SEC chairman belatedly learned of 2016 agency hack; CurveGlobal trades 1.5 million lots since launch

Sep 26, 2017

First Read

Hits & Takes
By JLN Staff

NFA is conducting a survey about its BASIC database. Please click HERE to offer your input. ~JJL

JLN spoke with the OCC’s Mark Morrison, the clearinghouse’s chief security officer, about cybersecurity in financial markets. Check it out below. It’s not as though there have been any big headlines drawing attention to the subject matter of late… Oh, wait, what’s that? Deloitte was hit by a hack, too? ~SD

LME Week is October 31 to November 3. Look HERE for details. ~JJL

Congratulations to CurveGlobal on the [|one year anniversary]] of their launch. They have traded 1.5 million lots since they launched a year ago. ~JJL

A thank you to CFTC Commissioner Sharon Y. Bowen for her service. The CFTC held a going away party for her yesterday. ~JJL

There is a fascinating story in the magazine, At the Lake, which tells the story of Snake Road and some of the Chicago civic leaders who had summer homes there. Among them were former CBOT President Charles L. Hutchinson and Norman Wait Harris, who founded Harris Bank. ~JJL


Cybersecurity is very, very tough: How a SIFMU’s cyber chief sees the threat
Spencer Doar – JLN

It’s alarming and getting ugly.

The Equifax hack in March compromised the personal information of an estimated 40 percent of the United States population. The Bangladeshi central bank is down $81 million after the SWIFT messaging system was hacked in early 2016. The SEC recently disclosed that a 2016 hack of its EDGAR database may have resulted in trading on nonpublic information for personal gain.

Then there are the cyber breaches of retailers: Target in 2013, which settled for $18.5 million, and Home Depot in 2014, which settled for $19 million, plus the recent backdooring of CCleaner, the compromise of the U.S. Office of Personnel Management in 2015, the WannaCry attacks targeting a variety of industries — the list continues and the costs are enormous.

None of this is lost on the financial services sector, which has multiple points of entry and plenty of critical data to protect. It is in this environment that OCC hired its first chief security officer (CSO), Mark Morrison, in May. Morrison spent 30-plus years working in cybersecurity for various government agencies, including the National Security Agency and Department of Defense. After retiring from the government, Morrison headed to State Street in 2013 before becoming the OCC’s CSO. Beyond Morrison’s hire, the OCC has tripled the number of security staff in the last five years.

Read the rest HERE.


Support the LaSalle Street Trading Tech Awards; Make a Difference and Change Lives
By John Lothian – JLN

Sixteen years ago my life changed when I attended the LaSalle Street dinner supporting the Boy Scouts and I decided to sign up to become a leader. The event, now called the LaSalle Street Trading Tech Awards, is coming up on November 9 at the Chicago Board of Trade Building in the 12th floor atrium.

You have a chance to support this event, attend this event and learn how you can help change the lives of young Scouts by participating in the Trading Tech 300 merit badge workshop program. This year we impacted the lives of 420 Scouts, with 515 merit badges earned and nine firms participating so far this year.

I hope you will support the event financially, either corporately or individually, and realize some of the same good will I have received from my experience with the Scouts.

Back in 2001, my friends at Nasdaq-Liffe (yes, that was a thing) invited me to the legendary Chicago Area Council Boy Scout soiree.

After hearing an inspiring message from a Boy Scout leader at the event, and reflecting on my 1st grade son’s Cub Scout experience, I decided to get involved. It was one of the best things I have ever done.

For the rest of the commentary, go HERE


Jessica Titlebaum Darmoni – A Unique Voice in Derivatives
Pallavi Goodman
“The friends that have known me all my life think it’s crazy that I’ve made a career in the capital markets,” said Jessica Darmoni, my subject in this post. I usually write about women in product as well as entrepreneurial women. Jessica Darmoni falls in the latter category but from an industry we are not accustomed to seeing a lot of women – the niche world of derivatives.

**A nice profile about our friend Jessica Titlebaum Darmoni. ~JK


Brothers Who Found Eminem Are Taking Part of His Music Public
Lucas Shaw – Bloomberg
They’re selling a slice to Royalty Flow, which plans mini-IPO; Streaming growth boosts investor interest in music catalogs
Compact discs were replacing records when Jeff and Mark Bass took a chance on a young white rapper named Marshall Mathers. Eminem, as he’s known, blossomed into one of the world’s most popular musicians.

**What rhymes with IPO? ~JK


Wall Street gears up for bike ride raising money for autism research; Bike ride supported by CBOE Bats Global Markets, Virtu Financial, IEX, Nasdaq and Citadel is raising money for research into autism.
Hayley McDowell – The Trade
Wall Street is preparing to take part in the third annual ‘Wall Street Rides FAR’ bike ride on 7 October just outside of New York City in a bid to raise money for the Autism Science Foundation (ASF).

***** Riding well and doing good things. ~JJL


MarketsWiki Page of the Day: CurveGlobal
CurveGlobal, LSEG’s interest rate derivatives platform, is celebrating its first anniversary. The platform has traded 1.5 million lots since its launch.


Monday’s Top Three
Yesterday’s top read piece was Gary DeWaal‘s Bridging the Week. Second was The New York Times’ Regulator Wants Financial Industry to Self-Report Wrongdoing. Third was Bloomberg’s ‘War-Torn’ Chicago Is More Popular With Tourists Than Ever. I highly recommend the architecture tour.


MarketsWiki Stats
108,225,882 pages viewed; 22,789 pages; 209,446 edits
MarketsWiki Statistics


Lead Stories

SEC chairman belatedly learned of 2016 agency hack: testimony
Pete Schroeder and Sarah N. Lynch – Reuters
The chairman of the U.S. Securities and Exchange Commission belatedly found out in August, about three months after being confirmed, that hackers breached the regulator’s database of corporate announcements in 2016, according to prepared congressional testimony seen by Reuters on Monday.

CurveGlobal trades 1.5 million lots since launch; LSEG’s interest rate derivatives platform celebrates its first anniversary having launched in September last year.
Hayley McDowell – The Trade
The London Stock Exchange Group’s interest rate derivatives platform CurveGlobal has reported 1.5 million lots have been traded since its launch a year ago.

Bank of England policy shift boosts ICE trading; Currency and interest rate futures contract volumes surge
Philip Stafford – FT
Expectations of a UK interest rate rise by the Bank of England in the coming months are providing a boost to the financial futures business of Intercontinental Exchange, the US exchanges operator.

Hedge Fund Assets Hit All-Time Month-End High Driven By Inflows And Returns
Seemingly against popular expectation, hedge fund assets under management set a new all-time month-end high at the end of August 2017. With redemption pressures abating in certain segments and continued strong interest in others, along with consistently positive returns, the hedge fund industry appears to be shrugging off its naysayers.

Japan’s big banks plan digital currency launch; J Coin designed to wean Japanese off heavy dependency on cash
Martin Arnold and Leo Lewis in Tokyo – FT
Japanese banks plan to introduce a digital currency ready for the 2020 Tokyo Olympics as they respond to the threat from China’s Alibaba, which recently launched its mobile-phone payments service in the country.

Banks Lobbying to Stem MiFID’s Spread Spark a U.S. Client Revolt
Robert Schmidt and Benjamin Bain – Bloomberg
Wall Street brokerages are quietly lobbying regulators to ensure new European rules that will upend banks’ investment research operations don’t spread to America. But the campaign is causing tension with public pension funds and other large investors that are some of their biggest clients.

Treasure map of the ETF world revealed
Chris Flood – Financial Times
Asking an exchange traded fund provider “just who is buying your ETFs?” often prompts the unsatisfactory reply “all types of investors”.
A peculiarity of the $4.4tn ETF industry is just how little is known about many of the institutions that own these marketable securities that track an index, commodity or bond. This is a big obstacle for asset managers trying to expand in a rapidly growing sector.

Euronext’s FastMatch launches FX tape; FX tape will improve post-trade transparency and allow participants to monetise their trading data.
Hayley McDowell – The Trade
FX spot market operator FastMatch has launched its FX tape designed to improve post-trade transparency and allow traders to monetise their trading data

Citi fined $550k for swap data reporting failures; Citi failed to correctly report LEIs for tens of thousands of swap transactions.
Hayley McDowell – The Trade
Citigroup’s Global Markets business has been slapped with a $550,000 fine in the US for failing to report legal entity identifier (LEI) information for swap transactions.

Forget the Fed Taper, Here’s Why the Global Liquidity Party Is Set to Intensify
Sid Verma – Bloomberg
The Federal Reserve’s plan to pare its $4.5 trillion balance sheet elicited barely a whimper in markets when it was announced last week, widely seen as a testament to the well-choreographed nature of the move. JPMorgan Chase & Co. has another read.

Europe’s Banks Finally Start Thinking About Mergers; After retreating to their domestic markets to patch up their balance sheets, some European lenders are warming to deals
Max Colchester and Ben Dummett – WSJ
The freeze in European bank mergers is finally showing signs of thawing. After being whipped by scandals and losses, Europe’s banks retreated to their domestic markets to patch up their balance sheets.

Big Investors Want Directors to Stop Sitting On So Many Boards; Governance advisers and even boards themselves say directors risk spreading themselves too thin
By Sarah Krouse and Joann S. Lublin – WSJ
Giant money managers voted against the re-election of Ronald Havner, Jr. in May to the board of a real-estate company. Their reason: He runs a different company and sits on two other boards.

Ex-HSBC forex trader goes on trial in New York; What prosecutors say was front-running was ‘standard industry practice’, defence says
Alistair Gray in New York – FT
The British banker on trial in the US on charges he schemed to front-run a $3.5bn currency deal “threw his client under a bus to make more and more money”, prosecutors argued on Monday.

Navigating Systematic Internalisation
Ollie Cadman, Vela Trading Technologies via TABB Forum
Under MiFID II, liquidity in Europe is to be rerouted, as the business model of broker crossing networks is overhauled and more OTC equity volume is brought under pre-trade transparency rules due to the revised Systematic Internaliser regime. For the buy-side trader, tracking liquidity in the transformed landscape will be challenging. The key to handling the SI network will be an agile connectivity solution that can deliver insight into the trading venues in order to support best execution decisions, but that limits information leakage.

Exchanges, OTC and Clearing

CurveGlobal celebrates first anniversary
Platform building firm foundation – 1.5 million lots traded since launch; Over 40% of overall volume achieved in last 3 months; Most recent 100,000 lots of volume traded in 8 business days
CurveGlobal, the interest rate derivatives venture launched by London Stock Exchange Group in partnership with a number of major dealer banks* and another exchange, CBOE, today celebrates its first year of operation. The platform has seen 1.5 million lots traded since its launch in September 2016, with over 40% of this achieved in the last 3 months.

Irish Stock Exchange seeks partner to lure Brexit business
Irish Times
The Irish Stock Exchange (ISE) is understood to be on the lookout for another bourse operator to join forces with, marking a departure from its prized independence. The move comes as the firm seeks to position itself for opportunities after Brexit.

LME WEEK October 31 to November 3
LME Week is the annual gathering of the global metals community in London. Representatives from the entire supply chain meet to discuss current trends in metals markets, what to expect for the year ahead, and to network with industry peers and colleagues.

SGX to report 1Q FY2018 results on 25 October
Singapore Exchange (SGX) is reporting its first-quarter (1Q) results for Financial Year 2018 (FY2018) after the market closes on 25 October 2017.

SGX hits record volumes in FX futures
Singapore Exchange (SGX) announced a daily volume record for its SGX INR/USD futures contract, with a total of 108,417 contracts traded on 22 September 2017, translating to a notional value of USD 3.34 billion. SGX INR/USD is SGX’s most actively traded FX futures contract, and recent volume growth has extended SGX’s market share to more than 40%.

The Options Industry Council to Ring The Nasdaq Stock Market Closing Bell
The Options Industry Council (OIC), an industry resource funded by OCC, the world’s largest equity derivatives clearing organization, and the U.S. options exchanges, will visit the Nasdaq MarketSite in Times Square.

TAIEX derivatives: Delisting of Daily Futures on TAIEX derivatives
The Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG took the following decision effective 15 November 2017:

ASX AGM – Chairman and Managing Director and CEO’s addresses

FastMatch launches FX Tape; Global consolidated tape for FX spot market to improve transparency for investors
FastMatch, Inc., the fastest growing FX spot market operator, which operates as a Euronext company since August 2017, announced today the launch of FX Tape. This new and innovative market data product will improve post-trade transparency in FX markets and allow market participants to monetize their trading data. FX Tape will also serve as a central reference point for Spot FX transacted prices helping market participants evaluate best execution performance.

Bats LIS platform attracts more than 100 buy-side firms; Bats sees record growth with more than EUR10 billion traded since the launch of its block trading platform less than 10 months ago.
By Hayley McDowell – The Trade
Bats Europe’s block trading platform has attracted more than 100 buy-side firms, as it reports over EUR10 billion has been executed since its launch 10 months ago.

More than EUR10 Billion Traded on Bats LIS Since Launch; 100+ buy – side firms connected to and utilising Bats LIS; Record average daily value traded of EUR111 million on Bats LIS month – to – date in September
Bats Europe, a CBOE Holdings, Inc. company and the region’s largest equities exchange operator, today reported that more than EUR10 billion has executed on Bats LIS, its block trading platform powered by BIDS technology, since its launch less than 10 months ago.

VIX Options Set New Daily Volume Record
CBOE Holdings, Inc. said today that trading volume in options on the CBOE Volatility Index (VIX) reached a new all-time high on Monday, September 25.

Deutsche Börse Group Has Joined The #We4Europe Initiative – For an open, united and strong Europe: #We4Europe
Deutsche Börse Group has joined the #We4Europe initiative to advocate for the future of Europe, together with other companies such as Deutsche Bank, Deutsche Telekom, Lufthansa, BMW and Volkswagen. The initiative came about to point the way for an open, united and strong Europe. From political and economic integration to a shared market – the initiative seeks to raise awareness of these values, which have given Europe prosperity, freedom and peace for decades.

ASX ‘increasingly confident’ of blockchain-inspired tech’s potential; On track for December announcement
Rohan Pearce – ComputerWorld
ASX’s chairperson, Rick Holliday-Smith, says the company is “increasingly confident” of the potential for a system based on blockchain-inspired distributed ledger technology (DLT) to replace the Australian Securities Exchange CHESS system.


FastMatch Launches FX Tape
FastMatch, Inc., the fastest growing FX spot market operator, which operates as a Euronext company since August 2017, announced today the launch of FX Tape. This new and innovative market data product will improve post-trade transparency in FX markets and allow market participants to monetize their trading data. FX Tape will also serve as a central reference point for Spot FX transacted prices helping market participants evaluate best execution performance.

Fidessa Recognised With A Hat-Trick Of Awards
Fidessa group plc today announced that it has been recognised with three prestigious awards for its sell-side derivatives and equities trading platforms. The firm collected both Equity Trading System of the Year and Derivatives Trading System of the Year awards at the FOW and Global Investor Asia Capital Markets Awards presented in Singapore last week – the latter for the fifth consecutive year. In addition, Fidessa’s derivatives platform was named Best Trading and Execution Technology at the CTA Intelligence European Services Awards, adding to its win in the same category at the CTA US Awards earlier this year.

Proprietary Trading Group Chooses Rival Systems for CME Options Trading
Rival Systems
Charlesworth, a Chicago-based proprietary trading group of Marquette Partners, has switched their trading technology to Rival Systems because of Rival’s superior speed, ease of use, and amazing customer support. After running Rival side by side with other vendors the choice was easy – with Rival, Charlesworth can efficiently quote in the most competitive CME options markets without getting picked off, capture edge with Rival’s Electronic Eye, and easily integrate with proprietary trading strategies by leveraging the Rival AP

Bitcoin market may be financing North Korea after sanctions
John Crudele – NY Post
You probably heard that there are newly imposed sanctions against North Korea. But I’m told the nations that put those sanctions in place are worried North Korea is getting around them by using the bitcoin market to get secret financing.

‘Crypto’ hedge funds spring up in crowded field; Managers lured by soaring value of bitcoin and other cryptocurrencies
Chloe Cornish, Lindsay Fortado, Richard Waters and Robin Wigglesworth – FT
Ari Lewis was a high school student in Long Island, New York, when he bought his first bitcoin in 2012. It cost less than $10, he recalls.

The Man Starting the World’s Biggest Crypto Fund Calls Bitcoin a Bubble
Erik Schatzker – Bloomberg
He is said to aim to raise $500 million after Fortress losses; ‘Largest bubble of our lifetimes,’ he says of digital currency
Mike Novogratz is reinventing himself as the king of bitcoin. The swaggering macro manager who flamed out at Fortress Investment Group LLC is starting a $500 million hedge fund to invest in cryptocurrencies, initial coin offerings and related companies. Novogratz will put up $150 million of his own money and plans to raise $350 million more by January, mainly from family offices, wealthy individuals and fellow hedge fund managers, said a person familiar with his plans.

Trading Technologies seeks to reverse another Patent Trial and Appeal Board decision
Finance Feeds
Trading Technologies is seeking to reverse a PTAB ruling from August this year, which found that some of the claims about its ‘996 patent concerning “click based trading with intuitive grid display of market depth” are patent-ineligible.

Join AionNext and Step into the Future of Online Trading
Business Wire
Founded by computer engineers and former investment bankers, AionNext is a pioneering cryptocurrency trading platform that will allow you to step into the future of finance and generate incredible profits by joining a global network of traders and investors.


How Germans Re-Elected Merkel While Boosting Her Opponents
Andre Tartar, Cedric Sam, Hayley Warren and Sam Dodge – Bloomberg
Angela Merkel’s bloc may have underperformed in Sunday’s election, but she still won a fourth term as chancellor. Her Christian Democratic Union/Christian Social Union (CDU/CSU) alliance garnered 33 percent of the national party vote and about 37 percent of the direct ballots that elect local representatives for each of Germany’s 299 districts.


How to Make Sure Global Companies Pay Their Taxes
Peter Coy – Bloomberg
We all know by now that big multinational corporations, from Apple Inc., to Pfizer Inc., to IKEA of Sweden AB, minimize their tax bills by exploiting differences in tax rates and rules between different countries. Outrage is running high, especially in Europe, where there’s strong pressure on politicians to extract more taxes from big companies, especially the U.S. tech giants.

FINRA orders Morgan Stanley to pay $13 million in fines, restitution
Elizabeth Dilts – Reuters
The Financial Industry Regulatory Authority said on Monday it ordered Wall Street investment bank and securities brokerage Morgan Stanley to pay $13 million in fines and restitution to clients for inadequately supervising certain short-term trades.

Ex-HSBC currency chief’s motives debated as U.S. fraud trial starts
Jonathan Stempel – Reuters
A former top HSBC Holdings Plc (HSBA.L) executive threw his Scottish client “under the bus” by using his knowledge of its large planned currency transaction to do his own trading first, a U.S. prosecutor said on Monday at the start of a closely-watched trial.

BlackRock fees in limbo over donation to U.S. presidential candidate
Trevor Hunnicutt – Reuters
senior BlackRock Inc executive made a donation to an unsuccessful U.S. presidential candidate last year, an action that may prohibit the world’s largest asset manager from collecting some fees from a state government, a company regulatory filing showed.

CFTC’s Division Of Market Oversight Extends Existing Relief And Provides Additional Relief For Reporting Parties From Reporting Obligations As Required By The OCR Final Rule
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) today issued a no-action letter (CFTC Staff Letter 17-45) that extends current relief and provides additional relief to reporting parties from reporting obligations as required by the ownership and control reports (OCR) final rule (OCR Final Rule).

Farewell Address of CFTC Commissioner Sharon Y. Bowen at the Institute of International Economic Law at the Georgetown University Law Center
… First let’s talk about the areas where we have had good momentum – there are a number of ways in which we have improved the safety and soundness of our markets in the last three years, including the expansion of clearing, the U.S.-European equivalence agreement on the regulation of transatlantic central counterparties (CCPs), and international data harmonization.

CFTC Orders Citibank, N.A. and London-based Citigroup Global Markets Limited to Pay a $550,000 Penalty for Swap Data Reporting Violations Involving Legal Entity Identifier Information and Related Supervision Failures
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Citibank, N.A. (CBNA) and Citigroup Global Markets Limited (CGML) (collectively, Citi), for failing to report Legal Entity Identifier (LEI) information for swap transactions properly to a Swap Data Repository (SDR), failing to establish the electronic systems and procedures necessary to do so, failing to correct errors in LEI data previously reported to an SDR, and failing to perform supervisory duties diligently with respect to LEI swap data reporting, all in violation of CFTC Regulations.

Speech of James McDonald, Director of the Division of Enforcement Commodity Futures Trading Commission Regarding Perspectives on Enforcement: Self-Reporting and Cooperation at the CFTC
NYU Program on Corporate Compliance & Enforcement / Institute for Corporate Governance & Finance

NFA is embarking on a redesign of BASIC, a tool which allows the public to research the background of firms and professionals in the derivatives industry. Please take a moment to offer us your thoughts on how we can make BASIC more useful for you.

SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors
The Securities and Exchange Commission today announced two new initiatives that will build on its Enforcement Division’s ongoing efforts to address cyber-based threats and protect retail investors. The creation of a Cyber Unit that will focus on targeting cyber-related misconduct and the establishment of a retail strategy task force that will implement initiatives that directly affect retail investors reflect SEC Chairman Jay Clayton’s priorities in these important areas.

Updated: Five Do’s and Don’ts That Can Help You Achieve Greater Financial Security
Drawing on the findings of the FINRA Investor Education Foundation’s National Financial Capability Study of more than 25,000 American adults, the FINRA Foundation has developed five tips to help consumers both manage their day-to-day financial challenges and build a brighter financial future.

FINRA Sanctions Morgan Stanley $13 Million in Fines and Restitution for Failing to Supervise Sales of UITs
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Morgan Stanley Smith Barney LLC $3.25 million and required the firm to pay approximately $9.78 million in restitution to more than 3,000 affected customers for failing to supervise its representatives’ short-term trades of unit investment trusts (UITs).

Upcoming Board Meeting and FINRA360 Update
The FINRA Board of Governors meets this week and will discuss—among other agenda items—the progress we have made with respect to FINRA360, an initiative in which FINRA is looking at our processes to ensure we are operating as an efficient and effective self-regulatory organization. In advance of this meeting, I wanted to update you on this progress and to share with you some key information about the Board meeting, including the rulemaking items that will be discussed.

ASIC obtains orders to wind up investment and technology companies
The Supreme Court of Queensland in Brisbane has appointed Mr Michael Hill and Mr William Harris, of McGrathNicol, as joint and several liquidators of Gognos Holdings Ltd (Gognos) and Dynamic Agri Tech Ltd (DAT) (companies). The court has ordered that the liquidators’ appointment be stayed until 10 am on Friday, 29 September 2017, in order that the companies’ rights of appeal be preserved.

Sebi to allow mutual funds, PMS to participate in commodity futures market
Sebi wants large institutional investors to participate in commodity platforms in India
Dilip Kumar Jha – Business Standard
Months after allowing Category-III hedge funds to trade in commodity futures, the Securities and Exchange Board of India (Sebi) is all set to grant mutual funds and portfolio management services (PMS) permission to participate in the commodity derivatives market.

SEC hackers accessed authentic data used by companies in tests -sources
Sarah N. Lynch, Joseph Menn – Reuters
Hackers breached the U.S. Securities and Exchange Commission’s computer system last year by taking advantage of companies that used authentic financial data when they were testing the agency’s corporate filing system, according to sources familiar with the matter.

Clayton says SEC needs ‘substantial time’ to unravel 2016 hack
David J Lynch – FT
Criminal hackers gained access to the Securities and Exchange Commission’s online corporate filing system in 2016 by exploiting “a defect in custom software,” SEC Chairman Jay Clayton plans to tell the Senate Banking Committee on Tuesday.

Investing and Trading

We’re Reaching Peak Gold
Danielle Bochove – Bloomberg
The world may have already produced the most gold in a year it ever will, according to the chairman of the World Gold Council.
Production is likely to plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China, Randall Oliphant said in an interview Monday.

Citi Says Get Ready for an Oil Squeeze
Sharon Cho and Serene Cheong – Bloomberg
Those in the oil market fearing a flood of OPEC supply next year will probably be better off preparing for a shortage, according to Citigroup Inc.
Five countries in the group — Libya, Nigeria, Venezuela, Iran and Iraq — may already be pumping at their maximum capacity this year, Ed Morse, the bank’s global head of commodities, said in an interview. Rather than a surge in output, there’s a risk of a market squeeze emerging as early as 2018, driven by those nations because of weaker investment in exploration and development, he said.

Short Sellers Ought to Watch Passive Flows, Goldman Says
Chris Dieterich – WSJ
Quants across Wall Street are warning about a side effect of passive investing: Single-stock trading could become more difficult.
Analysts at Goldman Sachs Group on Monday noted that the waves of money moving into index funds are diminishing the supply of shares available to stock pickers. The reason is straightforward: Indexes don’t reshuffle positions often, so stock buying or selling tends to derive from investor flows, rather than changes to corporate fundamentals. This means shares can be effectively locked up in passive funds for long periods.

AIMA research shows portfolios that include managed futures funds perform better and reduce risk
Portfolios that include managed futures funds perform better and reduce more risk than those without them, according to research published by the Alternative Investment Management Association (AIMA).

Why Emerging Markets Aren’t Too Hot to Handle; The Fed’s rate plans may give emerging-market investors pause, but there are some important counterweights to consider
Richard Barley – WSJ
It’s been a hot year for emerging-market investments. With the U.S. Federal Reserve raffirming its plans for rising rates, that might be cause for nerves. But the thing investors need to remember is just how long emerging markets spent out in the cold.

The Modern IPO is Useless. Let’s Reinvent It; New shell company has ambitions so grand that its founders have trademarked ‘IPO 2.0’
James Mackintosh – WSJ
A golden age of financial innovation is with us, so it’s time to reinvent the IPO. Again. The latest attempt comes from a $690 million shell company set up by Chamath Palihapitiya, a tech-to-private-equity executive, and Ian Osborne, a British political-PR man turned technology adviser.

CTAs can still have a seat at the table
Charles McGrath – Pensions & Investments
A recent study released by the Alternative Investment Management Association found adding managed futures to a portfolio of 60% equities and 40% bonds can lower risk and diversify returns.


Fed needs to see prices rise before next rate hike, Evans says
The Federal Reserve should wait until there are clear signs that American paychecks and prices are rising before raising interest rates again, a U.S. central banker said Monday, warning that moving too fast would be a policy “misstep.”

Citi Is Bringing Back One of the Most Infamous Bets of the Credit Crisis
Sridhar Natarajan, Dakin Campbell and Alastair Marsh – Bloomberg
Post-crisis, Jia Chen has become the face of market’s revival; Citigroup dominates, but Wall Street eyes bigger slice of pie
Jia Chen was in London again this summer — just one of the many trips she’s recently made across the Atlantic — to peddle a product left for dead in the ruins of the financial crisis.

Citi Says Get Ready for an Oil Squeeze
Sharon Cho and Serene Cheong – Bloomberg
Some nations including Iraq may be pumping at maximum capacity; Supply gap could emerge in market as early as 2018: Ed Morse
Those in the oil market fearing a flood of OPEC supply next year will probably be better off preparing for a shortage, according to Citigroup Inc.

Most Bond Traders Don’t Like Their Jobs
Kevin McPartland – Greenwich Associates
Overall job satisfaction in the United States is now over 50%. One study even puts the percentage of American’s satisfied with their job at an amazing 92%. If you trust either measure, that means the vast majority of working people in the U.S. like, or at least don’t hate, their job. Pretty impressive, given how tough things were after the Great Recession and how much complaining people do about work in general.

Shawn McLoughlin appointed CEO of BGC Financial, Americas
Automated Trader
New York – BGC Partners has announced that Shawn McLoughlin is being appointed CEO of BGC Financial for the Americas region, effective immediately. McLoughlin brings to the role more than 30 years of experience in the financial services industry.


Puerto Rico’s Agriculture and Farmers Decimated by Maria
Frances Robles and Luis Ferre-Sadurni – NY Times
José A. Rivera, a farmer on the southeast coast of Puerto Rico, stood in the middle of his flattened plantain farm on Sunday and tried to tally how much Hurricane Maria had cost him.
“How do you calculate everything?” Mr. Rivera said.
For as far as he could see, every one of his 14,000 trees was down. Same for the yam and sweet pepper crops. His neighbor, Luis A. Pinto Cruz, known to everyone here as “Piña,” figures he is out about $300,000 worth of crops. The foreman down the street, Félix Ortiz Delgado, spent the afternoon scrounging up the scraps that were left of the farm he manages. He found about a dozen dried ears of corn that he could feed the chickens. The wind had claimed the rest.

China’s Rise Will Change How Investors View the Riskiest Markets
Andrew Janes – Bloomberg
Beijing doesn’t tie cash to reforms like IMF: Exotix’s Malik; Belt and Road positive for Pakistan, Kenya and Ethiopia
China’s Belt and Road initiative will be a boon for frontier markets, but investors should be careful reading into the implications, says Exotix Partners LLP’s Hasnain Malik.

Japanese stocks ready for Snap! Crackle! Pop!; Markets behave in some predictable ways ahead of an election
Leo Lewis – FT
Whether courageous, cocky or calamitous, Prime Minister Shinzo Abe’s decision to dissolve parliament and call an early election is a gift to otherwise narrative-free Tokyo markets and proponents of the election-themed “Snap! Crackle! Pop!” trade.

Britain should update its foreign investment rules; Intellectual property is a strategic economic asset for the country
FT View
Britain’s greatest economic strength is the ingenuity of its people. With world-class universities, a distinguished history of technological innovation and a global reputation for inventive design, Britain is justifiably proud of its creative firepower. Trinity College, Cambridge has produced nine-times as many Nobel-winning scientists as China.

Bitcoin and Copper in Lockstep Show Chinese Speculators’ Power
Jack Farchy, Eddie Van Der Walt and Mark Burton – Bloomberg
Cryptocurrency’s correlation with metals seen since June; Some in copper industry see potential for price falls
Copper and bitcoin don’t obviously have much in common.

Russia Threatens to Shut Facebook Over Local Data Storage Laws
Ilya Khrennikov – Bloomberg
Global internet firms must store local client data in Russia; Roskomnadzor blocked LinkedIn earlier, says law is mandatory
Facebook Inc. will by shut down in Russia next year if it fails to comply with requirements to store user data locally, according to the head of Russia’s state communications watchdog.

China’s HNA Group says will keep investing in the United States
Reuters Staff
HNA Group Co, one of the most acquisitive Chinese buyers of overseas assets, will keep investing in the United States, one of its key overseas markets, the conglomerate’s Chief Executive Officer Adam Tan said on Tuesday.

Singapore banks shut accounts of some cryptocurrency firms
Singapore banks have closed accounts of several companies which specialise in providing cryptocurrency and payments services, according to two local bodies which represent financial-technology firms


Barnier Demands Brexit Concessions Clarity as Talks Resume
Nikos Chrysoloras and Viktoria Dendrinou – Bloomberg
The European Union’s chief Brexit negotiator Michel Barnier signaled the bloc won’t agree to start discussing a trade deal with the U.K. until the British government offers additional clarifications about the concessions that Prime Minister Theresa May appeared to offer last week.

EU Dangles Praise for U.K.’s May But Asks More for Brexit Trade
Ian Wishart – Bloomberg
Prime Minister Theresa May’s speech failed to break the Brexit stalemate, as the European Union demands more from the U.K. if there’s to be any hope of a discussion about trade next month.

Brexit Puts Trillions of Pounds of Contracts at Risk, BOE Says
Jill Ward and Silla Brush – Bloomberg
Impairment to servicing could disrupt market functioning; Tens of thousands of counterparties could be affected
The Bank of England said an agreement is needed as part of the Brexit process to protect the “long-term validity” of 20 trillion pounds ($27.1 trillion) of existing derivative contracts.


Equifax Hack Likely to Hang Over Victims for Years
Lizette Chapman – Bloomberg
Like many of you, I still feel blindsided by the Equifax hack. Knowing my private information is now in the hands of criminals with long-term plans—identity sales on the dark web haven’t spiked following the theft—is unsettling.

Behavioral risks at the systemic level
Patrick McConnell –
The possibility of Deutsche Bank being fined some US$14 billion by US regulators for grave misconduct before the global financial crisis (GFC) has recently raised the specter of a systemic banking crisis, as Deutsche Bank is considered to be a systemically important bank (SIB).

Louis Dreyfus shareholders agree to arbitration over stake sale: sources
Anthony Deutsch, Gus Trompiz – Reuters
Family shareholders of commodity trader Louis Dreyfus [AKIRAU.UL] have agreed to arbitration talks to settle a long-running dispute over a share sale, sources familiar with the matter have told Reuters.

Maverick Trading Celebrates 20-Year Anniversary
Maverick Trading
Maverick Trading, the premier proprietary trading firm, recently celebrated its 20th anniversary. Founded in 1997, Maverick Trading has two divisions, focused on options trading and foreign currency trading. It is one of the few proprietary trading firms that discourage day trading and one of the only firms that allows its traders to actively trade option

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