First Read

SGX named Exchange of the Year at global Energy Risk Awards
Singapore Exchange (SGX) has been named ‘Exchange of the Year’ at the Energy Risk Awards 2016, becoming the first Asian exchange to receive this title. The ceremony for the awards, which recognise excellence across the global energy and commodities markets, was held in Houston, USA on 17 May. SGX was selected by a judging panel consisting of Energy Risk’s editorial team and industry experts in recognition of SGX’s innovation in commodity derivatives and energy risk management.

***** I hope SGX enjoys more than one Tiger beer to celebrate this award.


No Reason to Cry Over Spilt Milk When It’s This Cheap
Megan Durisin – Bloomberg
U.S. dairy cows have been busy pumping so much milk that 2016 output is expected to reach a record, according to the Department of Agriculture. Inventories are becoming burdensome at processing plants in some regions, and sellers are “struggling to find a home” for supplies, the agency said. Consumers are benefiting: they’re paying the lowest prices for retail milk in six years, government data showed Tuesday. Related: all that milk means that cheese is also cheap.

***** The whole Chick-Fil-A eat more chicken campaign is going to be a bust with this news.


Make America Gold Again: Calls for Everyone’s Favorite Standard Are Back
Michelle Jamrisko – Bloomberg
Hard-money cause wins new converts in age of economic anxiety; What do economists think of gold standard? ‘It was horrific’. When times are tough, new economic theories get a better hearing. Maybe some old ones, too.

****** More and more gold standard stories floating out there. Old bad economic theories never really die.


Donald Trump’s Plan for America Includes Shutting Down the Media
By Jonathan Chait – NY Magazine
Donald Trump’s candidacy is abnormal in so many ways — some of them hilarious — that important markers tend to slip past the public with little notice. One of those was a radio interview Trump’s longtime ally Roger Stone gave this weekend with Breitbart News Saturday. In the interview, Stone denounced CNN and warned, “When Donald Trump is president, he should turn off their FCC license.” The context for this threat is that Trump previously denounced coverage in the Washington Post, implicitly threatening to go after the paper’s owner on antitrust and tax issues as retribution for the Post’s coverage. Now Stone is making in a completely undisguised fashion the threat Trump made in a barely disguised fashion.

****** Over my dead body.


Tuesday’s Top Three
Leading off our top three by a wide margin is Electronic trading innovator predicts brokerage industry cull. Any other day the second most read story Country Club Members Are Bearing the Brunt of the Golf Recession
probably would have had the #1 spot. Coming in a distant third but still well read was the story, Michael Lewis just dropped two big hints about what he’s working on next


Did You Know?

Some interesting facts are worth noting. Today’s “Did You Know?” is about Cybersecurity.

The consulting firm PwC reported in its Cybersecurity and Privacy, Hot Topics 2015 that:

  • The US government notified 3,000 companies that they were attacked, and charged nation-backed hackers with economic espionage.
  • More than half of global securities exchanges are hacked
  • The average estimated reported financial loss due to cybersecurity incidents was $2.7 million in 2014
  • Incidents topping $20 million or more in losses increased 92 percent from 2013 to 2014
“Did You Know?”
is brought to you by:


Lead Stories

SEC says cyber security biggest risk to financial system
Cyber security is the biggest risk facing the financial system, the chair of the U.S. Securities and Exchange Commission (SEC) said on Tuesday, in one of the frankest assessments yet of the threat to Wall Street from digital attacks.

**Also see our Did You Know? section today.

US clearer OCC faces credit rating cut from S&P Global
Financial Times
The Options Clearing Corp faces a cut to its credit rating after S&P Global Ratings warned the US clearing house’s cover to withstand a default was weaker than those of its US and European peers.

**OCC response below in Clearing section.

Bonuses for Traders, Hedge Fund Managers Seen Falling in ’16
Laura J Keller – Bloomberg
Fixed-income desks may see bonus cuts of 20%, consultant says; Hedge fund bonuses could be down 15% this year, Johnson says
Bonus pools could decline by as much as 20 percent for some Wall Street workers this year, with incentive pay falling at almost every type of financial-services firm, according to compensation consultant Johnson Associates Inc.

EU, U.S. Race to Spare Banks $5 Billion Clearing Capital Hit
Silla Brush – Bloomberg
Options Clearing Corp. estimates capital impact on EU banks; EU, U.S. regulators strive to reach agreement before June 15
European Union and U.S. financial regulators are racing to agree on a plan to prevent billions of dollars in capital requirements from hitting banks’ trades in stock options and other securities starting next month.

BofA Called ‘Bro’s Club’ in Female Director’s Bias Suit
Patricia Hurtado, Robert Burnson – Bloomberg
Woman says male counterpart’s bonus was more than 3 times hers; Bank says it takes such claims seriously, will investigate
Bank of America Corp. was sued by a managing director who says that beneath the “veneer of a world-class financial institution,” the company treats women in her position like “second-class citizens” and pays them substantially less than their male counterparts.

Citadel expands in stock trading
By LYNNE MAREK – Crain’s Chicago Business
Citadel is growing in the stock market-making industry, just as big banks exit it and regulators rev up their scrutiny.

Wall Street Faces New Front for Lawsuits After Top Court Ruling
Neil Weinberg, Dani Burger, Greg Stohr – Bloomberg
Decision on naked short case seen opening door for state suits; Ruling could apply to other securities-law cases, lawyer says
The U.S. Supreme Court dealt a blow to financial services firms trying to fend off allegations that they facilitate illegal short selling, affirming the rights of investors to make their case in plaintiff-friendly state courts.

Investors’ Flight From Negative Rates Flattens Yield Curve; Brighter economic data raises specter of Fed rate increase; yield curve is flattest since 2007
A combination of strengthening economic data at home and plummeting interest rates overseas is causing distortions in the U.S. bond market as investors grapple with the question of when the Federal Reserve will next raise interest rates.

Bank of America misled trading partners, lawsuit alleges; Female executive claims male peers were paid millions more, bank run as a ‘bros club’
By Christina Rexrode, The Wall Street Journal
A Bank of America executive has accused her employer of misleading trading clients, in a lawsuit in which she called the bank a “bros club” and said it discriminated against her for being a woman.

The Commodity That No One Knows About But Everybody Wants to Buy
Thomas Biesheuvel, Jesse Riseborough – Bloomberg
Niobium is used in steel and 7 times more valuable than copper; China outbids 15 companies for rare chance to own Brazil mine
The world’s mines and steel plants got so devalued during the commodity slump that some were just given away by owners struggling to cut losses or debt. But there’s at least one metal that’s been attracting a lot of attention.

Bring On the Currency War
By Narayana Kocherlakota – Bloomberg
The U.S. government seems concerned about what will happen if other big nations push down the value of their currencies against the dollar. Actually, it could be good for the global economy.

Barclays Libor Woes Began When it Broke Ranks
By Mark Gilbert – Bloomberg
Five former Barclays traders are on trial in London, accused of rigging money-market rates. A lawyer used a story I wrote nine years ago when the credit crisis was erupting as a stick to beat up bank executives called as witnesses in the case, who deny they were aware of any problems with the interest rates the bank was submitting. With hindsight, I’m increasingly convinced that the scandal came to light because Barclays, unlike its peers, tried to do the right thing by reporting that borrowing costs were surging as financial markets fractured.

Hedge Fund Association Announces 2016 Board Election Results
The Hedge Fund Association (“HFA”), a leading global non-profit trade and non-partisan lobbying organization, is pleased to announce the results of its 2016 Board of Directors election. HFA’s bylaws allow a capacity of 15 Directors. All HFA Directors are unpaid volunteers elected by HFA members and serving for 3 year terms. This year’s election filled 5 Board positions with the following industry leaders.

Senate Passes Bill Exposing Saudi Arabia to 9/11 Legal Claims
A bill that would let the families of those killed in the Sept. 11 attacks sue Saudi Arabia for any role in the terrorist plot passed the Senate unanimously on Tuesday, bringing Congress closer to a showdown with the White House, which has threatened to veto the legislation.

ANZ traders joked about rigging headline interest rate
Leo Shanahan, Ben Butler – The Australian
ANZ traders joked about their ­rigging of the headline interest rate and mocked “mani­p­ulation ­within the ­financial system” and what “good blokes” they were for helping each other set rates.


European Council, Council Of The European Union: Manipulation Of Market Benchmarks: Council Adopts Tougher Rules
On 17 May 2016, the Council adopted new rules aimed at ensuring greater accuracy and integrity of benchmarks in financial instruments.

Central banks have to monitor blockchain closely: Bank of Japan; Japan’s central bank is to keep an open mind on the issuance of its own digital currency.
by Martin Essex – News.Markets
The close attention being paid by the world’s monetary authorities to the blockchain technology that powers the bitcoin virtual currency has again been emphasised by a senior central banker; this time by Hiroshi Nakaso, deputy governor of the Bank of Japan.

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

    • FICC: Notice of Filing to Suspend the Interbank Service of the GCF Repo Service (Release No. 34-77840; File No. SR-FICC-2016-002; May 16, 2016)


    • FINRA: Notice of Filing of a Proposed Rule Change Amending Rule 12904 (Awards) of the Code of Arbitration Procedure for Customer Disputes and Rule 13904 (Awards) of the Code of Arbitration Procedure for Industry Disputes to Permit Award Offsets in Arbitration (Release No. 34-77844; File No. SR-FINRA-2016-015)


    • ISE Mercury: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Schedule of Fees (Release No. 34-77841; File No. SR-ISEMercury-2016-11; May 16, 2016); see also Exhibit 5


    • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Nasdaq Rule 4703 (Release No. 34-77839; File No. SR-NASDAQ-2016-066; May 16, 2016); see also Exhibit 5


    • NYSE: Notice of Filing of Amendment No. 5 to Proposed Rule Change Adopting Initial and Continued Listing Standards for the Listing of Equity Investment Tracking Stocks and Adopting Listing Fees Specific to Equity Investment Tracking Stocks (Release No. 34-77850; File No. SR-NYSE-2016-22); see also Exhibit 5


    • NYSE Arca: Notice of Filing of Proposed Rule Change Relating to a Change to the Underlying Index for the PowerShares Build America Bond Portfolio (Release No. 34-77849; File No. SR-NYSEArca-2016-62)


    • NYSE Arca: Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to the Listing and Trading of Shares of the AdvisorShares KIM Korea Equity ETF (Release No. 34-77847; File No. SR-NYSEArca-2016-64)


    • NYSE Arca: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Definition of Professional Customer in Rule 6.1A(a) (4A) (Release No. 34-77837; File No. SR-NYSEArca-2016-65; May 16, 2016); see also Exhibit 5


    • NYSE Arca: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the NYSE Arca Options Fee Schedule (Release No. 34-77835; File No. SR-NYSEArca-2016-61; May 16, 2016); see also Exhibit 5


    • NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the Definition of Professional Customer in Rule 900.2NY (18A) (Release No. 34-77836; File No. SR-NYSEMKT-2016-53; May 16, 2016); see also Exhibit 5



Exchanges & Trading Facilities

LME profits rise 160% as fee hike offsets falling trading volumes
Metal Bulletin
The London Metal Exchange recorded net profits of $108.57 million in 2015, up 160% on the previous year, as an increase in trading fees, stronger market data sales and the disposal of a stake in LCH.Clearnet more than offset the commercial impact of a 4.5% drop in trading volumes.

BSE looks to prevent trade reversals in currency derivatives
Business Standard
To ensure safety of the securities markets, top stock exchange BSE will introduce a mechanism for prevention of reversal trades in currency derivatives segment from June 6. The exchange has already implemented this measure in the equity derivatives segment from March.

LSE and Deutsche Börse to hold shareholder vote in July
ByIan Walker, Marketwatch via Financial News
The London Stock Exchange and Deutsche Börse are making good progress preparing merger documents for shareholders and expected these to be published next month.

CME Group Declares Dividend
CME Group
CME Group Inc., the world’s leading and most diverse derivatives marketplace, today declared a second-quarter dividend of $0.60 per share, payable June 27, 2016, to shareholders of record as of June 10, 2016.

Nasdaq Welcomes Macquarie Group to the Nasdaq International Designation
By GlobeNewswire
Nasdaq, Inc. (Nasdaq:NDAQ) today announced that Macquarie Group, a leading provider of financial, advisory, investment and funds management services based in Sydney, Australia, is the latest company to join the Nasdaq International Designation. Through its membership, Macquarie will have access to Nasdaq’s investor relations services and unparalleled visibility assets to increase awareness with investors for their U.S.-traded Level 1 ADRs.

Nasdaq, Inc. Prices EUR600,000,000 Senior Notes Offering
By GlobeNewswire
Nasdaq, Inc. (the “Company”) (Nasdaq:NDAQ) today announced that it priced a public offering of EUR600,000,000 aggregate principal amount of Euro-denominated 1.75% senior notes due 2023 (the “Offering”). The Company expects to use the net proceeds from the Offering for general corporate purposes, which may include, without limitation, the repayment of indebtedness and the funding of the cash consideration payable in connection with the Company’s acquisition of 100% of the equity interests in U.S. Exchange Holdings, Inc. (the indirect owner of three electronic options exchanges: International Securities Exchange, ISE Gemini and ISE Mercury) (the “ISE Transaction”) or other future acquisitions.

Successful debut of Portuguese Treasury Bonds dedicated to retail
“OTRV MAIO 2021” demand exceeds EUR1.2 billion
Euronext today announced the first issue of Treasury Bonds, dedicated to retail investors, to be listed in its regulated market on May 19. Initially set at EUR350 million, the Portuguese Treasury and Debt Management Agency (IGCP), which has issued this “OTRV Maio 2021” bond on behalf of the Portuguese government, increased the total amount to EUR750 million based on the demand surge on the first day of the subscription period.

SBI plans to sell up to 5% stake in NSE; According to sources, the bank expects about Rs 1,000 crore from the stake sale
Business Standard
State Bank of India (SBI) plans to sell part of its holding in National Stock Exchange (NSE), where it owns 15 per cent stake.

MARF Admits To Trading An Issue By Globasol – New Project Bond Issue
The Mercado Alternativo de Renta Fija (MARF) has registered a EUR45.3 million project bond issued by Globasol Villanueva 1 (Grupo Solaria) to cancel the debt associated with the existing project finance operation and refinance it, thus extending its maturity to 2037.

Thai Bourse Initiates Two New Awards For “SET Awards 2016”
The Stock Exchange of Thailand (SET) has joined Money & Banking magazine to organize the 13th SET Awards, initiating two new awards: the Best Innovative Company Awards and the Young Rising Star CEO Award, while adjusting award criteria to meet the current competitive nature of the business world, and announcing list of qualified firms after preliminary screening to compete for awards by year end.


Itiviti Delivers Multi-Protocol Automated Testing Solution to the Canadian Securities Exchange
Itiviti, a world-leading technology provider for the capital markets industry, today announced that the Canadian Securities Exchange (CSE) has engaged Itiviti to implement a test automation solution that leverages VeriFIX by Itiviti. This project is a significant example of Itiviti’s leadership and expertise in consolidated, automated testing for multi-protocol trading environments.

Australia watchdog to publish fintech ‘sandbox’ proposal in June
Australia’s securities regulator is set to publish a proposal next month to allow financial technology companies to start operating without a full license, one of the agency’s top executives said on Wednesday.

Meet Nicole Sherrod, One Of The People Judging The Future Of Fintech
The 2016 Benzinga Fintech Awards is the only event in fintech dedicated to recognizing innovation in financial services and capital markets. Ahead of the May 24th awards show and gala, meet the industry leaders we tapped to determine the most innovative companies in fintech.

FinTech shake up awaits
FT Adviser
Growth in the UK’s FinTech sector is fuelling innovation in financial services. Backed by both government and regulator, digitisation is predicted to shake up the way customers access and use financial services. And this, of course, has profound ramifications for traditional providers and advisers.

SWIFT Shares Industry Insights From Annual Business Forum London Event – SWIFT’s Polling Results Identify Securities Settlement As An Area To Be Most Impacted By Distributed Ledger Technology In The Next Five Years
On 20 April 2016, 1,200 financial services professionals gathered at the Tobacco Dock in London for SWIFT’s annual Business Forum London (BFL). Focused on ‘Building the Future of Financial Services’, the event featured keynote presentations and interactive panel sessions, with live audience polling that addressed some of the key challenges facing the industry, such as the application of distributed ledger technology (DLT) in financial services.

Real-Time Event Based API for Financial Data Launched by Barchart
Today, Barchart, a leading provider of financial market data and technology, has announced the release of a real-time event based API, a new managed service that brings cloud-based event monitoring and notifications to the financial marketplace. Barchart’s event based API provides firms with the ability to easily integrate event based alerts, that use market data and related information, into their websites, software, mobile apps and internal systems.


Trump preparing plan to dismantle Obama’s Wall Street reform law
Republican presidential candidate Donald Trump said on Tuesday that sweeping financial reforms put in place under President Barack Obama were harming the economy and he would dismantle nearly all of them.

Brexit would threaten world-class British research, major report warns; Report reveals how critical areas of research, and particular regions of the country, would fare should EU funding dry up
Ian Sample – The Guardian
Great swaths of research under way in universities and businesses across the UK will come under threat should Britain leave the EU, according to a major report into the nation’s finances.

US business favours Clinton over Trump; Traditional bonds between the Republican party and corporate world unravel
by: Barney Jopson in Washington – FT
Lobbying groups representing a wide range of American companies would prefer Democrat Hillary Clinton in the White House over businessman Donald Trump by a ratio of two to one, in a clear sign of how the controversial Republican is straining ties between the party and its traditional base.

The Most Underpriced Investment on Wall Street: A Trump Victory; Donald Trump as president isn’t factoring into many investors’ plans, despite his success at the polls
Even when he took the lead in the Republican race late last summer, Donald Trump remained a joke on Wall Street.

Microsoft, Hewlett Packard Say U.K. Should Avoid Brexit
Adam Satariano – Bloomberg
Companies say EU membership important for future investments; Both businesses employ thousands of staff in the U.K.
Microsoft Corp. said the U.K. should remain in the European Union, becoming one of the largest companies to come out against a June referendum to exit the bloc.

Bernie Sanders Takes His Anti-Wall Street Message to Puerto Rico
By MARYALICE PARKS – Good Morning America
Though he apologized repeatedly Monday morning for his lack of Spanish skills, Bernie Sanders told an audience in Puerto Rico, “If elected president of the United States, you will have an ally in the Oval Office.”

Hedge Funds & Managed Futures

Bond Buyers Can’t Stop Themselves as Risks Hit a 15-Year High; Ten-year Treasury yield this year has fallen more than half of a percentage point, implying a significant price increase
Global investors are struggling to reconcile low U.S. government-bond yields with signs of economic strength, underscoring the sense that Treasury markets are increasingly vulnerable to a reversal following this year’s gains.

The Tiny Cayman Island Holding $265 Billion in Treasuries
Andrea Wong, Alexandra Scaggs – Bloomberg
Caymans rank third among foreign holders of U.S. debt; Hedge funds domiciled in Caribbean territory drive trend
A Caribbean financial center favored by hedge funds is now the third-biggest foreign owner of U.S. government debt.

The World’s Safest Bonds Are Actually Wild Risks; See how government-bond prices could move if interest rates change, using our interactive calculator
Desperate for yield, investors are buying government bonds that come due further and further in the future. If you lend your money to the government, you expect to get it back. It’s not for nothing that British government bonds are ‘gilt-edged,’ and the U.S. Treasury yield is considered ‘risk-free’ in financial models. What could possibly go wrong?

Gold is insurance against the bad guys hitting the reset button
By Stephen Guilfoyle – Yahoo Finance
It used to be that when I spoke about gold, the folks that listened would look at me as if I were speaking in some ancient foreign language that nobody could understand. Lately, as I stand at my spot on trading floor of the New York Stock Exchange, willing to talk the financial markets or baseball with anyone who’s also willing—more and more am I asked about gold. Several times a week in fact.

Fund managers shun UK stocks; Allocations to British equities fall to lowest levels since 2008, according to BofA
by: Aime Williams and Madison Marriage – FT
Global fund managers are avoiding UK stocks in the run-up to a referendum on Britain’s membership of the EU, as the chance of a Brexit now tops investors’ worry list.

UK equity allocation hits lowest level since financial crisis on Brexit fears; Managers do not think Brexit will happen
Daniel Flynn – InvestmentWeek
UK equity allocation has fallen to its lowest level since 2008, with fund managers rating a Brexit as the biggest tail risk for markets, according to the latest Bank of America Merrill Lynch survey.

Opinion: The real problem with negative interest rates? They are a stealth tax
Central banks have slashed interest rates to nothing. They have printed money on a vast scale. Where that has not quite worked, and if we are being honest that is most places, they now have a new tool. Negative interest rates. Across a third of the global economy, money you put in the bank does not only generate nothing in the way of a return. You actually get charged for keeping it there.

Banks & Brokers

Morgan Stanley CEO sticks by performance target in tough questioning
Morgan Stanley Chief Executive James Gorman on Tuesday stood by his intention to reach a key performance target after facing sharp questions from an analyst about whether he can achieve the goals he laid out.

U.S. banks scrutinize SWIFT security after hacks: reports
Major U.S. banks are scrutinizing security of the SWIFT messaging network following cyber attacks in Bangladesh and Vietnam involving fraudulent transfer requests, according to media reports on Tuesday.

Morgan Stanley CEO: Brexit ‘damaging’ for the UK
Jon Marino – CNBC
As the vote to exit the European Union draws near, Wall Street bank CEOs are stepping up rhetoric against a Brexit.

Pressure grows for more opt-outs from Basel for smaller banks; Key MEP urges broader exemptions for regional banks as FRTB looms
Philip Alexander –
Political consensus appears to be emerging at the European Commission to limit the way the European Union applies Basel bank capital standards to small banking institutions. Until now, most regulatory standards issued by the Basel Committee on Banking Supervision have been imposed on all EU banks through the Capital Requirements Regulation (CRR), but policy-makers are beginning to urge wide-ranging exemptions for smaller banks. “Proportionality is often just a phrase we hear from the commission,…

Ex-Citigroup Head Vikram Pandit Gets Back to His Finance Roots; Mr. Pandit’s new company with a Comcast-backed investment firm will seek stakes in more mature financial-services companies
Old-school finance still appeals to former Citigroup Inc. CEO Vikram Pandit.

J.P. Morgan Reduced Some Employees’ Access to Swift System in Recent Weeks; Limits on use of interbank messaging service come amid questions about breaches at two Asian banks
J.P. Morgan Chase & Co. has limited some employees’ access to the Swift global interbank messaging service amid questions about security breaches at a pair of Asian banks that used the funds-transfer platform, people familiar with the matter said.

Clearing & Settlement

OCC Responds to S&P Announcement on Credit Rating Watch
Press Release
“OCC continues to hold a AA+ credit rating from S&P and S&P’s rating report today notes that OCC’s financial safeguards exhibit certain strengths relative to our global peers. These safeguards include: (i) the use of a two-day margin period of risk, (ii) the inclusion of a $1.8 billion prudential margin of safety in the clearing fund above the cover 1 level, (iii) our ability to call for additional individual intra-day clearing fund contributions of up to $1 billion, and (iv) our ability to re-size the clearing fund intra-month if required by changing market conditions. Like other systemically important central counterparties, OCC is actively working with U.S. and international regulators to implement enhancements to further strengthen its loss absorption capacity and liquidity resources based on conservative stress testing methodologies.”

EU, U.S. Race to Spare Banks $5 Billion Clearing Capital Hit
European Union and U.S. financial regulators are racing to agree on a plan to prevent billions of dollars in capital requirements from hitting banks’ trades in stock options and other securities starting next month.
The European Commission, the EU’s executive arm, and the U.S. Securities and Exchange Commission have stepped up talks ahead of June 15, when the capital increases are set to apply to EU banks’ trades at U.S. clearinghouses run by the Options Clearing Corp. and the Depository Trust and Clearing Corp. EU law requires banks to have more capital for trades at foreign clearinghouses that the bloc’s regulators say lack oversight and rules equivalent to its own.

HSBC launches OTC Clearing Collateral Service
HSBC Securities Services, part of HSBC’s Global Banking and Markets business, has launched its Over-the-Counter (OTC) Clearing Collateral Service.
The service is designed to support clients in meeting the requirements of the G20 swap clearing reforms now extending into Europe and Asia, which place greater demand on buy-side firms to better manage and mobilise their collateral.

Fixing rule clashes on derivatives and capital is EU priority
Financial News
Reducing conflicts between new derivatives and capital requirement rules – as well as lowering reporting burdens for asset managers – are among the issues the European Commission wants to address as part of its sweeping review of post-crisis reforms.

DTCC coaxing HFTs to become clearing members; US Treasuries CCP concerned about contagion risk threat to existing members
Robert Mackenzie Smith –
The Depository Trust & Clearing Corporation (DTCC) is trying to convince high-frequency trading (HFT) firms to clear their US Treasury trades at its clearing house to mitigate possible contagion risk. The DTCC’s securities clearing house, the Fixed Income Clearing Corporation (FICC), is the main central counterparty (CCP) for the US Treasury market. Its clearing members comprise banks, broker-dealers and trading platforms, but the FICC is now pushing to sign up HFT firms as well, given their significant…

Indexes & Products

Trading halts curbs in sight, to boost MSCI Odds
Business Standard News
Shanghai and Shenzhen stock exchanges will publish new rules on trading halts as early as next week, the China Securities Journal reported, a move that would raise the odds of the country’s stocks being included in MSCI Indices. The rules are aimed at curbing arbitrary trading halts by companies listed in China, so-called A shares, and limiting the trading-halt period, the report said on Tuesday, citing an unidentified official at Shanghai Stock Exchange. Some public companies abuse the current system to announce merger and acquisition plans to push up stock prices and then say the deals fail, the report said.

JP Morgan expands smart beta range with US Mid Cap Equity ETF
ETF Strategy
JP Morgan Asset Management has launched a smart beta US mid cap equity exchange-traded fund on NYSE Arca, bringing its total smart beta diversified return equity ETF offering to eight. The JPMorgan Diversified Return US Mid Cap Equity ETF (JPME) targets the US mid cap equity market through a multi-factor investment process.

Columbia Threadneedle Moves Into Expanding Smart Beta Field
Columbia Threadneedle, part of Ameriprise Financial (AMP), says one of its units is acquiring Emerging Global Advisors, a maker of smart-beta portfolios focused on emerging markets. This news emerged just as BlackRock’s iShares business projected that smart-beta ETF assets will reach $1 trillion globally by 2020 and $2.4 trillion by 2025.

Franklin Templeton Unveils Fees For ‘Smart Beta’ ETFs – Focus on Funds
Franklin Templeton Investments unveiled how much money it will charge investors to own its forthcoming “smart beta” exchange-traded funds in documents filed with regulators late on Tuesday.

Global smart beta ETF assets to reach $1tn by 2020, says iShares
ETF Strategy
Smart beta exchange-traded fund assets will reach $1tn globally by 2020 and $2.4tn by 2025, according to a recent report by BlackRock’s iShares. With current smart beta ETF assets at $282bn (Bloomberg 31 March 2016), the provider’s projections reflect an annual organic growth rate of 19%, double the growth rate of the overall ETF market.

How BlackRock, Goldman Seduce Hedge Fund Clients in $2.4 Trillion Market; So-called smart-beta exchange-traded funds are lapping up assets at so rapid a pace that some observers see a bubble. In the meantime, they’re stealing market share from hedge funds.
Bradley Keoun – The Street
Computers are taking over the money-management industry.

Ex-Citigroup Head Vikram Pandit Gets Back to His Finance Roots; Mr. Pandit’s new company with a Comcast-backed investment firm will seek stakes in more mature financial-services companies
Old-school finance still appeals to former Citigroup Inc. CEO Vikram Pandit.


SEC Awards More Than $5 Million to Whistleblower
Today’s award is the SEC’s third highest to a whistleblower. In September 2014, the agency announced a more than $30 million whistleblower award, exceeding the prior highest award of more than $14 million announced in October 2013. Since the inception of the whistleblower program in 2011, the SEC has awarded more than $67 million to 29 whistleblowers, including one for more than $3.5 million announced last week.

Nasdaq Stockholm Orders Capio To Pay A Fine Corresponding To One Annual Fee
The Disciplinary Committee of Nasdaq Stockholm (“the Exchange”) has ruled that Capio AB (“Capio”) has breached Nasdaq Stockholm’s Rule Book for Issuers (“the Rule Book”) and has therefore ordered Capio to pay a fine of SEK 344.869, corresponding to one annual fee.

Environmental & Energy

Does Donald Trump represent a step forward for climate change action?
By Kate Aronoff – The Guardian
Donald Trump will have a climate plan and it will be ugly. For now, the Republican frontrunner is pedaling the kind of denialism his party loves, having called global warming everything from a “hoax” to a “con job” to a Chinese plot.

France Seeks German Support for Carbon Emissions Floor Price
By Francois De Beaupuy and Geraldine Amiel – Bloomberg
French Environment and Energy Minister Segolene Royal plans a domestic floor price for carbon of about five times the current European level and hopes Germany and other European nations will follow.

In Texas, Market Forces Driving Shift From Coal, Study Says
By Jim Malewitz – The Texas Tribune
Texans are on pace to rely more heavily on natural gas, wind and solar energy to power their lives in the coming decades — and much less on coal.

Morgan Stanley’s Sherk stresses value of oil hedging; Options have become good way for E&P firms to raise capital, top banker says
Elizabeth Blosfield –
Oil-producer hedging programmes have been crucial in helping the US energy industry weather the steep downturn in crude prices and, in the present environment, options transactions have emerged as an important way for exploration and production (E&P) companies to raise capital, according to Peter Sherk, the global co-head of commodities at Morgan Stanley. “The energy industry right now is struggling. It’s in a much tougher spot than it had been and that many had anticipated,” said Sherk, speaking…

Fracking will provide a buffer for consumers as oil price rises; The response of the shale industry will be key, writes Ed Crooks
by: Ed Crooks – FT
Oil producers in the US have already ridden to the rescue of consumers once this decade. Soon they may have a chance to do it again. The oil market has been hit by a series of shocks, from wildfires in Canada to militant attacks in Nigeria, which have taken an estimated 3m barrels a day from global supplies.

Australian LNG Exports Face Restrictions in Labor Party Plan
James Paton – Bloomberg
National-interest test proposed for future gas investments; Proposal comes amid concerns over rising local gas prices
New liquefied natural gas projects in Australia, which is forecast to become the world’s largest exporter of the fuel, may need to set aside supplies for domestic use under a policy proposed by the opposition Labor Party.


Two-Minute Tumble Highlights China Market Jitters in Hong Kong
A two-minute plunge and snap back by Chinese stock futures in Hong Kong has added to the nervousness in the city’s market, amid concerns over China’s economy.

Hong Kong Trading Suspensions Leave Some Investors Stranded
Two years ago, private-banking clients at Morgan Stanley bought into Tianhe Chemicals Group, one of the hottest initial public offerings in Hong Kong. Now some of them can’t get out.

The ‘truce’ in global currency wars is on borrowed time
Financial Times
The Chinese metropolis of Shanghai and the city of Sendai in Japan’s north are linked by a twice-weekly three-hour flight. The cost? About £400 or, in the currencies that matter, Rmb3,800 and ¥63,000.
In the broader currency stratosphere, the link between Shanghai and Sendai has greater resonance, offering as good a guide as any to prospects for the global economy and market stability.

Hong Kong Trading Suspensions Leave Some Investors Stranded; With Tianhe, Hanergy and nearly 50 more companies’ shares frozen for three months or more, regulators consider easing delisting process
wo years ago, private-banking clients at Morgan Stanley bought into Tianhe Chemicals Group, one of the hottest initial public offerings in Hong Kong. Now some of them can’t get out.

China to curb shadow banking via checks on fund house subsidiaries
China plans to tighten supervision over fund houses’ subsidiaries and rein in the expansion of a sector worth nearly 10 trillion yuan ($1.53 trillion) as regulators target a key channel for so-called shadow banking to contain financial risks, according to a copy of the draft rules seen by Reuters.

What China Tech Companies Get Wrong
China’s digitization growth is impressive, but it’s not sustainable without government intervention.

Elephant in the Room at This Week’s G-7 Is Sure to Be the Yen
Enda Curran – Bloomberg
Japan’s Finance Minister says exchange rates may be discussed; Host nation can expect opposition to any talk of intervention
When finance chiefs and central bankers from the Group of Seven countries gather this week at a hot springs resort in northern Japan, the official agenda has them focusing on ways to revitalize global growth and crack down on cross-border tax evasion.

Japan’s Rebound Blunts Push for New Stimulus
The first quarter growth that Japan registered on Wednesday was bad news for policy makers seeking looser fiscal policy: It decreased? the political imperative for a big stimulus package while not signaling any sustained recovery.?

Frontier Markets

Brazil government taps Wall Street favorite to head central bank
Brazil’s interim government on Tuesday named the lead economist of the nation’s largest private bank to head the central bank, in a further shift away from interventionist policies that many blame for a deep recession and near double-digit inflation.

Perky U.S. data, Fed rate talk knocks emerging assets
Heightened prospects of a Federal Reserve interest rate rise weighed on emerging markets on Wednesday, while political turmoil surrounding South African Finance Minister Pravin Gordhan knocked the rand to a two-month low.


Columbia University to Open a First Amendment Institute
The fight to preserve freedom of the press is getting a $60 million war room.

****SR: Good one on my alma mater!

The Cheese Glut, and What We’re Doing About It – Podcast
The U.S. is getting buried under a mountain of cheese.

Both Glassdoor And The WSJ Need To Be Careful About The Gender Pay Gap
Tim Worstall Forbes
Over here In Europe we have a new report about the gender pay gap GPS -1.25% from Glassdoor. Listing countries by how good or bad they are at dealing with the problem. The problem with the report on the problem, so to speak, is that they’re not managing to link together the reasons why the results are coming out as they do. The Wall Street Journal also has a piece about that same gender pay gap and they make a related but slightly different mistake. Everyone is, finally and as I’ve been saying for near a decade now, agreeing that it’s really motherhood and child care which cause the pay gap. Excellent, we are at least getting to the root cause of the problem. But then people aren’t quite grasping what the numbers are telling them about that very point, that it is motherhood and child care causing that pay gap.

U.S. grain handler Andersons rejects HC2 Holdings’ $1 billion bid
U.S. grain handler Andersons Inc (ANDE.O) said it rejected a takeover bid from HC2 Holdings Inc (HCHC.A) for about $1 billion in cash, calling the bid “opportunistic”.

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