| June 24, 2016 | "Irreverent, but never irrelevant" | | |  | John Lothian
Publisher
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Not-So-Slow News Day
JLN Staff
The world just took a step toward hell in a handbasket.
Britain voted to leave the European Union, its Prime Minister, David Cameron, announced he will resign, and the markets everywhere are plunging, as is the British pound. "Leave" won 52 percent to 48 percent. Scotland, which voted overwhelmingly to stay in the EU, is talking about a referendum on independence from Britain.
While we at JLN generally stick to market structure, technology, regulation and the "non-price-oriented" risks to one's business, sometimes prices are the story, and the culmination of these other risks. So let's first run down a few prices, then look at what the historic vote may mean for the market structure.
After a decent rally yesterday, where the British pound touched 1.50 to the dollar for the first time in a while, it fell at one point about 18 big figures lower. Those of us who were on the trading floor when the pound dropped out of the ERM in 1992 know how big a move this was. Equity markets are down across the board today, but hardest hit in the UK and Asia. Japan was down about 8 percent. The FTSE was down about 7 percent at one point, but recovered a bit. Banks, naturally, are getting creamed. The opening print on Barclays, for example, saw the stock down about 30 percent.
Atop everyone's mind is this question - "How did the market get this so wrong?" The predictive power of markets is dubious at best. Markets are a snapshot, an equilibrium value of assets, and the amalgamation of the views of all market participants, given what information is known and what is expected down the road. But amid this information are the market prices themselves. So in the case of Brexit, some see stability in the currency and equity markets as a sign that all is well, and buy into and reinforce the stability. It is easy to see why a surprise can rattle the market and unravel this stability, as it was held together by circular logic.
Prices will (or may already have) reached a new equilibrium, and market participants will move on. But what about the market structure? Though the phrase "game changer" is now cliche, this vote truly is one. Today marks a new market paradigm, with many more questions than answers.
What is the future of London as a financial center? Does this vote shift power to the continent? Or to New York? What about the impending merger between the London Stock Exchange and Deutsche Boerse Group? They said going into the vote that it changes nothing, but can that actually be true?
Now it appears imminent that Scotland will hold its own referendum to rejoin. Does this mean Scotland will abandon the pound and join the eurozone?
The developed nations, led by the US and EU, have just spent the last six years overhauling financial market regulations. Though many of the rules are similar, and conform to the G-20 agreement forged in Pittsburgh in 2009, there have been hundreds if not thousands of meetings, calls, roundtables and such, to harmonize rules across jurisdictions. For example, the US and the EU have been battling for several years on central counterparty equivalence, and are only now making true progress. Does Britain need to start from scratch? If so, this is a huge and costly undertaking.
In other words, the market structure effects of the historic vote are and will be taking shape over the coming weeks and months.
There are literally hundreds of stories on Brexit today. We've culled the list to a handful which we found valuable. We also have started a special Brexit page in John Lothian News - a roundup of the best and most interesting stories on the issue, to help you cut through the noise.
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ADMIS Celebrates 50th Anniversary
By John J. Lothian
Our friends at ADMIS celebrated the 50th anniversary of their firm yesterday with a part in the CBOT Buildings new rooftop deck. They unveiled a video celebrating their 50th anniversary, produced by John Lothian Productions. Congratulations to ADMIS on their anniversary and here to to wishing them another 50 successful years.
Here is a link to the video
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With a single vote, England just screwed us all
By Felix Salmon - Fusion
I'm sitting here looking at my burgundy-red British passport, with EUROPEAN UNION emblazoned in gold letters across the top. I've fastened the shirt I'm wearing with cufflinks which have the UK flag on one side, and the German flag on the otherÂmy proud European heritage. I'm thinking about everything I loved about growing up in London: the food, the culture, the fact that in one teeming, vibrant city you could find the entire world. I'm thinking about the single happiest moment that I ever saw my (German) mother, when I ran into the kitchen and told her to come, watch the TV, the Berlin Wall was coming down, the unthinkable was happening. Europe was really, truly, coming together
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***** Self inflicted wounds are the worst kind. They hurt physically and mentally.
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Barry Nobel to Leave PHLX
Barry Nobel will be leaving Nasdaq/PHLX in August. He wrote a gracious note to friends and colleagues yesterday and said he has no future plans other than a full life. Barry was a market maker at PHLX for 16 years before joining the exchange staff in 1999. He has survived all the changes in market structure since then, and even ownership changes. We wish him Godspeed for what comes next.
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SEC Approves IEX as a National Securities Exchange and Issues Interpretation To Allow IEX "Speed Bump"
Katten Muchin Rosenman LLP
As has been widely reported, the application of Investors' Exchange, LLC (IEX) to register with the Securities and Exchange Commission (SEC) as a national securities exchange has generated unprecedented interest and a fair share of controversy. IEX came to public prominence as the result of its featured role in the 2014 Michael Lewis book Flash Boys. From the initial application to approval, the registration process took 10 months, required five application amendments by IEX, and generated nearly 450 comment letters.
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***DA: Our friends at Katten have cut through the noise and put together a no-nonsense look at the IEX approval. Still unresolved, in my mind anyway, is what makes the SEC think this will not lead to utter chaos.
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Thursday's Top Three
Readers seemed to love the Bloomberg story about Donald Trump and the hstory of 40 Wall St., and our "top 10 questions asked of prospective tenants." So much so that the story received the most clicks yesterday. Second place was held by an enforcement story. Dull, right? Not really. This one involved professional athletes such as Mark Sanchez, Jake Peavy and Roy Oswalt, so it climbed the "juiciness" scale. Rounding out the top three was the Reuters story about Martin Abbott's recent idea, Potential rival to LME would be costly; tie-up an option
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| Lead Stories | A Bad Day for Europe
By Editorial Board - Bloomberg
This was never supposed to happen. Three years ago, when U.K. Prime Minister David Cameron promised his country a referendum on remaining a member of the European Union, he was sure of victory. The country had other ideas. On Thursday Britain voted to quit.
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U.K. Backs Brexit as Cameron Resigns After Historic Rupture
Thomas Penny, Svenja O'Donnell - Bloomberg
Prime minister to step down as Johnson weighs next step; Pound plunges 11%, the biggest decline ever, as gold surges
The U.K. voted to quit the European Union after more than four decades in a stunning rejection of the continent's postwar political and economic order, prompting Prime Minister David Cameron to resign and sending shock waves around global markets.
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**Great voting graphic in this story.
BlackRock warns of messy divorce from the EU; The world's largest fund management group has warned that it expects the UK's "divorce" from the European Union to be "messy, drawn out and costly".
By Joe McGrath - The Trade
The world's largest fund management group has warned that it expects the UK's "divorce" from the European Union to be "messy, drawn out and costly".
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City of London's business leaders shocked by Brexit; Several highlight growing wealth gap as cause for vote out of EU
by: Patrick Jenkins, Financial Editor - FT
The City of London's business leaders have responded with shock and horror to news of the vote for the UK to leave the European Union, with several acknowledging the growing divide between Britain's elite and those at the bottom of society as a cause.
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LSE, Deutsche Boerse press on with $30 billion merger after Brexit vote
Reuters
London Stock Exchange Group Plc (LSE.L) and Deutsche Boerse (DB1Gn.DE) vowed on Friday to press ahead with a $30 billion merger despite Britain's vote to leave the European Union.
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Joint Statement of the Deutsche Börse and the London Stock Exchange Group
Deutsche Boerse
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| | | | Brexit | A tragic split; How to minimise the damage of Britain's senseless, self-inflicted blow
The Economist
HOW quickly the unthinkable became the irreversible. A year ago few people imagined that the legions of Britons who love to whinge about the European UnionÂsilly regulations, bloated budgets and pompous bureaucratsÂwould actually vote to leave the club of countries that buy nearly half of Britain's exports. Yet, by the early hours of June 24th, it was clear that voters had ignored the warnings of economists, allies and their own government and, after more than four decades in the EU, were about to step boldly into the unknown.
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Brexit's Blow to Animal Spirits
By Chris Hughes - Bloomberg
CEOs and bankers had been preparing to push the button on deals and fundraisings after Britain voted to remain in the European Union. Those hopes have been dashed overnight.
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FIA's response to the UK's exit from the EU
FIA
In response to the UK's vote in favour of leaving the European Union, and in view of the considerable uncertainty about how this decision will impact financial markets broadly and our industry specifically, FIA will support our members during what will undoubtedly be a protracted period of transition.
/goo.gl/kQsVMS
Why Banks Are Taking Brunt of 'Brexit' Crash
By PAUL J. DAVIES - WSJ
European bank shares are getting crushedÂthe sum of all investors' fears focused on the most exposed stocks.
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ECB Stands Ready to Add Liquidity After U.K. Votes to Leave EU
Alessandro Speciale - Bloomberg
Central bank monitoring markets, in close contact with peers; ECB says euro-area banks have sufficient capital, liquidity
The European Central Bank said it will give banks all the funding they require to quell market turmoil after the U.K. voted to leave the European Union.
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For Currency Traders, a Quiet Thursday Then a Vertical Red Line
Anchalee Worrachate - Bloomberg
>From Tokyo to Toronto, FX shops reel from the shock of Brexit; In Hong Kong, "paralyzed in fear, curled up fingers and toes"
Ryan Nettles just can't stop looking at the vertical red line on his screen. The head trader at Swissquote SA, a bank in the bucolic hills outside Geneva, spent most of Thursday handling buy orders from clients who expected Britain to remain in the EU. The chart on his screen was mostly green as the pound crept above $1.50 overnight for the first time since December.
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S&P Prepares U.K. Ratings Downgrade as Britain Votes to Leave EU
Lucy Meakin - Bloomberg
S&P predicts period of uncertainty that may prevail for years; 52% of Britons voted to leave the European Union in referendum]
S&P Global Ratings is preparing to remove the U.K.'s top credit grade after the country voted to leave the European Union.
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Brexit: Retail brokers under pressure as markets seize up; Hargreaves Lansdown blames volume of trades
by: Aime Williams - FT
UK retail investors faced difficulties trading on Friday morning as the rush to sell stocks following the EU referendum result caused markets to seize up.
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| | | | Regulatory | | For more regulatory, visit MarketsReformWiki, our website focused on current market reform efforts. | FCA monitoring markets post Brexit; Says too early to tell impact on regs; UK regulator says it is keeping a close eye on market conditions as UK votes to leave the EU.
By John Bakie - The Trade
The impact of Brexit on UK financial regulation will be highly dependent on the relationship the country seeks with the European Union, the Financial Conduct Authority has said.
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Statement on European Union referendum result
UK FCA
On 23 June, the UK voted to leave the European Union (EU). This has significant implications for the UK.
The FCA is in very close contact with the firms we supervise as well as the Treasury, the Bank of England and other UK authorities, and we are monitoring developments in the financial markets.
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Clearinghouses seek guidance on giving boards cybersecurity know-how
Neil Roland, MLex
A global proposal to improve cybersecurity at derivatives clearinghouses should specify how they should increase their boards' and senior managers' expertise in this area, European central counterparties said.
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CFTC Requests Public Comment on Swap Clearing Requirement Submissions
CFTC
The U.S. Commodity Futures Trading Commission (CFTC) is requesting public comment on submissions the CFTC received over the past several years from seven registered derivatives clearing organizations (DCOs) pursuant to section 2(h)(2)(B) of the Commodity Exchange Act (CEA) and CFTC regulation 39.5(b). The comment period will be open until July 25, 2016.
1.usa.gov/290qVWL
NY regulator says some banks not complying with settlements
By Suzanne Barlyn - Reuters
Financial institutions that settled misconduct charges with New York State's financial regulator have committed new improper behavior and "serious compliance failures," the agency's head said on Wednesday.
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Dodd, Frank blast ruling that MetLife not too big to fail
BY DENA AUBIN AND LISA LAMBERT - Reuters
A federal court's striking down of the government's designation of insurer MetLife Inc (MET.N) as "too-big-to-fail" could undermine efforts to head off another financial crisis, authors of the landmark Dodd-Frank Wall Street reform law said.
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U.S. banks take complaints over Basel III to Senate hearing
By Xuanyan Ouyang - MarketWatch
U.S. bank officials said Thursday the Basel III reforms are too complex and do not align with reality in the United States. The complaints about the international regulatory framework came before the Senate Banking, Housing and Urban Affairs Committee.
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Emir clearing mandate for NFCs is unjustified - EDF Trading; No good reason to subject energy firms to mandatory clearing, says firm's head of regulation
Roberto Barros - Risk.net
European Union policy-makers should reconsider the rules requiring certain commodity firms to clear all their over-the-counter derivatives transactions, according to the top regulatory official at EDF Trading, the London-based trading arm of French multinational utility EDF. Cemil Altin, head of regulatory affairs at EDF Trading, warned it would be costly to impose mandatory clearing on so-called nonfinancial counterparties (NFCs) and the move would have no appreciable benefit in terms of limiting...
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| | | | Exchanges & Trading Facilities | Bats sees half-day's volume in first hour; Half a day's trading took place in just one hour on Bats' European trading platforms today.
By Conner Guidry - The Trade
Bats Global Markets has reported that over 25 billion worth of stock has been traded in the first hour of opening, compared to the past five day's average of 50 billion.
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FIA releases SEF Tracker for May
FIA
Total trading volume on SEFs averaged $457.3 billion per day during the month of May, which was approximately the same from the previous month but up by 18.1% from May 2015. In contrast to the overall uptrend, average daily volume in credit default swaps showed a significant drop, reaching its lowest level in two years.
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TOCOM and Huatai Futures Sign Memorandum of Understanding
TOCOM
Both parties agreed to develop mutually beneficial business opportunities and other areas of collaboration. They also intend to pursue projects that could increase market liquidity, reliability and operating efficiency.
Currently, Huatai Futures is applying for a TOCOM remote broker membership for its Hong Kong subsidiary. Later they will launch a joint marketing project in mainland China.
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TOCOM Gold Rolling Spot Volume Records New High at 39,370 Lots
TOCOM :
The Tokyo Commodity Exchange Inc. announced today that daily trading volume of Gold Rolling Spot futures contract recorded new high at 39,370 contracts. Gold Rolling Spot futures was launched on May 7, 2015 and the last highest volume was 29,471 contracts on November 30, 2015.
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Deutsche Börse-LSE Merger Backed by Influential Advisers to Shareholders; LSE investors told the rationale for merger to create largest exchange group by income is compelling
By EYK HENNING - WSJ
The proposed $30 billion merger of Deutsche Börse AG and London Stock Exchange Group PLC has won backing from two influential shareholder-adviser services, even if Britain votes to exit the European Union.
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France sticks knife into London Stock Exchange-Deutsche Börse merger
MICHAEL BOW - Evening Standard
FRANCE's most powerful business lobby has called on EU competition authorities to block the London Stock Exchange-Deutsche Börse merger over fears that it will trigger an exodus of French companies to London or Frankfurt.
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Nasdaq Conducts Annual Election for Subsidiary Board Directors
By GlobeNewswire
Nasdaq, Inc. (Nasdaq:NDAQ) announces the appointment of nine directors to The NASDAQ Stock Market LLC, NASDAQ PHLX LLC, and NASDAQ BX, Inc. Boards; the election of Thomas A. Kloet as Chairman of the Boards and the retirement of three directors. Directors serve a one-year term.
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TWILIO LISTS IPO ON THE NEW YORK STOCK EXCHANGE; Celebrates IPO with first-ever coding event from the floor of the NYSE
ICE
San Francisco-based Twilio Inc., a leading cloud communications platform, began trading today on the New York Stock Exchange (NYSE) under the ticker symbol "TWLO" after its initial public offering, which raised $150 million in gross proceeds. Citadel Securities is the NYSE Designated Market Maker (DMM) for the company's shares.
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Euro-BONO-Futures: Replacement of Market-Making scheme
Eurex
Effective from 1 July 2016, the Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG decided to replace the Designated Market-Making scheme for Euro-BONO-Futures (Eurex product code: FBON) on long-term Spanish government bonds announced in Eurex circular 182/15 by an adjusted Designated Market-Making scheme.
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| | | | Politics | The real reason why Wall Streeters paid $50k to have dinner with Donald Trump Tuesday night
Julia La Roche - Yahoo Finance
Donald J. Trump, the presumptive Republican nominee for president, began making the rounds on Wall Street to raise much-needed cash for his campaign.
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No One to Trust: the Anger That Connects Brexit, Trump, Le Pen
Marc Champion - Bloomberg
Mistrust of elites, institutions drives anti-EU campaign; 'Everyone for themselves' in G-zero world, Bremmer Says
In 1999, the historian Norman Davies predicted the breakup of the U.K. There was nothing inevitable about the union of England, Scotland, Wales and Northern Ireland, he wrote in "The Isles," and no reason to think it could withstand the competing nationalisms it contained.
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Trump Says 'I See a Big Parallel' in Brexit Vote and U.S. Race
Kevin Cirilli, Stephanie Baker - Bloomberg
U.S. presidential candidate arrives at Scottish golf course; 'They've taken back their independence,' Trump tells reporters
U.S. Republican presidential candidate Donald Trump praised the decision by British voters to withdraw from the European Union during an appearance at his golf course in Scotland Friday and said he sees "a big parallel" to his own campaign.
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| | | | Hedge Funds & Managed Futures | | For more, subscribe to the JLN Managed Futures newsletter or visit the Managed Futures section on JohnLothianNews.com. | U.K. Asset Managers Brace for Redemptions After Brexit Vote
By Sarah Jones - Bloomberg
Schroders tumbles as much as 28 percent, most since 1991; Buxton says brace for selling as funds aim to meet outflows
Schroders Plc and Aberdeen Asset Management Plc led a selloff in British asset managers as industry experts warned that the U.K.'s vote to leave the European Union could lead to a surge in redemptions.
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I Don't Hate Gold. I Just Don't Love It.
By Barry Ritholtz - 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.
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Wealth Adviser Daily Briefing: Building a Philanthropic Game Plan for Businesses
By MICHAEL WURSTHORN - WSJ
The 'Brexit' Vote: Visit WSJ.com/markets for the latest coverage on the U.K.'s vote to decide whether to leave the European Union and its impact on currencies, stocks, bonds, oil and gold.
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| | | | Banks & Brokers | Goldman Scraps On-Campus Interviews for Robo-Recruiting
Dakin Campbell - Bloomberg
Bank seeks to become 'school agnostic' for job applicants; Firm will stop campus interviews for all but MBA candidates
Goldman Sachs Group Inc., seeking to curb bias in its selection of junior employees, plans to discontinue on-campus interviews for undergraduates.
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Deutsche Bank to shut 188 German branches and cut 3000 staff
Reuters
Deutsche Bank (DBKGn.DE) confirmed on Thursday it had struck a deal with its works council to shut a quarter of its German branches, slightly fewer than expected, as it cuts costs and revamps retail banking.
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Brokerages expect UK to remain in EU; Here is a quick compilation of what the brokerages expect from the Brexit polls, and its impact on financial markets
Puneet Wadhwa - Business Standard
On June 23 Britain will vote whether to stay in the European Union (EU) or not. Over the past few weeks, the possibility of Britain leaving the EU (Brexit) has stirred global financial markets with leading global brokerages and research houses highlighting implications for currency, debt and equity markets. Also Read: Britain to vote in EU referendum today Here is a quick compilation of what the brokerages expect from the Brexit polls, and its impact on global financial markets. Citi Research We maintain our probability of Brexit at 30-40 %, but push this to the top of ...
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JPMorgan just handed us a tragic example of Wall Street at its most basic
Linette Lopez - Bloomberg
Everyone is smiling! These clothes are fun! Vineyard Vines, YouTube
Over the years, Wall Street has tried over and over to change its image as a workplace mainly for straight white males who come from the same families, went to the same schools, and share the same views on everything from fiscal responsibility to the greatness of The Gipper.
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JP Morgan: Roles may move out of UK 'in the months ahead'
Financial News
JP Morgan became the first big institution to warn of positions moving from the UK after the vote to leave the European Union, with a memo to staff saying "the location of some roles" may need to move "in the months ahead".
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High-frequency trading firm sues Merrill Lynch
Ian Bolland - HITC
A high-frequency trading firm set up by two hedge funds sued Merrill Lynch because a tax-arbitrage strategy linked to French stocks didn't turn out to be as profitable as expected.
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Deutsche Bank's Stress Test Lesson
By PETER RUDEGEAIR - WSJ
Here's a study guide for bankers looking to ace the Federal Reserve's annual stress tests: confine yourself to one state and keep more assets in deposit-bearing balances at other banks than in loans.
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ITG Agrees to Pay $5.25 Million to Ex-CEO Gasser in Settlement
Annie Massa - Bloomberg
Gasser claimed company wrongfully terminated, defamed him; Brokerage removed Gasser in August amid dark pool settlement
Investment Technology Group Inc. agreed to pay $5.25 million to Robert Gasser, its former chief executive officer, to settle claims that the company wrongfully terminated his contract and defamed him.
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Britain's banks to work as normal despite Brexit -BBA chief
Reuters
There will be no disruption to banking services in Britain despite market turmoil caused by the country's historic vote to leave the EU, the chief executive of the British Bankers Association said on Friday.
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| | | | Clearing & Settlement | CFTC Requests Public Comment On Swap Clearing Requirement Submissions
Press Release
The U.S. Commodity Futures Trading Commission (CFTC) is requesting public comment on submissions the CFTC received over the past several years from seven registered derivatives clearing organizations (DCOs) pursuant to section 2(h)(2)(B) of the Commodity Exchange Act (CEA) and CFTC regulation 39.5(b). The comment period will be open until July 25, 2016.
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Japan, U.S. Seek Swaps Collateral Rule on Time as EU Delays
Bloomberg
Japanese and U.S. regulators said they intend to impose collateral rules on the $493 trillion swaps market on schedule in September, while leaving the door open to a delay after the European Union said it would miss the deadline.
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| | | | Indexes & Products | Indexing Frenzy Another Thing to Stress About in Stocks Friday
Bloomberg
Friday's session will be an eventful one for U.S. stocks.
As if results of the U.K. secession vote and bank stress tests weren't enough, tomorrow is also the date of the annual rebalancing of FTSE Russell's stock indexes, a procedure that reliably exacerbates trading. In 2015, the reconstitution helped fuel a jump in volume to more than 10 billion shares, the seventh-highest total of the year.
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FTSE 100 and sterling plunge on Brexit vote | Business
Business | The Guardian
Shares plunged and the pound plummeted to a 31-year low as panicked traders reacted to the UK's vote to leave the EU and the prospect of recession amid months of market turmoil.
/goo.gl/pBvvJe
ETFs to Be Wounded Not Crushed in a Stampede From Junk Bonds; Exchange-traded funds will not be hit as hard as mutual funds if there's large redemptions of investments in illiquid assets
Alastair Marsh - 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.
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Key VIX Futures Prices Jump More Than 60% By Early Friday Morning
By Matt Moran - CBOE
Prices for certain futures contracts on the CBOE Volatility Index® (VIX®) rose more than 60% during the early part of the June 24 trading day, as more updates about the anticipated results of the Brexit referendum were divulged.
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Index shifts, Brexit vote could make Friday freaky on Wall Street
By Chuck Mikolajczak, Reuters
Friday could offer an especially wild ride on Wall Street as traders react to the vote on British membership in the European Union and adjust their portfolios to the annual reconstitution of the widely followed Russell stock indexes.
The annual FTSE Russell index adjustment, in which stocks are added to and subtracted from the Russell 2000 small company and Russell 1000 .RUI large company indexes, typically produces the year's highest volumes.
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| | | | Technology | | For more, visit the Tech/HFT section on JohnLothianNews.com. | London, fintech decelerator of the world
Izabella Kaminska - FT
On the matter of London's bid to establish itself as the fintech capital of the world, well known Twitter and blogging raconteur Dan Davies says:
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Well, at least fintech will be fine
Kadhim Shubber - FT
Lol, no, of course it won't.
The UK's "peer-to-peer" lenders are facing their first economic shock and possible down cycle. But where some see the apocalypse, the likes of Ratesetter see an opportunity:
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| | | | Enforcement | Merrill Lynch to Pay $415 Million for Misusing Customer Cash and Putting Customer Securities at Risk
SEC.gov
An SEC investigation found that Merrill Lynch violated the SEC's Customer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account. Merrill Lynch engaged in complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account. The maneuver freed up billions of dollars per week from 2009 to 2012 that Merrill Lynch used to finance its own trading activities. Had Merrill Lynch failed in the midst of these trades, the firm's customers would have been exposed to a massive shortfall in the reserve account.
1.usa.gov/28SWPIw
***DA: A banner day for BAML...
Merrill Lynch Paying $10 Million Penalty for Misleading Investors in Structured Notes
SEC.gov
According to the SEC's order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee. Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date. But the offering materials failed to adequately disclose a third cost included in the volatility index known as the "execution factor" that imposed a cost of 1.5 percent of the index value each quarter.
1.usa.gov/28SXqtK
Merrill Lynch fined $415m for misusing client money; BofA arm cut its trading costs by failing to separate out customer assets
by: Alistair Gray in New York and David J Lynch in Washington - FT
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.
/goo.gl/JZFoKs
Kerviel Faces Complaint Over Covert Tape of Prosecutor, AFP Says
Gaspard Sebag - Bloomberg
Jerome Kerviel, the ex-Societe Generale SA trader responsible for a 4.9 billion-euro ($5.5 billion) trading loss, faces a criminal complaint following the release of a covert recording of a prosecutor who cast doubt on the handling of the probe against him, Agence France-Presse said.
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Bafin fines Deutsche Bank for anti-money laundering flaws: source
Reuters
German financial watchdog Bafin last year imposed a fine of 40 million euros ($44 million) on Deutsche-Bank (DBKGn.DE) for flaws in its systems designed to prevent money-laundering, a person close to the matter said.
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| | | | Environmental & Energy | | For more, subscribe to the JLN Environmental/Energy newsletter or visit the blog. | The Rotten State of U.S. Oil Reserves; The Energy Department needs Congress to greenlight upgrades.
Brian Wingfield - Bloomberg
Bryan Mound, nestled in a 500-acre marshland south of Houston, is among the heavily guarded salt caverns on the Gulf Coast of Texas and Louisiana. There, the government keeps the national emergency oil stash, known as the Strategic Petroleum Reserve (SPR), stored more than 2,000 feet underground. The pipelines at Bryan Mound are capable of delivering 1.5 million barrels a day into the market to offset price or supply shocks if everything is in working order.
goo.gl/VplCvW
Why the GOP is trying to stop the Pentagon's climate plan
By Danny Vinik - Politico
In Washington, big agencies rarely get high marks for innovation and foresight. But when it comes to coping with climate change, the largest federal agencyÂthe PentagonÂhas taken a spot in the vanguard.
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Climate Scientists' Personal Carbon Emissions Come Under Scrutiny
By Lisa Song - Inside Climate News
Abigail Swann makes a point of telling students what she's doing to reduce her own carbon footprint when teaching about potential climate change solutionsÂsuch as biking to work or eating less meat.
goo.gl/W9UhyE
| | | | Asia-Pacific | Asia panics as Britain decides to divorce the EU
by Sophia Yan
Panic is spreading across Asia as Britain shocked the world with its vote to leave the European Union.
Stock markets are bleeding red. Japan's benchmark Nikkei took the biggest hit, closing with a 7.9% loss. Shares in Hong Kong and Australia slumped about 3%.
The British decision to leave the union surprised many investors, who are now finding themselves in uncertain territory. It's a move that could damage important trade links and business ties between the U.K. and Asia.
goo.gl/6EGcl5
Asian exchanges up margins, suspend contracts amid Brexit turmoil
Reuters
The Australian and Singapore exchanges raised the cash firms must pledge to cover futures trades on Friday, and trading was briefly halted in Japan's Nikkei contracts as Asia-Pacific bourses were buffeted by volatility linked to Britain's vote to leave the European Union.
Trading margins, in the form of cash or securities, are pledged by brokers to exchange's clearing houses, which sit in between a trade to secure transactions in the event either party goes bust.
goo.gl/ehMXSH
The British Brexit vote is awful news for China
Quartz
During a visit to the United Kingdom last year, Chinese president Xi Jinping not-so-subtly called on Britain to remain in the European Union.
"China hopes to see a prosperous Europe and a united EU, and hopes Britain, as an important member of the EU, can play an even more positive and constructive role in promoting the deepening development of China-EU ties," said China's foreign ministry, paraphrasing Xi's remarks (paywall).
goo.gl/SMpJHt
| | | | Frontier Markets | How Brexit impacts Africa, other emerging markets
by Charlie Robertson, Global Chief Economist, CNBC Africa
There is a pan-Developed Market aspect to this anti-establishment vote - which is likely to raise market concern that Donald Trump could become president of the US in November 2016, or Marie Le Pen may do well in the French presidential election in 2017, or the hard-left may do well in Spain's forthcoming parliamentary elections, etc. We still imagine that political trends support a shift against the richest in society (London voted to Remain), and in favour of Keynesian spending.
goo.gl/F5GhwW
DIARY-Emerging Markets Economic Events to July 6
FRIDAY, JUNE 24
BEIJING - Indian Finance Minister Arun Jaitley speaks at a forum on 'Invest in India' - 0115 GMT. BUDAPEST - Business forum on growth and competitiveness. Speakers: Hungarian central bank Chief Economist Daniel Palotai and Managing Director Barnabas Virag - 0700 GMT. COLOMBO - Sri Lanka's central bank announces interest rate decision - 1230 GMT. SINGAPORE - Singapore-Development Bank of Singapore institutional investors symposium. Monetary Authority of Singapore Deputy Managing Director Jacqueline Loh will be speaking.
goo.gl/VTEh05
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