First Read

Time to Close the Asset Class Ban Loophole; Corzine and his ilk Should be Banned Across All Asset Classes
By John J. Lothian

With the recent news that former MF Global CEO Jon Corzine is attempting to make a comeback at age 70 as a hedge fund manager, it became clear there is a hole in our regulatory system that needs to be fixed. Corzine is banned for life by the CFTC from trading futures, yet he can operate in the securities and FX worlds managing other people’s money.

It is time to clean up the regulatory loophole and banish those whose trading privileges have been revoked in one asset class from trading in other classes.

There is a simple self-regulatory fix for this that does not even involve the government. The NFA and FINRA could jointly recognize each other’s lifetime bans and suspensions and carry that across each organization. If someone is banned from trading futures by the CFTC or NFA, then FINRA can likewise issue a ban on the person from trading securities markets or holding a position at a FINRA-regulated firm.

The other solution would be for the states to recognize a ban from the NFA or FINRA and reject any registrations of said offenders.

For the rest of the commentary, go here


Options Adoption: Growth Potential in the Advisory Space

In this JLN video, Emily Sweet, senior analyst with Cerulli Associates, goes through some key findings from a study the firm conducted titled “How Financial Advisors Use and Think About Exchange-listed Options.”

The study, sponsored by the Options Industry Council, surveyed 600-plus financial advisors who both use and do not use options on behalf of clients.

Read the rest and watch the video »


Remembering Christopher Keith, NYSE Tech Pioneer and PDQ Founder
D. Keith Ross, PDQ Enterprises, LLC – TABB Forum
Christopher Keith, former CTO at NYSE and founder of ExchangeLab and PDQ Enterprises, often was so far ahead of his time that he had to wait on markets to catch up. The contributions he made to financial markets will reverberate for years to come.

***** Condolences to the family and friends of Christopher Keith.


Wall Street’s Endangered Species: The Ivy League Jock
Justin Baer – WSJ
When Michael Savini came to Wall Street in 2006, banks and brokers had stocked their annual recruiting classes with a preponderance of new hires who shared at least one thing in common: They’d played college sports.

****** They ruled the day and have been replaced by geeks.


Hurdling Options Obstacles: OptionsPlay Finds Advisors Need as Much Help as Retail Investors
Spencer Doar – JLN
When trading options, the options chain is both an advertisement and entry point for the retail investor. But for an options novice, a chart of prices for puts and calls is not the most clear or engaging means of joining the fray. Founded in 2012, OptionsPlay has some 70,000 users and aims to remove the clutter and noise from trading options with straightforward explanations, strategy visualizations, strategy recommendations and technical data and analysis. What founder Mark Engelhardt and crew didn’t realize when they started the firm was that it’s not only retail traders who needed an assist— financial advisors were desperate for tools to help adopt and implement options trading, too.


How New York Is Building the Renewable Energy Grid of the Future
InsideClimate News
The result, say the state’s regulators, is that New York is already attracting hundreds of innovative companies of all stripes. The plum opportunities are not only in installing wind turbines and solar panels, which are generating new employment opportunities across the country, they are also in emerging technologies related to smart grid management and storage. These jobs are largely invisible to the public and, in some cases, didn’t even exist a few years ago.

***** New York is on a roll.


Americans Go Hog Wild for Pork as Summer BBQ Season Kicks Off
by Megan Durisin – Bloomberg
‘It’s a good time to be a carnivore,’ Rabobank analyst says; Growing demand helps offset another year of rising meat output
It’s boom times for pork enthusiasts. Americans celebrating Memorial Day this weekend — the unofficial kick-off to summer and the grilling season — can keep the party going with cheaper pork chops.

****** Pass the napkins, the pig sickles are on the grill!


Thursday’s Top Three
Our top read stories from Thursday were led, by a long shot, by Bloomberg’s piece on Terry Duffy in Bloomberg’s CME’s CEO Is Expected to Make Full Recovery After Lung Collapse. Second, went to the new academic paper by John M. Griffin, Amin Shams Manipulation in the VIX?. Third was the Wall Street Journal piece on Magnetar Capital This Old School Hedge Fund Is Going Quant


MarketsWiki Stats
101,153,635 pages viewed; 22,491 pages; 205,948 edits
MarketsWiki Statistics


Lead Stories

A Step Backward in Financial Regulation; The Choice Act would reverse much of the legislation adopted after the financial crisis, making the banking system less safe.
By Kermit Schoenholtz And Lawrence White – Bloomberg
Doubt this pair is smiling now. Photographer: Andrew Harrer/Bloomberg
The scarring experience of the financial crisis of 2008, and the federal government’s actions to avert widespread chaos in the financial system, remain poorly understood events across the political landscape.

‘Spotify Rule’ Would Help New York Stock Exchange Woo Unicorns; Big Board tweaks its rules regarding direct listings, an alternative to traditional IPO
By Alexander Osipovich and Maureen Farrell – WSJ
The New York Stock Exchange is seeking to change its listing standards as it vies for Spotify AB and other hot startups that are considering an unusual tactic called a direct listing.

Bank of Canada says it won’t use blockchain for interbank payment system
Modernizing Canada’s aging payments systems will help strengthen the stability and efficiency of the country’s financial system and reduce systemic and liquidity risk, a senior official at the Bank of Canada said on Thursday.

London Stock Exchange boss fires EU politicians euro clearing warning: “You protect, you fragment, you isolate, you stall”
William Turvill – City AM
London Stock Exchange boss Xavier Rolet has warned of the damage the EU would inflict on itself if it makes a grab for the City’s lucrative euro clearing market.

Bitcoin plunges more than $300, goes negative after earlier hitting all-time high
Evelyn Chang – CNBC
Bitcoin jumped more than 12 percent Thursday to an all-time high of $2,791.70 before plunging and giving up the day’s gains. The rise, based on strong demand out of Asia, had brought its gains for the month of May to more than 100 percent, according to CoinDesk. But the digital currency’s volatility became apparent later in the session as it suddenly sank by more than $315 to trade lower.

Labels Matter: What to Call the Stock Rally; “Trump Trade,” “Reflation Trade” or “Liquidity Trade”?
By Mohamed A. El-Erian – Bloomberg
Although they are from perfect, labels play an important role in providing shorthand signals for bigger phenomena. This, in turn, influences how people think about the past, present and future, and which actions would be warranted and why.

Hedge Fund Got Bananas Bonanza of Inside Information; And it ignited a money-printing machine.
By Matt Levine – Bloomberg
The rules of insider trading are complicated. You might think it’s as simple as “don’t trade on nonpublic information you got from an insider,” but it isn’t. There are strange and subtle rules about how you can get that information, about what sorts of benefits to the insider, or friendship between you and the insider, that make his tips and your trading illegal. The rules are even more complex for traders who get their tips indirectly; there, the inquiry involves not only what benefit the insider got, but also what the traders knew about it.

Losing Faith in Free Trade Will Make Americans Poorer; Big steel likes Trump’s choice for trade representative. The rest of us shouldn’t.
By Ramesh Ponnuru – Bloomberg
Winners and losers. Photographer: David McNew/Getty Images
Robert Lighthizer’s nomination as U.S. trade representative made the steel industry happy. Both the Steel Manufacturers Association and the American Iron and Steel Institute put out statements lauding the choice, with the latter citing his “dedication” to the steel industry. U.S. Steel Corp has been Lighthizer’s most prominent client as a lawyer in recent years.

Nomura Trader Jury Hears What U.S. Calls Fraud-in-the-Making
by Chris Dolmetsch – Bloomberg
Attorney for Michael Gramins argued audio is theatrical stunt; Former Nomura mortgage traders charge with lying to clients
The three former Nomura Holdings Inc. bond traders on trial for lying to their customers about bond prices haven’t said whether they’ll testify in their own defense. But jurors still heard from one of them as he allegedly prepared to lie to a client.

Central bankers unveil code to crack down on currency market rigging; The FX market has been rattled by fines for currency rigging
Ben Martin – Telegrap
The architects of a new code of conduct that aims to clean up the global foreign exchange markets have conceded it will do little to stop currency traders who are intent on breaking the rules and manipulating the $5 trillion-a-day industry.

Ethics, Quants and Cold-Calling; Also Fannie Mae and Freddie Mac, worries about worries, and cod.
By Matt Levine – Bloomberg
I used to be a lawyer, and lawyers have a code of ethics. Now I am a journalist, and journalists have a code of ethics. One thing that strikes me about these codes is that they are opposites. Oversimplifying massively, the basic rule for a lawyer is that your obligations are to your client, and you have to act in her best interests, even if that is against the interests of accuracy; legal ethics is then mostly a set of exceptions to this principle.

Exchanges, OTC and Clearing

HKEX Plans to Introduce Phase 2 of Securities Market’s Closing Auction Session
Hong Kong Exchanges and Clearing Limited (HKEX) announced today (Friday) that it plans to implement Phase 2 of its securities market’s Closing Auction Session (CAS) in the early third quarter of 2017, subject to relevant regulatory approvals by the Securities and Futures Commission.

London Stock Exchange Group signs Memorandum of Understanding with Kenyan Ministry of Energy and Petroleum
London Stock Exchange Group
London Stock Exchange Group (LSEG) today signed a Memorandum of Understanding (MoU) with the Kenyan Ministry of Energy and Petroleum. This is the first agreement signed between LSEG and the Government of Kenya.

London Stock Exchange welcomes Alfa to the Main Market
London Stock Exchange Group
Largest IPO in 2017 so far – software company valued at £975 million, raising £254 million; Confirms London Stock Exchange’s leading role as global listing venue for high growth technology companies
London Stock Exchange today welcomes Alfa Financial Software Holdings (Alfa), a developer of mission-critical software for the asset finance industry, to the Main Market, following the company’s £975 million IPO. Raising £254 million, it is the largest company to list in London in 2017 so far.

Coinbase suffers outages amid bitcoin surge
Coinbase said on Thursday it suffered outages this week as the bitcoin exchange saw “unprecedented traffic and trading,” with the digital currency hitting record levels.

Performance Bond Requirements: Energy, Equity Index, Interest Rates and Agriculture – Effective May 26, 2017
CME Group
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

NGL and Agricultural Margins – Effective May 26, 2017
CME Group
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

STOXX opens Hong Kong to expand into the Asia-Pacific market and appoints new head for Greater China
Deutsche Börse
STOXX Ltd., the operator of Deutsche Boerse Group’s index business, and a leading global provider of innovative and tradable index concepts, today announced the expansion of its presence in Asia Pacific with the opening of a new office in Hong Kong.

First smart beta ETF launched on Japanese companies of BNP Paribas Easy on Xetra
Deutsche Börse
A new BNP Paribas Easy smart beta stock index ETF has been tradable on Xetra and Börse Frankfurt since Thursday.

SIX Financial Information sweeps the board at the Inside Market Data and Inside Reference Data awards
SIX Financial Information has been crowned Best Overall Data/Service Provider for the first time at the Waters Technology Inside Market Data and Inside Reference Data awards. The data vendor also took home the Most Innovative Regulatory Solution, in addition to being named Best Corporate Actions Provider for the eighth consecutive year.


Colt optimizes routes between Tokyo, Chicago exchanges
Telecom Asia
Colt Technology Services has launched newly optimized low-latency network routes linking stock exchanges in Tokyo and the Chicago Mercantile Exchange.
The enhancements aim to benefit traders in Chicago who require fast connectivity to Tokyo, or exchange venues in Tokyo that require low-latency connectivity to Chicago.

Wolverine Execution Services bridges the gap between voice and electronic trading
This new functionality, within the WEX Trading Platform (WTP), will provide a simple and fully electronic workflow, which will mirror the traditional high touch trading.

Pact to Speed Up Bitcoin Drives Digital Currency to Record High
by Justina Lee – Bloomberg
Growth hurdle cleared as more than 50 companies sign agreement; Deal seen as move to maturity for industry racked by discord
Bitcoin’s seemingly unstoppable rally has just been given new impetus.

Alfa Financial Group valued at £975m in largest UK tech IPO since ’15
Nicholas Megaw – FT
Alfa Financial Software has completed the UK’s largest technology listing in almost two years, pricing its initial public offering at the top of its range with a valuation just shy of £1bn.

Even the world’s largest bitcoin exchange couldn’t handle this week’s cryptocurrency boom
Jon Russell – TechCrunch
For those operating a bitcoin exchange — where people can buy cryptocoins — you’d imagine that the current surge in value for bitcoin and others like Ethereum’s ether coin is a dream come true. The answer is yes and no.

‘I could have gone around the world or bought a yacht’: How throwing out one computer part cost an Australian tech expert $4.8 MILLION; A man who spent $25 on internet currency says he missed out on $4.8 million; Campbell Simpson threw out hardware with now extremely valuable Bitcoin; The tech writer had 1400 Bitcoins which are now worth over $3000 each; He says he missed out on incredible wealth because he unknowingly threw it out
By April Glover For Daily Mail Australia
A man has shared his grief after he unknowingly threw out a portable hard drive seven years ago which is now worth $4.8 million.

Bitcoin ‘nerds’ give way to Wall Street suits at digital currency conference; Two major digital currency conferences came to New York this week.; More investors and business people attended than expected for a technology-focused conference, attendees said.
Big U.S. financial institutions announced more involvement in the digital currency industry this week.
Evelyn Cheng – CNBC
The world of finance is getting so interested in bitcoin that it’s no longer just the land of coders.

Wall Street laughed at a call for bitcoin at $25,000—but after a 400% surge, the laughter is fading
By Mark DeCambre – MarketWatch
Yuk it up! But will Yves Lamoureux have the laugh last? Back in February when one bitcoin was worth $994, the owner of an eponymously named boutique advisory firm in Montreal forecast that the cryptocurrency would hit $25,000 over the next 10 or 15 years—a figure that is both outlandish and mind-boggling, and it was met with more than just a dollop of skepticism and derision.

Worldpay Looks to Bring Real Payments to Virtual Worlds
by Jeremy Kahn – Bloomberg
London payments firm will bring VR payments to games companies; Firm finds real world geography matters for VR acceptance
Worldpay Group Plc, the London-based payments processor, has created a way to handle debit and credit card transactions in virtual reality.

Japan lender Mizuho to launch fintech venture
Japan’s Mizuho Financial Group will start a venture next month to create new businesses using “fintech,” an executive said, joining a global race in financial technology that threatens to unsettle traditional players.


‘Mnuchin Rule’ Against Wealthy Tax Cuts Comes Back to Bite Him
by Anna Edgerton – Bloomberg
Secretary says legislative debate could affect tax outcome; Mnuchin reiterates Trump’s intent is middle-income tax cut
A pledge not to give the wealthiest Americans an absolute tax cut is coming back to haunt Treasury Secretary Steven Mnuchin.

Trump trade barbs at Germany cloud G7 Taormina summit; World leaders begin their ‘most challenging’ meeting for years
Anne-Sylvaine Chassany and George Parker in Taormina – FT
EU leaders scrambled to defuse mounting tensions between Germany and the US after President Donald Trump said Germany’s trade surplus was harming the US economy, as world leaders gathered in Sicily for “the most challenging” G7 meeting in years.


SEC Names Peter Uhlmann Managing Executive in Chairman’s Office
The Securities and Exchange Commission today announced that Peter Uhlmann has been named the managing executive in the Office of Chairman Jay Clayton. Mr. Uhlmann will advise Chairman Clayton in matters relating to agency administration, operations, and management, and will serve as the Chairman’s primary liaison to divisions and offices on these matters.

Final piece of post-crisis banking reform Basel III laid out as BCBS chooses “aggregate output floor”
Lucy White – City AM
The final piece of the ongoing post-crisis Basel III banking reform has been laid out today in a speech by Bill Coen, secretary general of the Basel Committee on Banking Supervision (BCBS).

Local Court dismisses insider trading charges against Darren Wayne Thompson
On 23 May 2017, following a two-day committal hearing at the Sydney Downing Centre, Local Court Magistrate Greg Grogin did not commit Mr Darren Wayne Thompson for trial on any of the 11 charges of procuring insider trading.

Queensland Supreme Court imposes penalties on dishonest MFS officers and funds manager
The Supreme Court of Queensland has disqualified from managing corporations and imposed financial penalties on four former officers and the funds manager of MFS Investment Management Limited (MFSIM), now known as ACN 101 634 146 (in liquidation), whom the court found did not act honestly in carrying out their duties in managing MFSIM, the responsible entity of the Premium Income Fund (PIF), a managed investment fund holding millions of dollars of investors’ funds. It also ordered them to pay compensation.

ASIC reports on promoting better conduct in the wholesale spot foreign exchange market
ASIC released Report 525 Promoting better behaviour: Spot FX today. This report sets out ASIC’s observations on key behavioural drivers of conduct arising from recent ASIC investigations into the wholesale spot foreign exchange (FX) businesses of the major Australian financial institutions.

ASIC proposes next steps on regtech
ASIC will establish a new regtech industry liaison network, conduct a number of new technology trials using regtech applications and establish a ‘hackathon’ later this year to help identify roadblocks to the successful and rapid take-up of the sector.

Commission Obtains Judgment Against and Imposes Industry Bar on New Jersey Resident for Securities Fraud
The United States Securities and Exchange Commission today announced that on May 17, 2017, the Honorable Alison Nathan, United States District Court Judge for the Southern District of New York, entered a judgment, on the consents of William J. Wells and Promitor Capital Management LLC, permanently enjoining them from violating the anti-fraud provisions of the federal securities laws and ordering them to jointly and severally pay $660,427.62 in disgorgement. The SEC also announced that, on May 18, 2017, it issued an industry and a penny stock bar against Wells.

Ponzi Scheme Operator Sentenced to Prison in Parallel Criminal Case
A former Boston resident charged by the Securities and Exchange Commission with fraud for operating a $10 million Ponzi scheme involving purported bridge loans to Jamaican businesses has been sentenced to 70 months imprisonment in a parallel criminal case.

Investing and Trading

PPT and the “God of the Gaps”
The Reformed Broker
Earlier this week, CNBC Fast Money hosted a former trader who came on to discuss the Plunge Protection Team urban legend as a bonafide explanation for why the market has been acting the way it has.

Index IDEA: More than $180 billion flows into US-listed ETFs in 2017 through May 19
FTSE Russell
Approximately $182 billion in new assets have flowed into US-listed exchange traded funds (ETFs) in 2017 as of May 19, according to ETF global research and advisory firm XTF. This puts overall assets in US-listed ETFs at approximately $2.9 trillion and, and is an all-time record for absolute flows from January 1 through May 19 based on XTF historical data since 2003.

Buy-side looks to overcome cash collateral challenge; Panelists at The TRADE’s Future of Post Trade event explained asset managers are seeking alternatives to posting cash collateral.
By Joe Parsons – The Trade
Asset managers are looking at alternatives to posting cash collateral for their bilateral derivatives trades, panelists at The TRADE’s Future of Post Trade event explained.

Amazon’s Brush With $1,000 Signals the Death of the Stock Split; Stock splits, once considered a way to keep shares affordable for mom-and-pop investors, are rare today as companies aspire to new heights
By Erik Holm and Ben Eisen – WSJ
Big companies are giving up on the stock split.

The Fees and the Darkness
By Nir Kaissar – Bloomberg
The fiduciary rule is coming!The Department of Labor announced on Monday that its much-anticipated fiduciary rule — or at least the lion’s share of its provisions — would go into effect on June 9. In a nutshell, the rule prohibits brokers from taking money from mutual funds they recommend to clients unless they disclose those payments to their clients.

OPEC’s Cuts Are Shrinking Trading Opportunities
Jodie Gunzberg – S&P Dow Jones Indices
The unintended consequences of OPEC’s policy (in summer of 2014) of flooding the market with oil to lower prices and gain market share are starting to show. It seems they failed to realize increasing the price by cutting back supply wouldn’t work with high U.S. inventories. The spare capacity of OPEC does not matter for oil price when U.S. inventories are high.


Barclays DirectEx gets algo upgrade; New feature allows algo users to generate block IOIs on its DirectEx platform.=
By Hayley McDowell – The Trade
Barclays Capital has developed an algorithmic trading feature in the US allowing users to generate block indications of interest (IOIs) through its DirectEx platform.

Bankers plotted to rip off clients in online chat room
By Kevin Dugan – NY Post
Bankers say the damnedest things. A giant French bank on Wednesday was fined $350 million by New York regulators after investigators discovered a secret online chat room where traders and salespeople openly plotted to rip off clients — and discussed how they could throw authorities off their track.

Wells Fargo Sweetens Broker Recruitment Bonuses; Bank raises deals as Morgan Stanley, Merrill Lynch, UBS pull back
By Michael Wursthorn – WSJ
Wells Fargo & Co. is sweetening its signing bonuses for veteran brokers, a move to capitalize on Morgan Stanley ‘s and Merrill Lynch’s retreat from the industry’s costly recruiting practice known as “prisoner exchange.”

Canadian bank bosses challenge the bears; Difficulties at Home Capital do not reflect problems in the housing market
Alistair Gray – FT
For years, investors who have predicted the end of Canada’s house price boom and placed bearish bets on the country’s banking sector have been wrong. Or, as they would describe it, early.

Why ex-Goldman trader shunned hedge funds for a Japan broker
As the biggest earthquake ever recorded in Japan rocked the Roppongi Hills skyscraper in central Tokyo, Makoto Yamada put on his helmet, dropped to his knees, and traded.

Banks fear fracturing of Asian trading desks by FRTB; Rules could produce “lots of little country desks”, warns StanChart market risk head
Philip Alexander –
Global banks fear they will be forced to break up their emerging market trading desks to comply with new market risk capital rules, according to conference speakers.


China Exerts More Control Over Its Currency With Tweak to Yuan Fix; The People’s Bank of China is adding a ‘countercyclical’ component to its model in an effort to prevent big swings
By Lingling Wei and Saumya Vaishampayan – WSJ
China’s central bank said it was tweaking the mechanism for setting the yuan’s daily fix to smooth out fluctuations against the dollar, an acknowledgment that the country is hitching the yuan’s value closer to the U.S. currency.

China’s biggest investment banks fined for role in short selling; Citic, Haitong and Guosen punished for helping trading during market downturn
Gabriel Wildau in Shanghai – FT
China’s securities regulator has fined three of China’s largest investment banks for facilitating bearish bets on the stock market by a unit of US-based Citadel Securities during the Chinese market rout of late 2015.

China’s Monetary Turbocharger Is Running at an All-Time High
Bloomberg News
Ratio between M2 and base money signals robust credit demand; More efficient stimulus use also stores up risks for economy
For every yuan that the People’s Bank of China injects into the nation’s financial system, it’s up to the banks to decide how far they stretch it in the form of loans to the economy.

Here’s a lesson OPEC could learn from soybean farmers
By William Watts – MarketWatch
Do soybean farmers have a lesson for OPEC oil producers? There are some broad but intriguing parallels between the rise of South America, particularly Brazil, as a soybean-exporting juggernaut over the last four decades and the rise of U.S. shale output.


EU adds English teachers’ pay in Brussels to Brexit bill; Detailed demands set to be sent to UK in June ahead of start of formal talks
Alex Barker in Brussels – FT
The EU has added a new item to Britain’s estimated EUR100bn gross exit bill: the cost of English teacher salaries at Brussels’ elite European schools for a two-year period after Brexit.

U.K. Must Honor EU Obligations in Brexit, Germany’s Spahn Says
by Guy Johnson and Tony Czuczka – Bloomberg
Deputy finance minister bristles at talk of EU ‘exit fee’; Warns U.K. campaign rhetoric may make Brexit talks harder
German Deputy Finance Minister Jens Spahn said the U.K. can’t escape its financial obligations to the European Union and called on British politicians to restrain harsh Brexit rhetoric that may make talks with the EU more difficult.


World Bank’s Star Economist Is Sidelined in War Over Words
Andrew Mayeda – Bloomberg
The World Bank’s chief economist has been stripped of his management duties after researchers rebelled against his efforts to make them communicate more clearly, including curbs on the written use of “and.”

Investment bank internships: a guide for MBAs; Students should beware the overconfidence that can often squander opportunities
by: Scott Rostan – FT
French philosophers are generally not part of the curriculum covering the skills needed for investment banking and financial modelling. However, with the time for summer internships in the banking industry drawing near, I often find myself repeating the same Voltaire quote to MBA students: “Common sense is not so common.”

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