US companies transformed into 800lb gorilla in bond market; Voice Brokers Beware: New MiFID Rules…

Sep 12, 2017

First Read

Hits & Takes

Markets Media Group is pleased to present its 3rd Annual Markets Choice Awards: Women in Finance event, which will kick off Markets Media Week on Tuesday, November 7, 2017. Women in Finance Are Back!. ~JK

Chicago Tech Rocks returns September 28, 2017 at the Metro Chicago, 3730 N. Clark Street. Started in 2016, CTR is unique rock & roll fundraiser. Its sole aim is to DRIVE AWARENESS and RAISE MONEY in support of select non-profit schools and project-based learning programs that are helping prepare a new and diverse generation of technology talent. ~JJL

If you haven’t seen our Asia Pacific news – here you go. ~JK


Interest (in) rates: CME’s suite soars
Spencer Doar – JLN

Despite historical seasonality trends pointing to decreased trading activity in summer months, CME’s interest rate complex has been red hot. In the past month, CME Group has experienced records in a variety of rate-related products in terms of average daily volumes, open interest, electronic trading and investor participation.

Average daily volumes (ADV) and open interest (OI) in Ultra 10-year Treasuries, Wednesday Weekly Options on Treasuries (just launched in June), electronic trading of eurodollar options are all at highs and foreign investor participation is on the rise.

Read the rest here
**And check out Spencer Doar’s info graphic. Nicely done. ~JK


My Journey Through the Financial Industry – Amy Shelly

“Go find your friends. That’s the start of your networking skills. Learn how to go up and talk to people. Have a conversation, be interested in what they’re saying and tell them what you’re looking for and what interests you.”

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Amy Shelly, CFO at the OCC, talks about her winding path through the industry. Shelly spent the early part of her career in banking, spending seven years with Goldman Sachs and three with JP Morgan. Shelly moved on to work for Hull Investments as an accountant where she was introduced to the trading floors. Add in the OCC, and Shelly has worked in proprietary trading, investment banking, retail broking and clearing. But, Shelly maintains she got these jobs with the same skill set and attitude. You should know what the business is doing, think about how to move it forward, learn about your colleagues, and always network.

Watch the video »


Why you’ll never be ready for MiFID II : Fidessa Fragmentation Index
“How many of these things will there be? How much liquidity will pass through them? Will it be toxic or not and what will be the best way to interact across all of them? The sad but true answer is that basically, as a collective industry, right now we just don’t have a Scooby. More to the point, it will be well into next year before any meaningful (and quantitative) data is going to be available that can help shape participants’ behaviour.


MarketsWiki Page of the Day: Security Traders Association
The Security Traders Association’s annual Market Structure Conference is taking place this week in Washington, D.C. featuring SEC Commissioner Michael Piwowar and panel discussions on such topics as MiFID II, the Consolidated Audit Trail, and the recommendations made by the SEC Equity Market Structure Advisory Committee, EMSAC.
JLN is covering the conference, with John Lothian, Spencer Doar, and Mike Forrester attending.


Monday’s Top Three
Monday’s top story was actually led by a personal profile. It seems everyone wants to see where Rumi Morales from CME Ventures has gone to. Second went to
Bloomberg’s China Is Said to Ban Bitcoin Exchanges While Allowing OTC. And third went to the Chicago Tribune’s The growth of Chicago’s Super Loop: So much building, so little architecture. Is Chicago losing its architectural flare?


MarketsWiki Stats
107,463,843 pages viewed; 22,769 pages; 209,095 edits
MarketsWiki Statistics


Lead Stories

US companies transformed into 800lb gorilla in bond market
Financial Times
Apple, Alphabet and Microsoft are among a host of top-tier US companies that have become a force in the global bond market, as they pump hundreds of billions of dollars into government and corporate debt.
Thirty US companies together have more than $800bn of fixed-income investments, according to a Financial Times analysis of their most recent filings with the US Securities and Exchange Commission.

Voice Brokers Beware: New MiFID Rules May Cost You Your Job
By Stefania Spezzati and Mark Burton – Bloomberg
Executing trades by telephone to become rarer in Europe; Shift to electronic platforms may exacerbate volatility
Sweeping regulations designed to make markets more transparent threaten to erode the last bastions of European voice trading, from bonds to commodities.

Bitcoin ETF idea still a little funky, experts say
John McCrank – Reuters
Demand for exchange-traded funds that would provide exposure to cryptocurrencies like bitcoin is strong, but regulators will likely wait until the underlying market matures more before approving such products, a panel of securities industry experts said on Friday.

Citigroup sees 15% fall in third quarter trading revenues
Adam Samson – Financial Times
Citigroup’s chief financial officer said on Monday that the bank expects trading revenues to fall about 15 per cent in the third quarter, compared with a bumper performance in the same period in 2016.

After roads and railways, China’s Silk Road dealmakers eye financial firms
After ports and industrial parks, the dealmakers leading China’s trillion-dollar push to build a modern Silk Road are turning to the financial sector, targeting Europe’s banks, insurers and asset managers to tap funds and expertise.

London wins top financial center title once again as gap with New York widens
Gemma Acton – CNBC
London has held onto top spot in the latest ranking of global financial centers as the gap with second placed New York City (NYC) widens, according to the most recent iteration of the semi-annual report released on Monday.

Asia and the threat to global economic security
East Asia Forum
The slow and uneven economic recovery from the global financial crisis has been a primary driver of the populist anti-globalisation backlash in the United States and parts of Europe. One consequence was the election of Donald Trump. Another was the divorce of the United Kingdom from the European Union. The election of President Trump has introduced huge global uncertainty into international economic policy at a time of major changes in the global balance of power, when stability and certainty are at a premium.

Wall Street Is Turning on China’s ‘Perfect Buyers’
Julie Steinberg and Ben Dummett – WSJ
Chinese companies are finding it harder to buy and invest in businesses abroad—even if they are willing to pay top dollar for such deals.

Murdoch Faces Wide-Ranging U.K. Probe Over Fox’s Bid for Sky
Joe Mayes – Bloomberg
The U.K. said it planned to expand its probe into 21st Century Fox Inc.’s bid for pay-TV broadcaster Sky Plc, exposing Rupert Murdoch and his family to further scrutiny over governance at their media empire and adding to the uncertainty about the 11.7 billion-pound ($15.5 billion) deal’s fate.

Exchanges, OTC and Clearing

CDS Moves To T+2 Settlement
CDS Clearing and Depository Services Inc. (CDS), Canada’s national securities depository, clearing and settlement hub, today announced the successful transition to a two day securities settlement period, or T+2, from the previous three day period, or T+3. Thursday, September 7, 2017 marked both the final settlement date for T+3 trades and the first settlement date for T+2 trades.

CBOE Holdings Announces Plans to Launch Options on S&P Select Sector Indices
Press Release
CBOE Holdings, Inc. (BATS: CBOE | NASDAQ: CBOE) announces plans to expand its suite of product offerings tied to S&P Dow Jones Indices with the planned launch of options on the 10 S&P Select Sector Indices that comprise the S&P 500®, a key benchmark of the U.S. equities market. The new index options will offer investors across the globe new ways to efficiently incorporate U.S. sector investing strategies into their portfolios.


Make room for some blocks : Fidessa // Regulation Matters
Block trading is unique as it enjoys rare bi-partisan support by practitioners and politicians alike. Unfortunately, relatively few people know how to navigate among block venues, due to their inherent opacity. To make matters worse, even fewer market participants command orders exceeding the Large in Scale (LIS) thresholds and decide to execute them in one go rather than put them through the algo-grinder churning out thousands of tiny trades.

Fintech bonanza? A third of financial technology startups expect to IPO within five years
Lynsey Barber – City A.M.
The UK’s ambitious fintech startups are eyeing success on the public markets with a third of them planning an IPO in the next five years, new figures reveal.

Fidor Bank In Singapore: Establishing Tomorrow’s Fintech Entrepreneurs
Madhvi Mavadiya – Forbes
Smart Nation Singapore continues to forge ahead in the financial technology industry, especially with the news announced last month that challenger bank Fidor has invested in five polytechnics so that students and lecturers are trained on developing fintech applications, using Fidor’s API sandbox and fidorOS digital banking platform. This is a significant step for Singapore’s financial sector and fintech alike as students will be able to develop digital banking services and will inevitably go on to apply these skills when working in traditional banking or other areas.

BNP Paribas AM acquires fintech
Jamie Williamson – Financial Standard
BNP Paribas Asset Management is adding digital advisory services to enhance the digitalisation of its distributors, buying a majority stake in a Belgian fintech.
Gambit Financial Solutions is now the preferred partner for all current and future robo-advisory solutions for BNP Paribas AM’s retail and wealth management networks.

SoFi CEO Mike Cagney to step down after lawsuits; Hard-charging entrepreneur says bad press was a ‘distraction’ for online lender
Ben McLannahan in New York – FT
Mike Cagney, the hard-charging chief executive and chairman of SoFi, is standing down in the wake of a pair of lawsuits alleging sexual harassment and unfair work practices at America’s biggest online lender.


States to Trump: Leave Retirement Rule Intact or We’ll Act
The controversy over a rule restricting conflicted retirement advice is shifting to states, which are moving to bolster investor protections out of concern the Trump administration will weaken the federal provision.


ITG’s Selway drops out of running for key U.S. SEC job
Jamie Selway, the leading candidate to head the U.S. Securities and Exchange Commission’s Division of Trading and Markets, has withdrawn his name from consideration, according to a person with direct knowledge of the matter.

Bond Traders Warn MiFID II Will Drive Business From Europe
Silla Brush and Alexander Weber – Bloomberg
Bond trading firms are making a last-minute plea to regulators, warning that unless tweaks are made to Europe’s MiFID II rules, business will flee to other regions.
The firms, which included Michael Spencer’s NEX Group Plc, London Stock Exchange Group Plc unit MTS Markets, MarketAxess Holdings Inc. and Tradeweb Markets LLC said the European Union requirements for traders’ personal data clashes with practices in Singapore, Hong Kong and New York. The group sees a migration of capital markets activity away from regulated venues as a result.

United States Files Civil Fraud Complaint Against Former Deutsche Bank Head of Subprime Mortgage Trading; Defendant Involved in the Sale of Over $1 Billion in Deutsche Bank Residential Mortgage-Backed Securities
The United States today filed a civil complaint in federal court in Brooklyn, New York, against Paul Mangione, former Deutsche Bank head of subprime trading. In its complaint, the United States alleges that Mangione engaged in a fraudulent scheme to misrepresent the characteristics of loans backing two residential mortgage-backed securities (RMBS) that Deutsche Bank sold to investors that resulted in hundreds of millions of dollars in losses. This suit is brought pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and seeks an appropriate civil penalty.

SEC Drops Fraud Suit Against Wall Street Financier
Maria Armental – WSJ
Wall Street’s top cop has dropped a civil lawsuit against a financier accused of manipulating the shares of companies he helped take public, after a judge had tossed out key evidence in a related criminal case.

ITG’s Selway drops out of running for key U.S. SEC job
Jamie Selway, the leading candidate to head the U.S. Securities and Exchange Commission’s Division of Trading and Markets, has withdrawn his name from consideration, according to a person with direct knowledge of the matter.

Asia curbs digital coin offerings, but finds regulation hard- Nikkei Asian Review
Nicky Burridge – Nikkei Asian Review
Alarmed at a sudden rise in the volume of investment in digital tokens being offered through initial coin offerings, Asian authorities are scrambling to set out regulatory frameworks for the sector.

Investing and Trading

Investors Say Being Long Bitcoin Is Now the Most Crowded Trade
Dave Liedtka – Bloomberg
Chinese regulators aren’t the only ones getting nervous about the astronomical rally in bitcoin.
Bullish bets on the cryptocurrency are now considered the most crowded trade in financial markets, according to fund managers surveyed by Bank of America Merrill Lynch. Twenty-six percent cited bitcoin, surpassing the 22 percent who considered the most overheated wager to be the long trade on the Nasdaq Composite Index. Shorting the dollar was third, at 21 percent.

Your Tolerance for Investment Risk Is Probably Not What You Think; Questions financial advisers ask clients to get at the answer actually measure something completely different—often leading to misguided investment strategies
By Meir Statman – WSJ
Anybody who has ever been to a financial adviser knows the drill. The adviser begins by asking you to fill out a questionnaire, aimed at getting at a key measure: your appetite for risk. By knowing how much risk you’re able to tolerate, the adviser knows how much you’re willing to lose to get where you want to go.

How Warren Buffett broke American capitalism; For the investor, the ideal business is one that takes no capital but still grows
Robin Harding – FT
Growing up, I admired nobody more than Warren Buffett, the greatest investor ever. His achievement is towering. The market is an implacable opponent but here was a man who beat it year after year, making $75bn out of nothing but wisdom and charm. There was moral purity in his modesty, his ethics and his quiet attachment to home in Omaha, Nebraska. What footballer, politician or thinker could compare?

Warburg Pincus Completes Acquisition of 49% Stake in Fortune SG from Societe Generale
Warburg Pincus, a leading global private equity firm focused on growth investing, and Societe Generale, one of the largest European financial services groups with presence in 66 countries, jointly announced today that Warburg Pincus has completed the transaction to acquire 49% stake in Fortune SG (“Fortune”), a leading asset management company in China.


Warburg Pincus Completes Acquisition of 49% Stake in Fortune SG from Societe Generale, Business News
Warburg Pincus, a leading global private equity firm focused on growth investing, and Societe Generale, one of the largest European financial services groups with presence in 66 countries, jointly announced today that Warburg Pincus has completed the transaction to acquire 49% stake in Fortune SG (“Fortune”), a leading asset management company in China.


Fee model would boost Asian ETF market
Leo Lewis – Financial Times
While regulators in the US fret that the pace of growth in the exchange traded fund market may be too explosive, their counterparts in Asia along with asset managers and distributors sweat over what more can be done to raise investor interest.
As US ETF assets under management passed the $3tn mark this summer, AUM in the Asia-Pacific industry just managed to creep over $350bn.

Japan regional bank consolidation “inevitable”: adviser to regulator
Leika Kihara and Sumio Ito – Reuters
Further consolidation among Japan’s regional banks is inevitable given a rapidly ageing population and ultra-low interest rates, an adviser to the country’s financial regulator said.

Anthony Rowley: Tremors in Tokyo as ‘Japan premium’ looks set for comeback- Nikkei Asian Review
Nikkei Asian Review
“Japan premium” sounds rather like a superior brew of Japanese ale. But the term came into use more than 20 years ago to describe something rather less intoxicating — the punishingly high cost that Japan’s banks had to pay if they wanted to buy dollars in overseas markets.

China’s Fossil-Fuel Phase-Out Fails to Alarm Big Oil Investors
Aibing Guo – Bloomberg
In the first day of trading after China said it’s working on a deadline to end sales of fossil-fuel-powered vehicles, shares are holding ground in the oil companies that stand to lose out.
The listed units of China’s big three oil companies — PetroChina Co., Cnooc Ltd and China Petroleum & Chemical Corp. — all posted gains in early trading on Monday in Hong Kong, most likely buoyed by a tick up in crude prices. China Petroleum, better known as Sinopec, which is also trading Monday without the right to receive its next dividend, rose 1.7 percent after stripping out the impact of the payout.

JFD Brokers plans EU, Africa and Asia expansion as it promotes Mohamed Hassan to head Bus Dev
CySEC regulated retail forex and CFDs broker JFD Brokers announced that it has promoted Mohamed Hassan to Chief Business Development Officer, in charge of expanding markets, as JFD reaches out to international audiences across the globe.

Cargill sells US steel fabrication centres to Japan’s Metal One
Gregory Meyer – Financial Times
Cargill, the world’s biggest agricultural trading company, has agreed to sell its US steel fabrication centres as it continues to shuffle its sprawling portfolio in search of better returns.

Australian Banks Sitting on A$500 Billion of ‘Liar Loans,’ UBS Says
Emily Cadman – Bloomberg
Here’s something else for policy makers to worry about as they attempt to engineer a soft landing in Australia’s property market.
The country’s lenders could be sitting on A$500 billion ($402 billion) of “liar loans,” or mortgages obtained on inaccurate financial information, according to an estimate from UBS Group AG.

India Swaps Cheaper LNG for More Volume in 2nd Reworked Deal
Debjit Chakraborty and Saket Sundria – Bloomberg
Petronet LNG Ltd. has reached an agreement to rework a liquefied natural gas supply agreement with Exxon Mobil Corp., the second such renegotiation by the Indian company for gas supplies after reaching a similar deal with Qatar, according to people with knowledge of the development.

Japan Post confirms $12.1bn share sale
Financial Times
The Japanese government has launched the $12.1bn follow-on sale of a stake in Japan Post Holdings.


What Happens if Brexit Negotiations Don’t Work?; It’s not out of the question that negotiators could fail to reach a deal.
It’s been nearly three months, and three rounds, since Brexit negotiations began, and the parties aren’t far from where they started. The European Union’s Chief Brexit Negotiator Michel Barnier closed the last round of negotiations on August 31 by announcing that neither side had made “any decisive progress” on any of the key issues surrounding the United Kingdom’s withdrawal from the bloc. His British counterpart, David Davis, was only slightly more optimistic: “We’ve seen some concrete progress. … There remains some way to go.”


The New Corporate Recruitment Pool: Workers in Dead-End Jobs; In a tight labor market, companies are looking to set up in cities with large numbers of the underemployed who would leap at a new opportunity
By Jennifer Levitz – WSJ
Pressed for workers, a New Jersey-based software company went hunting for a U.S. city with a surplus of talented employees stuck in dead-end jobs.

Scammers Are Constructing Fake People to Get Real Credit Cards; How fraudsters use scraps of data to build synthetic identities.
By Jennifer Surane – Bloomberg
On a warm day in May, agents from the FBI and the U.S. Postal Inspection Service descended on a leafy neighborhood in South Carolina and raided the home of a DJ suspected of using fake identities to obtain 558 credit cards from Capital One Financial Corp.

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CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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