Intercontinental Exchange plans alternative rate to tarnished Libor

Jan 25, 2019

First Read

Hits & Takes
JLN Staff

Congratulations to Viable Markets on a successful “Rates Evolved” conference in New York Yesterday. The program was richly filled with quality content from a nice selection of industry participants. The regulators did not show, as the government shutdown has ceased their participation in such events. The weather was not so great and my plane was delayed 4 hours coming home. Luckily I was able to get on an earlier flight and only arrive home 2 hours late.

I really liked the construction of the event, with panels, great transition videos and one on one meetings available to sponsors. I was not so sure however about the chamomile fruit juice. This event, and other Viable Markets events, have a bright future.~JJL

We work in a global industry. So it’s interesting to see some analysis on the Trump call to pull out of the Trans-Pacific Partnership deal with 11 other countries, none named China. From NPR, “The Peterson Institute predicts the U.S. stands to lose over $130 billion over the next decade by not being part of the pact.”~JK

The US Energy Information Administration (EIA) released its Annual Energy Outlook 2019 report. Notables include: the US will be an exporter of energy in 2020 for the first time in almost 40 years, and renewables (wind and solar power) will surpass nat gas and coal in electric generation in less than 10 years.~JK

Researchers at the Massachusetts Institute of Technology (MIT) have created their own cryptocurrency. They’re saying it is more efficient and scalable than most cryptocurrencies currently in the space. It uses a new method of mining, which seems like a hybrid of both bitcoin and Ethereum. They also claim it requires 99% fewer users on its network than other cryptos. You can read about it in our “Cryptocurrency” section.~MR

China creates app to tell you if you are near someone in debt and encourages you to report them.” Big brother things not even science fiction authors imagined. ~JB

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We must rethink our clearing house rules; The EU and US should drop duplicative registration requirements
Dawn Stump – FT
Ten years ago, when the leaders of the G20 nations were struggling to respond to the financial crisis, they agreed to develop a co-ordinated response to change the handling of over-the-counter derivatives. These transactions are used to manage risks such as interest rate changes and credit exposure. During the crisis, the risk of individual parties defaulting on these contracts exposed the global financial system to vulnerabilities.
/on.ft.com/2FY4Dat

***** CFTC Commissioner Dawn Stump doing her best Scott O’Malia impersonation.~JJL

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Keeping Score of Trade Compliance: A Regulator’s Perspective from Tom Sexton, NFA CEO, Part 2
Rick Lane- Trading Technologies
Recently, our CEO Rick Lane sat down with NFA President and CEO Tom Sexton at our Tech Tap to learn more about NFA and how the organization deals with a variety of issues we all face. In Keeping Score of Trade Compliance: A Regulator’s Perspective from Tom Sexton, NFA CEO, Part 1, they discussed the history of the organization, its key functions and specific technology initiatives. For part two of their talk, which covers how NFA tries to stay ahead of the technology curve, Tom’s professional background and more, read on.
bit.ly/2FO6kYM

***** Side job for the CEO of TT is talk show host. Look out Dr. Phil.~JJL

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The Nasdaq for Classic Cars Targets Millennials With New Store; Rally Rd. is finally open for business.
Hannah Elliott – Bloomberg
Every afternoon at Sant Ambroeus restaurant on Lafayette Street in Soho, Manhattan’s fashionable power people lounge for lunch.
/bloom.bg/2FMrzKt

****** I don’t get it.~JJL

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Rothschilds Sell Last Piece of Austrian Empire After 200 Years
Matthias Wabl – Bloomberg
It’s the end of an era for the Rothschilds in Austria. Once the Habsburg empire’s top financier, the family that started to do business in Vienna around 1815 is selling its last piece of land in Austria, closing a 200-yearlong history that included booms, busts, crashes and wars.
/bloom.bg/2G3fQGZ

****** Interesting story.~JJL

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Thursday’s Top Three
Our top read stories on Thursday were led by Efinancial Careers’ post Junior traders are leaving Goldman Sachs and Morgan Stanley to pursue technology careers. Second was Bloomberg’s This Is What Happens When You Try to Sue Your Boss about Alex Beigelman and UBS. Third was about the stock crash and rebound of Jardine Matheson Holdings on SGX on Thursday, in Bloomberg’s A $41 Billion Flash Crash in Singapore Gives Traders a Fright

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Lead Stories

Intercontinental Exchange plans alternative rate to tarnished Libor
Philip Stafford – FT
Intercontinental Exchange, the US exchanges operator, is looking to launch an alternative rate to replace Libor, the tarnished benchmark that global authorities are trying to phase out in the next two years.
/on.ft.com/2FNukLw

Derivatives lobby urges clearing controls after Nasdaq default
Financial News
The trade body for the world’s $595tn over-the-counter derivatives market has called for better controls at clearing houses in the wake of high-profile defaults. The International Swaps and Derivatives Association published a series of best practice guidelines on January 24 to help clearing houses improve and maintain robust risk management.
bit.ly/2HxNeYJ

Weed Versus Greed on Wall Street; As potential profits in cannabis grow, big banks and blue-chip investors will lose their reticence about the pot business
Carol Ryan – WSJ
The whiff of pot on Wall Street is unmistakable, but banks, wary of federal regulators, won’t touch the stuff. Temptation was easy for banks to resist when following the letter of federal law simply meant refusing business from pot dispensaries with safes overflowing with cash. Now that tens of millions of North Americans can consume marijuana legally, with many more on the way, the rest of corporate America has left its financial institutions behind.
/on.wsj.com/2FP5nPP

Exchange-traded derivatives hit record in 2018; Data from the Futures Industry Association (FIA) showed that equity index futures and options were a main driver for the record activity.
Hayley McDowell – The Trade
Derivatives traded on exchanges hit a new all-time record in 2018 of more than 30 billion contracts, according to statistics from the Futures Industry Association (FIA).
bit.ly/2FOdCM6

Goldman, Morgan Stanley Ask to Cancel Trades After $41 Billion Flash Crash
Sofia Horta e Costa , Bei Hu , Cathy Chan , and Livia Yap – Bloomberg
Goldman Sachs Group Inc. and Morgan Stanley asked some counterparties to cancel or amend trades in Jardine Matheson Holdings Ltd., after a $41 billion flash crash on Thursday saw shares change hands far below the market level, according to people familiar with the matter.
/bloom.bg/2FZOXDx

Bitcoin Is Worth Less Than the Cost to Mine It, JPMorgan Says
Eric Lam – Bloomberg
Low-cost Chinese operations may still have positive margins; Crypto has failed as a diversification hedge: JPM’s Normand
The production-weighted cash cost to create one Bitcoin averaged around $4,060 globally in the fourth quarter, according to analysts with JPMorgan Chase & Co.
/bloom.bg/2G0s9n6

Diversification is Causing Active Managers to Underperform. AI Could Fix It.
Institutional Investor
Human portfolio managers — who have a limited number of good ideas — have a better chance of outperforming benchmarks when they run concentrated portfolios. But their efforts to manage risks by diversifying into hundreds of stocks are diluting their returns.
bit.ly/2HJjxEf

House financial panel seeks hearing with top US bank chiefs; Session would be first meeting between bank bosses and new chair Maxine Waters
Laura Noonan – fT
A powerful US House of Representatives committee is preparing for a public face-off with the chief executives of America’s biggest six banks over how their institutions have performed in the decade since the financial crisis.
/on.ft.com/2G10bYK

CEOs of Six Top Banks to Testify Before Congress; Wall Street giants expected to testify before House Financial Services Committee in March or April
Andrew Ackerman and Emily Glazer – WSJ
The chief executives of the six largest U.S. banks are poised to testify together before House lawmakers in Congress this spring, according to people familiar with the matter, for the first time since shortly after the financial crisis.
/on.wsj.com/2G3y8rg

A Star Banker’s Choice: Plum Job or Tens of Millions of Dollars
Patrick Winters , Jan-Henrik Foerster , and Sonali Basak – Bloomberg
His attempted defection to Santander risked his deferred pay; People with knowledge of the matter say his next move is key
Andrea Orcel is facing the trade of his career: collect tens of millions of dollars in deferred compensation from UBS Group AG or keep a career in banking.
/bloom.bg/2FNqS3M

BlackRock China ETF Is Where Wall Street Makes Global Macro Bets
Yakob Peterseil – Bloomberg
Cheap options on FXI allow for bullish or bearish tariff bets; Correlation with SPY suggests possibility of U.S. equity hedge
A $5.9 billion ETF is fast becoming the epicenter for Wall Street bets on everything from the global trade war, U.S. equity volatility and China’s sputtering growth engine.
/bloom.bg/2FMwYBf

Banks Are a Shrinking Presence in the U.S. Corporate Bond Market
Claire Boston – Bloomberg
Bond issuance from financial companies has fallen in half; U.S. bank bonds are a top trade for 2019, CreditSights says
The biggest issuers of U.S. corporate bonds are easing up on selling new securities, which could translate to gains for investors holding the debt. Banks and other financial companies have sold around $50 billion of bonds so far this year, about half of what they issued in the same period a year ago. For the largest U.S. banks the decline has been even steeper — they sold just $12 billion of debt after earnings, about a third of sales at the same point last year.
/bloom.bg/2FNcAzZ

Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff; Next week’s meeting could yield more clues
Nick Timiraos – WSJ
Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight.
/on.wsj.com/2FPbfc5

A Davos Debate: What Is Finance for?; Caisse’s Michael Sabia fears finance has forgotten its original purpose as backers of corporate investment
James Mackintosh – WSJ
The head of one of the world’s largest long-term investors has a warning for shareholders and the financial elite meeting in Davos: Start acting like owners of the companies in which you invest, or prepare for a populist backlash against modern capitalism.
/on.wsj.com/2FMuump

Hemp Bets Grow After Crop Is Legalized; Farmers, food makers rush into potentially volatile market for products containing cannabidiol
Heather Haddon – WSJ
Hemp is poised for a comeback. The fast-growing plant related to marijuana was farmed across the U.S. for more than a century, its strong fibers woven into rope and textiles. Cultivation was largely banned from 1970 until December, when President Trump signed a new $867 billion farm bill that removed hemp from a list of federally controlled substances.
/on.wsj.com/2FIG2Gy

Exchanges, OTC and Clearing

Exchange operator ICE plans benchmark to replace Libor
Reuters
New York Stock Exchange operator Intercontinental Exchange Inc said on Thursday it plans to launch a new benchmark to replace the Libor, as part of global efforts to scrap its use after a manipulation scandal.
/reut.rs/2FO2AXq

ICE Benchmark Administration Introduces The U.S. Dollar Ice Bank Yield Index For Review And Comment By Market Participants
ICE
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that ICE Benchmark Administration (“IBA”) has published a paper introducing the U.S. Dollar ICE Bank Yield Index for review and comment by market participants.
/goo.gl/Mmxo6g

FIA releases annual trading statistics showing record ETD volume in 2018
FIA
FIA today released summary statistics for annual trading activity in the global exchange-traded derivatives markets that showed record activity in 2018.
The number of futures and options that changed hands on exchanges around the world rose 20.2% to 30.28 billion contracts, an all-time record. Futures volume rose 15.6% to 17.15 billion contracts, while options volume rose 26.8% to 13.13 billion contracts.
bit.ly/2MuuxDU

Aquis beats rivals to EU share trade licence ahead of Brexit
Huw Jones – Reuters
Pan-European stock trading platform Aquis Exchange has secured French regulatory approval for a new hub in Paris, putting it ahead of rivals in preparing for a potentially disruptive British exit from the European Union. With just over two months before Brexit day on March 29, Aquis and rivals Cboe and Turquoise are racing to get approval for EU hubs that would help them cope in the event of a disorderly departure.
/goo.gl/t1dRQi

NYSE, Nasdaq, CBOE, IEX, And MEMX: Exchanges Doomed By Excess
Kurt Dew – Seeking Alpha
The financial markets need an agenda. The recent focus of financial market commentary has been mostly negative – excessive exchange fees, Balkanization, and fragmentation. However, fulfillment of the promise of electronic trading asks for something more than lower fees.
bit.ly/2FO3jb6

Blockchain firm Symbiont raises $20 million from Nasdaq and Citi; Symbiont has previously worked with Vangaurd to simplify its index data sharing processes using blockchain technology.
Hayley McDowell – The Trade
Nasdaq and Citi have participated in a $20 million funding round for capital markets blockchain platform and technology provider, Symbiont.
bit.ly/2FOwMS7

GFF Summit 2019: Connecting buy-side clients from across Europe and beyond
Frank Odendall, Head of Buy-Side Repo Initiative at Eurex
Eurex Clearing made significant inroads for the clearing of EUR-denominated OTC IRS in 2018 connecting buy-side clients from across Europe and beyond. Similarly, Eurex Repo successfully on-boarded pension funds, investment funds and regional banks from the Netherlands, UK and Spain to Eurex Repo’s centrally cleared repo market as both cash takers and cash providers utilizing the innovative Select Finance – ISA Direct for Repo direct access model.
bit.ly/2FPeQXk

Eurex Repo transactions: Amendments to the Clearing Conditions and Price List of Eurex Clearing AG
Eurex
This circular contains information with respect to Eurex Clearing AG’s service offering and corresponding amendments to the Clearing Conditions of Eurex Clearing AG (“Clearing Conditions”) and Price List of Eurex Clearing AG (“Price List”) regarding the following topics:
bit.ly/2FNegth

Eurex Clearing FIXML Interface: Change of WebSphere MQ message format
Eurex
The WebSphere MQ message format will change to MQHRF2. This change is required in order to send MLID (Message Level ID) as a named property, which is already available to AMQP clients as an application property. Clearing Members need to ensure that their applications are able to correctly decode MQ messages in MQHRF2 format.
bit.ly/2FOeMaq

Amendments to the Clearing Conditions and FCM Regulations: Introduction of courses of action in case of market disorder, impossibility and force majeure
Eurex
In order to account for the increasing degree of uncertainty Eurex Clearing AG (Eurex Clearing) is facing with regards to cross-border regulation, it will incorporate additional provisions on market disorder, legal impossibility and force majeure into the Clearing Conditions of Eurex Clearing (Clearing Conditions) and the FCM Regulations of Eurex Clearing (FCM Regulations).
bit.ly/2FMBLCJ

Deutsche Börse supports business newspaper for students
Deutsche Börse
With the Frankfurt Stock Exchange, Deutsche Börse Group has recently been supporting the student newspaper “Handelsblatt Newcomer”. In the current issue of January, the Frankfurt Stock Exchange appears as a partner for the first time. The aim of the cooperation is to familiarize young people aged 14 and older with the topics capital market and stock exchange. The commitment is one of the initiatives with which Deutsche Börse Group promotes economic education .
bit.ly/2FQvjuo

Listing Nominating Committee Seeks Candidates for Inaugural Listing Review Committee
HKEX
The Listing Nominating Committee of The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX) is now seeking applications from individuals interested in serving on the Exchange’s Listing Review Committee and the GEM Listing Review Committee1.
bit.ly/2FOBnnl

Fintech

Keeping Score of Trade Compliance: A Regulator’s Perspective from Tom Sexton, NFA CEO, Part 2
Rick Lane – Trading Technologies
Recently, our CEO Rick Lane sat down with NFA President and CEO Tom Sexton at our Tech Tap to learn more about NFA and how the organization deals with a variety of issues we all face. In Keeping Score of Trade Compliance: A Regulator’s Perspective from Tom Sexton, NFA CEO, Part 1, they discussed the history of the organization, its key functions and specific technology initiatives. For part two of their talk, which covers how NFA tries to stay ahead of the technology curve, Tom’s professional background and more, read on.
/goo.gl/Gj1fkE

$1.2 trillion brokerage giant TD Ameritrade is working on a new technology similar to Domino’s pizza tracker, and it could save them millions
Dan DeFrancesco – Business Insider Prime
The future of getting questions answered from your brokerage might be as easy as checking when your pizza will be delivered or if your Uber driver has arrived. That’s the idea behind a new tool TD Ameritrade is developing to help employees, and eventually customers, keep track of processes like adding additional funds into their account or filing paperwork, as they move their way through the organization.
/goo.gl/ZeW713

BOJ’s Kuroda warns fintech firms could disrupt banking system
Leika Kihara, Mark Bendeich – Reuters
apan’s central bank chief, Haruhiko Kuroda, said on Thursday that fintech companies could disrupt the banking system of advanced economies in a serious way.
/reut.rs/2FNpEWe

Heathrow Turns to AI to Cut Gap Between Flights by 20 Seconds
Christopher Jasper – Bloomberg
London’s Heathrow airport will test an array of ultra high-definition cameras to help determine more accurately when its runways are clear of planes and cut the gap between flights by as much as 20 seconds.
/bloom.bg/2FY5fwN

Shoshana Zuboff: Facebook, Google and a dark age of surveillance capitalism; It’s time to fight back against businesses that poach our private experience for data
Shoshana Zuboff – FT
Last week Mark Zuckerberg came under attack from Roger McNamee, his former adviser. McNamee, who has criticised the Facebook CEO before, lambasted Zuckerberg and his corporation for its relentless pursuit of user data with increasingly illicit and destructive methods.
/on.ft.com/2FS1MRp

Dash Financial Technologies appoints financial chief; Scott Patrick brings 25 years’ experience to Dash and will lead the company’s financial planning and operations.
Hayley McDowell – The Trade
US agency execution firm Dash Financial Technologies has appointed a new chief financial officer to oversee financial operations and planning for the firm.
bit.ly/2FMLd9i

Cryptocurrencies

Market Manipulation Main Concern for SEC & Possible BTC Bull Returning: Winklevoss Brothers
Alex Tomzack – Ethereum World News
Creators of the U.S. based cryptocurrency exchanging platform Gemini – Cameron and Tyler Winklevoss added their thought on the current situation of ETF projects and SEC’s standing point, during an interview with Laura Shin on Unchained crypto-podcast.
The brothers believe that the negative reply that the commission gave to many Bitcoin ETF were lead [in majority] by the market-manipulation concern. Accordingly Tyler noted that digital currency investors/traders should be introduced and experience the same protection as if they would purchase a share of leading firms like Apple or Tesla.
bit.ly/2Mxv6No

Bitcoin Whales Have A New Tool Going Into This Year’s Tax Season
Michael del Castillo – Bloomberg
It’s tax season, which means the adventurous who dared to invest in cryptocurrency last year are having to reckon with especially burdensome requirements.
bit.ly/2FMgdpX

***For context, a “Bitcoin Whale” is someone who holds a significant number of bitcoins. They can have significant effects on the crypto market, since they are capable of making much higher-volume trades than other individuals.

Cryptocurrency firm Robinhood wins New York trading license
Aparajita Saxena – Reuters
New York on Thursday gave approval to commission-free startup Robinhood to trade in seven cryptocurrencies, including bitcoin, ether, bitcoin cash and litecoin, on its online platform.
/reut.rs/2FO3284

Cryptocurrency firm Robinhood wins New York trading license
TheStar.com.my
New York on Thursday gave approval to commission-free startup Robinhood to trade in seven cryptocurrencies, including bitcoin, ether, bitcoin cash and litecoin, on its online platform.
bit.ly/2FNnPsn

The Shutdown Is Even Hurting Bitcoin’s Expansion
Avi Salzman – Barron’s
Bitcoin is designed to operate outside the control of any government. But the crypto industry’s expansion as a new asset class still appears to dependent on governments.
bit.ly/2FQgJTG

Levi Strauss, Harvard Trial Ethereum Tech to Track Factory Workers’ Welfare
Yogita Khatri – Coindesk
Harvard University, jeans giant Levi Strauss and U.S. think-tank New America are investigating blockchain as a means to improve labor welfare.
bit.ly/2FZ9Izg

Overstock’s tZERO Token Platform Has Officially Opened for Trading
Nikhilesh De – Coindesk
Overstock.com’s much-anticipated security token trading platform, tZERO, officially began trading Thursday afternoon.
bit.ly/2FXfB02

A faster, more efficient cryptocurrency
Rob Matheson – MIT News
MIT researchers have developed a new cryptocurrency that drastically reduces the data users need to join the network and verify transactions — by up to 99 percent compared to today’s popular cryptocurrencies. This means a much more scalable network.
bit.ly/2RfG3nB

When Bitcoin ETF? Not Any Time Soon, But Maybe by 2020
Nikhilesh De – Coindesk
For the first time in more than a year, there are no active bitcoin exchange-traded fund (ETF) proposals pending before the U.S. Securities and Exchange Commission (SEC).
bit.ly/2G3cy6B

Stories from Alternative Crypto Sources

Iranians embrace cryptocurrency trading as Iran struggles to cope with US sanctions and hyperinflation
Jibin M George – AMB Crypto
bit.ly/2RRr9ZV

Dark Web Hacker Proves Leak of Customer Data From World’s Leading Cryptocurrency Exchanges
Francisco Memoria – CCN
bit.ly/2RPxswP

Politics

Fake news on Twitter most likely to be shared by conservatives, study finds; The research follows a similar study on the spread of misinformation on Facebook during the 2016 US elections
Anthony Cuthbertson – The Independent
The majority of people engaging with misinformation on Twitter in the build up to the 2016 US presidential elections were older, conservative users, a new study suggests.
/ind.pn/2FOz9oa

Koch network tells donors it plans to stay out of 2020 race, once again declining to back Trump
Josh Dawsey and Michelle Ye Hee Lee – Washington Post
The conservative Koch political network has told donors that it plans to once again stay out of the presidential race and will not work to help reelect President Trump in 2020, a move that sidelines a major player that has been pivotal in mobilizing voters on the right for more than a decade.
/wapo.st/2FNJ64X

EY CEO: This is the shutdown’s biggest weight on the economy
JP Mangalindan – Yahoo Finance
In an interview with Yahoo Finance’s Editor-in-Chief Andy Serwer at the World Economic Forum this week, EY CEO Mark Weinberger discussed the major consequences of the partial government shutdown that has dragged on for nearly six weeks.
/yhoo.it/2FRXCcf

U.S. government shutdown may yield a recession: Scaramucci
Michael Connor – Reuters
The U.S. government’s partial shutdown might be enough to tip America’s economy into recession if it runs longer than another month, a former White House aide said on Thursday.
/reut.rs/2FP7C5X

Airlines Say They’re Close to a ‘Tipping Point’ Due to the Shutdown
Mary Schlangenstein , Justin Bachman , and Alan Levin – Bloomberg
American, Southwest, JetBlue warn of potential delays, lines; FAA doesn’t see performance lag; TSA absenteeism has risen
U.S. airline bosses stepped up their criticism of the partial government shutdown, warning that the closing threatens to snarl air travel.
/bloom.bg/2FRaWNQ

George Soros launches attack on Chinese president Xi; Billionaire describes use of AI to control citizens as ‘mortal threat’ to open society
Roula Khalaf and Arash Massoudi – FT
George Soros launched an attack on China’s president Xi Jinping, singling out advancements in artificial intelligence in the hands of repressive regimes as a “mortal threat” to societies around the world.
/on.ft.com/2FQhT1u

Which financial service institutions are helping workers affected by the shutdown?
Soo Youn – ABC
The partial U.S. government shutdown is on its 35th day, and with it, a looming second consecutive missed paycheck for hundreds of thousands of workers.
/abcn.ws/2FMDIza

Trump Adviser Stone Charged as Part of Mueller Investigation; Roger Stone was arrested in Florida on charges of lying to Congress, obstructing an official proceeding and trying to persuade a witness to lie
Aruna Viswanatha – WSJ
A longtime political adviser to President Trump, Roger Stone, was arrested in Florida early Friday on charges of lying to Congress, in the latest indictment from special counsel Robert Mueller’s investigation.
/on.wsj.com/2FZt2fK

Regulation

Hong Kong SFC Says Yingda Securities Likely Tricking Investors
David Kimberley – Finance Magnates
Proving that it’s not only Europeans that are susceptible to the sharp talons of investment scammers, this Thursday the Securities and Futures Commission (SFC) added a Chinese firm to its Alert List. The Hong Kong regulatory intermittently adds firms to the list if it suspects them of offering their services to investors in Hong Kong without having the necessary regulatory licensing. It also adds firms that it believes are based in Hong Kong or that have some association with the territory.
bit.ly/2FNuUJt

SEC ‘has’ to investigate Christmas Eve sell-off, says ex-SEC attorney
Michelle Fox – CNBC
The market sell-off on Christmas Eve shouldn’t be ignored by regulators, a former attorney for the Securities and Exchange Commission told CNBC on Thursday.
Dec. 24, 2018, was the worst Christmas Eve trading day ever for U.S. equities, with the Dow Jones Industrial Average plunging 653 points.
/cnb.cx/2Mzb0ST

Billion-Dollar Retirement Scam: Who Ya Gonna Call? SEC, CFTC?
Edward Siedle – Forbes
Billions being skimmed from 401k retirement investor accounts. A knowledgeable insider with compelling evidence ready to blow the whistle on a market leader. Ongoing systemic fraud that needs to be addressed immediately to protect the retirement security of millions of Americans.
That’s the whistleblower case I’ve been working on over the past month. The problem is—and it’s a big problem—the SEC Office of the Whistleblower is currently closed.
bit.ly/2MvPgY4

First Appellate Decision Holds that SEC Can Bring Extraterritorial Enforcement Action Based on Conduct or Effects in United States
The National Law Review
The Court of Appeals for the Tenth Circuit held today that the Securities and Exchange Commission may bring an enforcement action based on allegedly foreign securities transactions involving non-U.S. residents if sufficient conduct occurred in the United States.
bit.ly/2Mus50a

Investing and Trading

Attractive alpha generating opportunities: Spread trading Eurex and ASX bond futures
Thomas Browne, fixed income quant analyst – InTouch Capital Markets
On 10 December 2018, Eurex Exchange has extended its trading hours into the Asian morning, allowing for effective spread trading between Eurex Bund and Schatz futures, and ASX 3y and 10y bond futures. This paper shows that spread trading between Eurex and ASX fixed income futures can offer attractive alpha generating opportunities. Choosing regression-based hedge ratios for Eurex Bunds and Schatz Futures vs ASX 10s, or ASX 3s, and sometimes mixing in some Treasuries, creates mean-reverting spreads that can be traded when they reach their extremes, with high likelihood of profitable retracement.
/goo.gl/ZmCV6w

U.S. Fed seen swapping MBS with Treasuries – BAML
Reuters
The U.S. Federal Reserve will eventually replace its mortgage-backed securities with short-dated Treasuries in an effort to reduce their interest rate risks, Bank of America Merrill Lynch analysts said in a report released on Thursday.
/reut.rs/2FOXbiK

IMF official questions Fed’s global role in next crisis
Reuters
A senior International Monetary Fund official publicly questioned on Thursday whether the U.S. Federal Reserve might feel constrained from lending a hand to other nations in the event of another global financial crisis.
/reut.rs/2FRY9Lh

Scamming Grandma: Financial Abuse of Seniors Hits Record; Banks report 12% increase of suspected cases as they step up efforts to detect and stop fraud
Yuka Hayashi – WSJ
U.S. banks reported a record 24,454 suspected cases of elder financial abuse to the Treasury Department last year, more than double the amount five years earlier, according to government data.
/on.wsj.com/2FP7Vh7

85-Year-Old Man Loses $74 Million in Gold Scam: SCMP
Jinshan Hong – Bloomberg
An 85-year-old man has become Hong Kong’s biggest victim of a bullion trading scam after being conned out of HK$580 million ($74 million) over two years, according to South China Morning Post.
/bloom.bg/2FS0NAH

J.P. Morgan pares U.S. first quarter GDP view to 1.75 percent
Reuters
J.P. Morgan economists reduced their outlook for U.S. economic growth in the first quarter to 1.75 percent from 2.00 percent as the partial U.S. government shutdown has stretched to a second month for the longest one ever, they said on Thursday.
/reut.rs/2FP7JOV

Investment grade bond funds attract record cash; Flows to US short-term funds hit $3.02bn as rate rise expectations soften
Nicole Bullock – FT
Cash poured into investment grade bond funds in the past week amid expectations that rises in US interest rates were likely to be put on hold.
/on.ft.com/2FMdUmN

Bondholders face a greater likelihood of haircuts; Financial engineering cannot create the growth to pay retirees and the rich
John Dizard – FT
Institutional investors assume that capital markets, along with their legal frameworks, are there to make it possible for them to earn returns on their liquid assets, if not for themselves then for the principals or beneficiaries for whom they work.
/on.ft.com/2FNcQyX

Olam to exit sugar and other commodities as it streamlines business
Neil Hume – FT
Olam, one of the world’s largest food traders, is to exit sugar and three other commodities as it looks to streamline its business and focus on more attractive markets.
/on.ft.com/2FPcBTU

Institutions

Is Wells Fargo Making Lemonade With RIA Plan?
Barron’s
The president of Wells Fargo Advisors, David Kowach, last month announced a novel divergence from the traditional wirehouse playbook: the opening of several RIA offices around the country.
bit.ly/2FOXIBg

BlackRock Appoints a New Global Head of Renewable Power
Brian Eckhouse and Annie Massa – Bloomberg
New head David Giordano has overseen Americas and Asia-Pacific; Firm manages over $5 billion in renewable assets globally
BlackRock Inc., the world’s largest asset manager, promoted David Giordano to global head of renewable power.
/bloom.bg/2FOoiKL

IG Group revenue and profit slide after regulatory clampdown; Shares drop 7 per cent due to impact of European rules
Kate Beioley – FT
IG Group, Europe’s largest online trading platform, posted an 18 per cent fall in profit and a slide in revenue over the six months to the end of November as a regulatory clampdown on derivative products took its toll.
/on.ft.com/2FO4HKE

Deutsche Bank’s CEO vows to bring ‘pride back,’ finds support among Davos leaders
Spriha Srivastava – CNBC
Deutsche Bank, the embattled German lender, has found some support among leaders gathered at the World Economic Forum (WEF) in Davos. In the past few years, the bank has made headlines for all the wrong reasons — from settlements with the U.S. Department of Justice, to management reshuffles, weak earnings, constant restructuring, merger speculation and steep stock price falls.
/cnb.cx/2FP6zmx

Credit Suisse Loses $60 Million on Canada Goose
Jan-Henrik Foerster – Bloomberg
Swiss bank’s loss said to come from fourth-quarter block trade; Canada Goose slumped after tensions rose over Huawei arrest
Credit Suisse Group AG lost about $60 million late last year after it was left holding shares in a North American clothing company that slumped during rising trade tensions between Canada and China, according to people with knowledge of the matter.
/bloom.bg/2FMcIQl

Regions

Is Climate Change Drying Up German Rivers — and Growth?; The unusually warm weather that lowered the Rhine in 2018 wasn’t a fluke, but likely part of a global trend that official data should take into account.
Leonid Bershidsky – Bloomberg
Greg Fuzesi, an economist at JPMorgan, has estimated that the low level of the Rhine and other important German rivers shaved off 0.7 percentage points of economic growth in 2018. The phenomenon, caused by a year of extraordinarily warm and dry weather, was almost certainly related to human-driven climate change.
/bloom.bg/2FXj1zU

Less Power to Him; Turkey’s parliament has given President Erdogan too much sway over economic matters.
Editorial Board – Bloomberg
The same day Turkey’s central bank turned down President Recep Tayyip Erdogan’s exhortations to cut interest rates, the parliament granted him emergency powers to act as he sees fit in the event any “negative development” threatens the country’s financial stability. Lawmakers also created a new Financial Stability and Development Committee, but the president has the authority to second-guess its recommendations.
/bloom.bg/2FYVHBJ

Venezuela’s political turmoil sparks investor fears; Beijing and Moscow are owed billions of dollars by crisis-wracked country
Henry Foy, Jonathan Wheatley and Lucy Hornby – FT
Political chaos in Venezuela sparked by international support for the leadership of opposition politician Juan Guaidó has called into question more than $25bn worth of investments made by China and Russia, the most prominent backers of Nicolás Maduro’s threatened regime.
/on.ft.com/2FYVy19

US private equity investors double down on German banks; Cerberus is hunting more deals even after EUR730m of paper losses on EUR4bn it invested
Olaf Storbeck and Patrick Jenkins – FT
Cerberus Capital Management has tackled plenty of tough investments — epitomised by its doomed buyout of the US carmaker Chrysler in 2007. Yet it rarely makes bets as audacious as its push to engineer a turnround of Germany’s historically dysfunctional banking sector.
/on.ft.com/2FXiON8

Mood turns ‘a lot more gloomy’ at Davos; Corporate chiefs fear momentum behind growth is likely to slow amid global uncertainty
Gillian Tett and Arash Massoudi – FT
As Takeshi Niinami, chief executive of Japan’s Suntory Group, moved around this year’s World Economic Forum in Davos, he could sense a shift in the corporate mood. “Compared with last year it is a lot more gloomy,” observed Mr Niinami, who has been coming to Davos for more than a decade.
/on.ft.com/2FYVqib

Brexit

Ireland central bank warns of ‘immense’ threat of no-deal Brexit; Huge damage to economy foreseen should political talks fail
Arthur Beesley – FT
Ireland’s central bank has warned of “immense” economic threats from a no-deal Brexit, saying the “worst-case” scenario for Dublin was a disorderly UK departure from the EU.
/on.ft.com/2FO3YsU

Goldman warns as British MPs examine life after Brexit for banks
Huw Jones – Reuters
British lawmakers launched an inquiry on Friday to plot the best way forward for finance after Brexit as Goldman Sachs warned it could cut jobs if the United Kingdom crashes out of the bloc without an agreement in two months’ time.
/reut.rs/2FOto9F

Queen sends a Brexit message to UK politicians: end your bickering
Guy Faulconbridge, Kate Holton – Reuters
Queen Elizabeth has sent a delicately coded message to Britain’s factious political class over Brexit, urging lawmakers to seek common ground and grasp the big picture to resolve the crisis.
/reut.rs/2FR8Z3Y

The risks of a second Brexit referendum must now be run; Another vote will be divisive — but what is happening is already splitting the country
Martin Wolf – FT
What is going to happen over Brexit? Like everybody else, I do not know the answer. But I can say what should happen. The answer is a second referendum. Unlike many Remainers, I do not take that view with enthusiasm. On the contrary, I recognise the dangers. But the unreasonable behaviour of Brexiters has left no other course. Their determination to pursue the catastrophic option of a ” no-deal” Brexit, rather than accept compromise, leaves no alternative to asking voters to vote again.
/on.ft.com/2G0ue2I

Businesses Are Taking Action After Brexit Warnings Go Unheeded
Amie Tsang – The New York Times
Companies and trade groups had implored British leaders to give them reassurances and information. They say they can’t wait any longer.
/nyti.ms/2UgASFL

Businesses Are Taking Action After Brexit Warnings Go Unheeded; Companies and trade groups had implored British leaders to give them reassurances and information. They say they can’t wait any longer.
Amie Tsang – NY Times
Businesses have been sounding the alarm over Britain’s impending departure from the European Union ever since its approval in a 2016 referendum. But this week, with lawmakers unable to agree on any sort of orderly plan as the March deadline for a deal nears, their warnings rang louder — and some decided to act.
/nyti.ms/2FS2XAj

Miscellaneous

There’s a Media Bloodbath Underway
Katherine Krueger – Splinternews.com
It’s another terrible week to work in media. After the news hit yesterday that BuzzFeed, HuffPost, and Gannett would slash their workforces, layoffs were underway this morning at HuffPost, once hailed as a new model for digital publishing.
bit.ly/2FMujaJ

The 20 Best Wines for Under $20; Pick these up for your next party.
Elin McCoy – Bloomberg
Everyone, including me, loves a bargain, especially when it comes to wine. My definition of “bargain?” A wine that tastes at least twice as good as its price, preferably more.
/bloom.bg/2FNtw9J

On the phone with John McAfee, the cybersecurity tycoon running for president and from the law: Reporter’s notebook
Matt Gutman – ABC News
The voice on the other end of the line croaked: “Matt, this is bigger than Belize!” I’ve come to recognize John McAfee’s gravelly voice – which tonight sounds like he’s swallowed a rock garden. He tells me ebulliently, he’s on a boat, he’s running for President and he’s running from the IRS. An $8 million dollar yacht, he boasts. Well, not a new yacht, and not exactly his, but a supporter’s yacht, but it’s beautiful.
/abcn.ws/2Tgzzqg

Digital media struggles to make the numbers add up; Companies such as BuzzFeed and Vox Media are having to cut costs to stay afloat
Save to myFT
Anna Nicolaou and Patricia Nilsson – FT
A chill has gripped the once hot digital media sector, with companies formerly lauded as the future of news laying off staff and cutting costs to stay afloat.
/on.ft.com/2FOfQLu

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