First Read

Recharging
By Jim Kharouf

Mark Twain once wrote that “The secret of success is making your vocation your vacation.” Unfortunately for me, I am not a professional tennis player, or Olympic mountain biker. I’ve returned from a couple weeks off and I suspect many in our industry are about to wind down their time off as well. Vacation feeds your vocation in many ways and is an essential tool to keep yourself energized for the work and responsibilities ahead. Some slough off vacation as a waste of time – and that is true if you waste it. For me, it’s a time to share with family, friends and to reflect on what is next – an invaluable exercise.

I hope you have enjoyed your summer vacation, or are in the process of doing so. If not, I hope you plan one for the fall and winter, as these stretches can be grueling with conferences and a lot of work that needs to be completed in the next four months.

I am recharged and ready. I hope you are too.

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All the Fun Is Going Out of Hedge Funds
By Barry Ritholtz – Bloomberg
By now, almost every finance aficionado knows about the problems in the hedge-fund industry. With almost $3 trillion in assets under management, the industry has been bedeviled by complaints of underperformance and high fees. Large institutions that put money into hedge funds are now reversing course, led by endowments and pension funds. Redemptions totaled $20.7 billion in the three months through July, with $5.7 billion withdrawn by investors last month. As high-profile firms have suffered outflows, they have begun cutting employees.
/goo.gl/qPO6Fk

***** They are taking the fun out of fund, leaving just Duh!

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India Names Urjit Patel as Central Bank Governor; Patel takes over at the RBI as it undergoes a structural overhaul and begins to unload bad loans on its banks’ balance sheets
By GABRIELE PARUSSINI and RAJESH ROY – WSJ
India appointed Urjit Patel as its next central bank chief Saturday, picking from the Reserve Bank of India’s current roster of leaders in what economists and executives hope is a sign of New Delhi’s commitment to the inflation-fighting policies of departing governor Raghuram Rajan.
goo.gl/nO0IrP

***** Out of all the Patels they could have picked, they choose Urjit?

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Battle for Coding Talent in Cornfields of Illinois Lures CME
Declan Harty – Bloomberg
The world’s largest exchange operator is going to college. To ramp up its recruiting efforts, CME Group Inc. will on Sept. 9 open an office at the University of Illinois at Urbana-Champaign’s Research Park, a technology epicenter that already hosts 101 finance, technology and agriculture companies. Students tapped to work on projects ranging from cryptocurrencies like bitcoin to cloud computing.
goo.gl/QKYuzG

***** Everyone must code. And University of Illinois produces some of the best coders in the world.

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Beer Costs to Rise as Barley Lashed by Rain in France, Germany
Camilla Naschert, Isis Almeida – Bloomberg
French crop will slump 21% this year and Germany’s by over 9%; German maltster says price gains will be passed onto brewers
Making beer just got a lot more expensive in Europe as downpours hit barley crops in France and Germany. Heavy rain this year has shrunk barley crops, boosting costs for companies that use the grain to make malt, a key ingredient in beer. Maltsters paid as much as 11 percent more for barley earlier this month as farmers in France, the European Union’s biggest grower, gather the smallest crop in five years and the harvest in Germany declines by more than 9 percent.
goo.gl/SrprRE

***** Rain makes grain, but in this case NOT.

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The Feds Want to Give You Money to Learn to Code. Here’s Why That’s a Problem; The Obama administration’s latest attempt to fix higher education has some critics unimpressed.
Shahien Nasiripour – Bloomberg
Colleges aren’t keeping up with changes in the workforce, leading to millions of underemployed graduates and what employers describe as a yawning gap between the number of openings they’re looking to fill and the number of Americans fit to fill them. The combination of relentless tuition hikes, skyrocketing student debt loads, low graduation rates, and stagnant earnings suggests now is a good time to begin tinkering with possible solutions. On Tuesday, the U.S. Department of Education announced a small experiment to do just that.
goo.gl/ZRw741

***** If you can code, you can pay off your tuition debt faster than in many other jobs.

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Drew Shields, Trading Technologies – Next-Generation Product Development
MarketsWikiEducation.com

“There will always be someone as smart or smarter than you and you have no control over that. The only thing you have control over is whether you have more drive, more passion than others.”

As chief technology officer at Trading Technologies, Drew Shields has been instrumental in the implementation of the software vendor’s new top-to-bottom makeover. The new architecture required lots of technical talent, to be sure, but it also required two additional attributes – hunger, and the ability to challenge the status quo.

In college Shields majored in theology, and he started in the business world with few discernible technical skills. But he had the drive and passion to succeed, and he was given a chance to prove himself. He says that, while some job opportunities at TT require specific expertise, in many cases the company places a higher priority on a candidate’s motivation and attitude.

That’s not just next-generation product development; that’s next-generation talent development.

Watch the video »

Chicago 2016 Video Releases to Date
Lisa Dunsky, OCC – Hit By A Brick: How Setbacks Shape Your Career
Kate Maehr, Greater Chicago Food Depository – Volunteerism: Good for the community and good for you!
Christian Domin, GlenStar Properties – Value Investing: Office Space and Associated Risks
Rob D’Arco, Rival Systems – Technology: the Center of the (Financial) World
Jeff Levoff, Partner, DRW – Make a Market: Proprietary Trading in the Modern Era
Walt Lukken, FIA – The New Normal and the Five Tips
Rumi Morales, CME Ventures – Investing in the Future of Fintech

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Whistleblowing; President Banned; Bad Reports; CCP Risk; De Minimis
Bridging the Week – Gary DeWaal
Last week another publicly traded company was sanctioned by the Securities and Exchange Commission for using a standard severance agreement that the Agency claimed potentially impeded employees from exercising their whistleblowing rights. Also, the SEC recently upheld the banning of the president of a broker-dealer from acting in any officer or manager position for 31 days because of his supervisory failures, while a swap dealer was sued by the Commodity Futures Trading Commission in federal court for allegedly committing new reporting violations that were a type that were also the subject of a prior enforcement action. As a result, the following matters are covered in this week’s edition of Bridging the Week:
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Friday’s Top Three
The Friday trend of higher-than-average clicks on the lighthearted and quirky, rather than deep market structure issues, was alive and well last week. The top clicked story of the day was The Wolf Of Wall Street Fake Cocaine Put Jonah Hill In Hospital. In second place, from Bloomberg’s Matt Leising, was a bit of rain on the distributed ledger parade – Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust. Rounding out the top three was We must protect shareholders from executive wrongdoing, former Deutsche Bank employee Eric Ben-Artz’s editorial in the FT about why he turned down a sizable whistleblower award. Hint: hush money is dirty money.

Lead Stories

Why No One Trusts China’s Markets
By Christopher Balding
When China’s top securities regulator said recently that it plans to delist Dandong Xintai Electric Co. for falsifying initial public offering documents, it didn’t grab many headlines. But it suggested some far-reaching changes may be afoot.
/goo.gl/90r4g2

How This Hedge Fund Robot Outsmarted Its Human Master
Kathleen Chu, Komaki Ito – Bloomberg
Simplex uses artificial intelligence to trade Japan futures; AI investors are outperforming as global hedge funds struggle
Yoshinori Nomura felt like weeping. It was the morning of June 24, Brexit day, and markets were moving against him. Well, not against him, exactly. It was the hedge fund manager’s self-learning computer program that had placed the bet, selling Japanese stock-index futures before a sizable market advance. Nomura had anticipated a rally, but decided not to interfere, and his fund was paying the price.
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FXCM says notified CFTC, NFA of January 2015 capital shortfall
Gertrude Chavez-Dreyfuss – Reuters
U.S. retail broker Forex Capital Markets (FXCM.N) said on Friday it promptly notified the Commodity Futures Trading Commission and the National Futures Association of its capital deficiency on January 15 last year, when the Swiss National Bank moved to abandon the Swiss franc’s peg to the euro. This was contrary to what the CFTC said in its lawsuit against FXCM filed on Thursday. The CFTC said FXCM was under-capitalized for two days in January last year and failed to report that to the commission.
goo.gl/kyOzWr

Banks Sprint to Meet $493 Trillion Swaps Market Margin Rules
Silla Brush – Bloomberg
Rules could require more than 700 billion euros in collateral; U.S., Japan start start Sept. 1; Hong Kong, Singapore delay
The world’s largest banks are racing to meet a U.S. and Japanese deadline next month when billions of dollars in new collateral requirements will begin to hit the over-the-counter derivatives market, even as new regulatory fault lines emerge.
goo.gl/gEzclW

Exclusive: Hong Kong exchange, Tradeweb in talks over ‘Bond Connect’ platform
By Saikat Chatterjee, Michelle Price and Umesh Desai – Reuters
The Hong Kong exchange is in talks with Tradeweb, a fixed income trading platform, to connect China’s $7.5 trillion bond market with overseas investors, three sources with direct knowledge of the discussions told Reuters.
goo.gl/iHbJQ7

In Scramble for Yield, Pension Funds Will Try Almost Anything; Options strategy used by pension funds aims to work like a volatility dampener
By BEN EISEN and AARON KURILOFF – WSJ
Some pension funds are seeking to profit from others’ fear. Pension funds in Hawaii and South Carolina are plying an arcane options strategy called cash-secured put writing. In a typical trade, the investor sells a contract, known as a put, to someone who owns stocks and is willing to pay up for protection in case they decline. If, within a certain time, the shares fall below a given price, the investor buys the stocks at that price, or covers their lost value.
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**JK: Somewhere, Phil Gocke is smiling. This was an issue he spent much time on during his years at the Options Industry Council

India’s Not-So-New Central Banker
By Mihir Sharma – Bloomberg
The Indian government’s decision to elevate a well-respected deputy governor at the Reserve Bank of India to become the country’s next central banker is, frankly, a bit of a relief. The naming of Urjit Patel comes after months of quite unnecessary drama — first over whether current RBI chief Raghuram Rajan and the government were getting along, then whether Rajan would be granted an extension, next whether he would quit in irritation and finally over who would replace him.
/goo.gl/IeqE0a

A top Wall Street strategist explains why everything about markets seems broken right now
Myles Udland – Business Insider
“The market is broken.” This sentiment has become more or less the received wisdom in the investing world over the last several years.
goo.gl/bVHqNB

An Inflation Warning From the Land of Negative Rates
Raine Tiessalo, Peter Levring – Bloomberg
“It feels like someone has killed inflation expectations.” Risto Murto, the chief executive officer of Varma Mutual Pension Insurance Co., which oversees $46 billion in assets, says all the evidence now “definitely” suggests that the “disinflation risk is greater than the inflation risk.”

The ‘Flash Boys’ Stock Exchange Goes Online: Why Individual Investors And High-Frequency Traders Should Care
Javier Hasse – Benzinga
Capital Group is one of the best-known mutual fund managers in the world, having delivered healthy returns for decades. However, over the past few years, the firm has been exploring new paths to increased profits, including the creation of a new stock exchange, the first one ever owned exclusively by a group of buy-side investors — Capital Group was the first of many.
goo.gl/s8hKOK

FCA in talks with blockchain firms; Regulator’s fintech sandbox working with several blockchain specialists.
By John Bakie – The Trade
The UK’s Financial Conduct Authority (FCA) has signalled it is talking to a number of firms working on blockchain technology and how it will be applied to the financial services.
goo.gl/Ub5qA0

FCA considers approving blockchain businesses; Watchdog weighs approval for a small number of companies using process behind bitcoin
by: Caroline Binham and Madhumita Murgia in London – FT
UK consumers are one step closer to using products underpinned by blockchain technology after the financial watchdog said it was considering approving a “small but significant number of firms” using the process behind bitcoin, the cryptocurrency.
/goo.gl/YWH9NA

To Crack Down on Securities Fraud, States Reward Whistle-Blowers
By GRETCHEN MORGENSON – NY Times
In the aftermath of the financial crisis, a growing army of confidential informants — better known as whistle-blowers — has helped federal securities regulators identify and prosecute wrongdoers.
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Survey Roundup: Financial Firms Bank on Intelligence to Fight Crime
By BEN DIPIETRO – WSJ
In FCIU They Trust: A survey of 121 investment and commercial banks in Europe and North America by analytics firm SAS found 19% said they were fined by regulators in the past three years for failing to stop financial crime, with 22% of that group saying the penalty was $1 billion or more. The survey found 82% of firms have set up or are planning to create a financial crime intelligence unit, with 98% saying FCIU is a top corporate priority and 94% saying they plan to improve FCIU training.
goo.gl/kT59IB

Questions about central bank firepower loom at Jackson Hole; Fresh ideas on how to fight future downturns in low interest rate conditions likely on the agenda
Sam Fleming in Washington
As investors squabble over when the Federal Reserve might lift short-term interest rates, central bankers meeting in Wyoming this week are likely to be debating what they might do if a future downturn forces them to put monetary policy into reverse.
/goo.gl/LVppLk

City firm axes big-money bonuses to stop ‘wrong behaviours’; Star fund manager Neil Woodford claims performance-related pay fails to boost returns
Kate Palmer – Telegraph
Neil Woodford, one of the country’s most prominent fund managers, has axed bonuses at his firm for all staff in a bid to discourage “short-term” decision-making.
goo.gl/En6v1V

DEUTSCHE BANK’S $10-BILLION SCANDAL; How a scheme to help Russians secretly funnel money offshore unravelled.
By Ed Caesar
Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters. Volkov would speak to a sales trader—often, a young woman named Dina Maksutova—and ask her to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner. Deutsche Bank was helping the client to buy and sell to himself.
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Exchanges, OTC and Clearing

Exclusive – Hong Kong exchange, Tradeweb in talks over ‘Bond Connect’ platform
Saikat Chatterjee, Michelle Price and Umesh Desai – Reuters
The Hong Kong exchange is in talks with Tradeweb, a fixed income trading platform, to connect China’s $7.5 trillion (6 trillion pounds) bond market with overseas investors, three sources with direct knowledge of the discussions told Reuters. One of the sources said the talks on the creation of the so-called Bond Connect were exclusive and advanced.
goo.gl/hQUt0V

IEX’s ‘Flash Boys’ exchange goes live, aims to disrupt market
Reuters
IEX Group, the upstart trading venue featured in Michael Lewis’s book “Flash Boys: A Wall Street Revolt,” began operations as a public stock exchange on Friday after more than 2-1/2 years as an off-exchange trading platform. The Investors’ Exchange is the 13th U.S. stock exchange and will compete with the likes of Nasdaq Inc (NDAQ.O), Bats Global Markets (BATS.Z) and Intercontinental Exchange Inc’s (ICE.N) New York Stock Exchange.
goo.gl/mW8h1V

Latest Charles Li Direct: Taking Mutual Market Access To The Next Level
Press Release
Shenzhen Connect was announced last week, the culmination of a lot of hard work and effort between regulators and the exchanges in Shenzhen and Hong Kong. It was also a major milestone in our mutual market initiative, giving investors on both sides of the boundary more choices and enhanced access to each others’ markets while playing a valuable role as a trusted partner in China’s financial liberalisation drive.
goo.gl/ghL1aG

Bats Europe Encourages Industry Harmonisation For MiFID II Requirement For Order Record Keeping – MiFID II Compliant Record Keeping Process And Algorithm Testing Enhancements Now Available For Participant Testing On Bats Europe
Mondovisione
Bats Europe (Bats), the region’s largest stock exchange operator, has made available for testing on its platform its MiFID II compliant process for order record keeping, which the exchange is proposing as the industry approach to encourage harmonisation. Bats is also making available a range of enhancements to facilitate further user testing of their algorithms.
goo.gl/93usK0

Politics

Trump’s Empire: A Maze of Debts and Opaque Ties
By SUSANNE CRAIG – NY Times
On the campaign trail, Donald J. Trump, the Republican presidential nominee, has sold himself as a businessman who has made billions of dollars and is beholden to no one.
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Donald Trump the Mortgage Broker Was in Trouble From Moment One
Heather Perlberg – Bloomberg
Trump Mortgage launched as housing began to crack in 2006; It’s “a great time to start a mortgage company,” he said
Donald Trump had heard all the chatter, the idle talk about how the U.S. housing market was overheating and trouble was looming. He was unfazed. It was the spring of 2006 and he was pushing a new mortgage business, Trump Mortgage LLC.
goo.gl/0GgPJX

We are now entering the Age of Stupid. How did our voters become so credulous?
JANET DALEY – Telegraph
Politics has passed through many epochs. There have been eras of isolationism, or imperial conquest, or egalitarianism, or nationalist aggression. Now, in the transatlantic sphere at least, we seem to be entering a new historical phase: the Era of Stupid. American and British politicians at the highest level appear to be engaged in a competition to see who can utter the most defiantly ill-informed, aggressively ignorant statements about precisely the issues that governments have traditionally regarded as life-and-death matters.
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Investing and Trading

This Is Radical: Three New ETF Ideas That Actually Make Sense
Jason Zweig – WSJ
More than 1,900 exchange-traded funds offer almost every investing strategy you could think of — and many that might occur to you only if you were drunk. Maybe the manic innovation needs to stop, and the fund industry should go back to basics. ETFs are diversified funds that trade on an exchange as if they were a single stock; they generally track a market index at low cost and high tax efficiency. You can use them to capture the performance of cocoa or livestock or palladium or the Singapore dollar, to hold water-related stocks with high dividends, or to earn twice the opposite of the daily return on gold-mining stocks trading largely in Canada. There isn’t yet an ETF that seeks to deliver triple the return of hotel companies traded on the Stock Exchange of Mauritius, but the year is still young.
goo.gl/dM9fmR

Inside the secretive US hedge fund stalking British companies
Ben Martin
When the Argentine sailors brandished their weapons at officials from the Ghanaian port of Tema, they could have sparked a deadly international incident.
goo.gl/U1uk7M

Kobe Bryant and Jeff Stibel Unveil $100 Million Venture Capital Fund;; The retired NBA star and his partner today will unveil their vehicle for investing in technology, media and data companies
By DENNIS K. BERMAN – WSJ
Meet Kobe Bryant, venture capitalist. The retired NBA star will today unveil his venture-capital fund, a $100 million vehicle for investing in technology, media and data companies.
goo.gl/KieyQ6

Carbon capture can drive a 21st century revival of British industry
AMBROSE EVANS-PRITCHARD – Telegraph
Renaissance beckons for the once great industrial hubs of northern England and Scotland, and the unexpected catalyst may be stringent global climate controls.
goo.gl/e8ETCe

Two Strategies, One Crowded Trade; Buying low-volatility stocks and shares with good dividends often amounts to the same thing
By JUSTIN LAHART – WSJ
Two of this year’s best stock strategies have a major downside: They are pulling investors into the same crowded and increasingly expensive trade.
goo.gl/WjBqwB

Institutions

Questions about central bank firepower loom at Jackson Hole
Sam Fleming – Financial Times
As investors squabble over when the Federal Reserve might lift short-term interest rates, central bankers meeting in Wyoming this week are likely to be debating what they might do if a future downturn forces them to put monetary policy into reverse. Policymakers will meet at the mountain resort of Jackson Hole amid concerns that central banks’ recession-fighting firepower is thin, and that an overhaul may be needed for how authorities steer their way through the economic cycle.
goo.gl/jq0yJ5

Morgan Stanley Neglected Warnings on Broker
Nathaniel Popper – NY Times
A troubling call came in to Morgan Stanley’s internal hotline in May 2010. One of the company’s top financial advisers in Mississippi, Steve Wyatt, was struggling with medications and was “not sleeping, coming in 3 and 4 a.m.,” his assistant said on the call, according to notes taken by the person who answered the phone. Mr. Wyatt, a broker, was also trading client money “erratically,” the assistant said. Morgan Stanley is one of the top banks on Wall Street, operating one of the most sophisticated financial advisory businesses in the world. But when the call came in, there was little effort to help fix the problems, Mr. Wyatt’s colleagues — and Mr. Wyatt himself — testified in arbitration.
goo.gl/octf9P

Mary Ann Deignan leaves Bank of America for Lazard
Financial Times
One of Wall Street’s most senior female bankers has departed Bank of America Merrill Lynch to join a team at Lazard advising companies on how to defeat shareholder activists, in the latest example of dealmakers at big banks leaving for boutique rivals. Mary Ann Deignan, who has served as BofA’s co-head of global equity capital markets since 2014, focusing on US company initial public offerings, resigned from the bank last week, according to people familiar with the matter.
goo.gl/np7kzU

The Feds Want to Give You Money to Learn to Code. Here’s Why That’s a Problem
Shahien Nasiripour – Bloomberg
Colleges aren’t keeping up with changes in the workforce, leading to millions of underemployed graduates and what employers describe as a yawning gap between the number of openings they’re looking to fill and the number of Americans fit to fill them. The combination of relentless tuition hikes, skyrocketing student debt loads, low graduation rates, and stagnant earnings suggests now is a good time to begin tinkering with possible solutions. On Tuesday, the U.S. Department of Education announced a small experiment to do just that.
goo.gl/ZRw741

Tudor Demands Managers Take More Risk in Hedge Fund Shakeup
Saijel Kishan – Bloomberg
Billionaire Paul Tudor Jones, who’s facing his worst performance since the global financial crisis, wants to show investors he hasn’t lost his mojo. Jones, the legendary macro trader, told investors in an Aug. 16 letter that he will manage a larger chunk of their money himself. He also said managers at his $11 billion Tudor Investment Corp. will be forced to take more risk.
goo.gl/np7kzU

All the Fun Is Going Out of Hedge Funds
Barry Ritholtz – Bloomberg
By now, almost every finance aficionado knows about the problems in the hedge-fund industry. With almost $3 trillion in assets under management, the industry has been bedeviled by complaints of underperformance and high fees. Large institutions that put money into hedge funds are now reversing course, led by endowments and pension funds. Redemptions totaled $20.7 billion in the three months through July, with $5.7 billion withdrawn by investors last month. As high-profile firms have suffered outflows, they have begun cutting employees.
/goo.gl/qPO6Fk

The Case for Raising the Fed’s Inflation Target
Greg Ip – WSJ
Six years ago, Olivier Blanchard, then chief economist at the International Monetary Fund, floated the idea that central banks should target 4% inflation instead of 2%. I remember giving a colleague countless reasons why he was wrong. It was I who was wrong. Events since 2010 have led me to conclude those objections no longer apply. The Federal Reserve should give serious consideration to raising its inflation target.
goo.gl/I9QjV2

India taps insider Patel as RBI head, seeking continuity
Manoj Kumar and Rafael Nam, Reuters via Yahoo Finance
Reserve Bank of India insider Urjit Patel won a promotion to run the central bank on Saturday with a mandate to cement the bank’s commitment to keeping inflation low, as the tenure of the man he is replacing draws to a turbulent conclusion.
goo.gl/qM4aLg

New Indian central bank head’s arduous task: getting banks to lower rates
Suvashree Choudhury and Devidutta Tripathy – Reuters
One of the biggest challenges for India’s incoming central bank chief is a problem he and his predecessor have long grappled with – how to spur stubborn state banks to cut borrowing costs more aggressively to boost the economy.
goo.gl/Sfp7r4

Modi Swaps Rock-Star Rajan for Quiet Technocrat at India RBI
Sandrine Rastello and Rajhkumar K Shaaw – Bloomberg
Goodbye global financial rock star, hello quiet trusty technocrat. In promoting Deputy Governor Urjit Patel to lead India’s central bank, Prime Minister Narendra Modi sought someone who would cement credibility with international investors without upsetting his political base. Raghuram Rajan, who steps down on Sept. 4, managed to do both.
goo.gl/izWdNp

The Fed’s Effect on Black Americans
Narayana Kocherlakota – Bloomberg View
The U.S. Federal Reserve appears to be paying more attention to how its policies affect black Americans. This is a wise move, because blacks stand to gain a lot more than others from the Fed’s efforts to support economic growth.
/goo.gl/3iybTl

Deutsche whistleblower Ben Artzi moves on after spurning award
John Reed – Financial Times
Eric Ben Artzi, the former risk officer who helped to expose false accounting at Deutsche Bank, this week shocked Wall Street by refusing a multimillion-dollar whistleblower award from the US Securities and Exchange Commission. Were he to take it, he calculates that his share of the $16.5m payout — split with another former Deutsche banker — would net more than $3m, after lawyers’ fees and 50 per cent of the award due to his ex-wife in a divorce settlement.
goo.gl/L5NYcD

Deutsche Bank’s Fed Up Whistle-Blower
Lionel Laurent – Bloomberg
The whistle-blower’s dilemma is usually easy to understand, if hard to solve. Choose the ethically honest path and you face ostracism and the sack; head down the less honest route and you may have more job security and better promotion prospects.
/goo.gl/oj2UPc

Fintech

Bitcoin is still an inaccessible, obscure experiment—but Bitcoin 2.0 could change our lives
Jon Evans – Quartz
Five years ago, bitcoin was an obscure and esoteric online currency, used by few and understood by fewer. Today, after half a decade of sturm, drang, and drama—not to mention multi-million dollar hacks and grandiose proclamations—it is … an obscure and esoteric online currency, used by few and understood by fewer. Despite the breathless prophecies of countless pundits, neither death nor revolution have come to pass.
goo.gl/aOywhp

Industry worried about confidentiality of blockchain
Paul Walsh – The Trade
A majority of surveyed banks view transaction confidentiality as a major concern when implementing blockchain technology, according to a new report. A Greenwich Associates report entitled “Securing the Blockchain” revealed that 63% of participating banks viewed confidentiality of transactions as a major concern for blockchain development.
goo.gl/eVXHBN

The Netherlands’ Small (But Mighty) FinTech Scene
PYMNTS.com
Though Brexit has left everyone looking for the “next best” European startup capital, the Netherlands, while a strong contender, may be destined for greater things. Holland may not be the biggest European nation, but in this week’s Tech Center Roundup, we explore why it could just have the most potential.
goo.gl/OOgKDx

In the Bitcoin Era, Ransomware Attacks Surge
WSJ
One evening in April, Dave Winston stood in a convenience store in suburban Charlotte, N.C., uneasily shoving $20 bills into a slim automated-teller machine unlike any he had ever seen. He was buying bitcoin, a digital currency unknown to him a few hours earlier, before hackers took over his computer.
goo.gl/O32glB

Ex-DTCC Elena Gaetini Joins Expanding Risk Focus EMEA Team
MarketWatch
Risk Focus Inc. [https://riskfocus.com ] , the leading provider of control and compliance for regulatory trade and transaction reporting to the global capital markets, announces the appointment of Elena Gaetini as European Head of Business Development & Governmental Affairs, extending the company’s reach in Continental Europe. Risk Focus is unique in providing clients with a regulatory trade reporting SLA, enabling financial institutions to stay ahead of regulators’ compliance requirements.
on.mktw.net/2bYi5hr

Regulation

JPMorgan settles with FDIC, Deutsche Bank in WaMu case
Reuters
Aug 19 JPMorgan Chase & Co on Friday said it has settled litigation with the FDIC and Deutsche Bank AG stemming from its purchase of Washington Mutual Inc’s banking operations during the financial crisis. In a regulatory filing, JPMorgan said it will be paid $645 million in cash from the estate of Washington Mutual Bank, for which the FDIC acts as receiver, and release its claims against the estate.
goo.gl/Yyijjv

?US long-term liquidity plan marred by flaws traceable to Basel, banks say
Neil Roland, MLex
The US Federal Reserve’s proposed net stable funding ratio has severe flaws that can be traced to deficiencies in the underlying global standard, banking groups said.
goo.gl/KhQvL3

CFTC Charges Forex Capital Markets, LLC with Undercapitalization, Failing to Timely Report Undercapitalization Violation, and Guaranteeing against Customer Losses
CFTC
The CFTC Complaint, filed on August 18, 2016, alleges that FXCM, as an RFED in the business of offering or engaging in retail off-exchange foreign currency transactions, was required to maintain adjusted net capital of approximately $25 million on January 15, 2015. However, the Complaint alleges that on that day FXCM admitted it had a shortfall of at least $200 million under its adjusted net capital requirement, meaning FXCM had liabilities exceeding its assets by approximately $175 million.
goo.gl/hrf7mX

CFTC Charges Deutsche Bank AG with Multiple Swap Reporting Violations, Related Supervision Failures, and Violation of a Prior CFTC Order
CFTC
As alleged in the CFTC’s Complaint, on April 16, 2016, Deutsche Bank’s swap data reporting system experienced a Systems Outage that prevented Deutsche Bank from reporting any swap data for multiple asset classes for approximately five days. Deutsche Bank’s subsequent efforts to end the System Outage repeatedly exacerbated existing reporting problems and often led to the discovery or creation of new reporting problems, many of which violate a CFTC Order entered in September 2015 (see CFTC Press Release and Order 7255-15, September 30, 2015).
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$45 million California wine fraud hits Chicago wallets
Greg Trotter – Chicago Tribune
Chicago wine enthusiasts who thought they were buying wine futures at an incredible price were instead financing a 66-year-old California man’s penchant for fast cars, women and golf. By the time Fox Ortega Enterprises — which operated as now-defunct Berkeley, Calif., wine retailer Premier Cru — filed for Chapter 7 bankruptcy in January, thousands of customers had paid more than $45 million for wine they never received, according to court documents. The bankruptcy filing listed more than 250 Illinois residents owed money, many of them from Chicago and the North Shore.
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Israeli Regulator Considering Steps to Boost Bank Profitability
Yaacov Benmeleh and David Wainer – Bloomberg
Share on Facebook Share on Twitter Israeli banking supervisor Hedva Ber is seeking ways to help banks become more profitable. She’s already urged them to shutter branches and reduce their workforce and now wants to open up new industries to lenders. Ber is mulling ways to let banks provide services to Israel’s $174 billion pension market, presently controlled by insurance companies. That could help banks make back the some of the expected losses when new lenders take customers in the small business and consumer loan sectors.
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Sebi initiated 614 proceedings in FY16, recovered Rs 224 crore
Business Standard
Markets regulator Sebi launched 614 proceedings against the entities which defaulted on payment of penalties in 2015-16 and recovered dues worth over Rs 224 crore. In comparison, the number of attachment proceedings initiated by the Securities and Exchange Board of India (Sebi) in 2014-15 stood at 1,619.
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Sebi faces ‘complex challenges’ in regulating commodity markets: Sinha
Business Standard
The Securities and Exchange Board of India (Sebi) faces “many complex challenges” in regulating the commodity markets, says chairman U K Sinha (pictured). These challenges, according to Sinha, emanate from underlying markets, which are “fragmented, dispersed and not under its regulatory purview”.
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Regions

Raghuram Rajan’s legacy: Building credibility for RBI
Business Standard
Rajan stabilised the rupee, reined in inflation, attacked banks’ stressed assets, reconstituted the monetary policy framework and allowed payments banks and small finance banks Raghuram Rajan came with definite plans that could be executed in his three-year term as the governor of the Reserve Bank of India (RBI). By his admission, he managed to deliver 95% of them and the rest require skilful handling to be seen through.
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Offshore wind farm a green-energy milestone
Bill Loveless – USA Today
The first offshore wind energy farm in the USA is up and nearly ready to go, marking a new chapter in the nation’s changing electricity grid. Thursday, workers finished installing the last of five turbines off Rhode Island’s coast, a little more than a year after the Providence-based developer Deepwater Wind first put steel in the water.
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Carmakers face profit threat as China toughens emissions rules
Christian Shepherd- Financial Times
Three months after announcing the biggest annual loss in the company’s history for 2015 due to its diesel emissions scandal, Volkswagen in July unveiled unexpectedly high profits for the first half of this year, fuelled by sales of VW cars in China. There, unlike Europe and the US, the VW brand has not been tarnished by the German carmaker’s scandal, and Chinese demand for vehicles is strong in spite of the country’s economic slowdown. But China’s tolerance for polluting vehicles — the market is dominated by cars powered by petrol engines — is now drawing to an end. A rollout of new legislation due to be completed by 2020 aims to tighten China’s rules on cars’ emissions and fuel economy, bringing them into line with western countries and thereby curbing the industry’s contribution to global warming and air pollution.
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Government on hook for China banks’ shrinking capital; China banks start reporting H1 earnings this week; Banks’ profit growth seen flat, capital ratios falling; Banks under pressure to lend more, write down bad loans; Small banks’ capital near new regulatory lower limits; First examples of recapitalisation already beginning
By Sumeet Chatterjee – Reuters
Hit by bad loans, Chinese banks are expected to show a weakening in their capital strength in first-half earnings, raising the prospect that government might have to inject more than $100 billion to shore them up, according to some analysts.
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Urjit Patel is new RBI Governor: Here’s how India Inc, brokerages have reacted; The industry has welcomed the decision of the government to give the job to an insider who headed a committee on monetary policy reforms
BS Reporters/ Reuters
The government has announced Urjit Patel as the next governor of the Reserve Bank of India for a three-year term, succeeding Raghuram Rajan who in a surprise announcement in June said he did not want to stay on.
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Miscellaneous

Train Your Brain for Trading (No, Really!)
Jon Asmundsson – Bloomberg
A stock’s price is ticking up and down on a screen in front of you. Do you rationally evaluate the probabilities that the price will rise before you pull the trigger on a trade? Or do you go with your gut? You may prefer to think superior ability—that mysterious X-factor some traders appear to have—is rooted in the former scenario. But a few years ago, researchers at the California Institute of Technology went to the trouble of taking pictures of people’s brains while they were evaluating trades. Surprise: As rational as you are, you probably opt for that gut feeling a lot.
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The Silver Lining in China’s Gold Drought
Adam Minter – Bloomberg View
After Monday’s closing ceremonies, critics will have plenty of time to dissect all that went wrong with this year’s Games in Rio — from pool water that turned mysteriously and dangerously green, to empty stands, even for premier events. A different but no less agonizing debate is likely to take place in China. Just a few weeks ago, international and local analysts were predicting that the country would repeat its recent success as a dominant No. 2 in the medal tallies. Yet entering the final weekend, Chinese athletes are far behind their pace for gold in the last two Olympics — and in real danger of coming in third in the standings behind Great Britain.
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****SD: After this article’s publication, China did end up finishing third in the medal count behind GB.

Britain’s farmers will need help after Brexit; A reformed system of agricultural subsidy should replace the CAP
FT View
Britain’s decision to leave the EU poses challenges for many sectors of the economy. Few are likely to feel the heat in the next few years quite as much as the country’s farmers.
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Russian Wheat in Best Run Since April as Quality Grain Sought
Anatoly Medetsky – Bloomberg
Farmers charge more for high-protein wheat after rain damage; Ukrainian prices also climbed, while French wheat declined
Russian wheat prices extended a rebound, capping the best run since April, as farmers charged more for high-protein grain after rains damaged crops there and in major competitor France.
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When Corn Doesn’t Plump Up, Funds Left With Wrong-Way Bets
Jeff Wilson, Megan Durisin – Bloomberg
Hot U.S. weather hampered crops during key development stages; Speculators boost wagers on decline before prices advance
Investors betting on a record U.S. corn crop are about to get a closer look at yields — and they may not like what they see.
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