Charles Schwab Has a $3.6 Trillion Edge on the Fintechs

Oct 2, 2018

First Read

Exchange Legacy: WFE Tackles The Question Of The Role Of Exchanges. It’s Much More Than You May Think.
By Jim Kharouf – JLN

Can exchanges change the world and shape the future?

This goes well beyond the traditional mantras that derivatives markets help set prices and offset risk, or stock markets help raise capital for companies. Hats off to the World Federation of Exchanges’ General Assembly and Annual Meeting, being held this week in Athens to ask the questions such as: What is the exchange & CCP role in bringing economies back to life? How do they best enable sustainable development? How can they serve their stakeholders better?

Hosted by the Athens Stock Exchange, this year’s meeting venue is located just below the Acropolis, which seems an appropriate locale to ask exchange leaders the compelling question: just what can exchanges do for domestic and global economies, and better yet, what will their legacy be 10 years or 1000 years from now? Greece’s rich history may offer some clues on what will stand the test of time.

To read the rest of this story, go here

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Hits & Takes
JLN Staff

The 10th Annual Kent Conference is coming up. James McDonald, director of the Division of Enforcement, and Brian Bussey, director of the Division of Clearing and Risk will be joining Rosemary Hollinger on a panel. Former political candidate Renato Mariotti will be doing a panel. They have Ted type talks from 6 top notch lawyers including Cliff Histed, Jake Kahn and Aaron Tantleff.~JJL

Itiviti has a new talk on their blog, “Trading infrastructure testing: the main challenges.”~JJL

Jessica Darmoni has a blog post on Hehmeyer.com interviewing Rumi Morales, titled Three Minutes With Rumi Morales, Partner At Outlier Ventures And Proud “Crypto Mom”~JJL

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The Spread – Bumpy Road – 10/1

JohnLothianNews.com

A speed bump? For options? Say it ain’t so, Joe! Oh, it is so? Cool. For more details on the latency development at Eurex, tune in to this week’s episode of “The Spread.”

Watch the video and see the stories referenced here »

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Cinnober

The 2 Big Myths About the Financial Crisis
Nicola Gennaioli and Andrei Shleifer, Project Syndicate – Barron’s
Over the last decade, research by many economists, including us, arrived at a broadly shared narrative of the 2008-2009 financial crisis. As we describe in our new book, A Crisis of Beliefs: Investor Psychology and Financial Fragility, the fundamental cause of the crisis was the deflation of the housing bubble, starting in early 2007. For several years until then, home prices in the United States rose dramatically, fueled by massive borrowing by homebuyers and banks’ investments in mortgages and mortgage-backed securities. As the housing bubble burst, both borrowers and bankers suffered.
/goo.gl/7d3vyu

****Long story short, financial professionals were blind to what was happening around them.~JB

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I Created ‘The Bernank’ on YouTube. And I Was Mostly Wrong.
Omid Malekan – NY Times
In November 2010, as the Federal Reserve embarked on its second round of bond buying, Omid Malekan uploaded to YouTube a cartoon called “Quantitative Easing Explained,” which was critical of the central bank’s response to the financial crisis. Within weeks, millions of people had viewed it. Here, nearly eight years later, he says that he got it largely wrong.
/jlne.ws/2RfECXo

****Hats off to people who can admit they were wrong. ~SR

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Monday’s Top Three
The most read story yesterday came from the The Wall Street Journal – How Dirty Money Disappears Into the Black Hole of Cryptocurrency. Second most read was the Financial Times Special Report: Exchanges, Trading and Clearing. Third was from The Block Chicago crypto trading shops are going on a hiring spree

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Lead Stories

Charles Schwab Has a $3.6 Trillion Edge on the Fintechs; The 81-year-old discount-investing pioneer is taking on a new crop of rivals.
John Gittelsohn – Bloomberg
Charles Schwab’s cheeks redden in a mixture of amusement and outrage as he recites the ways people on Wall Street make money. They take little nicks, he says, gesticulating with his left hand as if gripping a kitchen knife. High fees, fat spreads, excessive trades. “They all want to do it the old-fashioned way: Take advantage of the customer,” the white-haired chairman and founder of Charles Schwab Corp. says at his San Francisco office, a comfortable 3,000 miles or so west of the New York Stock Exchange. “Get the high commission, baby!”
/jlne.ws/2Rjsa9e

Institutional Investors Are Using Back Door for Crypto Buys
Olga Kharif – Bloomberg
Hedge funds, miners shift sales to over-the-counter trading; Transactions run counter to peer-to-peer crypto history
Institutional investors are becoming more involved in the $220 billion cryptocurrency market than many observers may realize.
/jlne.ws/2RlbG0n

SEC to Focus on Empowering Main Street Investors for 2018 World Investor Week; Joint Investor Bulletin Issued on Understanding Digital Assets and Online Investing
SEC
The Securities and Exchange Commission today announced that empowering Main Street investors will be the SEC’s focus during World Investor Week, which takes place Oct. 1-7, 2018. SEC staff will emphasize both the basics of investing and savings as well as important emerging issues like the rise of initial coin offerings and digital assets, distributed ledger technology, and other innovations.
/jlne.ws/2RdQ85w

Dearth of Wind Power in Europe Set to Bring Back Dirty Plants
Jesper Starn and Rachel Morison – Bloomberg
High pressure system to block windiest weather in the north; Mixed outlook for temperatures after very warm September
Europe will likely need more coal and natural gas this month as the region is spared the usual autumn storms.
/jlne.ws/2Rl0OiG

SEC endorses investor view of Elon Musk’s indispensable role at Tesla; Regulator’s chief says CEO may be ‘important to future success’ of the electric car maker
Kadhim Shubber in Washington – FT
Tesla fans have long seen Elon Musk as indispensable to the success of the lossmaking electric car maker. On Saturday, Jay Clayton, the chairman of the Securities and Exchange Commission, seemed to endorse that view.
/jlne.ws/2RfeFr7

Regulation and innovation don’t have to be enemies
Jamie Powell – FT
Wired Magazine, the US tech-focused monthly, is concerned about government regulation. In a piece published Saturday, Zachary Karbell argues, without a hint of irony, that the SEC’s proposed removal of Musk from his position as Tesla chief executive, “would be the market equivalent of executing someone for petty theft, and the damage will extend well beyond Musk himself.”
/jlne.ws/2Riopkg

Fed Rethinks How to Define a Big Bank; Central bank may change criteria it uses to apply some of its capital, liquidity rules for biggest U.S. lenders
Ryan Tracy – WSJ
The Federal Reserve could broaden the number of banks receiving regulatory relief from Trump-appointed officials under an initiative that changes how it defines a big bank.
/jlne.ws/2RkdhUa

How the S.E.C. Is Trying to Push Traditional Corporate Governance Upon Tesla
Peter J. Henning – NY Times
That was quick. Just two days after the Securities and Exchange Commission filed a securities fraud lawsuit accusing Elon Musk of misleading investors, he agreed on Saturday to a settlement that he initially spurned.
/jlne.ws/2RhnujU

America’s Malls Aren’t Dying as Fast as Some Traders Would Like
Jeremy Hill – Bloomberg
For traders betting on the death of America’s malls, being right and making money are proving to be two very different things.
Reminiscent of Michael Burry of “The Big Short” fame, these hedge funds have piled into a trade that could reap huge profits if loans taken out by beleaguered mall and shopping-center operators eventually go bust.
/jlne.ws/2zLTxSA

Exchanges, OTC and Clearing

Thomas Book: “We want to further increase fairness in pricing” (part III); The Chief Executive Officer of the derivatives exchange on 20 years of Eurex, innovations, the Chinese market and the protection of buy-side market participants
Eurex
In the final part of his interview with the Börsen-Zeitung, he explains the chances he sees on the Asian markets, volume drivers and the usage of new benchmark interest rates.
/jlne.ws/2RkfGya

TMX Group Thanksgiving Holiday Market Closures
TMX
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange will be closed on Monday, October 8, 2018 for the Thanksgiving holiday.
/jlne.ws/2Rho3Ky

The World Federation of Exchanges Publishes Report Into Global SME Markets
Press Release
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today published a report (together with a supplementary dataset) entitled ‘An overview of WFE SME markets’, examining the current status of 33 SME markets across 29 WFE member exchanges.
WFE member exchanges have long recognised the importance of small and medium-sized enterprises (SMEs) to the economies in which they operate. To support the growth and development of these firms, many stock exchanges have established dedicated SME markets or trading segments that cater for these companies. Today’s report builds on previous research into these SME markets and initiatives, which was undertaken by the WFE and the World Bank in 2015 and 2016.
/goo.gl/m165D2

Fintech

Genesis Proprietary Trading Contracts With Trading Technologies To Use The TT Platform
TT Press Release
Genesis Proprietary Trading, a leading Australian proprietary trading company, and Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, today announced Genesis has contracted with Trading Technologies to use the TT futures trading platform. With this agreement, Genesis’ proprietary traders have access to TT’s fully integrated suite of cutting-edge functionality for trading all TT-connected global markets.
/goo.gl/YW5VNN

Refinitiv aims to spend to take on Bloomberg; Unit spun out of Thomson Reuters in $17bn deal has to cut costs to reduce debt
Philip Stafford – FT
It is laden with debt after one of the biggest leveraged buyouts since the financial crisis, but the head of Refinitiv, the trading and data business being spun out of Thomson Reuters, is planning to spend money to take on Bloomberg.
/jlne.ws/2Rf7zCZ

Thomson Reuters closes deal with Blackstone, rebrands as Refinitiv; Blackstone has said that it plans to continue investing in the newly-rebranded Refinitiv business following closure of the $17 billion deal.
Hayley McDowell – The Trade3
Thomson Reuters has closed the sale of a 55% interest in the company’s Financial & Risk company to private equity firm Blackstone, and has now rebranded the unit as Refinitiv.
/jlne.ws/2RcOAsF

Scott Visconti joins Vela as CTO
Press Release
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, today announced that Scott Visconti has joined Vela as CTO, focusing on technology strategy, supporting growth, and the next stage of development of Vela’s product stack, services, and processes.
Scott will be based in Vela’s headquarters in New York and report to CEO Jennifer Nayar. He will lead the global development team and work alongside the executive team to cement the firm’s position as an innovative and transformational leader.
/jlne.ws/2zMvItN

Credit Suisse to Use Apple Business Chat for Rich Asian Clients
Chanyaporn Chanjaroen – Bloomberg
Singapore, Hong Kong clients to use app for information, chats; WhatsApp, WeChat to be added to platform, spokeswoman says
Credit Suisse Group AG said it’s making it easier for wealthy clients in Singapore and Hong Kong to communicate with its private bankers by integrating Apple Business Chat into its digital platform.
/jlne.ws/2RilvvS

Hong Kong Monetary Authority’s ‘regtech’ push raises transparency concerns at financial institutions; De facto central bank backs broader use of technology in regulation but machine learning and artificial intelligence pose questions about opaqueness of processes
Georgina Lee – South China Morning Post
Hong Kong’s financial services industry has raised concerns about the use of technology such as machine learning and artificial intelligence as part of regulatory compliance efforts, as these measures will have the effect of reducing the ability of these institutions to meet their accountability commitments, to customers as well as regulators.
/jlne.ws/2Rjpf0g

Cryptocurrencies

The Bots Manipulating Bitcoin’s Price
Paul Vigna and Alexander Osipovich – WSJ
Investors know bitcoin’s violent mood swings well. What they often don’t know is that unscrupulous traders, wielding purpose-built software, can be behind them.
Manipulation in cryptocurrencies is a growing concern for regulators—and even for some proponents of the digital coins. The Securities and Exchange Commission cited that risk in August when rejecting several bitcoin-based exchange-traded funds. The office of New York Attorney General Barbara D. Underwood highlighted the issue last month in a report warning that crypto exchanges were vulnerable to manipulation.
/jlne.ws/2zLQiKJ

Puerto Rico’s Noble Bank Seeks Sale Amid Crypto Slide
Matthew Leising and Yalixa Rivera – Bloomberg
Firm is said to have lost clients including Bitfinex, Tether; It might fetch $5 million to $10 million, based on license
Noble Bank International, the Puerto Rican financial services firm with clients that have included prominent cryptocurrency ventures, is looking for a buyer, according to a person with direct knowledge of the situation.
/jlne.ws/2Rgqm0B

Two of Blockchain’s Biggest Consortiums Just Joined Forces
Ian Allison – Coindesk
Seismic shifts are happening in the world of enterprise blockchain. Announced Monday, the Hyperledger Project and the Enterprise Ethereum Alliance (EEA) have agreed to collaborate on bringing common standards to the blockchain space and cross-pollinate a wider open-source community.
/jlne.ws/2OsfTAr

Bitcoin Will Not Challenge Gold as a Safe-Haven Asset: Equity Analyst
CCN
Though many bitcoin investors believe multi-layer scaling solutions such as the Lightning Network (LN) will eventually make BTC a viable payment instrument for the proverbial coffee purchase, most argue that the flagship cryptocurrency’s primary short-term use case is as “digital gold.” However, an equity analyst at one of the world’s most respected investment research firms said that he doesn’t expect bitcoin to make a noticeable dent into the yellow metal’s market share.
/jlne.ws/2Neo52F

Wallet Provider Blockchain.com Makes LinkedIn’s 2018 Top 25 UK Startup List
William Suberg – Cointelegraph
LinkedIn has ranked cryptocurrency wallet provider and data firm Blockchain.com (formerly known as Blockchain.info) in its top ten most “sought-after” U.K. startup employers in new listings September 30.
/jlne.ws/2IuNfcL

The blockchain can’t change the world, but it’s a good start
Larry Alton – The Next Web
It’s hard to find a tech news site that doesn’t have at least one article in the headlines about how blockchain is going to change the world. The decentralized technology behind Bitcoin and other cryptocurrencies has been credited with the potential not only to disrupt our modern banking system, but to completely revolutionize industries like healthcare, investing, messaging, and even voting. The way I see it, the blockchain has been completely overhyped.
/jlne.ws/2xQtwzY

Five things that must happen for blockchain to see widespread adoption, according to Deloitte
Ryan Browne – CNBC
Blockchain is perhaps one of the biggest buzzwords in both finance and technology today. Proponents tout it as the technology that will revolutionize the financial services, pointing to its ability to function without a central authority and also store data in a tamper-proof way.
/jlne.ws/2IulIYQ

Russian State Nuclear Corporation to Develop Blockchain for ‘Increased Efficiency’
Ana Berman – Cointelegraph
Russian state nuclear energy corporation (Rosatom) will develop “advanced” digital technologies, such as blockchain, according to Rosatom IT department head Evgeniy Abakumov, cited by corporate outlet Strana Rosatom Monday, October 1.
/jlne.ws/2Ng0crJ

Politics

Trump’s trade wars fill US food banks to overflowing; Charities struggle to absorb $1.2bn of farm produce bought by government to aid growers
Gregory Meyer in New York – FT
A mountain of pears, pork, potatoes and other surplus food from the US government is set to strain the capacity of the country’s hunger charities, in an unlikely consequence of President Donald Trump’s trade wars.
/jlne.ws/2Ri83be

US considered ban on student visas for Chinese nationals; White House hawks urged Donald Trump to retaliate against Beijing meddling in US politics
Demetri Sevastopulo in Washington and Tom Mitchell in Beijing – FT
White House hawks earlier this year encouraged President Donald Trump to stop providing student visas to Chinese nationals, but the proposal was shelved over concerns about its economic and diplomatic impact.
/jlne.ws/2RinOiw

I.R.S. Tax Fraud Cases Plummet After Budget Cuts
Jesse Eisinger and Paul Kiel – NY Times
Tax evasion is at the center of the criminal cases against two associates of the president, Paul Manafort and Michael D. Cohen. The sheer scale of their efforts to avoid paying the government has given rise to a head-scratching question: How were they able to cheat the Internal Revenue Service for so many years?
/jlne.ws/2Ri2oCa

Regulation

Revealed: Deutsche Bank Trader With a $24,000 Daily Bonus
Patricia Hurtado – Bloomberg
Defense lawyers for two former Deutsche Bank AG traders accused of manipulating the benchmark Libor lending rate suggested in federal court that a key government witness had minimized the scope of his own crimes to get a more lenient sentence and to retain a $9 million bonus.
/jlne.ws/2zMgB3E

Singaporean Oil Trader Gets 12 Years in Chinese Prison Over Tariff Evasion
Andy Hoffman and Alfred Cang – Bloomberg
Dikun Yin was former managing director in Singapore for Gunvor; Company says it is not responsible for tax payments in case
A former Singapore-based managing director for Gunvor Group Ltd. was given a 12-year prison sentence in China for his role in evading Chinese tariffs on oil imports.
/jlne.ws/2RgqU6F

Credit Suisse is fined $10 million in U.S. over customer orders
Reuters
Credit Suisse Group AG (CSGN.S) was fined $10 million on Friday by the U.S. Securities and Exchange Commission and New York Attorney General Barbara Underwood over its handling of retail customer orders, including through its dark pool.
/jlne.ws/2QoLssb

CFTC Orders the Bank of Nova Scotia to Pay $800,000 Penalty for Spoofing in the Precious Metals Futures Markets; Bank’s Penalty Was Substantially Reduced in Recognition of Its Self-Reporting, Cooperation, and Remediation
CFTC
The Commodity Futures Trading Commission (CFTC) issued an Order filing and settling charges against the Bank of Nova Scotia (BNS) for engaging in multiple acts of spoofing in gold and silver futures contracts traded on the Chicago Mercantile Exchange (CME). The Order finds that BNS engaged in this activity by and through traders on its precious metals trading desk (Traders) from at least June 2013 through June 2016. The Order requires BNS to pay an $800,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing. BNS was notified of the misconduct by its Futures Commission Merchant, and when BNS became aware of the misconduct, BNS reported it to the CFTC.
/jlne.ws/2RdS4ei

Bank of Nova Scotia to pay $800,000 to settle U.S. CFTC charges
Reuters
Bank of Nova Scotia has settled charges filed by the U.S. Commodity Futures Trading Commission that it engaged in spoofing in gold and silver futures contracts traded on the Chicago Mercantile Exchange, the CFTC said on Monday.
/jlne.ws/2RiaMS7

Revealed: Deutsche Bank Trader With a $24,000 Daily Bonus
Patricia Hurtado – Bloomberg
Ex-Deutsche Bank traders say witness lied to retain his payout; Tim Parietti says he was ordered to share trading positions
Defense lawyers for two former Deutsche Bank AG traders accused of manipulating the benchmark Libor lending rate suggested in federal court that a key government witness had minimized the scope of his own crimes to get a more lenient sentence and to retain a $9 million bonus.
/jlne.ws/2RhkYtY

ASIC consults on ‘sunsetting’ class order regarding share and interest purchase plans
ASIC
ASIC has today released a consultation paper proposing to remake its class order on share and interest purchase plans. The class order is due to expire (‘sunset’) on 1 October 2019.
/jlne.ws/2RfjHUx

ESMA updates its opinion on ancillary activity calculations
ESMA
The European Securities and Markets Authority (ESMA) has today published an updated opinion on ancillary activity calculations. This updated opinion provides the estimation of the market size of commodity derivatives and emission allowances for the year 2017. ESMA has prepared those estimations based on data collected from trading venues as well as data reported to trade repositories under EMIR.
/jlne.ws/2RoCOvo

World’s Best Investor Tips for World Investor Week
FINRA
Throughout the world, people of all walks of life make countless investment decisions every day. That’s why a global campaign to raise awareness about the importance of investor education and protection make sense—and it’s happening right now. Promoted by the International Organization of Securities Commissions, World Investor Week (October 1-7) encourages individual investors, investment professionals, teachers, parents, regulators researchers and other interested parties to make a special effort to communicate key investor education messages.
/jlne.ws/2RcSKRj

FINRA Announces Plan to Consolidate Examination and Risk Monitoring Programs
FINRA
FINRA announced today that it plans to consolidate its Examination and Risk Monitoring Programs, integrating three separate programs into a single, unified program to drive more effective oversight and greater consistency, eliminate duplication and create a single point of accountability for the examination of firms. The effort is a result of FINRA360, the organization’s ongoing comprehensive self-evaluation and improvement initiative.
/jlne.ws/2RoD6Cu

FINRA and FINRA Investor Education Foundation Promote World Investor Week 2018
FINRA
Today marks the start of World Investor Week 2018, as FINRA and the FINRA Investor Education Foundation (FINRA Foundation) join securities regulators and investor advocates around the globe to raise awareness about the importance of investor education and protection in recognition of the weeklong global campaign.
/jlne.ws/2RiMAPm

NFA Comment Letter: RIN 3038—AE78: Segregation of Assets Held as Collateral in Uncleared Swap Transactions
NFA
Dear Mr. Kirkpatrick: National Futures Association (NFA) appreciates the opportunity to comment on the proposed amendments to the Commodity Futures Trading Commission (Commission) Regulations concerning the segregation of assets held as collateral in uncleared swap transactions (the Segregation Requirements) that were published in the Federal Register on July 30, 2018. NFA supports the Commission’s effort to streamline, simplify and reduce the cost of the Segregation Requirements. NFA also agrees with the Commission’s goals of reducing unnecessary burdens on market participants, facilitating more efficient swap execution and potentially encouraging more segregation of collateral.
/jlne.ws/2Ri9ZRd

SIFMA’s Board Of Directors Announces Newly Elected Officers
MondoVisione
The Board of Directors of SIFMA announced it has elected the following principal officers to leadership positions on the Board for 2019:
/jlne.ws/2RhRgoM

Investing and Trading

ETFs’ New Challenge: Showing Socially Responsible Funds Can Deliver
Asjylyn Loder – WSJ
Vanguard Group Inc. recently launched some of the cheapest funds yet featuring green and socially responsible companies, the latest example of do-good strategies that claim to deliver stock-market returns along with a clear conscience.
/jlne.ws/2zLb11b

IPO Market Has Never Been This Forgiving to Money-Losing Firms; Money-losing companies are going public at a record rate as investors hunger for new issues
Corrie Driebusch and Maureen Farrell – WSJ
Stock investors are welcoming money-losing companies into the public markets this year with open arms. About 83% of U.S.-listed initial public offerings in 2018’s first three quarters involve companies that lost money in the 12 months leading up to their debut, according to data compiled by University of Florida finance professor Jay Ritter. That is the highest proportion on record, according to Mr. Ritter, an IPO expert whose data goes back to 1980.
/jlne.ws/2RgvGB7

Yale’s Endowment Grew 12.3%, Beating Harvard’s but Not Some Others’
Geraldine Fabrikant – NY Times
Yale University’s endowment, the world’s second largest, grew 12.3 percent in the most recent fiscal year, to $29.4 billion, slightly better than the 11.3 percent it achieved in the previous year, officials said on Monday.
/jlne.ws/2RkeCdE

Institutions

“You Can’t Out-Lloyd Lloyd”: At Goldman Sachs, the David Solomon Era Begins with Subtle but Significant Changes |; As Solomon succeeds legendary risk titan Lloyd Blankfein as C.E.O., he faces a slew of challenges: how to sort through the regulatory minefield, pivot to commercial banking, and maybe even make Goldman a little more woke in the process.
William D. Cohan – Vanity Fair
After lunch on March 1, David Solomon was standing at his desk in his 41st-floor office at Goldman Sachs, high above the Hudson River, answering e-mails and talking on his telephone headset. For the previous 15 months, Solomon had been locked in a competition with Harvey Schwartz, with whom he served as co-chief operating officer at Goldman, for one of the most coveted positions on Wall Street.
/jlne.ws/2Rjq3SQ

Ex-Citadel natural gas investor opens new hedge fund
Svea Herbst-Bayliss – Reuters
An investor who previously helped oversee U.S. natural gas trading at Citadel has set up his own hedge fund, a person familiar with the plans said on Monday.
/jlne.ws/2RgrVeZ

The Banks That Helped Danske Bank Estonia Launder Russian Money
Frances Coppola – Forbes
Money laundering is a multi-bank phenomenon. Danske Bank Estonia has been revealed as the hub of a $234bn money laundering scheme involving Russian and Eastern European customers. But Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve’s electronic settlement system. Big banks, in other words.
/jlne.ws/2RhXgho

Regions

China’s ‘great wall of capital’ set to benefit mutual funds; Clampdown on risky wealth management products will help push $6tn into market, report says
Emma Dunkley in Hong Kong – FT
China’s clampdown on risky wealth management products and a push by global asset managers to sell funds in the country is set to channel about $6tn of capital into the mutual fund market over the next five years, according to a new report.
/jlne.ws/2Rjocxm

India Dodges a Lehman Moment. That Was the Easy Part; Now a government-directed IL&FS board must clean up the shadow lender’s mess.
Andy Mukherjee – Bloomberg
Even before it went belly up, India’s IL&FS Group was a strange fish: A private infrastructure financier that lent to risky projects it also owned, while throwing around the weight of nonexistent state connections to mask a multiyear liquidity squeeze.
/jlne.ws/2RjDaU3

A Big Problem in the Shadows for India’s Financial System
Andrew Peaple – WSJ.com
Spotting new “Lehman moments” has become a pastime for global market watchers since 2008. The latest supposed sighting is in India, where the government this week summarily replaced the board of Infrastructure Leasing & Financial Services—a nonbank lender that regulators have deemed systemically important, and which has recently roiled local markets after defaulting on a string of debts.
The story may not herald the collapse of India’s financial system. But it raises fresh—and serious—questions about its underlying health.
/goo.gl/KHu5Uk

Top Iron Ore Shipper Warns China Is at ‘Peak Steel’
Krystal Chia – Bloomberg
Australian government expects mainland production to contract; Iron ore prices forecast to decline into $50s next year, 2020
The world’s largest steel market is about to go into reverse. Production in China will peak in 2018 and then shrink next year as local demand drops, according to forecasts from the Australian government, which says the shift will add to headwinds for core ingredient iron ore.
/jlne.ws/2RjEgPF

Brexit

Brexit Is a Buy for the Brave; Investors should think twice before rejecting Europe’s least-loved equity market
Jon Sindreu – WSJ
Brexit is the kind of risk stock investors hate: Unpredictable, noisy, irrational. Therein may lie the opportunity. Negotiations over the U.K.’s withdrawal from the European Union reached a new low last month. European Council President Donald Tusk publicly spurned the latest British proposal for trading terms. In response, U.K. Prime Minister Theresa May said she expected “respect,” while Foreign Secretary Jeremy Hunt on Sunday drew comparisons between the EU and the “prison” of the Soviet Union.
/jlne.ws/2QlrMFA

Citigroup’s Investor Guide for No-Deal Brexit, or a Corbyn Upset
Eric Lam – Bloomberg
Gilts most at risk in case of Corbyn winning power, bank says; Pound to hit a new low on Corbyn or no-deal Brexit: Citigroup
Investors looking at the U.K. need to get to grips with two high-impact scenarios: a cliff-edge EU exit and the advent of a Labour government, Citigroup Inc. analysts said in a report game-planning Brexit risks.
/jlne.ws/2Ri6z0P

Beyond the rhetoric, Britain, EU preparing to move forward on Brexit
Gabriela Baczynska and Elizabeth Piper – Reuters
England (Reuters) – “Unworkable”, “unacceptable”, “impasse” – the words used to describe Brexit talks between Britain and the European Union do little to temper concerns that the two are heading for a chaotic divorce.
/jlne.ws/2zL1XJV

The Brexit effect: Brussels tries to blunt the Swiss model
Ralph Atkins in Zurich and Alex Barker in Brussels – The Financial Times
Switzerland: “not a model”. The text on a January presentation from the EU’s Brexit negotiators could not have been clearer. Do not seek inspiration from Switzerland for post-Brexit relations, the EU was telling the UK, we are not repeating that folly.
/goo.gl/729aqe

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