First Read

Are You Registered?
If you haven’t registered for our Trading Chicago event, a joint effort between John Lothian News and FOW, now is the time. The one-day event is set for June 28th at the Swissotel in Chicago.

You can register HERE and see the agenda for the conference. The program is packed with great topics and speakers. We’ll be leading off with a keynote from Craig Pirrong from the University of Houston and a debate over Dodd-Frank between Leslie Sutphen and Gary DeWaal.

Other panels cover trading derivatives in the age of populism, trading fixed income, customizable technology and the push into data, the options market structure and what US-based traders should know about Mifid II. We have two TED-style presentations as well.

The program is free to CTAs, hedge funds, prop firms and asset managers. It’s well worth your time to hear about these timely subjects and hear from top professionals in their fields. There’s a networking event after the program as well.

Why attend? There’s a ton of relevant information about how this industry is changing, evolving and growing. You will walk away with information that helps your trading, your clients or your firm.

Thanks for supporting the event. We look forward to seeing you there.


Montreal Exchange’s CEO Focused on Structural Adjustments

“The world is looking to trade more and more Canada and the fact that we’re only open during our own time zone is a bit prohibitive for some of the international clients.”

Last year, Montreal Exchange launched single stock futures and it turned out to be its best product launch in a decade based on rapidly growing open interest. The exchange also revamped its 5-year bond contract in order to make sure all points on the curve are accessible. With those changes in place, 2017’s goals center around structural change.

MX is altering its own rules to open its market making programs for more types of firms. But the biggest lift for MX, according to President and CEO Luc Fortin, is extending the exchange’s hours to align with London open. Partnering with an exchange in Asia to list MX’s products is also a possibility for the future. On top of that, clearing consolidation is in the works with an outside party and the group is looking at the best means of building a new trading system.

Read the rest and watch the video »


BANDING TOGETHER 2017; The Battle of the Law Firm Bands
A Benefit for Gifts For the Homeless
$20 Both Floors / Doors at 6:30
Are you ready to rock? Get ready to hear DC’s hottest lawyer bands (really!) while benefiting the homeless. Mark your calendars and spread the word about GFTH’S 14th Anniversary Banding Together – Battle of the Law Firm Bands.

***** See Walt Lukken and friends and their band support Gifts for the Homeless.


EVENT: Banding Together 2017
EVENT DATE: JUN 22, 2017
THE STORY: Welcome to the PRECEDENTS’ Banding Together ’17 Advance Voting Page! As “the band that all others must follow,” the Precedents have been rocking out at Banding Together since 2006. By “voting” for the Precedents with a donation to Gifts for the Homeless, you are not only advancing our quest to become D.C.’s Top Law Firm Band but also funding the purchase of essential clothing and winter items for distribution through the shelter system in Metropolitan Washington. The Precedents and Gifts for the Homeless thank you from the bottom of our hearts for your support. – Paul, Athena, Allison, Lamiya, Clint, Eric, Larry, Walt, Jeff and Mike

****** You can support Walt Lukken and his friends’ fundraising efforts here.


Cattle futures trades were bull, regulator alleges; Tennessee investment firm fined over scheme to bust position limits
Gregory Meyer in New York – FT
Vast pens teeming with cattle were at the centre of an investor’s brazen scheme to dupe futures traders, a regulator has alleged. Feedyards are a common sight ó and scent ó in remote parts of the US Great Plains region. At last count, 11m cattle were fattening there on corn and soya meal before their journey to the abattoir.

***** First chocolate milk, now this?


Old news media beat social in battle for public trust; Reuters annual survey shows greater willingness among younger readers to pay for news
David Bond, Media Correspondent – FT
Less than a quarter of social media users think it does a good job in separating fact from fiction, according to a report by the Reuters Institute for the Study of Journalism.

****** I am media and old, does that make me trusted?


Russell Group universities fall short of teaching quality benchmark; London School of Economics, Liverpool and Southampton rank behind peers
Helen Warrell, Public Policy Correspondent
More than half the UK’s elite Russell Group universities, including the London School of Economics, have failed to achieve the highest award in the first ever government league table based on the quality of teaching.

*****The Russell Group is often compared to the US Ivy League.


Our Sweltering Cities Will Pay a Heavy Price; Heatwaves lower productivity and may lead to urban depopulation.
Chris Bryant – Bloomberg
It’s so hot in Phoenix that American Airlines Group Inc has had to cancel scores of flights. With temperatures touching 119 degrees Fahrenheit (48 degrees Celsius) in the Arizona city, some jets couldn’t generate enough lift.

****** More people go to Wisconsin in the summer from other states than any other state. Just saying.


Wednesday’s Top Three
Our top three stories of the day on Wednesday were led by the Chicago Tribune’s piece on Citadel, How does Illinois’ richest man get top tech talent to Citadel?. Second went to Bloomberg’s piece These Are the Best CEOs in America, According to the People Who Work for Them. Third was from The Trade, on the news that Vela was buying Options City, in Trading technology firms set to merge


MarketsWiki Stats
103,029,050 pages viewed; 22,557 pages; 206,567 edits
MarketsWiki Statistics


Lead Stories

A Kansas Investment Firm Spurring Change on Wall Street
Landon Thomas Jr. – NY Times
Tucked away in a sleepy office park in this Kansas City suburb, a $26 billion investment advisory firm is helping drive Wall Street’s latest wealth boom.

Academics Clash Over VIX Bragging Rights; The rising popularity of the stock market’s most widely used ‘fear gauge’ amid a spell of low volatility has upped the stakes
Ben Eisen – WSJ
Two academics who did early work on a gauge of stock-market volatility fear they are being written out of its history. Menachem Brenner, a finance professor at New York University, and Dan Galai of the Hebrew University of Jerusalem called their version “Sigma” and say they pitched it to various exchanges years before the Chicago Board Options Exchange rolled out its volatility index in 1993.

In the New Bond Market, Bigger Is Better; Postcrisis regulations have reshaped bond markets, with the largest asset managers gaining advantages over smaller competitors
Jon Sindreu – WSJ
Giant bond firms increasingly are taking on a price-setting role in global debt markets, elbowing aside big banks facing tighter postcrisis regulation and generating concerns about the toll paid by smaller investors.

Citadel Deepens Reach Into Wall Street’s Bond-Dealing Stronghold
Liz McCormick – Bloomberg
Electronic market-maker to trade more off-the-run Treasuries; Move is expansion of foray into client-to-dealer market
Citadel Securities is ratcheting up its head-to-head fight against the world’s largest banks as it seeks to handle a greater share of investors’ trades in the $14 trillion Treasuries market.

Winning the Research Battle: Creating Value through a Data-Driven Approach
As regulatory pressure continues to grow, firms are now being held accountable for the first time for content they produce and the value they provide. Once viewed as a profitable engine for the sell side, the research arm has become a loss leader for independent broker-dealers and banks that can no longer count on trading commissions to offset the high cost of production.

**JK: A couple of interesting bits in this post include: 63.5 percent of research sent via email is opened within the first hour of its being received. After five hours, 80 percent of the people who will read the piece already have, and the average client will not open anything from 44 percent of the authors sending them research.

The Wrong Kind of Entrepreneurs Flourish in America; Crony capitalists seek to generate profits without producing anything of value.
Noah Smith – Bloomberg
When most people use the word “rent,” they mean the price paid to live in a house or apartment. But when economists say “rent,” they mean money that one person extracts from another without producing anything of value. When the government taxes people to give subsidies to companies, those subsidies are a form of rent. A monopoly generates rents from being able to jack up prices without being threatened by competition. Sometimes the government allows companies to get a certain amount of rent — for example, the royalties from patents, which we protect in an attempt to encourage innovation.

Quant fund is concerned about CFTC getting its software code
Kevin Dugan and Carleton English – NY Post
Renaissance Technologies, the $65 billion hedge fund, is pushing back against federal regulators’ interest in highly-technical trading software out of concern that their source code wouldn’t be secure in the government’s hands, The Post has learned.

What Are the Fed’s Stress Tests?; A primer on the Federal Reserve’s annual assessment of big banks
Ryan Tracy – WSJ
The Federal Reserve is releasing the results of its annual stress tests of big banks in two parts, on Thursday, June 22, and Wednesday, June 28. Here is what you need to know about the exams.

Are Activists Being Sabotaged by Their Brokers? New research suggests that brokers who execute trades on behalf of activist investors may be tipping off other clients
Alexander Osipovich – WSJ
Activist investors have tried hard to keep their trades secret and prevent others from piggybacking off their best ideas. Now, an academic paper released online this week highlights a potential risk for them: brokers leaking their confidential trades.

Capital Ratios and Risk Weighted Assets for Tier 1 US Banks
Amir Khwaja – Clarus Financial Technology
Following on from my recent Supplementary Leverage Ratio: Comparing US Banks article I wanted to look at Capital Ratios and Risk Weighted Assets (RWAs) published by the six largest US banks.

The Barclays case is rooted in the bank’s long-held ambitions; We should look back to the 1980s and the dawn of its universal banking strategy
Philip Augar – FT
The origins of Barclays’ prosecution by the UK’s Serious Fraud Office lie not in 2008, when the fundraising at the centre of the case actually occurred, but more than 30 years ago when it embarked on its mission to become a universal bank. That mission has defined Barclays’ corporate history ever since, directly or indirectly costing more than one chief executive his career; usually displeasing and only occasionally pleasing shareholders; and frequently worrying regulators ó and now ending with criminal charges levelled the company and four senior former executives, including John Varley, a former chief executive.

MSCI Forgets Its Doubts About China; What changed from last year? Not much.
Christopher Balding – Bloomberg
In the culmination of a long-running saga, MSCI Inc. yesterday announced that it would include some Chinese stocks in its widely used benchmark indexes, starting next year. China has taken this as recognition of its growing economic and financial might. But the decision seemed to have almost nothing to do with the reality of China’s financial markets.

Wednesday Is Fast Becoming Oil’s Least Favorite Day of the Week
Tracy Alloway – Bloomberg
Focus on weekly EIA report highlights oversupply concerns; Losses on WTI average 3.2% over the past four Wednesdays
Every Wednesday, WTI gets whacked.

Exchanges, OTC and Clearing

Single Stock Dividend Futures: Introduction of five Single Stock Dividend Futures on dividends of Nordic stocks
The Management Board of Eurex Deutschland and the Executive Board of Eurex Z¸rich AG decided with effect from 3 July 2017:

TORA Partners with London Stock Exchange Group’s UnaVista for MiFID II Transaction Reporting
TORA, provider of the industry’s most advanced cloud-based order and execution management system (OEMS), today announced that it has joined the London Stock Exchange Group’s UnaVista Partner Programme to help clients meet the transaction reporting requirements of MiFID II.

Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and MontrÈal Exchange Closed for Canada Day
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and MontrÈal Exchange will be closed on Monday, July 3, 2017, for the Canada Day holiday.


Blockchain Raised $40M in New Funding, CEO Says
Peter Smith, chief executive officer and co-founder at Blockchain, discusses his latest round of fund raising, volatility in cryptocurrencies and how they’re trying to change the financial system. He speaks on “Bloomberg Markets: European Open.”

Eze Software Launches MiFID II Commission Management Platform; Cloud Solution Aims to Cover Full MiFID II Workflow
Eze Software, a global leading provider of investment technology, is rolling out a new cloud-based commission management platform designed to help the buy-side manage MiFID II requirements. Building on Eze Software’s extensive experience in commission management, the MiFID II-focused solution is designed to handle the full commission management lifecycle, from research evaluation to budgeting, unbundling and specifying RPA payments.

openANX Decentralized Exchange Will Solve Major Problems in the Cryptocurrency Space
openANX will lower barrier to entry for new cryptocurrency users and reduce risk associated with transactions
openANX (, a real-world application of decentralized exchanges built on the Ethereum blockchain, today announced key technical aspects that will tackle two major problems in the cryptocurrency space: the barrier to entry for new cryptocurrency users, and risks associated with many transactions. openANX will allow new market entrants to easily enter the space and to understand their exposure to risk on any potential deal, a feature that’s lacking in current exchanges.

New Ethereum-Based Decentralized Cryptocurrency Exchange Aims to Improve Security and Transparency
Diana Ngo –
Hong Kong’s Open ANX Foundation has unveiled openANX, a project aimed at building a new decentralized cryptocurrency exchange and trading platform built on the Ethereum blockchain.

Ethereum Slides as Network Backlog Points to Growing Pains
By Camila Russo – Bloomberg
Initial coin offerings seen causing bottleneck in the network; Bitfinex, ShapeShift exchanges halt ethereum transactions
Ether, the virtual currency based on the ethereum blockchain, might be getting too popular for its own good.

Teenage bitcoin millionaire can see the cryptocurrency’s value shooting as high as $1 million
By Barbara Kollmeyer – MarketWatch
If this teen entrepreneur, high-school dropout and bitcoin millionaire has any predictive powers at all, then we’ve hardly seen the top of the market for the hot cybercurrency.


How Can Trump Get Anything Done With All Those Empty Seats?; A lack of staff at key agencies is weighing on the president’s agenda and frustrating cabinet officials.
Toluse Olorunnipa – Bloomberg
During Workforce Development Week at the White House in mid-June, President Trump and his top advisers spoke urgently about the need to fill millions of vacant jobs. “There are currently 6 million job openings in the United Statesóvacant jobs that can be filled,” Labor Secretary Alexander Acosta told reporters. “This is the highest number of job vacancies ever.”

***** When I said one way to stop regulatory growth is by not appointing regulators at the CMC meeting in January, I received no reaction from my panel.

‘I just don’t want a poor person’: Trump explains why he added billionaire Wall Street execs to his cabinet
David Choi – Business Insider
President Donald Trump offered some insight into why he added some Wall Street billionaires to his cabinet during a rally in Iowa Wednesday night.

ECB Sees Trump Administration as Key Risk to Global Economy
By Paul Gordon – Bloomberg
Central bank says fresh concerns have arisen as others fade; Federal Reserve is praised for ‘careful’ communication
The European Central Bank cited the government of U.S. President Donald Trump as a key reason why the risks to the global economy remain tilted to the downside.

U.S. Regulators Set to Offer Bank Rule Changes to Congress; Fed governor Jerome Powell says it could be appropriate to ease annual ‘stress tests’ for big banks
By Ryan Tracy and Rachel Witkowski – WSJ
Top U.S. policy makers are set to offer Congress significant ways to ease regulation of banks, according to testimony released Wednesday ahead of a Senate hearing Thursday.

That Bewildering Laptop Ban; You may soon have to check your laptop, even if no one seems to know why.
By The Editors – Bloomberg
When the U.S. government announced a ban on carry-on laptops and other gadgets for certain flight routes in March, the policy made little sense. In the months since, it has only grown more bewildering.


CFTC fines U.S. cattle futures traders $5 million
U.S. futures regulators fined a Memphis trading firm and three associates $5 million on Wednesday for using a manipulative tactic in CME Group Inc’s (CME.O) cattle futures, a market grappling with extreme volatility.

Industry left adrift amid SI delegated act proposal; Systematic internaliser regime could be redefined to close potential loophole, although industry experts question whether this will be enough.
Hayley McDowell – The Trade
Regulatory experts have agreed a proposed last-minute delegated act to redefine the systematic internaliser (SI) regime under MiFID II has left the industry adrift.

Buy-side anticipate unbundling compliance by year-end; Survey revealed 85% of asset managers expect to be compliant with unbundling by Q4 2017 or later.
Hayley McDowell – The Trade
The majority of buy-siders are confident on being compliant with MiFID II’s unbundling rules by the end of this year, according to research.

Closed-Door Talks Have Bank of Canada Concerned About Trust
Greg Quinn – Bloomberg
Staff outlined risks of social media leaks, privileged access; Internal study made recommendations to boost transparency
The Bank of Canada’s top policy makers spoke almost twice as often behind closed doors as they did in public over a three year span, according to an internal review that also said private speeches could undermine public trust.

RSRCHXchange survey reveals 85% of asset managers expect to comply with MiFID II rules in Q4 or later
RSRCHXchange via Mondovisione
Poll of 562 asset managers reveals that two weeks before the regulation enters law, 54% of funds still feel they don’t have enough information on research unbundling, indicating that more education needs to be done

ASIC commences consultation on proposed guidance on crowd-sourced funding
ASIC today released two consultation papers proposing guidance for public companies and intermediaries (i.e. crowd funding platform operators) to assist them in using the new crowd-sourced funding (CSF) regime commencing on 29 September 2017.

ASIC seeks better compliance with asset-holding requirements in funds management and custodial services
ASIC today released a report entitled ‘Review of compliance with asset holding requirements’. The report outlines ASIC’s findings following an extensive review of compliance by custodians and responsible entities of managed investment schemes with the asset holding requirements imposed by ASIC Regulatory Guide 133 Managed investments and custodial or depository services: Holding assets (RG 133).

Investing and Trading

Dollar five-year super-cycle is over: Barclays
Rises in U.S. interest rates will probably prop the dollar up over the next 18 months, but its multi-year run higher since 2012 looks to be over, strategists from British bank Barclays said in a note on Thursday.

Take a Look at the States Sending the Most Carbon Into the Air
Mark Chediak – Bloomberg
Texas is biggest carbon-dioxide emitter from power generation; California ranks near bottom based on emissions rates
A recent report distributed by a diverse group including Ceres, Bank of America Corp., the Natural Resources Defense Council and electricity suppliers Entergy Corp. and Exelon Corp. offers a state-by-state breakdown of carbon-dioxide emissions from power plants. Here are the highlights:

The Dirty Little Secret of ETFs Is a Selling Point for This Fund Veteran
Rachel Evans – Bloomberg
Securities lending acts as a hedge for new fund’s strategy; The practice offsets management fees, which hurt returns
Brad Lamensdorf is an unlikely whistle-blower on the inner workings of exchange-traded funds.

Your regular reminder that credit risk is above zero
Alexandra Scaggs – FT
Something odd is happening in the credit market, as UBS points out today: One narrow set of investment-grade bonds are yielding more than a group of junk bonds.


Nomura Chooses Frankfurt as EU Base After Brexit
Takahiko Hyuga – Bloomberg
Japanese rival Daiwa will also set up unit in German city; Fewer than 100 Nomura employees may transfer from London
Japan’s biggest brokerages are heading to Frankfurt.

Citi hires UBS banker as China head of corporate, investment banking: memo
Citigroup Inc (C.N) has appointed UBS Group AG (UBSG.S) senior China banker Jiang Guorong as its chairman and head of China corporate and investment banking, according to an internal memo seen by Reuters on Thursday.


China Will Be Part of a Popular Stock Index, Opening the Door to Foreign Money
Keith Bradsher and Alexandra Stevenson – NY Times
China’s effort to open its door to foreign investors has received a big push, as its stocks were accepted into a closely followed global index.

After MSCI verdict, still long wait for China’s full entry to global indexes
Michelle Price – Reuters
MSCI’s decision to add Chinese shares to a key benchmark is a major milestone, but investors say it will be a long and rocky road ahead before the might of the world’s second-largest economy is fully reflected in global indexes.

Australian banks furious after hit by new state tax in wake of federal levy
Jamie Freed – Reuters
An Australian state imposed a surprise tax on the country’s five biggest banks, a move that comes on top of a new $4.6 billion federal levy – prompting predictions that other states could follow suit and howls of outrage from the sector.

Beijing Is Investigating Some of China’s Top Overseas Deal Makers; Companies in question include Anbang, Fosun, HNA and Wanda
Lingling Wei – WSJ
China’s banking regulator has ordered the country’s commercial banks to investigate loans made to a group of companies that have aggressively invested overseas in recent years, according to people with knowledge of the matter.

The Saudi Shake-Up Has One Goal: Drag the Country Into Modern Era; The elevation of Mohammed bin Salman is a bet he can pull off a radical financial and economic transformation
Summer Said in Dubai, Justin Scheck and Michael Amon – WSJ
When Salman bin Abdulaziz became Saudi Arabia’s king two years ago, the country’s leadership appeared little different from how it had been for decades. The ruler and his designated successor were two of the country founder’s dozens of sons, a fractious fraternity that passed along power in an unbroken chain of conservative rule.

China has no choice but to walk financial tightrope; Beijing regulators are rightly trying to rein in shadow banking, but it carries risks
Diana Choyleva – FT
Just as brittle rivets are thought to have doomed the supposedly unsinkable Titanic, structural weakness in a little noticed corner of China’s seemingly indestructible financial system could be its undoing: some smaller participants in the money markets are at risk of a potentially catastrophic cash crunch.

China to investigate bank exposures after corporate buying spree
Lucy Hornby – FT
China’s banking regulator has ordered a probe into banks’ exposure to some of the country’s best connected and most acquisitive firms, as concerns grow over systemic risk posed by their buying spree.


The Brexit vote and UK markets one year on; Markets face fresh political and economic uncertainty 12 months after the country’s vote to leave the EU
Roger Blitz – FT
Markets reached a swift judgment after the UK’s vote for Brexit. Within 24 hours of the vote, sterling had plunged almost 10 per cent to a three-decade low, share prices sank and gilt yields slid. Here is a look at how the last 12 months unfolded and what will shape the next year.

Brexit One Year On: Keep Calm and Hedge The Pound
Jill Ward and Lucy Meakin – Bloomberg
British firms have proved innovative in year since referendum; Signs of slowdown are appearing as inflation weighs on growth
When Britons voted to leave the European Union a year ago, the managing director of PP Control & Automation, which makes electrical-control systems, was devastated.

Britain Still Believes in Fantasies on Brexit; The government of Theresa May has far less leverage in the talks than it is willing to acknowledge
Simon Nixon – WSJ
No one should have been surprised that the Brexit talks began this week with an immediate capitulation by the U.K. government over the sequence of topics to be treated. Brexit minister David Davis had boasted during the recent campaign that the European Union’s refusal to discuss a trade deal until sufficient progress had been made on settling Britain’s outstanding budget obligations and securing the rights of EU and British citizens would launch “the fight of the summer.” That was revealed to be empty bravado, given that the U.K. needs a deal far more than the EU does. Yet even now that Britain’s lack of leverage has been laid bare, an air of unreality remains about much of the Brexit debate.


Wall Street Journal fires reporter over alleged commercial ties; Newspaper says chief foreign affairs correspondent violated ethical guidelines
Shannon Bond in New York – FT
The Wall Street Journal has fired its chief foreign affairs correspondent for violating ethical guidelines following a report that alleged he was involved in commercial deals with a source including arms sales to foreign governments.

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