Hits & Takes
The crypto markets’ volatility is almost back to where it was in October, when the price of bitcoin was less volatile than stocks in Apple Inc. Given the nature of the crypto markets, of course, that could change at any second.~MR
In case you missed it there was an…interesting…bit of drama late last week when a contributor to the /r/wallstreetbets forum on Reddit claimed he had a “risk free” way of making money by placing box spreads via Robinhood phone app. Somehow he managed to leverage his $5,000 into a $250,000 bet. His deep in-the-money legs got called in for a $57,000 loss…but he still managed to extract $10,000 before Robinhood closed his account. You can read some about it here. Or you can watch a humorous GIF someone created about it here (warning: loud music). ~JB
Dash Financial Technologies named Scott Patrick, formerly of Brunswick Group, as CFO. Dash added James Doherty as managing director in November and recently acquired eRoom Securities.~SD
Clarification from yesterday’s note. The Overstock.com subsidiary, tZERO, plans to launch secondary trading on its security token this week. The initial tZERO security token was issued last year.~JK
***** Still time to sign up for Rates Evolved and use the link in the image above to get a 20% discount for up to 10 people.~JJL
Women in Listed Derivatives Announces 2019 Officers and Committee Chairs
Press Release via email
Women in Listed Derivatives (WILD) announced its 2019 officers and committee chairs.
Cathey Curley, Lead Business Analyst at Nuveen Investments, will serve as President; Katie Cleland, Global Head of Data, Analytics, and Client Reporting IT at Societe Generale will serve as Vice President; Mary Mapes, Manager of Global Operations at CME will serve as Treasurer; and Denise Knabjian, First Vice President of Process Innovation at OCC will serve as Secretary.
**It seems that WILD keeps getting better and better and better each year.~JK
Senate Dem introduces ‘Stop Stupidity’ act to end government shutdowns
Avery Anapol – TheHill
Sen. Mark Warner (D-Va.) on Tuesday introduced legislation to prevent future government shutdowns in the event of funding lapses.
The Stop Stupidity (Shutdowns Transferring Unnecessary Pain and Inflicting Damage In The Coming Years) Act would automatically renew funding for all aspects of government, besides the legislative branch and president’s office, at the same level as the previous year.
**Why stop there?.~JK
Tuesday’s Top Three
Nobody grabs attention quite like Chris Giancarlo. Our top story from The Wall Street Journal, Wall Street Backlash Sinks Plan to Transform Swaps Market, about his decision to leave existing swaps rules alone after getting industry feedback. Imagine that, a regulator who listens? Second was Bloomberg’s Brexit Forces Equity, Foreign-Exchange Markets to Leave London, about Cboe and CME moving their FX trading platforms to continental Europe. Third was the New York Times’ piece Chilling Davos: A Bleak Warning on Global Division and Debt
140,332,972 pages viewed; 23,392 pages; 216,344 edits
FX Traders ‘Flying Blind’ After a Month Without Positioning Data
Katherine Greifeld – Bloomberg
Latest weekly CFTC futures figures covered week ended Dec. 18; CIBC relying more on options pricing to gauge sentiment
As the partial U.S. government shutdown drags into its 33rd day, analysts are getting creative when it comes to gauging which way certain financial markets are leaning. The last U.S. Commodity Futures Trading Commission positioning data covered the week through Dec. 18, meaning the most recent snapshot of currencies, commodities and financial contracts preceded last month’s Federal Reserve decision. The figures — typically unveiled each Friday — indicate whether speculators are potentially stretched and vulnerable to a reversal.
Europe can break the Brexit impasse
The Brexit process has been chaotic and confusing. It has also made one thing perfectly clear: the UK will always be tightly tied to Europe. The depth of economic ties, historical associations and social bonds are simply too close, longstanding and important for a definitive break-up.
John Paulson mulls shutting his hedge fund; Founder says he will consider turning eponymous group into a family office in next two years
Lindsay Fortado – Financial Times
John Paulson, whose wildly lucrative bets against the US housing market made him a hedge fund industry superstar a decade ago, said he would consider turning his firm Paulson & Co into a family office “in the next year or two”. The 63-year-old money manager said that almost 75 to 80 per cent of the money managed by Paulson & Co was now his own capital, reflecting years of disappointing returns that have driven outside investors away.
Big U.S. Banks Are Letting Stress Tests Make Decisions for Them
Yalman Onaran – Bloomberg
If you’re a bond trader at a major bank, the next time you ask for an increase in your position limit, the answer is likely to be based on regulatory stress tests.
Seventy-eight percent of global banks now use the tests to assess concentrations and set limits internally, according to a Deloitte survey to be released Wednesday. That’s up from 67 percent in 2012, the first time the same question was posed. Eighty-seven percent of respondents said they use capital stress tests for strategy and business planning, up from 68 percent seven years ago.
The Latest Trend in Mobile Gaming: Stock-Trading Apps
Lisa Beilfuss – The Wall Street Journal
Morgan Snipes downloaded the Robinhood Markets Inc. app on his phone nine months ago with a plan to leave his day job behind. The stock market has turned into a game for inexperienced investors like 35-year-old Mr. Snipes, a small-business owner from Oklahoma City, thanks to commission-free trading apps.
Busting the Myth of Public Blockchains for Business
Busting the Myth of Public Blockchains for Business
Many in the tech community believe an Ethereum-based platform is the right choice for enterprise blockchain use-cases. But recent events confirm that the lack of settlement finality in public blockchains such as Ethereum renders their immutability and security guarantees worthless for business. While Ethereum is proving to be a valuable tool for a wide range of isolated social and economic experiments, R3’s Richard Gendel argues, its core technologies are the wrong foundation for business blockchain solutions. He offers three reasons why.
Seed CX Launches “Institutional-Only” Cryptocurrency Spot Trading
Institutional cryptocurrency exchange operator Seed CX announced the launch of spot trading in digital assets for financial institutions this Wednesday.
The company says that it is the first firm to have launched an institutional-only cryptocurrency spot trading platform and that it is the only exchange to offer both spot and derivatives trading.
Dorset Energy fund’s big bet on oil rebound pays off
The Dorset Energy fund gained 23.3 per cent in the first 11 days of this year, according to numbers sent to investors. Hedge funds on average are up about 1.7 per cent so far this year, according to data group HFR.
Fed’s Jumbled Talk Leaves Balance-Sheet Message in `Disarray’
Rich Miller – Bloomberg
The Federal Reserve’s best laid plan for a below-the-radar rundown of its $4.1 trillion balance sheet has gone awry.
Rather than operating in the background as policy makers intended, the strategy has been thrust into the spotlight as investors and President Donald Trump have attacked it for fueling last month’s stock market sell-off.
China Risks Real Hard Landing This Time
China’s economy is at risk of its long-feared “hard landing”—a rapid slowdown in growth that would hit employment hard and could trigger big problems in global debt and currency markets.
Five US market regulation forecasts for 2019 Davis Polk lawyers expect changes to Volcker rule and guidance on cryptocurrencies
Annette L Nazareth – Financial Times
While the new Democratic-controlled House of Representatives makes legislative reforms in financial regulation very unlikely, we predict the financial regulators will continue to effect change in key areas.
Here’s President Trump’s stock-market scorecard after 2 years in office
Sue Chang – MarketWatch
President Donald Trump has often taken credit for how well stocks do, inadvertently turning equities into a proxy report card for his presidency. But as Trump begins his third year in office, the stock market is sending mixed signals on some of his signature policies, including a protracted trade war with China.
Exchanges, OTC and Clearing
Machine learning in a nutshell
Konrad Sippel – Head of the Content Lab at Deutsche Börse
Machine learning and artificial intelligence: the tech discussion has revolved around these concepts for years now. But for many of us, questions remain. Why is it such a big deal? What has to come together to make it work? And how can it be applied in one’s daily tasks?
Konrad heads the Content Lab at Deutsche Börse, a think tank tasked with looking for innovative solutions that harness the capabilities of data science for Deutsche Börse Group and its clients.
GFF Summit 2019: Bringing CCP-specific benefits to the securities lending market
Gerard Denham, Eurex Clearing
The implementation of EMIR in Europe and the Dodd Frank Act in the US to reduce systemic counterparty and operational risk has imposed the requirement for counterparties to centrally clear eligible OTC derivative trades and to post initial margin and variation margin against non-cleared derivatives transactions. The shortage of high-quality collateral has stimulated the demand for securities lending to be increasingly utilized through secure and efficient programs.
Intercontinental Exchange Announces Several Enhancements To The ICE Permian WTI Crude Oil Futures Contract
Two new delivery options to offer delivery of Permian WTI on the water at Galena Park and Seabrook terminals; Storage futures bring new risk management tools to growing Houston market; Metals data provides unprecedented level of transparency into crude quality
Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced several new enhancements to the ICE Permian WTI crude oil futures contract (Contract code: HOU).
Keeping Score of Trade Compliance: A Regulator’s Perspective from Tom Sexton, NFA CEO
Just over a year ago, we acquired AI surveillance startup Neurensic, which led to our TT Score trade surveillance and compliance offering. TT Score helps our users stay fully compliant with market regulations by leveraging machine learning to identify trading behavior that might prompt regulatory inquiries. The move into technology for trade surveillance and regulatory compliance has been a fascinating one for us—and it has provided us with an even greater appreciation for regulatory organizations such as NFA.
Barchart Launches cmdtyExchange – An Event Highlighting Innovation and Technology in Commodity Markets
Barchart, a leading provider of commodity data and workflow solutions has announced the launch of cmdtyExchange, a new event to highlight the data, tools and technology driving innovation in commodity markets. The event, taking place May 8-10, 2019, will feature commodity market experts providing insights on the changing landscape of today’s agricultural industry.
Dash Financial Technologie names Scott Patrick CFO
Dash Financial Technologies Dash Financial Technologies, the industry’s leading capital markets technology and execution provider, today announced the addition of Scott Patrick as Chief Financial Officer.
Why bankers should drop their fear of fintech sandboxes
Penny Crosman – American Banker (PODCAST/AUDIO)
Bankers sometimes object to experimental zones for fintechs, complaining they are shielded from regulations that banks have to follow. But Brian Knight at George Mason University says fintechs will be held accountable for any legal violations that occur in sandboxes — and banks can use sandboxes, too.
A private equity bet in Latin America proves the strength of fintech investments there
Jonathan Shieber – TechCrunch
Latin America is getting another fintech unicorn thanks to Advent International’s acquisition of a 51 percent stake of Prisma Medios de Pago, an Argentine payments company formed as a joint venture between Visa International and local banks.
The deal, which values Prisma at $1.42 billion, is yet another sign of Latin America’s growing prominence for global investment and the central role that fintech plays in the development of an innovation economy in the region.
Will people ditch cash for cryptocurrency? Japan is about to find out
Mike Orcutt – MIT Technology Review
Japan’s citizens have an expensive habit: paying for things with cash. Most payments in the world’s third largest economy involve paper bills and metal coins. That sets Japan far apart from China and South Korea, where various “cashless” electronic payment schemes dominate, as well as the West, where credit and debit cards are much more popular.
One of the world’s largest crypto exchanges looks to go public in the US through a reverse merger
Kate Rooney – CNBC
Blockchain Industries announces it has signed a binding letter of intent to merge with Singapore-based Blockchain Exchange. The deal would mark the first cryptocurrency exchange to be publicly traded in the U.S. The plan involves the nonconventional route of buying an existing public company, then listing through a reverse merger — which could be much faster than an initial public offering, or IPO.
Bakkt Makes Initial Hiring Push for Bitcoin Futures Exchange
Anna Baydakova – Coindesk
Ahead of its hotly anticipated launch, bitcoin futures exchange Bakkt has launched a hiring campaign. Eight new job posting were published Tuesday on the company’s website.
Bakkt is looking for several experienced software developers, including mobile and blockchain developers; an institutional sales manager with experience in North America or Asia; and three higher-level positions including a director of finance, director of security engineering and director for blockchain engineering.
Report: Overstock Set To Launch tZERO Cryptocurrency
Wayne Duggan Benzinga – Yahoo! Finance
The highly anticipated launch of Overstock.com Inc. cryptocurrency tZERO is reportedly coming this week. Overstock CEO Patrick Byrne said the company was “ready to hit the button and go live” on Friday with tZERO, but is waiting another few days to process user signups before going live, according to CoinDesk. “But by the end of the next week we will be turning the trading system live,” Byrne said, according to the Jan. 18 story.
LSE’s technology to power Asian cryptocurrency platform
Noor Zainab Hussain, Anil D’Silva – Reuters
London Stock Exchange Group (LSE.L) said on Tuesday Hong Kong-based AAX would use its technology for cryptocurrency trading, allowing the British exchange operator enter a nascent yet highly speculative industry.
Sapphire Tech Targets Grin Cryptocurrency With New GPU Miner
Nikhilesh De – Coindesk
Hong Kong graphics card producer Sapphire Technology is launching a new line of miners targeting the privacy-focused “grin” cryptocurrency. Sapphire announced the launch of its RX 570 16GB HDMI Blockchain Graphics Card on Tuesday, saying it would be “the first of a new family” of products designed to mine grin and other cryptocurrencies. The product is not yet on sale, but will be available to order “soon.”
Top Officials at Two Korean Cryptocurrency Exchanges Face Fraud Indictments
Several of South Korea’s top crypto exchanges have found themselves in hot water, with executives at a couple of exchanges facing criminal charges and jail time. According to a news report on the Korean website Blockinpress, the CEO of Komid, a Korean crypto exchange, has received a three-year prison sentence for committing fraud against investors by artificially inflating the exchange’s actual trading volume.
Stories from Alternative Crypto Sources
Romania Imposes 10% Tax on Cryptocurrency Earnings
Jeffrey Gogo – Bitcoin.com News
Cryptocurrency exchange botches airdrop, gives $5.3M to its users
Matthew Beedham – TNW
$3.2 Trillion in Bitcoin Payments Processed in 2018: Is the Cryptocurrency a Better Version of Gold?
Joseph Young – CCN
US national debt reaches a new high under Trump
Lydia DePillis – CNN
The US national debt stood at $21.974 trillion at the end of 2018, more than $2 trillion higher than when President Donald Trump took office, according to numbers released Thursday by the Treasury Department.
The national debt has been rising at an accelerated rate in the aftermath of the 2008 financial crisis, when Congress and the Obama administration approved stimulus funding in order to keep the economy afloat.
Waters Urged by GOP Lawmaker to Examine Brexit, Fannie-Freddie
Elizabeth Dexheimer – Bloomberg
The top Republican on the House Financial Services Committee wants the panel’s Democratic chair, Maxine Waters of California, to consider holding hearings on issues including Brexit, overhauling Fannie Mae and Freddie Mac and cybersecurity.
Kudlow Says China Deal Hinges on Enforcement, Structural Issues
Toluse Olorunnipa and Jenny Leonard – Bloomberg
President Donald Trump’s top economic adviser said the scope of U.S. trade talks with Beijing is broader and deeper than ever before but a final outcome would ultimately depend on verification of Chinese commitments.
Larry Kudlow, head of the National Economic Council, said in an interview with CNBC Tuesday that “enforcement is absolutely crucial to the success of these talks.”
FINRA Releases 2019 Exam Priorities
The Financial Industry Regulatory Authority released Tuesday its risk monitoring and exam priorities for 2019 — highlighting new priorities as well as ongoing issues like cybersecurity and firms’ hiring of brokers with former infractions.
Fed Said to Probe Deutsche Bank Over Suspicious Danske Cash
Jesse Hamilton and Sonali Basak – Bloomberg
The Federal Reserve is examining how Deutsche Bank AG handled billions of dollars in suspicious transactions from Denmark’s leading lender, according to people familiar with the matter, further intensifying what could be one of the biggest money-laundering scandals ever.
SEC sued by whistleblower over Deutsche Bank misconduct
Dylan Tokar – Fast Company
A decade after the U.S. financial crisis, Wall Street is booming and the economy is back – but nagging questions remain about the failure of government regulators and prosecutors to prevent the collapse, and to hold top Wall Street bankers personally accountable for the catastrophe. A year after the recession ended, the Securities and Exchange Commission (SEC) in 2010 slapped Goldman Sachs with a hefty $550 million fine, but it only charged a single, mid-level Goldman trader. Emails obtained by ProPublica’s Jesse Eisinger and published by the site in 2016 shed some light on possible reasons why. In them, the senior SEC official who investigated Goldman lamented the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.”
U.S. Courts Will Only Remain Open Until Jan. 31
Andrew M Harris – Bloomberg
The U.S. court system can continue operating during the partial government shutdown until Jan. 31, according to a statement by the federal Administrative Office of the U.S. Courts.
ESMA Updates Commodity Derivatives Transitional transparency Calculations for MiFID II/MIFIR
The European Securities and Markets Authority (ESMA) has published today an updated version of the MiFID II/MiFIR transitional transparency calculations (TTC).
Investing and Trading
Is There A Gold/ Bitcoin Correlation
Jim Iuorio – CME Group OpenMarkets
Among the two major alternative currencies, gold has emerged on the upside, at least temporarily. On November 14, 2018, CME bitcoin futures broke through the important $6,000 support level and lost more than 40 percent of their value in the next 12 days. On that same day gold futures accelerated off their lows and began an explosive 9 percent rally higher.
US Stock Futures Gain Despite Trade Concerns; Oil Rises on China Stimulus Hopes
Martin Baccardax – TheStreet
Global stocks edged higher Wednesday with investors focused on the fate of U.S.-China trade talks and further signals of a slowing global economy that have blunted sentiment in equity markets around the world.
Companies take advantage of thaw in junk bond market
Joe Rennison and Eric Platt – Financial Times
A number of junk-rated companies took advantage of renewed investor appetite for riskier corporate bonds on Tuesday despite a broad stock market sell-off, borrowing more than $4bn.
Trader says he has ‘no money at risk,’ then promptly loses almost 2,000%
Shawn Langlois – MarketWatch
Investing legend Jack Bogle once said that “if you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” He didn’t mention anything about a 2,000% loss though. That’s where 1R0NYMAN comes in. The anonymous trader/internet hero created a stir on Reddit earlier this month with this absolute corker of a trade.
***The best thing the Internet does is give unprecedented freedom to everybody. The worst thing the Internet does is give unprecedented freedom to everybody.~MR
Capital raising by US oil companies falls sharply
Ed Crooks – Financial Times
Capital raising by US oil exploration and production companies has fallen sharply following the decline in crude prices that began last October, pointing to cutbacks in capital spending budgets and a continuing slowdown in activity. Companies in the sector have not held a single bond sale since the start of November, according to Dealogic, while share sales have also slowed. The data suggest that after a record-breaking boom in US oil output in 2018, growth will be weaker this year.
Fleeing Clients Are Grim Reality in Banks’ Push to Manage Wealth
Lucca De Paoli, Patrick Winters, and Tom Metcalf – Bloomberg
Managing money for the wealthy — once touted as a panacea for banks burned by investment banking’s cutthroat rivalry and lenders’ smothering capital requirements — is proving to be anything but.
UBS Group AG, the world’s largest wealth manager, predicted lower revenue from its asset management and wealth divisions in coming weeks after seeing $13 billion yanked during the final months of 2018. Credit Suisse Group AG signaled that its assets under management were resilient during the recent equities meltdown, but warned it’s been a tough quarter.
Goldman trading executive Gmelich to retire in March -memo
Elizabeth Dilts – Reuters
Justin Gmelich, a longtime executive in Goldman Sachs Group Inc’s bond trading business, plans to retire from the Wall Street bank in March, according to a memo sent by management on Tuesday.
U.S. Intelligence Warns Russia, China Seizing on Global Turmoil
Chris Strohm – Bloomberg
Russia and China are taking advantage of changes in the “strategic environment” that has prevailed for almost a century to gain influence and undermine American objectives, according to a new strategy issued by U.S. intelligence agencies.
Russia: Vladimir Putin’s pivot to Africa; Moscow is building influence on the continent, to the chagrin of former colonial powers
Henry Foy, Nastassia Astrasheuskaya and David Pilling – Financial Times
As protests raged in Zimbabwe’s cities last week, with police firing live ammunition at crowds who barricaded roads with burning tyres, the target of their anger was 8,000km away. President Emmerson Mnangagwa, who had sparked the unrest by raising fuel prices amid an economic crisis in the southern African country, was instead strolling through the Kremlin for talks with President Vladimir Putin, the first of what Moscow hopes will be many visits by African leaders this year.
Davos: Sanctions on Moscow hurt US long term, wealth fund head says
Holly Ellyatt – CNBC
U.S. sanctions on Moscow are starting to hurt America more than Russia, the chief executive of Russia’s sovereign wealth fund told CNBC Wednesday.
“Of course, we believe sanctions are wrong, and particularly U.S. sanctions, because they really undermine (the) U.S. long term,” Kirill Dmitriev, the CEO of the Russian Direct Investment Fund said, speaking to CNBC at the World Economic Forum (WEF) in Davos, Switzerland.
BOJ Leaves Stimulus Unchanged as It Cuts Inflation Outlook Again
Toru Fujioka and Masahiro Hidaka – Bloomberg
The Bank of Japan left monetary policy unchanged as it cut its inflation outlook once again, underscoring how far away its price target is and how few options the central bank has for drawing closer.
South Africa Is on a Path of Growth, Renewal, Ramaphosa Says
Michael Cohen – Bloomberg
South African President Cyril Ramaphosa said the country has been placed on a path of growth and renewal, with his administration going all out to attract investment, revive the economy and tackle graft.
A plan to stabilize struggling state power utility Eskom Holdings SOC Ltd. will be finalized within the next few weeks, Ramaphosa told reporters on Wednesday at the World Economic Forum in Davos, Switzerland. The government is focusing on rejuvenating its mining and manufacturing industries, and its growth prospects look favorable, he said.
Contract enforceability the ‘elephant in the room’ in Brexit discussions says MP Share
James Booth – City AM
Uncertainty around the enforceability of contracts is the “elephant in the room” in Brexit discussions, the chair of the justice select committee said today.
Brexit Brief: Former U.K. Chancellor predicts delay to EU exit
George Osborne, the former U.K. Chancellor who campaigned for the country to remain part of the European Union, thinks that a delay to Brexit is the most likely outcome from weeks of political deadlock.
Brexit drives up financial license applications in Luxembourg
Huw Jones – Reuters
Forty-seven banks, insurers and asset managers have plans to relocate some activities from Britain to Luxembourg due to Brexit, Luxembourg for Finance said on Wednesday.
U.K. Parliament Moves Closer to Stopping a No-Deal Brexit
Tim Ross – Bloomberg
The U.K. Parliament is moving closer to a plan to delay Brexit in order to stop the country dropping out of the European Union with no deal and avoid the risk of an economically damaging divorce.
Delaying Brexit won’t solve anything, Theresa May tells MPs
Theresa May has told MPs attempting to delay Brexit that it would not “solve the situation”. “The decision remains the same – the deal, no-deal or no Brexit,” she said at Prime Minister’s Questions.