 | | | | | | | | June 23, 2016 | | | | | First Impressions | | | Yesterday's Clicks
A story about the endless allure of mortgage bonds and one trader who dominated that market, A $541 Million Loss Haunts Deutsche Bank And Former Trader Dixon, was our runaway winner yesterday. Inside Trump's Most Valuable Tower: Felons, Dictators and Girl Scouts grabbed second, because, well, just look at that title! Since technical trading tool stories can be somewhat esoteric, I was a bit surprised by our third entrant, 'Bollinger Bands' suggest the stock market is ready to break out in a big way. Note: not a single Brexit story in the top three!
| | | | | | Quote of the day: | | | | | | “ | "If there's no horse I like or football I like, then I'll put a tenner on leave."
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| ” | Bettor David Howe in the story, "'Brexit' Vote Already Has a Winner: The Gambling Industry"
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| | | | Lead Stories | | |
Finance Firms Seen Investing $1 Billion in Blockchain This Year
Bloomberg
Financial and technology firms are expected to invest more than $1 billion to bring blockchain technology to capital markets in 2016. That's according to a new survey from Greenwich Associates, where a majority of participants said blockchain has the potential to change markets within the next five years. The 134 interviewees, including executives at banks, exchanges, asset managers and blockchain technology companies, said the main obstacle hindering the technology's widespread use was a "vested interest" in legacy systems.
bloom.bg/290kK4R
****SD: Good point from The Trade: Talent may be the big win from Blockchain
Exclusive: Barclays reins in foreign exchange trading before referendum result - sources
Reuters
Barclays stopped accepting new stop loss orders - an essential part of currency trading - on Thursday as it and other banks took action to limit potential losses and cap their exposure to the outcome of Britain's EU referendum. Clients of the UK-based bank, who asked not to be named for reasons of confidentiality, said Barclays had told customers on Monday it would not execute such trades, in which the bank seeks to close existing positions for clients at a pre-established price, through its machine-trading algorithms.
reut.rs/28TqVM4
****SD: Also, see Bloomberg's Don't Ask These Banks to Execute Brexit Trades They Recommend
Merrill Lynch fined $415m for misusing client money
Financial Times
US regulators launched a crackdown on finance companies that mix client money with their own as the securities watchdog issued its second-biggest Wall Street penalty ever to Merrill Lynch for misusing customer cash.Merrill, which is Bank of America's broker-dealer arm, agreed to pay $415m and admitted wrongdoing to settle Securities and Exchange Commission charges that it failed to safeguard about $60bn worth of customer assets  and profited from the practice.
on.ft.com/290ekT9
****SD: "And admitted wrongdoing" Â don't usually see that. Bloomberg's version here
Markets Priced for Pain on a 'Leave' Vote as Countdown Begins
Bloomberg
Pound, euro may lose 10% in seconds on Brexit: Upadhyaya
European stocks at risk of similar decline, HSBC says
What if the bookies are wrong? Hours before voting in the U.K. ends, with polls from previous days indicating a close race, financial markets are leaning toward an outcome where Britons opt to stay in the European Union. It's possible that investors are positioned the right way. But after pushing up global stocks this week and driving the pound to its highest level of 2016, those money managers face some pain if they wind up on the wrong side of the referendum results.
bloom.bg/290k9Qx
EU referendum: economic message lost on voters
Financial Times
Economists have spoken with almost one voice ahead of Britain's historic EU referendum  but the public has barely been listening. The profession has split roughly nine to one in favour of remaining in the EU, but as voters went to the polls on Thursday they appeared more in sympathy with Michael Gove, the leading Brexiter, who said that "people in this country have had enough of experts".
on.ft.com/290fuOI
****SD: Just more evidence people are more responsive to emotional appeals.
Wall Street banks score good grades on stress test
CNBC
Wall Street banks have enough cash on hand to keep the Fed happy  this year, at least. The 33 banks met or exceeded regulators' required capital cushions they would need to offset losses, according to the Federal Reserve, which on Thursday released the first portion of its annual stress test results. Banks had to project greater losses this time around, including $113 billion in trading losses for the eight biggest firms.
cnb.cx/28TxuhA
Credit Suisse Tries to Overhaul Its Image, but Problems Remain
NY Times
Wall Street's efforts to overhaul its culture since the 2008 financial crisis that nearly bankrupted the world's economy have not been a resounding success, despite calls by prominent regulators to stop rewarding bad behavior.
nyti.ms/290z5hH
Here's how much the top Wall Street banks have earned in fees this year
Business Insider
Where did the first half of the year go? The past six months have flown by, and we're already approaching the end of the first half of the year. That means it is time to check in on how Wall Street banks stack up in dealmaking.
read.bi/2906oBE
****SD: Two other stories from Business Insider based off of Dealogic numbers: Investment banking fees dive in the first half of year and This one chart will make Wall Street bankers weep; Withdrawn mergers 1H 2016
Fannie-Freddie Profits Don't Sway Ex-Official's Views on Sweep
Bloomberg
Core merits' of decision defended in unsealed deposition
Timothy Bowler says government focused on winding down firms
The U.S. government's decision to take all profits from Fannie Mae and Freddie Mac was the right thing to do even in light of the companies' subsequent return to profitability, a former Treasury Department official said in documents released this week.
bloom.bg/290kHWR
Deutsche Bank to cut 3,000 jobs in Germany
Financial Times
Deutsche Bank has reached an agreement with employees to cut nearly 3,000 jobs in its home base of Germany as margins are squeezed by low interest rates and strict regulation.
on.ft.com/28TmMHR
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| Central Banks | Here's a Rare Look Inside the ECB's QE Gearbox
Bloomberg
The European Central Bank is spending an unprecedented amount of money on euro-area debt in its efforts to revive the region's economy and meet its inflation target. Eighty billion euros ($91 billion) of quantitative easing every month, to be exact. But is it working? A new report by the Brussels-based research institute Bruegel gives a guarded 'yes' as an answer. One element of the analysis, by Maria Demertzis and Guntram Wolff, sheds a bit more light on the mysterious process known as "Portfolio Rebalancing."
bloom.bg/290kRxp
Central banks' impotent policies pose a greater economic threat
South China Morning Post
Brexit was only a distraction because there are greater threats of economic disruption out there. In their halcyon days, a central banker was a Master of the Universe who could move markets with hollow pronouncements such as "to do whatever it takes" to calm the markets. Now that interest rates are drifting below zero and economic growth remains weak, central bankers are faced with the dire consequences of their impotent policies. The resulting bubbles and market distortions will only lead to another financial crash.
goo.gl/OhOmMk
Yellen and Draghi's Policies Aren't So Easy After All
Bloomberg
Bad news for European Central Bank President Mario Draghi and Federal Reserve Chair Janet Yellen: their low-rate policies are juicing the economy a lot less than they would have in the past.
bloom.bg/28TqSA0
Former Bangladesh Bank Chief Blames Global System for Theft
NY Times
The former governor of Bangladesh's central bank, from which $81 million was stolen in February, says that flaws in the global money transfer system  and not any misstep by him  are to blame for the brazen heist.
nyti.ms/290zmkV
Learning to Live With the Fed's Low Rates
Bloomberg
The Federal Reserve last week decided not to hike interest rates just yet. This seems like a sensible enough decision -- labor market indicators are looking a bit weak, inflation is still a little below the Fed's 2 percent target, and Brexit and China's slowdown are obvious macroeconomic risks. Why raise rates when economic conditions look a little subpar?
bloom.bg/28TqRvS
Unintended consequences of negative rates
Financial Times
"There is a growing chorus of market participants, ourselves included, who are wondering aloud whether the world's central bankers have lost touch with reality, wilfully ignoring anecdotal evidence that negative interest rates [NIRP] do more harm than good." So said Strategas Research in a note published this week. Quite. The New York-based boutique listed the unintended consequences of NIRP.
on.ft.com/28TnepL
Japan Negative Rates Drive Biggest Lenders From Overnight Market
Bloomberg
Three of five largest say minus rates complicate call funding
Some banks relying on repurchase agreements to raise cash
A majority of Japan's biggest private lenders are still unwilling to borrow from the market for overnight loans almost six months after the Bank of Japan announced its negative interest-rate policy.
bloom.bg/28TtBJL
Dutch Central Bank Presents Results of Cryptocurrency Experiments
CoinDesk
A senior official for the central bank of The Netherlands has presented the results of two cryptocurrency tests designed to explore how bitcoin's blockchain might be adopted by national banking institutions.
bit.ly/28TCZwL
| | | | Regulatory News | Jury in Barclays Libor case reaches verdict for one trader
The Telegraph
The jury in the latest trial of Libor traders has reached a verdict on one defendant and continues to deliberate about the other four men. The traders, all formerly of Barclays, have denied conspiracy to defraud. Stylianos Contogoulas, Jonathan Mathew, Alex Pabon, Jay Merchant and Ryan Reich have been on trial since April.
goo.gl/QQtdsv
EU wants bank failure to look the same from Germany to Malta
Chicago Tribune
The European Union is pushing to unify rules for imposing losses on the bondholders of failing banks, as the divergent insolvency laws adopted by member states could distort markets and make it harder to keep taxpayers off the hook.
trib.in/28TtuOo
Wall Street Splits With Smaller Firms Over Broker-Rule Lawsuit
Bloomberg
Big banks favored compliance over fighting Labor Department
Wells Fargo, Morgan Stanley said to have opposed court battle
Some of the biggest Wall Street banks opposed an industry decision to sue the U.S. Labor Department over its new broker rules, exposing a fissure between the companies and their smaller competitors, people familiar with the matter said.
bloom.bg/28Toh95
Liquidity Issues: Black and Blue, or White and Gold?
TabbFORUM
Regulation's impact on the financial markets and liquidity conditions is a matter of perspective. Buy-side and sell-side firms point to different factors responsible for poor liquidity market conditions.
goo.gl/zD3qG1
****SD: Don't get me started on that dumb dress again...
China takes back control of interest rates
Nikkei Asian Review
The Chinese government is re-instituting limits on interest rates starting with Beijing, putting financial liberalization on hold to strengthen its banks and encourage write-offs of the country's growing pile of bad loans. Lending rates now cannot be set lower than 90% of the People's Bank of China's base rate of 4.35% on one-year loans. Deposit rates, on the other hand, are capped at 130-140% of the central bank's benchmark 1.5% rate.
s.nikkei.com/2908IZq
| | | | Currencies | Sleepless in the City Lets Traders Bet Billions on Brexit Result
Bloomberg
Memories of Black Wednesday, Swiss franc chaos on vote night
Sleeping bags, hotel rooms, coffee buoy those awaiting outcome
Enda Homan is going to pull an all-nighter -- and he can hardly wait.
The senior foreign-exchange trader at Allied Irish Banks Plc in Dublin will be glued to his screens through dawn as U.K. voters decide whether to stay in the European Union. It promises to be a record-setting evening, whether in terms of trading volatility or in gallons of coffee consumed.
bloom.bg/28TrHsq
****SD: Also, Currency Traders Face 3 a.m. Singapore Start for Brexit Results
Retail currency traders take deep breath before EU vote
Financial Times
Charlie Burton had planned to spend Friday admiring classic cars and F1 motors at the Goodwood Festival of Speed on the Sussex downs. But what is likely to be one of the most volatile trading days in the history of the global foreign-exchange market proved too much of a temptation for the retail currency trader with 15 years' experience.
on.ft.com/290eIkD
Pound's Day of Destiny Arrives as History Shows What's Possible
Bloomberg
Options show pound traders are as bearish as they've ever been
Liquidity would be biggest problem after a leave vote: Insight
It's finally here: the day when Britain decides on its 43-year membership of the European Union. And whichever side wins, the pound will be the focus of attention in financial markets around the world.
bloom.bg/28TtQUR
Fintechs play blame game over Brexit suspensions
Financial Times
The Brexit finger-pointing has already started between fintechs over a wave of suspensions that has rippled through the online foreign exchange sector. Currency Cloud, a digital foreign exchange broker, has denied claims by a client that it had been forced to suspend its service because of a postponement of some electronic FX orders by Barclays, reports Martin Arnold in London. Azimo, a digital cross-border payments upstart, told the FT that the main reason for suspending its service until after the referendum was the knock-on effect of the Barclays move on its supply of FX from Currency Cloud.
on.ft.com/28TmUap
Bitcoin Price Drops Another $100 on Massive Trading Volumes
Finance Magnates
Another day, another ride on the Bitcoin rollercoaster. From a level of around $670 yesterday the price of Bitcoin dropped almost as low as $540 today before returning to a level around $590 now. The total market capitalization of all bitcoins in circulation has dropped from a high of over $11 billion ten days ago to just over $9 billion today - a loss of $2 billion dollars in value in a very short time period.
goo.gl/KsNK5C
No end of reasons to whack Mexican peso
Financial Times
Currency traders are treating the Mexican peso like a piñata. Emerging markets risks go up, and it gets whacked. Oil prices go down, it gets whacked. A poll shows that Britain might vote to leave the EU: whack and whack again. The result of all this is that the peso has become one of the most enduringly undervalued currencies  and, this year, it has been the worst performing currency in the world against the US dollar. The trouble is that the Mexican peso is by far the most liquid of the emerging markets currencies, trading about $135bn a day, 24 hours a day. That makes it an ideal vehicle for hedging all kinds of risks in the financial system. Every time there is something new to worry about, additional traders alight on the peso as a short, meaning it never fully recovers from the last scare.
on.ft.com/290e2vx
FX: Order management systems come of age
Euromoney
OMSs are extending their influence across the buy and sell side, impacting the efficiency of broker-dealer sales desks and risk-management practices.
goo.gl/u79c5o
Singapore to include yuan assets in official foreign reserves
South China Morning Post
Singapore will add yuan-denominated investments into its official foreign reserves from June 2016 onwards, a move that recognises Beijing's financial liberalisation and may boost demand for the Chinese currency. Singapore's move will be much welcomed by Beijing as the yuan is officially slated to become a component currency of the International Monetary Fund's Special Drawing Rights this October.
goo.gl/ofHDLD
| | | | Indexes & Index Products | The Surprising Relevance of the Baltic Dry Index
The New Yorker
On January 11th of this year, online financial circles lit up with dire news. "Commerce between Europe and North America has literally come to a halt," one blogger wrote. "For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. . . . It is a horrific economic sign; proof that commerce is literally stopped." Although the Web site that first broadcast this information is prone to hysteriaÂthere are, in fact, many cargo ships on the world's oceans, in plain sightÂmore pessimistic market experts, such as Zero Hedge and the Dollar Vigilante, eagerly quoted it for their millions of readers. The story fit neatly into a narrative: the global economy, despite outward signs that it has clawed its way back from recession, is a small step away from an enormous crash.
bit.ly/290I02x
Russell 2000 Set for Historic Rebalancing Day
Wall Street Daily
Mention the word "rebalance," and most investors think of the boring annual process of buying and selling in order to reset the weight of each asset class in their portfolios. It's a chore, yes. But it's a simple, proven way to maximize returns, while minimizing risk. But today, I want to cover a lesser-known rebalancing event - but one that promises to be the busiest trading day of this year - and perhaps ever. I'm talking about the annual rebalancing of the small-cap Russell 2000 Index.
bit.ly/290I4zj
ETFs to Be Wounded Not Crushed in a Stampede From Junk Bonds
Bloomberg
If there's a stampede for the exit in the junk bond market, it won't be investors in exchange-traded funds that get hit hardest. That's the conclusion of the Financial Stability Board, whose members include the U.S. Federal Reserve and the Bank of England, published in a consultation document on Wednesday. It runs somewhat counter to warnings from Carl Icahn and Howard Marks that the funds can give an illusion of liquidity yet may be hard to get out of when market sentiment sours. It also gives a boost to ETF champions, such as BlackRock Inc.'s Larry Fink, who say the funds offer unparalleled transparency.
bloom.bg/290lkzF
Biggest crop ETF on track for best year since 2009
Financial Times
The largest exchange-traded fund linked to crop prices is again absorbing money after years of outflows, in a sign investors are warily returning to commodities markets. PowerShares DB Agriculture, an $891m fund tracking food commodities from wheat to sugar, has received net inflows of $162m in the year 2016 to date. The fund last had a full year of inflows in 2009, according to Invesco, the fund's sponsor and manager.
goo.gl/d7l8Su
| | | | Gold | I Don't Hate Gold. I Just Don't Love It.
Bloomberg
I don't hate gold. That may be hard for some of you to believe. You have read critical things from me about gold, the miners and the quasi-religious fervor surrounding the shiny yellow metal. Some of my commentary about it the past few years may have led some of you to pigeon-hole me as an anti-gold evangelist.
bloom.bg/28Trrd6
Rebel 'Romance' Means Gold and Cocaine to Flow After Peace Deal
Bloomberg
Guerrilla accountant describes metal's role in Colombian war
Peace efforts are driving rebel migration from FARC to ELN
Victor Builes's account of his four years as a Colombian rebel money man offers a harsh reality check for politicians and investors celebrating an historic peace accord 1,300 miles away in Havana. Recruited by the National Liberation Army, or ELN, in 2012 to trade cocaine and collect taxes at a gold mine, Builes said the prospect of a permanent cease-fire with the larger Revolutionary Armed Forces of Colombia, or FARC, is swelling ELN ranks with former FARC guerrillas.
bloom.bg/28TtY78
| | | | Miscellaneous | Do You Pass the Financial Stress Test?
Bloomberg
The largest U.S. banks find out today if they passed one of the Federal Reserve's annual stress tests. The goal is to be judged strong enough to weather the economic fallout from a major financial crisis like the one in 2008 that led to the tests. How would your own finances hold up under stress? Most of us don't evaluate them rigorously until we want a mortgage or auto loan or face a crisis.
bloom.bg/290j77h
'Brexit' Vote Already Has a Winner: The Gambling Industry
NY Times
Ask for his opinion, and David Howe eagerly tells you how he hopes Britain will leave the European Union. "We need to take control of our borders," he says. But these sentiments are, at the moment, as valuable to him as his personal views on Her Majesty's latest hat. He is more keen to know how the rest of the British electorate is inclined so he can win some money.
nyti.ms/290zvor
Goldman Sachs Scraps On-Campus Interviews for Robo-Recruiting
Bloomberg
Goldman Sachs Group Inc., seeking to curb bias in its selection of junior employees, plans to discontinue on-campus interviews for undergraduates. The move is a part of an overhaul at the New York-based bank that will standardize the recruiting process and seek to eliminate the likelihood that an interviewer chooses a candidate based on traits they share, such as college athletics or extracurricular activities, executives of the firm said Thursday.
bloom.bg/28TnOnb
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