Rise of MarketAxess mirrors demise of traders on Wall Street; How ETFs Swallowed the Stock Market

Aug 30, 2019

First Read

Hits & Takes
JLN Staff

Monday is Labor Day in the U.S. and markets will be closed. There will also be no JLN on Monday. We wish you a safe, healthy and happy weekend with family and friends.~JJL

MarketAxess Holdings Inc. has a market cap of $14.81 billion today, up from $9.1 billion at the end of 2018.~JK

The CME Group is taking registration for its University Trading Challenge. This is the chance to try your trading skills against teams from other schools. Spread the word to your college-attending friends around the world~JJL

Do you want to know where DRW is recruiting on campus? Check out the event schedule HERE.~JJL

Mark Rzepczynski has an article titled ‘Negative Interest rates as “Financial Vandalism.“~JJL

An ICE disciplinary notice hit the tape: Citigroup Global Markets was fined $7,500 for inaccurate reporting of open interest in No. 11 sugar futures. ~SD

Bloomberg reported Apple plans to unveil their latest iPhones at a Sept. 10 launch event.~JJL

For those awaiting the Aramco IPO on the Saudi Stock Exchange, the trading, market surveillance and post trade technology is supported by Nasdaq. Nasdaq signed a deal on the post-trade infrastructure with the exchange in 2017.~JK


Expect the Unexpected
MarketsWiki Education
In this video from MarketsWiki Education’s World of Opportunity event in Chicago, ABN AMRO Clearing Chicago CFO Mike Nowak talks about rolling with the punches – from changing careers due to 9/11 to learning about derivatives on the fly on the trading floor.
Watch the video »


New Study Looks at Impact of ESG Exclusions Across Regions
In May, STOXX introduced a fully-fledged ESG-X Index family comprised of versions of established benchmarks that exclude companies based on standard environmental, social and governance (ESG) principles.

****** Exclusions are the bane of ESG.~JJL


Picking a Bank CEO in Europe. How Hard Can it Be?; Very, and boards need to pay more attention to grooming successors.
Elisa Martinuzzi – Bloomberg
Picking a new CEO is one of the most important decisions a board can take, yet one that Europe’s banks appear to be intent on flubbing. Lenders are struggling to find successors for the current crop of leaders.

*****Pick one, and then six months later pick another one. How hard is that?~JJL


Fast-food restaurants in America are losing 100% of workers every year
Eric Rosenbaum – CNBC
If you think it sounds like a mathematical impossibility for a company to lose more than 100% of its workers every year, you’ve never worked in the fast-food industry. At fast-food restaurants, losing 100% of employees ó and then losing still more of the employees hired to replace those workers ó is a common, and worsening, labor problem.
The case of Panera Bread shows just how deep the employee turnover issue is for restaurant companies. Panera loses close to 100% of workers every year, and by fast-food industry standards that’s considered good.

**** Come work for JLN. Our turnover is less than that (waaay less).~JB


The British economy is not ready for Brexit; Even if the disruption is contained, it could cause a meaningful drop in output
Chris Giles – FT
Barring a rapid revolt from MPs opposed to crashing out of the EU, a hard Brexit is now the most likely outcome at the end of October. To get a deal with Brussels, UK prime minister Boris Johnson would need to devise practical and workable alternative arrangements to normal border controls in Ireland.

*****Are we ever ready for disaster, even man-made ones?~JJL


Thursday’s Top Three
Our top story of the day on Thursday was Huge hoard of Norman coins reveals medieval tax scam. Second was MarketWatch’s There’s a ‘bubble’ in passive investing, says investor made famous by ‘Big Short’. And third was the Philadelphia Inquirer’s Hedge fund CEO arrested at her Rittenhouse Square condo, charged in $63 million Ponzi. scheme


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CryptoMarketsWiki Coin of the Week: Bitcoin (BTC)

After holding steady for weeks above $10,000, bitcoin crashed $600 this week… in 30 minutes. Predictably, this triggered a significant dip in the price of each of the top 20 altcoins in the market. Since then, bitcoin has remained above $9,500.

Lead Stories

Rise of MarketAxess mirrors demise of traders on Wall Street; Electronic bond-trading platform has delivered better returns than Netflix or Amazon
Joe Rennison – FT
The news that MarketAxess was about to join an inner sanctum of corporate America stunned Rick McVey. The chief executive of the electronic bond-trading platform had just returned to his office in Hudson Yards in New York after a late-afternoon meeting, to find that the company had qualified for the S&P 500 index of the biggest US companies.

**Also see The Wall Street Journal’s August 18, 2019 piece A Hot S&P 500 Stock Is All About Bonds

How ETFs Swallowed the Stock Market; Exchange-traded funds and indexes make tactical asset moves easier and cheaper
James Mackintosh – WSJ
ETFs are eating the stock market, and investors should be delighted. Everyone knows that exchange-traded funds have soared in size over the past decade, with the biggest now valued at $258 billion. But where ETFs have really excelled is in grabbing trading, with far more trading now in several of the big ETFs than in the largest members of the indexes to which they are linked.

LSEG Turquoise increases rebates amid declining lit MTF landscape; Rebates on Turquoise will be significantly increased in September as the MTF looks to attract broker smart order routers.
Hayley McDowell – The Trade
The London Stock Exchange Group’s (LSEG) multilateral trading facility (MTF) Turquoise has made a series of substantial changes to its rebates structure, in the wake of declining activity across lit trading venues in Europe.

Aramco Proposes Two-Stage IPO, Shunning London, Hong Kong
Summer Said, Benoit Faucon, Ben Dummett and Julie Steinberg – WSJ
Saudi Arabian Oil Co. is considering a plan to split the world’s largest IPO into two stages, debuting a portion of its shares on the Saudi stock exchange later this year, and following up with an international offering in 2020 or 2021, according to people familiar with the plans. The company is leaning toward Tokyo as the venue for the second phase of its proposed plan, the advisers and officials said, as political uncertainty in the U.K. and China reduces the appeal of London and Hong Kong’s markets.

Barclays in Talks to Sell Automated Options Business to GTS
Viren Vaghela, Nick Baker and Stefania Spezzati, Bloomberg via Yahoo Finance
Barclays Plc is in talks to sell its New York-based automated options trading business to electronic market maker GTS. Negotiations are at an advanced stage, but there’s no assurance a deal will be struck, according to people familiar with the matter who asked not to be identified discussing private talks. Barclays representatives and a GTS spokesman declined to comment. Known internally as Automated Volatility Trading, the business buys and sells options to offer liquidity in that market. Its technology and equities heritage make it a natural fit for GTS, which has become one of the largest market makers at the New York Stock Exchange.

JP Morgan to launch electronic currency trading platform in Singapore
Hayley McDowell – The Trade
JP Morgan is set to launch an electronic FX trading and pricing engine in Singapore early next year, following in the footsteps of several other institutions that are expanding FX operations in the region

UBS Elevates More Women Bankers in Push to Diversify Leadership
Steven Arons – Bloomberg
Suni Harford, Sabine Keller-Busse take on top roles in revamp; Bankers take on responsibilities from departing Ulrich Koerner
UBS Group AG promoted female bankers to key positions at the top of world’s largest wealth manager, broadening the pool of potential candidates to eventually succeed Chief Executive Officer Sergio Ermotti and bringing more diversity to the board.

A Window on Index Liquidity: Volumes Linked to S&P DJI Indices
Chris Bennett, Tim Edwards, Sherifa Issifu and Craig Lazzara – S&P Dow Jones Indices
A robust and active trading ecosystem benefits asset owners and investment managers by fostering transparency, market efficiency, and investor confidence. This paper document s, for the first time, the extent and nature of that ecosystem for indices produced by S&P Dow Jones Indices. The results offer a window into trading around certain market benchmarks, providing a new perspective on the use of indices as the basis for active and passive investment strategies.

U.S. Chamber Calls for Halting China Tariffs and Resuming Talks
Mark Niquette – Bloomberg
China and the U.S. have duties taking effect starting Sunday; Chamber’s Donohue says trade war is putting economy at risk
The largest U.S. business lobby urged President Donald Trump and Chinese President Xi Jinping to withdraw new tariffs starting Sunday and return to talks in good faith to end an escalating trade war that is threatening the economy.

Throwing in the Towel on US Equities? UBS or Credit Suisse Could Be Next…
Paul Rowady – Alphacution Research Conservatory
If we were to take Deutsche Bank Securities, Inc. (DBSI) as a guide, wherein 18-year lows of measures like gross cash equities – which is the sum of equities owned and equities “sold but not yet purchased” – were used to represent relative strength or weakness of the underlying business, we would then need to put our friends at UBS and Credit Suisse in the same category. For each of DBSI, Credit Suisse Securities (USA), LLC (CSS) and UBS Securities, LLC (UBSS) – all three the US broker-dealer arm of a foreign bulge bracket bank – gross cash equities levels sit at 18-year lows as of December 31, 2018.

SACCR vs CEM Comparisons
Chris Barnes – Clarus Financial Technology
Welcome to my 250th blog for Clarus! That is quite a milestone – I’ve now inflicted nearly a quarter of a million words on our readers. I hope the vast majority have been useful.
To celebrate, you will have to suffer a bit of true geekiness. Today we’ll take a look at Regulatory Capital, which I fully admit is not everyone’s cup of tea… still, I will give you some easy to remember sound-bites at the end.

The Man Who Got Economists to Take Climate Nightmares Seriously
Eric Roston – Bloomberg
What if climate change turns out to be worse than we think? That anxiety is now commonplace, but a decade ago it took an influential paper by a Harvard professor to convince the insular world of climate economists to focus more of their attention on worst-case scenarios.

Exchanges, OTC and Clearing

Swiss Life joins Eurex Clearing as direct member
Bennett Voyles – MarketVoice
With the recent addition of three customers and two major European banks to its ISA Direct program this summer, Eurex Clearing has made important progress in standing up the direct membership model it first introduced in 2016.
As market regulators have pushed firms with large derivatives exposures to put their trades through a central counterparty, banking regulators have required banks to set aside more capital for the risks they take when clearing derivatives. As a result, some banks have pulled back from providing clearing services to clients.

SGX named Asia’s Best FX Exchange and Clearing House by FX Week for second consecutive year; Awards based on voting by FX and money-market professionals
Singapore Exchange (SGX) has retained its “Best FX Exchange in Asia” and “Best FX Clearing House in Asia” accolades at the FX Week Asia Awards 2019, following voting by foreign exchange and money-market professionals.

NYSE, MIAX and Cboe Exchanges’ Proposals to Amend ORF
SIFMA provides comments to the Securities and Exchange Commission (SEC) on NYSE, MIAX and Cboe exchange family rule proposals which pertain to ORF rate changes which were effective August 1, 2019.

Eurex Clearing connects to Capitalab for compression
Louisa Chender – Global Investor Group
Eurex Clearing is introducing Capitalab as an additional compression service provider

SR-NASDAQ-2019-069 – Proposal to modify the manner in which it calculates volume, liquidity and quoting thresholds applicable to billing on the Exchange in relation to a systems issue experienced by SIAC on August 12, 2019, which impacted trade and quote dissemination across all markets.
The Nasdaq Stock Market LLC, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b- 4 thereunder, is filing with the Securities and Exchange Commission a proposal to modify the manner in which it calculates volume, liquidity and quoting thresholds applicable to billing on the Exchange in relation to a systems issue experienced by SIAC on August 12, 2019, which impacted trade and quote dissemination across all markets.


Introducing FCG Oasys
FCG, the Nordic Risk and Compliance market leader, today announces the release of FCG Oasys, a system for active management of outsourcing arrangements in accordance with EBA (European Banking Authority) Guidelines on outsourcing arrangements entering into force the 30th of September 2019.

Market Data & Market Data Solutions – The Definitive Guide
When a company, contract or instrument becomes a tradable entity on a stock exchange the amount of data associated with that entity grows exponentially. This data can be grouped into different categories of data, such as reference data, fundamental data and market data.

How to Build an AI Ethics Committee; New road map provides guidelines for starting an ethics committee for artificial-intelligence and data concerns
Jared Council – WSJ
A new guidebook aims to help organizations set up data and artificial-intelligence ethics committees and better deal with the ethical issues associated with the technology.


Alan Howard-backed firm plots $1bn crypto venture; New vehicle aims to lure investors attracted by returns but put off by poor governance
Laurence Fletcher – FT
A firm owned by billionaire trader Alan Howard is planning to launch a $1bn venture that will put money in a range of cryptocurrency hedge funds, aiming to capitalise on a dramatic revival in the sector this year.

SEC Settles Charges With Crypto Token Issuers Accused of Fraud
Nikhilesh De – Coindesk
The U.S. Securities and Exchange Commission (SEC) settled charges with crypto exchange Bitqyck and its founders, alleging that they committed fraud with two different token sales.

The bitcoin price can finally be understood
Jemima Kelly – Financial Times
We thought we’d seen the best chart that would ever be made in cryptoland when Imperial College London professor Andrei Kirilenko gave us his crypto periodic table last year. But as it turns out, we were wrong.

India’s efforts to stifle cryptocurrencies could be doomed to fail; Government’s stance seems at odds with policy to embrace tech that can digitise the economy
Benjamin Parkin – FT
Cryptocurrency enthusiasts in India are a beleaguered bunch. At the height of a crypto craze early last year, about 5m Indians traded the virtual currencies in about two dozen exchanges, participating in a burgeoning market worth billions of dollars.

Top 10 Cryptocurrencies Now Trading Below 200-Day Price Averages
Sebastian Sinclair – Coindesk
Bitcoin now stands alone in the top 10 cryptocurrencies by market value at CoinMarketCap, with the rest having fallen below a key long-term moving average. The top 10 cryptocurrencies by market value, ether (ETH), XRP, bitcoin cash (BCH), litecoin (LTC), binance coin (BNB), EOS, bitcoin SV (BSV) and stellar (XLM), have now all closed firmly beneath their 200-period moving average (MA) on the daily chart.

UN Official: Crypto Makes Policing Child Trafficking ‘Exceptionally Difficult’
Daniel Kuhn – Coindesk
A top United Nations (UN) official said cryptocurrencies are making international efforts to combat terrorist financing, money laundering and cyber-crime “exceptionally difficult.” Neil Walsh, chief of the Cybercrime and Anti-Money Laundering arm of the UN’s Office on Drugs and Crime, said that the anonymizing and pseudo-anonymizing attributes of cryptocurrencies provide a “new layer of secrecy that favors the criminals,” when speaking to the Australian Broadcasting Corporation’s Linda Mottram.

Binance: Venus Project Will Court Regulators, Avoid Facebook’s Mistakes
Jack Martin – Cointelegraph
Cryptocurrency exchange Binance has said that it will learn from the regulatory issues that have plagued Facebook’s proposed Libra digital currency. In an interview, Aug 29, Binance co-founder He Yi claimed that the company will engage with regulators from day one regarding its Venus stablecoin project. He also confirmed previous rumors that Venus will be primarily geared towards non-Western countries.

Binance Funds 40 Developers to Build Open-Source Crypto Software
Daniel Kuhn – Coindesk
Malta-based crypto exchange Binance wants to spur greater research in open-source blockchain development.

Capital One Hacker ‘Breached 30 Organizations And Mined Cryptocurrency,’ Claims DOJ
Thomas Brewster – Forbes
Former Amazon employee Paige Thompson has been accused of not only hacking Capital One, but another 30 companies and in some cases using their servers to mine cryptocurrency.

China’s Digital Currency Will Be Two-Tiered, Replace Cash: Binance
William Foxley – Coindesk
A new research report from crypto exchange Binance says China’s digital currency will most likely be a two-tiered system replacing notes and coins in circulation. The report, issued yesterday, claims the People’s Bank of China (PBOC) central bank digital currency (CBDC) will be backed 1:1 by renminbi fiat as well as follow a two-tiered structured system with the bank, commercial banks, and retail market participants.

Scammers Target Canadian Bitcoin ATM Users With ‘Out of Order’ Sign
Jack Martin – Cointelegraph
Fraudsters in Winnipeg, Canada, have targeted Bitcoin ATM users in the city by simply sticking a poster on the machine. Police issued a warning on Aug. 29 that following the instructions on the poster will lead to an irretrievable loss of their Bitcoin.

Terrorist groups using Telegram to raise funds via cryptocurrencies – Report
The Block Crypto
Terrorist groups such as ISIS, Al-Qaeda and Hamas are using social media platforms, including Telegram, to raise funds via cryptocurrencies, according to new research.

Why Tether Volume Is At All-Time Highs
Leigh Cuen – Coindesk
A year after China banned local fiat on-ramps for crypto exchanges, Chinese traders continue to drive the market forward by using the dollar-pegged stablecoin tether (USDT). “Crypto trading businesses are restricted from accessing banking services in China, but they are thriving nonetheless,” Dragonfly Capital Partners co-founder Alexander Pack told CoinDesk. Traders generally work around such banking restrictions by using stablecoins.

Japan’s Coincheck Crypto Exchange Reduces Leverage by 20%
William Suberg – Cointelegraph
Japanese cryptocurrency exchange Coincheck has announced it is reducing the scope of its leveraged trading options to comply with local rules. In a blog post on Aug. 30, officials said they were reducing the size of leverage available for margin traders from five times to four times.

US-China Trade War Driving Retail Investors to Bitcoin, Says EToro
Marie Huillet – Cointelegraph
Financial analysts say a growing number of retail investors are betting on Bitcoin (BTC) as a hedge against macroeconomic turbulence during the protracted United States-China trade war. The London Economic reported the news on Aug. 29, citing data from eToro, a United Kingdom-based multi-asset investment platform and social network.


How central bankers can survive populist attacks; Rate-setters should remain calm and tell the unvarnished truth
The editorial board – FT
Central bankers are under fire. Donald Trump has branded Federal Reserve chair Jay Powell an “enemy” for running US monetary policy too tight for the president’s liking. Some British MPs have attacked the governor of the Bank of England Mark Carney for perceived opposition to Brexit, while Urjit Patel, the governor of the Reserve Bank of India, resigned last year after clashing with Narendra Modi’s government. Matteo Salvini, head of the Italian far-right League, has called for the Bank of Italy to be scrapped completely.

Why stop at parliament? Let’s get rid of the whole government; A timeout will send a clear message to the world: Britain has not gone mad, we’re just drunk
Henry Mance – FT
History is one damn thing after another; British politics is lots of damn things all at once. As a BBC journalist helpfully explained in the run-up to the Iraq war: “It’s like a complicated game of bluff, except it’s not a game and they’re not bluffing.”

‘We don’t work for you’: Fox News’s Neil Cavuto rebukes Trump for slamming network
Allyson Chiu – Washington Post
Fox News host Neil Cavuto delivered a scorching rebuke on Thursday to President Trump’s recent criticism that the cable network “isn’t working for us anymore,” and called out his tenuous relationship with the media.

Trump Gives Businesses Deregulation Whether They Want It or Not
Jennifer A Dlouhy – Bloomberg
Deregulatory zeal sometimes draws ire of regulated industries; Supporters say president’s moves are unleashing U.S. economy
Donald Trump campaigned on a promise to ease the grip of environmental rules he said were throttling businesses. But time and again, his deregulatory moves as president have drawn the ire of the very companies that were expected to benefit.

Trump Tax Returns Case Won’t Be Fast-Tracked, U.S. Judge Rules
Andrew M Harris – Bloomberg
House Democrats’ lawsuit seeking to quickly compel the U.S. Treasury Department and Internal Revenue Service to hand over President Donald Trump’s tax returns for the past six years won’t be decided any faster than any ordinary case, the federal judge hearing the dispute has ruled.


SEC Shuts Down $300 Million Fraud Perpetrated by San Diego Company and Its Principal
The Securities and Exchange Commission today announced it has filed charges and obtained a consented-to asset freeze against San Diego-based ANI Development LLC, its principal, Gina Champion-Cain, and a relief defendant, for operating a multi-year $300 million scheme that defrauded approximately 50 retail investors.
According to the SEC’s complaint, beginning in 2012, defendants fraudulently raised hundreds of millions of dollars from investors by claiming to offer investors an opportunity to make short-term, high-interest loans to parties seeking to acquire California alcohol licenses.

Privacy fears slow spread of UK-style data-sharing to combat money laundering
Dominic O’Neill – Euromoney Magazine
European banks are ramping up spending on the fight against financial crime, after a wave of money-laundering scandals on the continent.
However, industry insiders betray little optimism about the impact it will have on crime, let alone on banks’ reputations.

SEC Investor Advisory Committee to Meet on Sept. 19
The Securities and Exchange Commission’s Investor Advisory Committee will hold a public meeting on Sept. 19.The meeting will begin at 9:30 a.m. in the Multipurpose Room at SEC headquarters at 100 F Street, N.E., Washington, D.C. and is open to the public. The meeting will be webcast live and archived on the committee’s website for later viewing.

SEC Charges Dallas Company and its Founders With Defrauding Investors in Unregistered Offering and Operating Unregistered Digital Asset Exchange
The Securities and Exchange Commission today announced settled charges with Bitqyck Inc. and its founders, who allegedly defrauded investors in securities offerings of two digital assets, Bitqy and BitqyM, and operated an unregistered exchange to permit trading in one of them, a digital token called Bitqy.

SEC Awards More Than $1.8 Million to Whistleblower
The Securities and Exchange Commission today announced an award of more than $1.8 million to a whistleblower whose information and assistance were critically important to the success of an enforcement action involving misconduct committed overseas.

SEC Charges Private Lender and CEO with Fraudulent Mismarking Scheme
The Securities and Exchange Commission today charged Live Well Financial, Inc. and its CEO, Michael Hild, both of Richmond, Va., with perpetuating a multi-million dollar bond mismarking scheme against Live Well’s short-term lenders. The complaint also charges Live Well’s CFO, Eric Rohr, and Executive Vice President, Darren Stumberger, both of whom consented to partial judgments against them.

SEC Charges Adviser Firm and Its Principals With Defrauding Retired NFL Players
The Securities and Exchange Commission today charged a Tallahassee-based investment adviser firm and its two former principals with defrauding investors, most of whom were retired NFL players who had joined a class-action lawsuit against the league claiming they suffered brain injuries as a result of concussions.

Online publishing company and former director found liable for misleading and deceptive statements about mimicking the Future Fund
The Federal Court of Australia has found an AFSL holder and its former director made misleading and deceptive statements about an investment strategy targeting retired investors and investors approaching retirement, said to mimic the performance of the Australian Government’s Future Fund.

ASIC remakes ‘sunsetting’ class order facilitating the offer of share and interest purchase plans
ASIC has remade the relief in Class Order [CO 09/425], which was due to sunset on 1 October 2019. The new instrument, ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547, provides ASX-listed issuers of shares and interests under purchase plans with relief from the requirement to prepare a prospectus or Product Disclosure Statement if certain conditions are met.

After PPI, what could be the next banking mis-selling scandal?; Claims management companies are switching their attention to payday loans, investments and pensions
Nicholas Megaw, – FT
When Matthew started working for one of the UK’s biggest banks in the late 1990s, he didn’t think there was anything wrong with selling payment protection insurance. Soon, the pressure to sell policies to people who didn’t need, want or understand the cover they were signing up for made him feel ill.

Investing and Trading

Oil and Gas Bankruptcies Grow as Investors Lose Appetite for Shale; Smaller drillers, which account for sizable part of U.S. oil production, are struggling to pay off hefty debt burdens
Rebecca Elliott and Christopher M. Matthews – WSJ
Bankruptcies are rising in the U.S. oil patch as Wall Street’s disaffection with shale companies reverberates through the industry.

Short-sellers eye EU carbon market in anticipation of no-deal Brexit; Price of one credit has slid since Boris Johnson became UK prime minister
Nikou Asgari – FT
Speculators are hoping to reap a windfall by shorting the EU carbon market as traders bet that prices will be hit in the event of a no-deal Brexit.

How markets became curiouser and curiouser in August; Investors close out a month that set records for low bond yields and signalled trouble ahead
Joe Rennison, Colby Smith and Richard Henderson – FT
Financial markets “stepped through the looking glass” in August, challenging previously unassailable investment beliefs and signalling a profound unease about the future of the global economy.

Lagarde’s IMF legacy holds clues to her ECB presidency; French appointee’s record rests on political savvy and Argentina’s $57bn bailout
James Politi – FT
When Emmanuel Macron offered Christine Lagarde the presidency of the European Central Bank on the sidelines of the G20 summit in Osaka in late June, she responded with a question: was Angela Merkel on board?

ECB Buying Equities for Stimulus Isn’t Option, Nowotny Says
Jana Randow and Boris Groendahl – Bloomberg
Austrian governor sees room for tweaks of existing tools; Nowotny retires Saturday, will be replaced by Robert Holzmann
Adding equity purchases to the European Central Bank’s monetary-policy mix isn’t a realistic option, according to outgoing Governing Council member Ewald Nowotny.

Month of bond market milestones – How low can you go?
Dhara Ranasinghe, Ritvik Carvalho, Tom Arnold – Reuters
August has turned out to be another month of milestones for bond markets as an escalating trade conflict fans recession fears, pushing borrowing costs deeper and deeper into negative territory.

The Stock Market Has Become a Very Liberal Place; Left-leaning behavior by publicly traded companies is being rewarded by investors.
Jared Dillian – Bloomberg
Wall Street was a very conservative place politically when I started working in the capital markets in 1999, but it seems to have lurched to the left lately. It’s not only that many of the people who work there have becoming more liberal, but more importantly, left-leaning behavior by publicly traded companies is being rewarded by the stock market.


Ray Dalio’s Pure Alpha Fund Is Down 6% This Year
Hema Parmar and Katia Porzecanski – Bloomberg
The macro-focused Pure Alpha fund is down 6% this year; Bridgewater’s risk-parity All Weather fund is a bright spot
The flagship fund at Bridgewater Associates is missing out on the rebound that some macro managers are enjoying this year. The Pure Alpha fund at Ray Dalio’s firm has tumbled about 6% through Aug. 23. The losses were fueled by bearish wagers on global interest rates, according to a person familiar with the matter. The fund, which bets on macroeconomic trends, is trailing the 13% return for the MSCI World Index. A more levered version of the flagship fund, Pure Alpha II, was down about 9% in that time.

The Real Bubble Has Always Been in Active Management
Josh Brown – The Reformed Broker
Michael Burry joins the chorus of people referring to indexing and passive investing as a bubble. It’s not his main point – which is that value small caps are being ignored, which is true – but it’s a point we now hear tossed off on a daily basis as casually and nonchalantly as though the speaker were simply saying that water is wet or LeBron James is good at basketball. Most of the people referring to passive investing as a bubble have not accurately described the way in which it represents a bubble. What they’re really saying is that it is popular. So is shopping online and using Instagram and eating Mexican food. These things aren’t “bubbles.”

UBS and HSBC Robots Push Into Bond Sales Frontier
Katie Linsell – Bloomberg
UBS’s Strategic Development Lab designed algorithm for sales; HSBC working on bot to send trade suggestions to clients
UBS Group AG and HSBC Holdings Plc are bringing robots into bond sales, a corner of banking still considered by many to be off limits to the onward march of automation.

Swedbank CEO Defends Client Privacy Amid Dirty-Money Probes
Hanna Hoikkala – Bloomberg
The new chief executive officer of Swedbank AB says he’s all for transparency, after his predecessor misled the public about money laundering and was fired. But he also made clear he won’t do anything to diminish client privacy.

BNP Paribas plans bid for Deutsche Bank’s equity derivatives
French lender BNP Paribas plans to bid for Deutsche Bank’s equity derivatives book and is hopeful it can beat off rival bidders to secure a deal in the next few weeks, according to sources familiar with the matter.


Argentina is in default, says Standard & Poor’s; Restructuring plan amounts to the ninth time that the country has reneged on its debt
Tommy Stubbington – FT
Argentina has defaulted on its debt, according to Standard & Poor’s, the rating agency, after it announced plans to delay payments on its $101bn of borrowings.

Modi Creates Bank Behemoths to Spur India’s Slowing Economy
Suvashree Ghosh , Siddhartha Singh , and Shruti Srivastava – Bloomberg
Newly created lenders will hold 56% of the industry’s business; Modi wants to spur credit to revive growth from 5-year low
India is merging its state-run banks to form fewer and stronger lenders, as Prime Minister Narendra Modi looks to boost credit and revive economic growth from a five-year low.

How About a Mash Up of Green Bonds and Century Bonds?; Sweden should go green to juice its sale of 100-year bonds.
Mark Gilbert – Bloomberg
Sweden is considering selling 100-year bonds to take advantage of the unprecedented decline in global yields. With almost half of the nation’s debt already owned by the central bank, though, there’s skepticism about how much demand the debt office can drum up in what is an already illiquid market.


Boris Johnson’s Parliament Suspension to Get Early Test in Two Courts
Jonathan Browning and Kaye Wiggins – Bloomberg
Brexit opponents seek injunctions in Scotland, London, Belfast; Prime Minister plans to suspend Parliament in run-up to Brexit
U.K. Prime Minister Boris Johnson’s suspension of Parliament will get an early test Friday as two courts could rule on challenges from Brexit opponents who say the decision is an affront to democracy.

EU Concerned on U.K. Democracy After ‘Strange’ Parliament Move
Ian Wishart – Bloomberg
European politicians warn suspension will cut off debate…; …while U.K. foreign secretary says the charge is ‘nonsense’
European Union politicians expressed concern about the democratic legitimacy of Boris Johnson’s decision to suspend Parliament for five weeks, signaling the move could harm the U.K.’s bid for changes to the Brexit deal.

Toyota won’t build cars at UK factory the day after Brexit
Japan’s Toyota (7203.T) will not build cars at its British factory the day after Britain leaves the European Union as part of plans to handle any disruption from a potentially disorderly Brexit.

France to Stage Brexit Rehearsal in Port of Calais With Gove
Ben Sills – Bloomberg
The French government is holding a rehearsal for Brexit in the port of Calais Friday afternoon with U.K. minister Michael Gove as a special guest, Agence France-Presse reported.

U.K. Lawmakers in Brexit Uproar After Prime Minister Suspends Parliament; Rebel and opposition members rush to find ways to block a no-deal break with EU
Max Colchester – WSAJ
There was uproar in Westminster on Thursday after British Prime Minister Boris Johnson suspended Parliament for several weeks to push through Brexit, as rebel and opposition lawmakers rushed to plot ways to block a sudden break with the European Union at the end of October.

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Japan Exchange Appoints Hiromi Yamaji as Head of Tokyo Bourse

Japan Exchange Appoints Hiromi Yamaji as Head of Tokyo Bourse

First Read $29,676/$300,000 (9.9%) Gabriella Kusz and Patrick Troy ++++ Hits & Takes John Lothian & JLN Staff The artist who deposited an illegal charging bull sculpture in lower Manhattan has died at the age of 80. Arturo Di Modica, the Sicilian-born sculptor...

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