First Read

Futures For Kids Poker Night Ends With Win For Kids
By John J. Lothian

The big boys and girls were out for a night of fun playing poker for Futures For Kids in London last night and the winner was the kids.

First place in the tournament was a tie between Bill Templer and Richard Walker

The rest of the winners in order were: Richard Braham, Daniel Hirai, Doug Crawford, Rob Berry, Phil Roberts, James Biagioni, Alex Reynolds and Des Pec.

Sponsors of the event were Object Trading, Ancoa, Curve Global[[, [[Nasdaq, OSTC, CME Group and Morgan Stanley

About ~£7,000 was raised. Richard Walker asked Bill Templer, “Should we split it and donate the prizes to FFK?” which Bill accepted. So the real winner was the kids that Futures For Kids supports.

Well done people.


FIA Cares Great Chicago Steak Out- Individual Tickets are now available
Futures Industry Association
Individual tickets are now available for the Great Chicago Steak Out, benefiting the Greater Chicago Food Depository, at Expo 2016 being held on Thursday, October 20th, 2016 beginning at 6:30 p.m.

You can purchase individual tickets directly from the Greater Chicago Food Depository’s official Great Chicago Steak Out web page. **Please note that you may only purchase 4 individual tickets**

The FIA community has raised more than $3M over eight years as a part of the FIA Cares Expo Charity drive benefiting the Greater Chicago Food Depository. Thanks to our community’s generous efforts, the Greater Chicago Food Depository will be able to provide more than one million meals for men, women and children in need EACH YEAR. In the name of helping others, over 800 Expo delegates have come together for one night to give back to the community and to feast on a sampling of Chicago’s finest steakhouse selections.


Five tips for getting the most out of FIA Expo
3Points Communications
This year, Chicago’s FIA Expo is in mid-October rather than early November, which means it may have snuck up on you with its earlier-than-usual start. In preparation for next week, we’ve compiled a checklist that attendees can use to make sure they are ready for the futures industry’s biggest event of the year.

**JK: And don’t miss the free hot dog hour. Very big.


Future of Banking Looks Dark—Why That’s a Problem; Institutions’ sagging profitability poses wider threats to economic growth
Seven years since the global financial crisis, banks don’t look like a source of trouble. They’re making money and have thickened their buffers against bad loans, while extensive new rules have excised much of the risk from their operations.

**JK: It’s one thing to tame the banks, and another to whip them into submission. Just look at UBS’s trading floor:

MWE Europe 2016


America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs; The discontent driving Donald Trump’s campaign stems partly from the dashed employment promises of the late 1990s; $7-an-hour robots
By Jon Hilsenrath and Bob Davis – WSJ
The technology revolution has delivered Google searches, Facebook friends, iPhone apps, Twitter rants and shopping for almost anything on Amazon, all in the past decade and a half.

**JK: You could also watch economist Robert Gordon’s TED Talk, The death of innovation, the end of growth


World Federation of Exchanges publishes report into Emerging Market liquidity with Oliver Wyman
World Federation of Exchanges
The report, entitled Enhancing Liquidity in Emerging Market Exchanges, is designed to provide regulators and exchange operators in emerging markets with ideas around how to grow and enhance market liquidity – liquidity levers – and a potential framework for which of those levers may work best at which stage of market development.
The report identifies three key areas that exchanges and regulators can focus on to grow liquidity, with each area having a number of corresponding liquidity levers:


Nobel Prize in Literature Awarded to Bob Dylan; Prize awarded for creating “new poetic expressions within the great American song tradition”
U.S. singer-songwriter Bob Dylan was awarded the 2016 Nobel Prize in Literature, the Swedish Academy announced on Thursday.

**JK: Next year’s finalists will be Eminem and Snoop Dogg.


Wednesday’s Top Three
Yesterday’s top read pieces was not even close. Winner and still chairman emeritus is Leo Melamed, whose son produced a documentary about him, their relationship and futures called Futures Past. This trailer is a compelling watch. Second place goes to Treasury market plumbing in focus as JPMorgan pulls back. Third place went to Neurensic for its chilling blog post about liability in today’s regulatory structure, Trading Firms Beware: Those That House Spoofers Can Be Held Strictly Liable


MWE Europe 2016


Lead Stories

Pound slumps to 168-year low
Mehreen Kahn – Financial Times
By any measure, the pound is having a bad time. According to a trade-weighted index measuring sterling against a basket of its trading peers, the pound has now slumped to its lowest on record, stretching beyond the introduction of free-floating exchange rates in the 1970s and all the way back to the mid-19th century, according to data compiled by the Bank of England.

Tiny Bank-Beating Trading Firm Doesn’t Use Any Human Traders
John Detrixhe – Bloomberg
Self-learning machines help put XTX among top currency traders; Company is expanding into other markets, geographies
One of the world’s fastest-growing trading shops doesn’t have any traders.

Bridgewater employees evacuated, bomb threat unfounded
Lawrence Delevingne – Reuters
Bridgewater Associates, the largest hedge fund manager in the world, received a bomb threat on Wednesday and evacuated employees from its Westport, Connecticut, headquarters, the company said in an emailed statement.

Europe exchanges grab blocktrading share; Investors move shares to institutional-focused trading venues
by: Philip Stafford – FT
Europe’s two largest stock exchanges are making inroads in their attempts to persuade investors to move large blocks of shares on platforms that discourage high-frequency traders.

ICAP buys 70% stake in Abide Financial
by: Philip Stafford – FT
ICAP is stepping up its transformation into market infrastructure provision by purchasing the 70 per cent it did not own in Abide Financial, a Bristol-based trade reporting specialist.

One Measure of Investor Worry Just Hit Its Highest Level Ever
Joseph Ciolli – Bloomberg
Anxiety may have been hard to locate in the U.S. equity market before yesterday. But that didn’t mean it wasn’t there. One measure of expected turbulence, the relative cost of options that pay when stocks decline versus those that appreciate when they rise, jumped to the highest level ever recorded just before the S&P 500 Index buckled on Tuesday. Call it the new normal for investors conditioned to expect the worst when it comes to politics, the economy and corporate earnings.

Wells Fargo CEO Stumpf Quits in Fallout From Fake Accounts
Zeke Faux, Laura J Keller and Jennifer Surane – Bloomberg
John Stumpf, who led Wells Fargo & Co. through the financial crisis and built it into the world’s most valuable bank, stepped down as chief executive officer and chairman, bowing to public outcry over legions of accounts opened by his employees for customers who didn’t request them.

Fed Minutes Suggest Yellen Made the Difference in ‘Close Call’
Christopher Condon and Jeanna Smialek – Bloomberg
Divided in their views over the labor market, most Federal Reserve officials last month ultimately listened to Chair Janet Yellen’s argument for holding off on a rate hike, for now. “A growing number of committee members are pulling in the direction of hiking, so it’s becoming increasingly harder for Yellen to hold them back,” said Roberto Perli, partner at Cornerstone Macro LLC in Washington and a former Fed economist.

Mutual Funds Win Key Concessions on Liquidity Rules
Dave Michaels – WSJ
Mutual funds will soon face new regulations to reduce the risks of an investor exodus during a panic, though they have managed to win some concessions that will make the rules more flexible. The Securities and Exchange Commission is set to release the new rules Thursday, a key part of its plan to modernize supervision of the $15.7 trillion sector. The once staid business of pooling stocks and bonds has become more complex and risky, as funds adopt strategies that involve harder to sell securities, derivatives and leverage.

DRW Said to Hire From Tower, Goldman Sachs for Asian Business
By Andrea Tan and Matthew Leising – Bloomberg
Automated trading firm DRW Holdings LLC has hired Brook Teeter from rival Tower Research Capital LLC to run its Asian unit, according to people familiar with the matter. Chicago-based DRW has also recruited former Goldman Sachs Group Inc. managing director Mikhail Jirnov. Teeter, who is on gardening leave, will be based in Singapore when he starts in November, one of the people said. His LinkedIn profile shows him as Tower’s managing director for Asia from July 2013 to July this year. He was previously head of Getco Asia in Hong Kong, according to the site.

Brexit regret
The Economist
When Michael Gove, as justice secretary, was campaigning for Vote Leave ahead of the European Union referendum on June 23rd, he claimed that the people of Britain had “had enough of experts”, referring to the long list of countries and organisations that had warned that Britain would be better off remaining in the EU. New analysis from the British Election Study, polling more than 10,000 voters, has found that Mr Gove was partially right, at least among his supporters. Those who voted to Leave typically preferred the wisdom of ordinary people to that of experts.

Deutsche Bank News

Deutsche Bank fined for failings in equity research unit
Ben McLannahan – Financial Times
Deutsche Bank has suffered another bloody nose at the hands of US regulators, with a $9.5m fine for failings in its equity research department. The Securities and Exchange Commission said the Frankfurt-based bank had failed to keep proper controls over material non-public information generated by its research analysts, and also failed to properly preserve transcripts from its internal chat system which were sought by the SEC.

Deutsche Bank Said to Implement Hiring Freeze as CEO Cuts Costs
Aaron Kirchfeld, Jan-Henrik Foerster – Bloomberg
German lender said to tell unit COOs to stop external hires; Deutsche Bank hiring freeze comes amid cost cuts, legal woes
Deutsche Bank AG is implementing a companywide hiring freeze as Chief Executive Officer John Cryan seeks to lower costs and shore up investor confidence, according to people with knowledge with of the matter.

Exchanges, OTC and Clearing

Intercontinental Exchange Announces Approval of 5-for-1 Stock Split
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that its board of directors, through a designated dividend committee, declared a five-for-one stock split of ICE’s common stock in the form of a stock dividend. Stockholders of record as of the close of market on October 27, 2016 will receive four additional shares for each share of ICE common stock held on such record date. The new shares will be payable on November 3, 2016. ICE’s common stock is expected to begin trading on a split-adjusted basis on November 4, 2016.

Nasdaq Under Fire From High-Frequency Traders Over Data Service Plan
Alexander Osipovich – WSJ
Virtu Financial Inc., one of the world’s largest high-frequency trading firms, criticized a proposal by Nasdaq Inc. to roll out a new service that would boost costs for rapid direct access to stock market data. Virtu urged the Securities and Exchange Commission to not approve Nasdaq’s “Ultra” service, which would require subscribers to pay additional fees to obtain the fastest possible link to the exchange’s securities information processor, known as the SIP.

Hudson River Trading response to Chicago Stock Exchange plan signals new battle
Matt Turner – Business Insider
Another war of words looks to be developing on Wall Street. The Chicago Stock Exchange in August outlined plans to adopt what it calls a Liquidity Taking Access Delay, a 350-microsecond delay for those who trade against resting orders on the exchange. The Chicago Stock Exchange said in the filing that the LTAD was designed to neutralize high-speed traders engaged in latency arbitrage.

Re: Proposed Rule Change to Adopt the CHX Liquidity Taking Access Delay.
Virtu via SEC
Virtu Financial LLC is submitting this letter to share our views about the Proposed Rule Change to Adopt the CHX Liquidity Taking Access Delay (“LTAD Proposal”). In light of the continuing changes in our markets in recent months and the dynamic nature of market structure, we think it is important to consider the LTAD Proposal and other policy changes in the broader context of the US equity markets.

****SD: Short letter shorter – they’re for it.

Odd Lots: The Man Who Wants to Improve Stock Trading by Slowing It (PODCAST)
Katsuyama has racked up oceans of newspaper ink since being propelled into the public spotlight as the protagonist of Michael Lewis’s book on high-frequency trading, Flash Boys. The 38-year-old co-founder and chief executive of IEX, an exchange with a ‘speed bump’ designed to slow down lightning-fast traders on behalf of longer-term investors, won U.S. regulatory approval in June. In this special edition of Odd Lots, Katsuyama speaks with Bloomberg View Columnist Matt Levine about the next big steps in stock market structure.

HKEx names China commodity futures expert head of new China platform
by: Henry Sanderson – FT
Hong Kong Exchanges and Clearing has named Guo Xiaoli, a former general manager of the Zhengzhou Commodity Exchange, to lead its new commodity platform in southern China.

HKEX and SZSE kick off international roadshows for Shenzhen-Hong Kong Stock Connect
Hong Kong Exchanges and Clearing Limited (HKEX) and Shenzhen Stock Exchange (SZSE) today (Thursday) kicked off a series of international roadshows to promote Shenzhen-Hong Kong Stock Connect (Shenzhen Connect) with an event in Hong Kong.

ASX has updated its Cash Equities Clearing and Settlement Code of Practice (Code) to align with the set of Regulatory Expectations released today by the Council of Financial Regulators (CFR).

New Product Summary: Initial listing of Platinum/Palladium Spread Futures – Effective October 24, 2016
CME Group

Austrian derivatives: Trading at Eurex Exchange on 30 December 2016
The Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG decided to offer trading on 30 December 2016 in all Austrian equity derivatives and equity index derivatives.

TSX Ignite 2016 Live Event Series Visits Montréal on October 14
Toronto Stock Exchange (TSX) and TSX Venture Exchange continue this year’s TSX Ignite live event series in Montréal on Friday, October 14.


The markets have taught Theresa May a hard lesson on sovereignty; The British government will learn about the limits of control in an open economy
by: Martin Wolf – FT
Politicians propose; markets dispose. Last week began with a statement by Theresa May, the UK prime minister, of her plans for Brexit. The foreign currency markets responded by writing down the value of UK assets. The UK is determined to “take back control” of its fate. But formal sovereignty is not power. The UK government announces its intentions. The reaction of others determines results.

Investing and Trading

Index IDEA: FTSE Russell factor indexes show decline in momentum outside the US
FTSE Russell Blog
Momentum has had less of an influence in emerging and non-US developed markets in the last six months according to the FTSE Comprehensive Factor Indexes. The new indexes, introduced in 2015 and underlying a series of exchange traded funds (ETFs) offered by Deutsche Asset & Wealth Management, are designed to capture a broad set of five factors recognized as contributing to equity market performance; Momentum, Quality, Size, Value and Low Volatility.

Will Investors Drink Up New WSKY ETF?
Asjylyn Loder – WSJ
It’s bottoms-up on NYSE Arca today with the launch of the first exchange-traded fund pegged to booze stocks. Spirited Funds/ETFMG Whiskey and Spirits ETF – trading as WSKY — will invest in companies that sell liquor, such Brown-Forman, whose brands include top shelf bourbon Woodford Reserve and rail staple Jack Daniels, and Diageo PLC, which owns Tanqueray, Johnnie Walker and Captain Morgan.

We should all fear failing the savings marshmallow test; The politicians have raided the tax relief tuck shop — and soon they may be back for more
by: Claer Barrett – FT
Have you heard of the marshmallow test? You give a child a marshmallow. If they don’t eat it straight away they get a second one. A lesson in delayed gratification, evidence suggests children with the willpower to wait for the second sweetie tend to be smarter, more successful and (ironically) thinner in later life.

Pimco Turns Defensive as Fed Considers Rate Move Relatively Soon
Wes Goodman – Bloomberg
Total Return Fund boosts mortgage debt to 55% of total assets; Daiwa SB predicts yield curves will steepen in U.S., globally
Pacific Investment Management Co., which runs the world’s biggest actively managed bond fund, says it’s time to reduce risk.


Wells Fargo CEO John Stumpf Steps Down; President Timothy Sloan to replace Stumpf, under fire after bank’s sales-tactics scandal
Wells Fargo & Co. Chairman and Chief Executive John Stumpf, under fire for the bank’s sales-tactics scandal and his own handling of its fallout, is stepping down from both roles, effective immediately, the bank said Wednesday.

Wells Fargo Chairman, CEO John Stumpf Retires; Board of Directors Elects Tim Sloan CEO, Director; Appoints Lead Director Stephen Sanger Chairman, Director Elizabeth Duke Vice Chair
Well Fargo
Wells Fargo & Company (NYSE:WFC) announced today that Chairman and Chief Executive Officer John Stumpf has informed the Company’s Board of Directors that he is retiring from the Company and the Board, effective immediately. The Board has elected Tim Sloan, the Company’s President and Chief Operating Officer, to succeed him as CEO, and Stephen Sanger, its Lead Director, to serve as the Board’s non-executive Chairman, and independent director Elizabeth Duke to serve as Vice Chair. Sloan also was elected to the Board.

Wells Fargo Still Needs to Admit Its Fundamental Error
Aaron Back – WSJ
Wells Fargo’s famous stagecoach has been stuck in mud since its account-sales scandal broke last month. With the resignation of Chief Executive John Stumpf, the bank has a chance to get back on track. By replacing Mr. Stumpf with President and Chief Operating Officer Timothy Sloan, the bank appears to be striking the right balance between fresh thinking and reassuring continuity. Mr. Sloan is a Wells Fargo stalwart, having spent 29 years there. But Mr. Sloan has spent most of his career on the commercial side of the business, with little direct oversight over the troubled retail operations.

At Wells Fargo, Complaints About Fraudulent Accounts Since 2005
Stacy Cowley – NY Times
In 2005, the year John G. Stumpf became president of Wells Fargo, Julie Tishkoff, then an administrative assistant at the bank, wrote to the company’s human resources department about what she had seen: employees opening sham accounts, forging customer signatures and sending out unsolicited credit cards.

Snapchat Win Helps Morgan Stanley Evoke Its Facebook Glory Days
Alex Barinka and Sarah Frier – Bloomberg
Morgan Stanley’s IPO bankers can add a coveted notch to their belts. The New York-based bank nabbed the top underwriter role on Snapchat’s planned initial public offering, which could come to market as soon as March, according to people familiar with the matter. The mandate will be Morgan Stanley’s biggest advisory role on a technology IPO since it led Facebook Inc.’s tumultuous listing more than four years ago.

Ex-JPMorgan Executive’s Identity-Crisis Case Makes Top Court
Suzi Ring, Jeremy Hodges – Bloomberg
Regulator appealed Achilles Macris case in U.K. Supreme Court; Case will set bar on how FCA identifies traders in settlements
A years-long battle between a U.K. regulator and the banking industry over the identification of traders in sanction notices came to a head in London’s top court Thursday, in a crucial hearing for the future of the agency’s enforcement cases.


America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs
Jon Hilsenrath and Bob Davis – WSJ
The technology revolution has delivered Google searches, Facebook friends, iPhone apps, Twitter rants and shopping for almost anything on Amazon, all in the past decade and a half. What it hasn’t delivered are many jobs. Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012.

Google, Facebook to lay high-speed internet cable from L.A. to Hong Kong
By Drew FitzGerald – MarketWatch
Hong Kong is a major regional network hub outside China’s internet firewall.
Facebook Inc. and Google owner Alphabet Inc. GOOG, will join with a little-known Chinese company to lay an ultrafast internet cable between Los Angeles and Hong Kong, the latest sign of its U.S. backers’ insatiable appetite for bandwidth.


SEC to finalize liquidity rules for funds, with some changes
Lisa Lambert and Trevor Hunnicutt – Reuters
Mutual funds will have to show they have enough liquidity to cover a rush of redemptions from investors under rules that the top U.S. securities regulator is set to approve on Thursday. The rules have stirred up the $18 trillion U.S. open-end fund market since they were first proposed a year ago. This week the Securities and Exchange Commission indicated it is responding to some concerns and altering the proposal ahead of Thursday’s final vote.

CFTC Charges Utah Resident Kimball Parker and Florida Resident Timothy Baggett with Fraud and Other Violations in Connection with Offering and Selling a Futures Trading System
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the District of Utah, charging Defendants Kimball Parker of Lehi, Utah, and his Utah company, MakeYourFuture, LLC (MYF), and Timothy Baggett of Lakeland, Florida, and his Florida companies, Changes Worldwide LLC and Changes Trading LLC, with fraud and failure to make required advertising disclosures.

Regulator defends tough bank rules at MEP grilling
by: Jim Brunsden – FT
The top official of the Basel committee, the group that sets global banking standards, faced a grilling from EU lawmakers on Wednesday over concerns that controversial plans to toughen capital rules amount to an attack on the competitiveness of Europe’s financial sector.


Asia Fixed Income: Chinese Bond Market Was Slow in 2016
Michele Leung – S&P Indexology
The performance of China’s fixed income market has lagged other Asian countries this year. According to the S&P China Bond Index, the fixed income market delivered a YTD total return of 3.57% as of Oct. 11, 2016. China was one of the top three outperforming countries in the S&P Pan Asia Bond Index last year; the other two countries measured by the index, Indonesia and India, increased 17% and 9% YTD, respectively. Despite China opening up its bond market to offshore market participants, the country still underperformed, and in February there was a short rally following the Chinese Interbank Bond Market (CIMB) announcement, yet the gain was reversed in April.


Texas, Once a Star, Becomes a Drag on the U.S. Economy; Since the collapse in oil prices, jobs are lost and growth stagnant; leaving Houston for Atlanta
Texas helped lead the U.S. out of recession, thanks in part to the shale drilling revolution. But after more than two years of slumping oil prices, the state is now a sore spot for the national economy.

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