John Lothian: U.S. SEC approves clearinghouse OCC’s new capital plan; EU Rejects Deutsche Börse Appeal Against Blocked Merger With NYSE-Euronext; LSE has defied expectations to go from prey to predator

Mar 9, 2015

First Read

Fintech Exchange 2015: A Chicago Story
JohnLothianNews.com

Fintech is more than just a buzzword. Fintech is a movement – a global, top to bottom overhaul of financial systems, from consumer transactions at the grocery store to speed of light derivatives trades, to multi-billion dollar interbank payments. And on April 23, 2015, the center of fintech will be Chicago.

Barchart OnDemand, in association with FinTEX Chicago, will host Fintech Exchange 2015, a half day event featuring live presentations, a panel discussion and networking, all centered on the state of technology for financial markets and trading firms.
Watch the video »
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Air travel safer in 2014 despite Malaysian disasters-IATA
Reuters
Last year was by some measures the safest in the history of commercial aviation, despite two high-profile crashes involving Malaysia Airlines aircraft in which hundreds of people were killed, a leading industry body said on Monday.
While more people died in air accidents in 2014 than the average in recent years, the number of fatal accidents compared with the total number of flights was a record low, according to the International Air Transport Association (IATA).
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***JB: Not a usual JLN story but figured I’d ease the minds of all those in our office traveling today to the 40th Annual FIA Conference in Boca Raton, Florida. And by “all of those in our office” I mean everyone but me. I’m sad I cannot go but I can get a lot of mileage out of guilt trips for this so it’s not all bad. Stay tuned for on-the-spot reporting as well as a repeat of our popular Exchange Leader video series which will follow shortly after the conference is over.

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CME Group appoints Christopher Fix head of Asia Pacific
Reuters
CME Group Inc, operator of the world’s largest futures market, said it appointed Christopher Fix as managing director and head of Asia Pacific.
Fix previously served as chief executive of the Dubai Mercantile Exchange.
jlne.ws/1wjmfEt

**JK – You could say, the Fix is in.

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The Bull Market Turns Six. Can It Make It to Seven?
Kristen Scholer – WSJ
The current bull market is entering some rarefied air.
Monday marks the six-year anniversary of the bottom of the financial crisis. And the Dow Jones Industrial Average is up a whopping 173% since then. As the bull market officially turns six, it now ranks as the fourth longest of the 23 bull markets for the Dow since 1900, according to research firm Leuthold Group.
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**JK – Who among us is great at picking tops and bottoms. No hands, no hands, oh, put your hand down!

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A trade deal must work for America’s middle class
Lawrence Summers – Financial Times
Over the next few months the question of US participation in the Trans-Pacific Partnership trade deal is likely to be resolved one way or the other. It is, to put it mildly, a highly controversial issue. Proponents believe a deal is essential for both our economic and geopolitical interests; opponents fear it will benefit corporate interests and the wealthy at the expense of middle-class living standards.
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Fidessa Explores Challenges Of Global Execution
Press Release
Fidessa group plc (LSE: FDSA) has today released a new paper entitled Shifting sands – the harsh realities of executing in today’s markets. Authored by Will Winzor-Saile, Electronic Execution Product Specialist at Fidessa, the paper explores how the electronic execution landscape has evolved over the last 10 years and reveals the challenges that now exist for brokers wanting to trade across global markets.
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Bonds: How firm a foundation?
Tracy Alloway and Michael Mackenzie, FT
Regulators question if corporate debt could withstand a sudden reversal
On the eve of the financial crisis, the office of market supervision at the US securities watchdog included more than 100 employees charged with monitoring stocks and options, two people keeping an eye on $3.5tn worth of municipal bonds, and no one dedicated to the $5.4tn corporate bond market, where thousands of companies sell their debt.
jlne.ws/1Aadg4P

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How to Survive a Bear Market; If this six-year bull run ends, the worst thing is to overreact. Be ready and embrace it.
By E.S. BROWNING, WSJ
With the six-year bull market in stocks getting old, people are starting to wonder how they should prepare for a possible bear market.
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Boards without women breed scandal
Sophia Grene and Chris Newlands, FT
Public companies with more women on their boards are less likely to be hit by scandals such as bribery, fraud or shareholder battles, according to research from index provider MSCI, which looked at more than 6,500 company boards globally.
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****JK – New headline: “Men can breed!- Scandal”

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Germany Seeks to Boost Number of Female Board Members
By HARRIET TORRY, WSJ
Germany’s parliament Friday passed a bill requiring large listed companies to fill 30% of their supervisory board seats with female non-executive directors from next year, in a government move to shake up male monoculture in German firms.
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****JK – WILD applause for this move.

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Bridging the Week by Gary DeWaal: March 2 to 6 and 9, 2015 (Compliance Officer Sanctioned; EFRPs Redux; Lax Supervision; LME Reform)
Katten Muchin Rosenman LLP
The few regulatory and legal developments in the worldwide financial services industry this past week were centered in Europe where a bank, its senior compliance officer and its sole internal auditor were sanctioned for misleading a regulator, while a European court ruled that the European Central Bank could not require all clearinghouses processing euro – denominated transactions to be located solely in the Eurozone as opposed to in the United Kingdom too. A European-based bank was also fined by a US futures exchange for not maintaining required documents to support exchange for related position transactions.
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****JK – Looking forward to seeing Gary’s fishing vest and cap this week.

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An Evening with G.H. Financials and Rick Santelli
Our friends at G.H. Financials are hosting a networking event and Q&A with CNBC’s Rick Santelli on March 18 from 4:30-7pm at Seven Lions on Michigan Ave. in Chicago. Those wishing to attend should contact Stephanie Young at stephanie.young@ghfinancials.com

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RCM Asset Management – Alternative Investments Event
Join RCM Asset Management March 11, 2015 at 5 p.m. for a panel discussion and cocktails at the Marquette Hotel, 710 Marquette Avenue, Minneapolis, MN. This is a free event.
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MarketsWiki Page of the Day
London Stock Exchange Group

MarketsWiki Recent Updates

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Clive Weston; Allan Schoenberg; Danijel Medic; Darrell Jobman; Aline van Duyn; Bernard Dan

Companies, Organizations and Groups

CME Group, Inc.; Chicago Board Options Exchange; BATS Global Markets; Eurex

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59,625,565 pages viewed, 8,157 articles, 190,221 edits
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Lead Stories

U.S. SEC approves clearinghouse OCC’s new capital plan
Reuters
The U.S. Securities and Exchange Commission approved options clearinghouse OCC’s plan to boost shareholders’ equity to $247 million from $25 million at end 2013, OCC said on Friday.
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EU Rejects Deutsche Börse Appeal Against Blocked Merger With NYSE-Euronext
Tom Fairless – WSJ
The European Union’s decision to block a planned $17 billion tie-up between securities exchange operators NYSE Euronext and Deutsche Börse AG was legitimate, the EU’s second-highest court said Monday, rejecting an appeal from Deutsche Börse.
The deal, which would have created the world’s largest combined market for trading stocks and derivatives, was rejected by EU regulators in early 2012. U.S. antitrust authorities had approved the deal in late 2011, subject to relatively minor conditions.
jlne.ws/1wjhjiH

LSE has defied expectations to go from prey to predator
Jonathan Ford, FT
Asked to pick one of the winners in financial services a decade ago, it is unlikely that many would have nominated a stock market at all — let alone London Stock Exchange, the City of London’s traditional share-trading hub.
jlne.ws/1MmCLHD

ICE chief Jeff Sprecher warns London risks losing derivatives lead
Patrick Jenkins and Philip Stafford, FT
London risks losing its position as the world’s leading centre for derivatives trading amid an onslaught of new European regulations, one of the world’s biggest exchange operators has warned.
jlne.ws/18usFFg

Euro zone sentiment hits seven-and-a-half-year high in March
Reuters
Sentiment in the euro zone surged to its highest level in 7-1/2 years in March as investors heartened by the European Central Bank’s bond-buying program brushed off concerns about the economic turmoil in Greece.
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Eurozone Not Viable in Current Form – Top U.K. Fund Manager
Laurence Fletcher – WSJ
The eurozone is not viable in its current form, according to Neil Woodford, one of the U.K.’s most highly regarded fund managers.
Mr. Woodford, who is head of investment at Woodford Investment Management LLP, with £5 billion of assets under management, and was previously head of U.K. equities at Invesco Perpetual, said despite efforts by politicians to keep the currency bloc together, “ultimately I think economics has a habit of overruling politics.”
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Concerns About Deflation Show Up in an Obscure Derivatives Market; A Prediction Market for Inflation, or Deflation
By JUSTIN WOLFERS, NY Times
Something unusual is happening to prices right now: They are falling.
The recent sharp decline in gas prices is part of the story, but there is now growing fear that the Federal Reserve will undershoot its own 2 percent inflation target, hindering the economic recovery. There’s also a small but worrying risk that the economy could enter a deflationary rut.
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British Government Again Reduces Stake in Lloyds Banking Group
Chad Bray – NY Times
The British government has further reduced its stake in the Lloyds Banking Group for the second time in less than a month, the lender said on Monday.
The government, which is keen to reduce its holdings in Lloyds, announced in December that it would engage in a measured sale of a portion of its stake in the bank as part of a prearranged trading plan that runs through the end of June.
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France’s Hollande Casts Fate With Ex-Banker Macron; As the French president shifts away from tax-the-rich policies, economy minister Emmanuel Macron vows to be ‘more confrontational’
By STACY MEICHTRY and WILLIAM HOROBIN, WSJ
French Economy Minister Emmanuel Macron got an earful in January from U.S. technology and retail executives as they lectured him in a meeting at the Venetian hotel in Las Vegas about France’s inhospitable business reputation.
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At Goldman Sachs, Stress Test Results Could Endanger an Important Profit Source
by NATHANIEL POPPER, NY Times
After Goldman Sachs’s poor performance on Federal Reserve stress tests, analysts and investors are worried that the bank could be barred from buying back its own stock or increasing dividends.
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ECB Buying Starts New Era for Bonds, Euro; Currency heads toward parity with dollar; paying to hold debt
By JOSIE COX, WSJ
The arrival of the European Central Bank’s huge bond-buying plan Monday is forcing investors to prepare for the once unthinkable: paying to hold debt issued by the eurozone’s one-time trouble spots—even countries that have recently relied on financial bailouts to stay afloat.
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Swiss Banks Battle Undeclared Accounts; Spat Over Bank Account Set Up for Companion Illustrates Issue
By JOHN LETZING
Before he died in 1980, Maurice Pinot set up a Swiss bank account with 1 million francs ($1 million). For decades, the account paid out dividends and interest to Mr. Pinot’s longtime companion, and after her death, to her daughter, Micheline Fournie, a French citizen with a U.S. residency permit.
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Why Vanguard Is Secretive on Stock ETFs; Uncommon delays in reporting of components protect shareholders, it says
By JONATHAN BURTON, WSJ
Vanguard Group differs from other mutual-fund providers in notable ways, including its well-honed obsession with keeping shareholder expenses lower than its rivals.
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Hedge Funds To Surpass $3 Trillion; US, India To Outperform: Deutsche – Asia Stocks to Watch
Shuli Ren – Barron’s
Deutsche Bank conducted a survey of 435 global hedge fund investors who collectively manage $28.2 trillion in total assets, and came back with quite a few interesting observations.
First, hedge fund industry is expected to continue its growth, reaching $3 trillion this year, despite last year’s anemic 3.3% industry-wide return. Deutsche’s survey respondents expect the hedge fund industry to grow a further 7% this year, driven by $60 billion of net inflows in addition to $149 billion performance-based gains (+5.2% return). Since the Great Financial Crisis, abundant liquidity has pushed the hedge fund industry to more than double from $1.4 trillion in 2008 to $2.85 trillion in 2014.
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Regulatory

Credit-reporting agencies agree to overhaul
Reuters
New York Attorney General Eric Schneiderman reached a settlement with the three biggest U.S. credit-reporting agencies in a deal that will change the way they handle errors and treat medical debt.
Under the agreement, set to be announced on Monday, Equifax Information Services LLC, Experian Information Solutions Inc and TransUnion LLC, will be more proactive in resolving disputes over information contained in their reports.
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Tougher US stress test challenge looms for lenders in round two
Ben McLannahan in New York, FT
Bankers scanning the results of the first round of the Federal Reserve’s stress test last week would have breathed a small sigh of relief. Thirty-one of the biggest US banks were under the microscope, and all 31 passed. Even in the most stressful scenario involving almost $500bn of combined losses, said the Fed, they would have enough capital to keep doing business.
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Prepare for New Money-Fund Rules; Three issues for investors to consider as regulations lead to a shake-up in the funds
By KIRSTEN GRIND, WSJ
Money-market mutual funds used to be boring: a little-thought-about place to park your cash.
jlne.ws/1AadN6N

ESMA trade reporting standards “could decide” future of markets
Elliott Holley – Banking Technology
The European Securities and Markets Association is consulting financial institutions on which messaging protocol and data formats would be best for trade reporting under MiFIR. As the timeframe for reporting comes ever closer to real-time, the consequences could be serious.
jlne.ws/1E5FdOU

Exchanges & Trading Facilities

SGX deepens presence in Greater China
Press Release
Singapore Exchange (SGX) today opened its new Hong Kong office, which is registered as Singapore Exchange Derivatives Trading Limited (SGX-DT). Mr. Chew Sutat, Executive Vice President of SGX, hosted the office opening and reiterated SGX’s continued focus and commitment to its operations in Greater China.
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Russia’s Ulmart Shops Around with HK on IPO Schedule
Yvonne Lee – WSJ
The Hong Kong stock exchange, once one of the world’s top venues for IPOs, hasn’t been on the shopping lists of foreign companies for a long time. But a listing plan by a Russian ecommerce retailer could put it back in the fray.
Once a market that drew foreign companies from Italian fashion house Prada SpA in 2011 to Russian commodity firms seeking to play up their popularity among spend-thrift Chinese consumers, Hong Kong hasn’t seen a major non-Chinese company listing for at least three years.
jlne.ws/1wjphIE

LONDON STOCK EXCHANGE LAUNCHES ‘1000 COMPANIES TO INSPIRE BRITAIN’
London Stock Exchange
Second edition of landmark report launched; backed by the three major UK political parties; Identifies fastest-growing and most dynamic small and medium sized businesses (SMEs) in UK; Publication examines opportunities and challenges facing SMEs;50 company CEOs open trading in London celebrating their inclusion
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Korea Exchange: KOSDAQ Index Reached The Highest Level In 6 Years And 9 Months
Press Release
The KOSDAQ Index at the Highest Level in 6 Years and 9 Months and the Market capitalization at an All-time High (As of March 6, 2015)
On March 6, 2015, the KOSDAQ index broke the 635 points by posting 635.84p (+4.41p, +0.70%). The pervious peak of 637.00p was reached on June 9, 2008. The index broke the 610 point and 620 point mark by recording 610.16p and 621.31p on February 16, 2015 and February 24, 2014, respectively.
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Hedge Funds & Managed Futures

Bakken shale producer seeks out suitors
James Fontanella-Khan and Ed Crooks – Financial Times
Whiting Petroleum, the largest oil producer in the Bakken shale of North Dakota, has hired bankers to seek potential buyers after coming under financial pressure due to plummeting crude prices, according to people familiar with the matter.
Its market capitalisation was $5.7bn on Friday after a 52 per cent fall in its shares over the past 12 months. Including $5.6bn of net debt, the enterprise value is about $11.2bn.
jlne.ws/1wjlIlS

Top City financiers warn investors over Grexit chaos
Patrick Jenkins – Financial Times
Investors are underestimating the chaos that a Greek exit from the eurozone could trigger, many of the City of London’s top financiers have warned.
The immediate financial fallout from a possible “Grexit” has been mitigated over the past couple of years, as banks have shored up finances and cut exposures. But according to a poll of the FT City Network — the Financial Times’s forum of chairman and chief executives from across the banking, insurance, investment and broader business communities — markets are too sanguine about the knock-on risks.
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Japanese Companies Issue Record-Long Bonds; Investors Turn From Government Bonds in Search of Yield
By ELEANOR WARNOCK
The average maturity of domestic corporate bonds issued in Japan this year is at a record length, as companies take advantage of rock-bottom interest rates to issue longer-term debt to investors searching for extra yield.
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Maximize the dividend season with 31 new Single Stock Dividend Futures
Eurex
Since the beginning of the year, we have introduced 31 additional Single Stock Dividend Futures on dividends of European blue chips, giving you additional hedging tools. Our new contracts cover popular names like Lufthansa, Bouygues, National Grid and Ahold.
jlne.ws/1Hm4ZPX

Banks & Brokers

CME Group appoints Christopher Fix head of Asia Pacific
Reuters
CME Group Inc, operator of the world’s largest futures market, said it appointed Christopher Fix as managing director and head of Asia Pacific.
Fix previously served as chief executive of the Dubai Mercantile Exchange.
jlne.ws/1wjmfEt

Jefferies cuts commodities jobs in New York, Chicago: sources
Reuters
Investment bank Jefferies Group LLC [JGLL.UL], owned by Leucadia National Corp (LUK.N), has cut about 20 jobs in its commodities futures brokerage in New York and Chicago, three sources familiar with the cuts said on Friday.
jlne.ws/1E5EXiU

Tullett Prebon hires new Chief Risk Officer
Tullett Prebon
Tullett Prebon, one of the world’s leading interdealer brokers, today announced that Giles Triffitt has joined the company as Chief Risk Officer. His appointment further strengthens the Tullett management team, following the arrival of Philip Price as General Counsel in February.
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Clearing & Settlement

LSE opens LCH door to ICE, Eurex, CME
Luke Jeffs – Futures & Options World
The London Stock Exchange has underlined its commitment to “open access” by opening the door to its largest rivals and hinted again at its imminent futures exchange launch.
Speaking after he announced 2014 revenue up a quarter on Thursday, LSE chief Xavier Rolet told FOW: “Our commitment to open access means portfolio margining is open to everyone. ICE, Eurex, CME or any other large exchange can apply to become customers.”
jlne.ws/1KxbSmI

Chi-X labels ASX fee cuts ‘cynical’
Shaun Drummond – The Sydney Morning Herald
Chi-X Australia says cuts in equities clearing fees of up to 60 per cent announced by ASX Ltd on Monday prove these fees have always been too high.
ASX has offered minimum fee cuts on the clearing of equities trades from July 1 of 14.2 per cent, which would reduce the exchange’s revenue by $6.8 million a year if its present clearing monopoly is extended for five years.
jlne.ws/1GxEnxL

ABN AMRO Clearing Joins MEFFPower
Press Release
ABN AMRO Clearing will offer clearing and settlement of trades at MEFFPower, cleared by BME Clearing. The Spanish Power derivatives market is one of the top five markets in Europe and has >experienced great growth in the past decade. The maturities offered by ABN AMRO Clearing as swaps and futures will be: annual, quarter, months, weeks, week-ends and days. They can be either base load or peak load.
jlne.ws/1wjh0Va

Indexes & Products

Why Vanguard Is Secretive About Its Stock ETFs
WSJ
Vanguard Group differs from other mutual-fund providers in notable ways, including its well-honed obsession with keeping shareholder expenses lower than its rivals.
Vanguard also takes a less-appreciated but equally standard-breaking approach toward exchange-traded funds. Unlike other major ETF providers, Vanguard doesn’t divulge the daily holdings of its stock ETFs. Instead, Vanguard reports month-end portfolio data with a 15-day lag.
jlne.ws/1GxDNQF

WisdomTree Europe Hedged Equity Fund Is on a Roll
WSJ
A strong dollar, a weak euro and a $1.16 trillion European Union stimulus program have set WisdomTree Europe Hedged Equity Fund (HEDJ) on fire.
The $12.9 billion exchange-traded fund, which offers exposure to European multinationals while hedging out the impact of the euro, looks set to surpass WisdomTree Investments ‘ flagship $14.2 billion WisdomTree Japan Hedged Equity ETF (DXJ) in terms of assets by year-end.
jlne.ws/1GxDg14

Michael Lipper: lessons on how to be a good loser
Michael Lipper – Citywire
One of the least favorite tasks of a professional investment manager is to disappoint clients with a report of performance below some benchmark. Contrast this with how we look at our own accounts which we focus on too infrequently and get pleased or less as the account progresses to building one or more nest eggs to meet our or our beneficiaries’ long-term needs.
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Technology

Bank of America’s Data Initiative Follows Internet Companies Into the Cloud
WSJ
Bank of America’s move toward a software-defined data infrastructure reflects the migration of state-of-the art information technology developed by Internet companies into the broader economy.
jlne.ws/1E5zAjJ

Nymex Sends Incorrect Energy Prices
WSH
The New York Mercantile Exchange sent out thousands of incorrect oil and gas prices on Friday, leading trading platforms to show occasional spikes and dips that didn’t happen.
jlne.ws/1EuNfnj

Enforcement

Barclays and Deutsche traders face Euribor questioning
By Caroline Binham, Financial Regulation Correspondent, FT
UK fraud investigators have called in former traders from Barclays and Deutsche Bank for interview as suspects in their long-running criminal probe into whether a key borrowing benchmark was rigged.
jlne.ws/1wjiIWs

Environmental & Energy

What if states just say ‘no’ to climate rule?
By Timothy Cama – The Hill
Senate Majority Leader Mitch McConnell is counseling states to defy a key pillar of President Obama’s climate change initiative.
jlne.ws/1GisrfJ

Solar Impulse plane begins epic global flight
By Jonathan Amos – BBC News
A record-breaking attempt to fly around the world in a solar-powered plane has got under way from Abu Dhabi. The aircraft – called Solar Impulse-2 – took off from the Emirate, heading east to Muscat in Oman.
jlne.ws/1BY0dYI

Climate summit’s pledges on carbon cuts ‘won’t avert global disaster’
By Robin McKie – The Guardian
Pledges at this year’s climate summit to cut carbon emissions are likely to fall far short of the targets needed to avoid heating the planet by more than 2C. That is the stark conclusion of a report by a team led by British economist Nicholas Stern.
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***LB: Also in this story “The group, based at the Grantham Research Institute on climate Change at the London School of Economics, concludes that action planned by countries – in particular the European Union, the US and China – will still leave the world emitting 10bn tonnes of carbon a year in excess of levels needed to prevent global warming from having devastating consequences.”

Cargill adds to non-GMO ingredient portfolio with high-oleic sunflower version of IngreVita EPA/DHA omega-3 oil
Cargill
Food manufacturers looking to provide long-chain omega-3s (EPA and DHA) in their products can now do so with an oil blend made with high oleic sunflower oil produced from identify-preserved (IdP) conventionally-bred (non-GMO) high oleic sunflower seeds, fish oil and proprietary antioxidants.
jlne.ws/1GxtwE8

Asia-Pacific

China’s international payments system ready, could launch by year-end – sources
Reuters
China’s long-awaited international payment system to process cross-border yuan transactions is ready and may be launched as early as September or October, three sources with direct knowledge of the matter told Reuters.
The launch of the China International Payment System (CIPS) will remove one of the biggest hurdles to internationalizing the yuan and should increase global usage of the Chinese currency by cutting transaction costs and processing times.
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