meet the Fraternity Brothers Linked to the JPMorgan Hack; College life was an education in making fast cash online
Jordan Robertson Michael Riley, Bloomberg
When Anthony Murgio and Josh Aaron ran the place, the Phi Sigma Kappa house a block from Florida State University’s Tallahassee campus was a hive of digital moneymaking. Led by Murgio (chapter president) and Aaron (secretary), dozens of fraternity brothers paid their way through school writing Google ads that persuaded people to click links for everything from dating websites to electronics. Working in shifts, the brothers brought in thousands of dollars a month in commissions. For Murgio and Aaron, college life was an education in making fast cash online.
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***** This is a good read about good kids gone bad.

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Why ‘Hamilton’ Has Heat
By ERIK PIEPENBURG, Bloomberg
“Hamilton,” the mega-buzzy bio-musical about Alexander Hamilton and the founding fathers, opened tonight. In his review, Ben Brantley writes: “Yes, it really is that good.”
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***** Anyone know the best way to get tickets for this show? Legally?

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Is Marco Rubio right about 40% of banks wiped out by Dodd-Frank?
By Becky Yerak, Chicago Tribune
Marco Rubio said Dodd-Frank wiped out 40 percent of banks. That’s a bit overstated. Presidential contender Marco Rubio said during Thursday’s Republican debate that “over 40 percent of small and midsize banks have been wiped out since” the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
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****** I wish politicians would define their data set better.

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Could water be the Midwest’s ticket to economic rebirth?
The Economist
Cycling to and from work along the shores of Lake Michigan in the summer months, marveling at the brilliant turquoise water in the morning and shades of pink, purple and deep blue in the evening, ever-varying with wind and weather, is a treat for Chicagoans.
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****Water futures, anyone?

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Bridging the Week by Gary DeWaal: August 3 – 7 and 10, 2015 (Consulting Firms; Compliance Officers; SEC Forum Choice; AML; Swap Entities Registration)
By Gary DeWaal, Katten, Muchin Rosenman LLP
Compliance officers and anti-money laundering played a prominent role in material matters impacting financial services firms last week. Two chief compliance officers were suspended and fined by FINRA for supervisory and AML violations. Meanwhile, in SEC administrative tribunals, a chief compliance officer was only required to take additional training for his alleged law violation and another compliance officer was not sanctioned at all despite altering documents provided to the Commission. Separately, Promontory Financial Group was penalized by a New York regulator for its role in assessing AML violations by a client. As a result, the following matters are covered in this week’s edition of Bridging the Week:
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Stacey Cunningham, NYSE – The Intersection of People and Technology
MarketsWikiEducation.com

“It’s not about you. You don’t take it personally. You’re working for a goal.”

Stacey Cunningham, COO of NYSE, says the driving factor in her career has been “choosing what was right for the business and choosing what was right for the organization.” Some of those decisions were a good fit for her as well, but not always. She also talks about how technology has created speed and access to the financial markets in ways no one could have predicted. Here’s her story on the intersection of people and technology, and how that can work best on a single technology platform at NYSE.
Watch the video »

Lead Stories

On the Defensive, the S.E.C. Quietly Pursues High-Profile Cases
By ALEXANDRA STEVENSON and MATTHEW GOLDSTEIN, NY Times
Wall Street’s chief regulator, the Securities and Exchange Commission, appears to some to be in need of a makeover. Critics say it is too focused on minor cases, it is not aggressive enough in forcing wrongdoers to admit liability and yet it is too aggressive in seeking an unfair advantage for trying cases.
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CBOE Holdings Completes Acquisition of Livevol Data, Analytics Platforms
CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it has finalized the acquisition of the market data services and trading analytics platforms of Livevol, Inc., a leading provider of equity and index options technology and market data services to professional and retail traders, effective August 7. Financial terms of the deal were not disclosed.
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Algorithmic Trading: The Play-at-Home Version; Building computer trading models has become the latest DIY craze
By AUSTEN HUFFORD, WSJ
After more than 100 hours of coding over three months, Mike Soule was finally ready to switch on his project. He didn’t know what to expect. If things went right, he could be on his way to financial success. If things went wrong, he could lose his savings.
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US banks lock down rate traders on pay ahead of possible Fed move
Ben McLannahan in New York, FT
Wall Street banks are rushing to lock down their top interest-rates traders, in anticipation of bumper opportunities arising from a long-promised “lift-off” from the Federal Reserve.
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London’s money-laundering ‘enablers’ face crackdown
Cynthia O’Murchu in London, FT
When the law finally caught up with one of Nigeria’s richest men, headlines screamed of his extravagant lifestyle, including expensive London properties in St John’s Wood and Hampstead, a fleet of luxury cars and close to £1m spent on his exclusive American Express card.
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Markit launches centralised FX trade confirmation service
Markit
Citi and J.P. Morgan first to confirm FX options trades
Markit (Nasdaq: MRKT), a leading global provider of financial information services, today announced the launch of its FX trade confirmation service.
jlne.ws/1J5LC2x

China market turmoil could delay Hong Kong futures plan: sources
BY MICHELLE PRICE, Reuters
Plans by the Hong Kong stock exchange to begin trading China’s most popular index future could be delayed due to growing opposition from Chinese officials unnerved by a recent sell-off in mainland share markets, sources said.
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Traders Have Disappeared From the Gold Market
Joe Deaux, Tatiana Darie, Bloomberg
As gold continues to languish near its lowest price in five years, one element seems to be missing: traders.
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FX technology investment strategies revealed
by Paul Golden
While substantial investment has been made in FX technology since the global financial crisis, there are areas of the market where its impact has yet to be felt.
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Pearson set to offload Economist stake for £400m
Henry Mance and Arash Massoudi, FT
The De Rothschild family and Exor, the investment vehicle of Italy’s Agnelli family, are likely to emerge as the largest single shareholders in the Economist Group, although negotiations about the precise set-up are continuing, the people said.
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Regulatory

The paper lobby’s new federal target: The Securities and Exchange Commission
By Lisa Rein, Washington Post
First, the paper lobby fought the Social Security Administration’s move to issue paper earnings statements to 150 million Americans electronically, saving $72 million a year.
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Crowdfunding sites aim to make the law accessible to all
Jonathan Ford, FT
Using the internet to harness the financial power of crowds is hardly novel. Almost since the first electronic impulse pinged its way across the world wide web, entrepreneurs have been dreaming up sites to facilitate everything from charitable donation to hard-nosed investment.
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FCA Academy trains up new generation of regulators
By Lucy McNulty, Financial News
The Financial Conduct Authority is actively improving its ability to attract talent, according to Jacqueline Davies, director of human resources at the watchdog.
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German politician calls for momentum on financial transaction tax
Reuters
Europe should introduce a financial transaction tax as soon as possible, a senior member of Germany’s Social Democrats (SPD) said on Sunday, putting pressure on Finance Minister Wolfgang Schaeuble to add momentum to talks on the issue.
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Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
SEC

    • FINRA: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend the Tier Size Pilot of FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities) (Release No. 34-75639; File No. SR-FINRA-2015-028); see also Exhibit 5

 

    • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Update Public Disclosure of Exchange Usage of Market Data (Release No. 34-75637; File No. SR-NASDAQ-2015-093)

 

    • NASDAQ OMX BX: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to a Proposal to Update the Public Disclosure of Sources of Data BX Utilizes (Release No. 34-75638; File No. SR-BX-2015-048)

 

    • NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Modifying the Manner in which It Calculates Certain Volume and Quoting Thresholds Applicable to Billing on the Exchange in Relation to a Suspension of Trading on the Exchange on July 8, 2015 (Release No. 34-75649; File No. SR-NYSEMKT-2015-60)

 

    • NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 961 to Establish Exchange Rules Governing the Give Up of a Clearing Member by ATP Holders and Conforming Changes to Rules 960 and 954NY (Release No. 34-75642; File No. SR-NYSEMKT-2015-55); see also Exhibit 5 and Exhibit 3

 

    • Phlx: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Update the Public Disclosure Of Sources of Data Utilized By PSX (Release No. 34-75640; File No. SR-Phlx-2015-70)

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Exchanges & Trading Facilities

Options exchanges to testify at US state hearing
Futures & Options World
The top US options exchanges are set on Thursday to appeal to the US Department of Labour to water-down planned rules that they argue could significantly impact the US options market. The US Securities Markets Coalition, representing the largest US options markets and the main US options clearing house, will testify at the Department of Labour’s open hearings on proposed plans to redefine the types of assets against which brokers are allowed to charge individuals holding retirement accounts when giving that person advice.
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BATS REPORTS RECORD U.S. OPTIONS MARKET SHARE OF 10.8%
On Schedule to Launch EDGX Options on November 2nd, Pending SEC Approval
BATS
BATS Global Markets today reported July volume, market share, and monthly highlights for its U.S. options business, which reported its best month on record with 10.8% market share, up from 4.1% one year ago. The previous U.S. options monthly market share record was 9.9%, set in April 2015.
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BATS REPORTS RECORD U.S. OPTIONS MARKET SHARE IN JULY;
EQUITIES MARKET SHARE REMAINS STRONG IN U.S. AND EUROPE
Remains on Track to Launch Hotspot London Matching Engine in September,
BATS
BATS Global Markets (BATS) today
reported July data and highlights including record market share of 10.8% for its U.S. options business, surpassing the previous record of 9.9% set in April 2015.
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ICE lowers margins for cocoa, sugar
Reuters
ICE futures U.S. lowers Cocoa (CC) maintenance margins by 10 percent to $900 per contract from $1,000; CE futures U.S. lowers Sugar #16 (SF) maintenance margins by 14.3 percent to $600 per contract from $700
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Large Outflow of Money Witnessed in CME Group Inc.
MFI
CME Group Inc. (NASDAQ:CME) surged 0.15% during the last session. The last traded price was up 0.15 points at $97.24.
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Hedge Funds & Managed Futures

Activist Investors’ Secret Ally: Big Mutual Funds
By DAVID BENOIT and KIRSTEN GRIND, WSJ
Activist investor gained a board seat at Microsoft Corp. two years ago, corporate boards around the country were stunned. How had a shareholder with less than 1% of the software giant’s stock forced its way into the boardroom?
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A Cheer and a Half for Cheap Commodities
By JEFF SOMMER, NY Times
Commodities markets have taken a beating this summer. Oil, coal, coffee, soybeans, copper, iron and nearly every other commodity has fallen sharply in price, upending currency markets and inflicting pain in large parts of the world economy.
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The Long Shadow of Bill Gross
By OLAF STORBECK, NY Times
Pimco may not have emerged from the shadow of its larger-than-life co-founder Bill Gross, who left the world’s biggest bond fund abruptly in September 2014. But Allianz, its German owner, can take Pimco’s fall from grace in its stride. The company’s half-year results suggest its insurance division and a growing in-house asset manager are taking up the slack.
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Tension Runs High in VIX as Stock Insurance Costs Most Since ’06
Callie Bost, Bloomberg
Speculators’ appetite for protection from stock-market tempests has reached the highest in nine years. Options predicting a rise in the Chicago Board Options Exchange Volatility Index are the most expensive since 2006 relative to those betting on a drop. With gains narrowing, investors are hedging through calls on the VIX, which usually rises as the Standard & Poor’s 500 Index falls.
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A How-To Guide for Opening Your Own Wealth Management Firm
Margaret Collins, Bloomberg
Since 2007, only one segment of the wealth management industry has boosted its market share every year: independent advisory firms. They’ve more than doubled their assets in that time, overseeing about $2.7 trillion as of 2014. And there’s room for growth. According to an estimate by Boston Consulting Group, a total of $46 trillion in private wealth is up for grabs in the U.S. We asked several independent investment advisers, many of them former brokers, about setting out on their own. Here’s their advice.
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Bond Traders Brace for More Turbulence in Short-Term Treasuries
Alexandra Scaggs, Bloomberg
What a difference a week makes for bond traders betting on when the Federal Reserve will raise interest rates.
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Banks & Brokers

Goldman Trader-Turned-New York Chef Opens Restaurant in London
Steeled by a season of Hell’s Kitchen and New York success, Chef Seth Levine takes Hotel Chantelle on the road
Richard Vines, Bloomberg
Seth Levine headed home one day from his job on the floor of the New York Stock Exchange with Goldman Sachs Group. He noticed a line of people close to the corner of 54th Street and Lexington Avenue and asked, “What’s going on?”
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JPMorgan Defends Wix Amid Rout as CFO Plots Next Super Bowl Ad
Gabrielle Coppola, Bloomberg
Wix.com Ltd.’s decision to splurge on a Super Bowl ad earlier this year resulted in the Israeli Internet company attracting a record number of new users last quarter. Investors responded by dumping its shares.
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Second senior executive to leave IG Group
Jim Brunsden in London, FT
Chris Hill, chief financial officer of spread betting company IG Group, has become the second senior executive in a month to announce his departure from the group, saying he will leave early next year for FTSE 100 fund manager Hargreaves Lansdown.
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Big Brother bankers answer surveillance call
By Lucy Burton and Lucy McNulty, Financial News
A growing number of senior investment bankers are having to delve through reams of emails and other correspondence as part of the financial services industry’s push to ramp up its surveillance of staff.
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Clearing & Settlement

Clearing House of the Year
Financial News is delighted to announce the shortlist for its 13th annual Awards for Excellence in Trading and Technology, Europe. The winners will be announced at a gala dinner in London in October. Here are the nominees in the category of Clearing House of the Year: CME Clearing Europe, Eurex Clearing, ICE Clear Europe, EuroCCP and LCH.Clearnet
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Are You Ready for Same Day ACH Electronic Payments?
CPA
The Electronic Payments Association (NACHA, previously the National Automated Clearing House Association) has adopted a rule to move payments faster by enabling same-day processing for ACH payments.
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Indexes & Products

High-return era ends for many big public pension funds
Pensions & Investments
The Wilshire Trust Universe Comparison Service calculated the median return of public plans with more than $5 billion in assets at 3.4%.
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S&P 500 Flouts History in Break With Bonds That Often Ends Badly
Lu Wang, Bloomberg
As far as credit markets are concerned, U.S. stock investors have lost touch with reality.
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Invest in index funds for better returns
Gail Marks Jarvis, Chicago Tribune
Do you search the Web to find the best price on clothes or electronics? Do you drive across town to get a discount on a household item or to shave a few bucks off your groceries? Americans love a deal. But when it comes to their 401(k)s, IRAs, or other retirement and college savings, many are lousy shoppers. Consequently, they throw thousands of dollars away buying inferior mutual funds that will fail to cover retirement or kids’ college adequately.
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Exchange-traded funds for the active-minded
San Antonio Express-News
Actively traded ETFs have yet to burn up the track with mainstream investors, who mostly cling to passive funds that mirror indexes that are benchmarks for stocks, bonds and other investments. Unlike their passive cousins, active ETFs feature a hands-on manager who can take the reins of a portfolio and make daily decisions on how to best invest, much as in a traditional mutual fund.
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Tension Runs High in VIX as Stock Insurance Costs Most Since ’06
Bloomberg Business
Speculators’ appetite for protection from stock-market tempests has reached the highest in nine years. Options predicting a rise in the Chicago Board Options Exchange Volatility Index are the most expensive since 2006 relative to those betting on a drop. With gains narrowing, investors are hedging through calls on the VIX, which usually rises as the Standard & Poor’s 500 Index falls.
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Technology

Bitcoin startups lure quant whizzes from Wall Street
Daily Times
Armed with a doctorate in financial engineering, 34-year-old Timo Schlaefer was on his way to a promising career at Goldman Sachs in London.
In February he gave that up, and launched a company called Crypto Facilities Ltd, a bitcoin derivatives trading platform, which now has six employees. For now, the platform trades bitcoin forwards, which are directly linked to the price of bitcoin, but it’s also developing other digital currency derivative products.
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Enforcement

Zynga in $23 mln settlement over alleged fraud tied to IPO
BY JONATHAN STEMPEL
Zynga Inc reached a $23 million settlement to end litigation accusing the gaming company known for “FarmVille” of defrauding shareholders about its business prospects before and after its December 2011 initial public offering.
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Environmental & Energy

Insight: Tesla burns cash, loses more than $4,000 on every car sold
By Joseph white and Paul Lienert – Reuters
It’s crunch time for Tesla Motors. The Silicon Valley automaker is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles.
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The Price Of ‘C’ In China
OilPrice.com
Clearly, what China and the U.S. decide to do about the price of carbon will determine how much more there is to come, and how much hotter the atmosphere gets before renewables ascend the world’s energy throne. And it is likely that China itself will determine what that price is. When will carbon get a price? What should that price be? Will the markets decide or will politicians?
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Asia-Pacific

China Producer Prices Fall to Lowest in 6 Years Amid Weak Demand
Bloomberg
China’s producer prices fell in July to the lowest level since 2009, in the latest sign that Premier Li Keqiang must take measures to support growth.
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UBS Wary as China Seeks Global Help to Clean Up Local Debt Mess
Bloomberg
China is turning to global markets to help clear up a regional debt mess. Not everyone wants to be involved.
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Greed Makes a Comeback in China as Hot New Trade Sparks 5% Rally
Bloomberg
Greed is once again trumping fear in the Chinese stock market.
The Shanghai Composite Index surged 4.9 percent on Monday, posting the broadest rally in at least 17 years on speculation that China will start a new round of consolidation among state-owned companies. Investors snapped up shares even as export and producer-price data signaled economic growth is getting weaker.
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Frontier Markets

Vietnam set to open derivatives market next year
Thanh Nien Daily
A market for index futures and government bond futures will be opened in Vietnam next year, sometime between the third and the fourth quarter, the government website reported this week.
The country’s first derivatives market will be established at the Hanoi Stock Exchange, it quoted the Ministry of Finance’s latest order for the State Securities Commission of Vietnam as saying.
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Investors from smaller cities line up to join stock rush; Domestic net inflows into equity mutual funds crossed $2 billion in June, the second-biggest month since January 2008
Reuters via Business Standard
Mutual funds are seeing a surge in stock investments from the hinterland as growing ranks of provincial retail investors help drive a two-year long rally.
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Financial Technologies turns red in Q1; Posts a net loss of Rs 36 cr for quarter ended June 30
Business Standard
Technology company Financial Technologies (FTIL) posted a net loss of Rs 35.75 crore for the quarter ended June 30, 2015 as compared to a net profit of Rs 128.25 crore in the corresponding period last year.
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Court gives time till Oct 31 to MCA to pass its order on FTIL-NSEL merger; The court’s direction came in response to several extensions sought for the final order by the MCA as the hearing of all concerned parties is not yet completed
Business Standard
The high court on Friday extended the time to pass a final order by the ministry of corproate affairs (MCA) on the proposed merger of National Spot Exchange (NSEL) with parent company Financial Technologies (FTIL) to October 31. This was on a request from the Government of India.
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Miscellaneous

Corn Crop Conditions Seen Worsening in Satellite Images
Jeff Wilson, Bloomberg
Daily infrared images of U.S. farmland captured by satellite indicate worsening conditions for this year’s U.S. corn crop, according to one data-analysis company.
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Cargill, ADM kick off corn syrup price talks with increases
Reuters
Corn syrup manufacturers Archer Daniels Midland Co and Cargill Inc have kicked off annual negotiations with sweetener buyers by raising prices by some 15 percent, as feedstock supplies fall from record levels.
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