Week InReview

Ruh roh.

"A trainee day trader in France is suing a British brokerage for an amount comparable to almost its entire annual revenue after it seized the €10m profit he made using what he initially thought was a demonstration version of its platform....

"He was practicing trading at home on what he believed to be the demo version - placing €1bn of orders for European and U.S. equity futures - before realizing that it was the live platform and he had run up a loss of more than €1m. He continued trading, eventually building up a $5bn position in U.S. equity futures and turning the loss into a profit of more than €10m."


Friday | Jun 22, 2018
There's good reason to believe that pension demand for long bonds is an unseen driving force behind the flattest U.S. yield curve since 2007. And if that's the case, investors and Federal Reserve officials may be getting needlessly worked up about an impending recession. (Bloomberg Quint | Jun 20)

Market correlations like 2016 suggest dominoes lining up to fall
Morgan Stanley cross-asset gauge shows systemic risk building; development could spell an end to profitable hedge fund trade. While on-again, off-again risk aversion is the mantra for global markets in this age of trade spats, here's a sign that the latest flight to safety may endure beyond Donald Trump's next tweet. (Bloomberg Markets | Jun 19)

Bond traders gird for partial inversion as soon as next week
Gap between 7-, 10-year notes now around 4 basis points; spread has been a harbinger of past three inversions. The first step in the inversion of the U.S. Treasury curve may be poised to occur as soon as next week. The spread between 7- and 10-year yields slipped below 3.5 basis points Tuesday, after shrinking to 2 basis points last month, the smallest gap since at least 2009. The difference between the maturities, the narrowest among on-the-run benchmarks, may not be particularly well-watched. But its descent into negative territory has historically been a harbinger of similar moves elsewhere along the curve, often in as little as a few days, according to data compiled by Bloomberg and BMO Capital Markets. (Bloomberg Markets | Jun 19)

SEC lays out priorities for next 5 years
The top priority is protecting Main Street investors, Securities and Exchange Commission Chair Jay Clayton emphasized in a draft strategic plan. A second goal for SEC officials between now and fiscal year 2022 is keeping abreast of trends in evolving capital markets, including data security and electronic platforms. A third overall goal is enhancing the SEC's analytical capabilities and human capital development. The SEC is seeking public comments on the draft plan. (Pensions & Investments | Jun 19)

Swaps loophole leaves U.S. taxpayers on hook for trades
Loopholes that let the largest U.S. derivatives dealers skirt Dodd-Frank regulations haven't been fixed, according to a report published by left-leaning think tank Institute for New Economic Thinking. Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America handle about 90% of U.S. swaps trading, and have been able to shift some swaps contracts completed in the U.S. to foreign subsidiaries. That's effectively shielded those transactions from key elements of the 2010 Dodd-Frank financial reform law, including requirements for posting collateral on certain kinds of trades, according to a working paper by a University of Maryland law professor. The system could leave taxpayers on the hook in the next financial meltdown, the report says. (Bloomberg Markets | Jun 19)
The Cyber Cafe
Cybersecurity news every Friday
INFOGRAPHIC: Cyber Security & the Financial Industry
Who are the hackers? What are the biggest cyber threats to financial firms? What do they want?
- FINRA

'A wake up call.' OPM data stolen years ago surfacing now in financial fraud case
It has been four years since hackers stole personal information from 22 million people through the Office of Personnel Management, and only now are we seeing concrete evidence that the data is being used in financial crimes.

Symantec warns of China-based espionage campaign targeting satellites
A China-based cyber group is carrying out an extensive hacking campaign by targeting satellite, telecom and defense companies in the United States and Southeast Asia, a U.S. cybersecurity firm warned this week. The motive of the hacking group, known as "Thrip," is likely national cyber espionage.
Binge reading disorder
Hand-curated, chosen with love
Hey boss, you don't want your employees to meditate
A central technique of mindfulness meditation, after all, is to accept things as they are. Yet companies want their employees to be motivated. And the very notion of motivation - striving to obtain a more desirable future - implies some degree of discontentment with the present, which seems at odds with a psychological exercise that instills equanimity and a sense of calm.
 
Lies, China and Putin: Solving the mystery of Wilbur Ross' missing fortune
The commerce secretary promised to divest from almost all his holdings upon entering government, drawing bipartisan praise en route to an easy confirmation.  In November 2017, he confirmed in writing to the federal Office of Government Ethics that he had divested everything he promised. But that was not true.
- Forbes

China just handed the world a 111-million-ton trash problem
Few people consider used plastic to be a valuable global commodity. Yet China has imported 106 million tons of old bags, bottles, wrappers and containers worth $57.6 billion since 1992, the first year it disclosed data. So when the country announced last year that it finally had enough of everybody else's junk, governments the world over knew they had  a problem . They just didn't know exactly how large it was.