| September 25, 2017 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Cybersecurity is very, very tough: How a SIFMU's cyber chief sees the threat
Spencer Doar - JLN
It's alarming and getting ugly.
The Equifax hack in March compromised the personal information of an estimated 40 percent of the United States population. The Bangladeshi central bank is down $81 million after the SWIFT messaging system was hacked in early 2016. The SEC recently disclosed that a 2016 hack of its EDGAR database may have resulted in trading on nonpublic information for personal gain.
Then there are the cyber breaches of retailers: Target in 2013, which settled for $18.5 million, and Home Depot in 2014, which settled for $19 million, plus the recent backdooring of CCleaner, the compromise of the U.S. Office of Personnel Management in 2015, the WannaCry attacks targeting a variety of industries  the list continues and the costs are enormous.
None of this is lost on the financial services sector, which has multiple points of entry and plenty of critical data to protect. It is in this environment that OCC hired its first chief security officer (CSO), Mark Morrison, in May. Morrison spent 30-plus years working in cybersecurity for various government agencies, including the National Security Agency and Department of Defense. After retiring from the government, Morrison headed to State Street in 2013 before becoming the OCC's CSO. Beyond Morrison's hire, the OCC has tripled the number of security staff in the last five years.
Read the rest HERE.
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| | | | | | Lead Stories | | | Accessing Hidden Liquidity in ETFs and Their Listed Options
Kiran Pingali, Bloomberg Tradebook - TABB Forum
Exchange traded products listed in the US alone represent close to $3 trillion in assets under management, and trading in these instruments now accounts for more than 20% of the overall US equity trading volume and 30% of its notional value. This trading activity is concentrated in relatively few of the most popular ETFs, however. What is less obvious is the hidden liquidity that is available in the smaller ETFs, making these products effective trading and hedging vehicles as well. But accessing the hidden liquidity can be a challenge for the buy side.
/goo.gl/x9UK7V
The Real Threats to the Equity Bull Market
Nicholas Colas - Bloomberg
The current move higher for U.S. stocks may look like a bull market, but it shares few characteristics with an actual bull.
We need to look beyond the barnyard comparisons to understand the future direction of domestic equities. The real risks are entirely human and center on how investors factor long-term uncertainty into asset prices.
/bloom.bg/2wROJpV
As Volatility Rose, Trading Volume Actually Declined
Investing.com
Amid one of the wildest years in geopolitical history, when stock market volatility is knuckle-dragging at all-time lows, a Tabb Group report notes a three-year low in equity trading volume. While volatility reduction is a headline in 2017, there was an odd divergence in August that was among several nuanced reasons for the stock trading volume drop, Tabb Group's Valerie Bogard noted. Higher volatility normally correlates to higher stock trading volume, but that didn't happen in August, as a passive trend may be at play along with idiosyncratic differentials.
bit.ly/2wRB2qT
How to make sense of valuations
FT Adviser
Valuations are high right now in many equity markets around the world.
But does that mean these stocks are overvalued, fair value or in four-alarm-fire territory?
bit.ly/2wRp7JH
Why Financial Markets Underestimate Risk
Jeffrey Frankel - Project Syndicate
Today's economy is in a "risk-on" period, when investors exchange safe-haven assets like US Treasury Bills for riskier ones, from real estate to carry-trade currencies. But when such behavior assumes that economic conditions are more stable than they are, as seems to be the case today, trouble inevitably follows.
bit.ly/2xAOFOX
Equity Traders Act Like There's Little Risk Left in Europe
Sofia Horta E Costa - Bloomberg
'Nobody's excited and nobody's worried,' Morgan Stanley says; Trading on benchmark Stoxx 600 is the quietest since 2000
All's quiet on the European front, if stock traders are to be believed.
/bloom.bg/2xATXdt
Why A Hawkish Fed Is Negative For Dollar This Time?
Wayne Ko Heng Whye - FX Street
Fed appeared to be hawkish in its FOMC September meeting. Not only did they offer the timetable for its balance sheet unwinding, but also outlined another 3-4 interest rate hikes by end of next year. But we must take note Fed downgraded its long-term Fed fund rate target by 25bps, such move immediately flattened US Treasury yield curve. A flattening yield curve could be negative to the currency. Despite dollar moving higher after FOMC meeting, we saw that as a knee-jerk reaction, instead of a sustainable move.
bit.ly/2wSiZ44
| | | | | | Exchanges and Clearing | | | DGCX's Dubai India Crude Oil Futures named Best New Derivatives Contract
Saudi Gazette
THE Dubai Gold and Commodities Exchange's Dubai India Crude Oil Futures (DICO) contract has been recognized as the 'Best New Derivatives Contract' at this year's FOW Global Investor Asia Capital Markets Awards 2017.
bit.ly/2wRuXuB
| | | | | | Regulation & Enforcement | | | Regulator Wants Financial Industry to Self-Report Wrongdoing
David Enrich - NY Times
After years as a sleepy federal backwater, the Commodity Futures Trading Commission became one of Wall Street's most aggressive watchdogs during the Barack Obama administration.
nyti.ms/2xAN5N1
Scrap plan for new banking tax, London financiers tells UK opposition party
Reuters
A financial transaction tax proposed by Britain's opposition Labour Party would risk the competitiveness of London's financial center, the City of London Corporation said on Sunday, calling for the proposal to be scrapped.
The leftist Labour Party, which is holding its annual conference in southern English town of Brighton, has advocated a so-called 'Robin Hood' tax to levy charges on bond and derivative trades. It says the tax could raise 4.7 billion pounds ($6.34 billion) to fund higher public spending.
reut.rs/2xASILn
Commodity derivatives, stock broking under 1 entity
Times of India
Markets regulator Sebi on Thursday allowed brokers to merge their equity and commodity derivatives operations under a single entity, fulfilling a long standing demand from the broking community. The move could lower operational as well as trading costs for brokers. It may also lead to use of margin money deposited with stock exchanges by brokers to be used in commodity derivatives exchanges (Commexes) and vice versa  called margin fungibility in market parlance.
bit.ly/2xAo5Wd
SEC chairman faces grilling over hack defense
Josh Kosman - New York Post
SEC boss Jay Clayton better wear his asbestos suit on Tuesday, when he's likely to come under fire while testifying before a Senate committee bent on knowing what the regulator is doing to prevent another embarrassing cyberattack.
nyp.st/2xAyP75
Binary options marketing firm that sent more than 60 million fraudulent emails denies CFTC allegations
Maria Nikolova - Finance Feeds
Zilmil, which has to defend itself in a case brought by the CFTC, denies allegations about redirecting customers to binary options websites and sending more than 60 million fraudulent emails.
bit.ly/2wRQHXp
| | | | | | Technology | | | Navigating Systematic Internalisation
Ollie Cadman, Vela Trading Technologies - TABB Forum
Under MiFID II, liquidity in Europe is to be rerouted, as the business model of broker crossing networks is overhauled and more OTC equity volume is brought under pre-trade transparency rules due to the revised Systematic Internaliser regime. For the buy-side trader, tracking liquidity in the transformed landscape will be challenging. The key to handling the SI network will be an agile connectivity solution that can deliver insight into the trading venues in order to support best execution decisions, but that limits information leakage.
bit.ly/2xAG5jc
| | | | | | Strategy | | | Don't Be Fooled by a Single-Digit VIX
Todd Salamone - Schaeffer's Investment Research
If you're a long-time reader of Monday Morning Outlook, I apologize for what I'm about to say, as it is a refrain that you have heard before: We enter this week's trading with multiple benchmarks trading at psychological round-number levels that have historically marked hesitation points or profit-taking levels.
bit.ly/2wRXZKx
Goldman Sachs Warns Of S&P 500 (SPY) Correction Coming
ETF Daily News
Two weeks after the investment bank announced that according to its Bear Market Risk Indicator the odds of a crash have risen to 67%...
... on Monday morning, Goldman cross-asset strategist Ian Wright cautions in his latest Kickstart letter that the S&P is now rapidly closing in on the longest period in history without a 5% correction, and that as of today, only 4 times in history has more time passed without a 5% correction. The warning follows similar caution from Goldman's chief equity strategist David Kostin who as discussed yesterday, has a very bleak outlook for US stocks, and expects the S&P to slid to 2,400 by the end of the year, remain unchanged through the end of 2018 and rise just 100 points by the end of 2019.
bit.ly/2wRY9Sf
It's risky to go long on the dollar
Gaurav Kashyap - The National
The biggest talking point from the week gone by has been the Federal Open Market Committee rate decision.
As expected, the Fed kept US rates unchanged but hinted at a tightening schedule starting from October. The plan is to reduce the current US$4.5 trillion balance sheet by tranches of $10 billion per quarter. The announcement ultimately saw buying support in the US dollar, after the currency dropped to 91.22 levels against a basket of its major counterparts. The upside was limited however with the Greenback facing resistance in the channel between the 92 to 92.50 levels.
bit.ly/2wRBgOL
| | | | | | Miscellaneous | | | Merkel's Bloc Regroups After 'Nightmare Victory' in Germany
Arne Delfs, Rainer Buergin and Patrick Donahue - Bloomberg
Angela Merkel's political bloc is starting to draw lessons from its electoral losses to the Alternative for Germany party as pressure mounts for the chancellor to win back voters lost to the populist right.
/bloom.bg/2xBiq2d
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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Editor-in-Chief
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Editor
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Editor
| | | Spencer Doar
Editor
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