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Interactive Brokers Group Will Appoint Milan Galik as CEO

Jan 8, 2019

First Read

What’s In Style? Member’s Exchange Brings Together Wall Street Behemoths To Take On Nasdaq, NYSE and Cboe Global Markets
Jim Kharouf, JLN

So many marketing opportunities, so little time for the latest US stock exchange called the Members Exchange (MEMX).

The newest stock exchange, with its nine behemoth investor banks, brokers and market makers, could get a good deal at the Sears closeout sale on Member’s Only jackets and slip a “best road trip songs” on a Memorex cassette into the vest pocket. You’re welcome, soon-to-be-announced MEMX management and marketing team.

But this isn’t your Ella Fitzgerald’s exchange. The new owners are tired of the legacy exchanges’ grip on things like data fees and are looking to provide an easier, cleaner trading experience for traders. MEMX is made up of a Who’s Who on Wall Street and represent a sizeable amount of daily stock market volume. The MEMX investment roster includes: Bank of America Merrill Lynch, Charles Schwab, Citadel Securities, E*TRADE, Fidelity Investments, Morgan Stanley, TD Ameritrade, UBS and Virtu Financial. That makes it a formidable challenger to the likes to the Intercontinental Exchange‘s NYSE, Nasdaq and Cboe Global Markets

To read the rest of this story, go here

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Hits & Takes
JLN Staff

The new MEMX stock exchange knocked the Chris Concannon news right off the headlines. Concannon is headed to MarketAxess, where he will be the president and COO.~JJL

The bad news about the new MEMX exchange is that the current equity market exchange players will have a new competitor. The good news is that they will have another company to buy in a few years, just like they have with other competitors.~JJL

There is a natural cycle to this. When there is consolidation, like the Cboe-Bats deal, then the street feels compelled to start over again with a new competitor.~JJL

BlackRock is out with its 2019 survey of 230 global institutional investors, collectively representing $7+ trillion in assets. This year 51 percent said they were planning on decreasing their equity allocation. That compares to 35 percent of respondents in 2018 and 29 percent in 2017.~SD

News is that 2018 US income tax refunds will be sent out during the government shutdown, according to reports quoting White House sources. I am just wondering how the 12 percent of the IRS staff that is still working is going to accomplish that in a timely matter.~JJL

If this US government shutdown goes on, air travel is going to become a worse nightmare as TSA staffers are absent from their now unpaid jobs. Word is some government workers have sought out new jobs to pay the bills, which is why some workers are calling in sick during the shutdown.~JJL

Would you like an invoice for your 2019 subscription to the John Lothian Newsletter? Email me at johnlothian@johnlothian.com and ask for one. Enterprise subscribers should expect to see invoices this week.~JJL

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Interactive Brokers Group Will Appoint Milan Galik as CEO; Thomas Peterffy, Founder, Will Step Down in Third Quarter of 2019 and Remain as Chairman of the Board
BusinessWire
Interactive Brokers Group, Inc. (IEX:IBKR), announced today that it will appoint Mr. Milan Galik as Chief Executive Officer of the Company, succeeding Mr. Thomas Peterffy in this role. Mr. Peterffy will continue as Chairman of the Board and remain closely involved in the operations of the company that he founded. These changes will occur in the third quarter of 2019, concurrently with Mr. Peterffy’s 75th birthday. Mr. Galik has been with the Company for 28 years and has served as its President since 2014. Mr. Galik has been a member of the Company’s Board of Directors since its initial public offering in 2007.
/jlne.ws/2FfTeT5

***** Good to see that mandatory 75 year old retirement policy is working.~JJL

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R.J. O’Brien Affiliate Officially Launches OTC Agricultural Structured Products Group – Team Led Melisa Culbertson Offers Customized Bilateral OTC Products, Fueled By First-Of-Its-Kind Proprietary Software Platform
RJ O’Brien
Chicago-based R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, today announced that its affiliate R.J. O’Brien Financial has officially launched its over-the-counter (OTC) Agricultural Structured Products Group.
/jlne.ws/2CbVgAG

****** The subject of the Special Report we sent out this morning at 6 AM CST.~JJL

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No butts: Bloomberg staff told to stop dropping cigarettes
Tim Burke – Financial News
Bloomberg has come under fire from one of its high-profile neighbours, which is accusing staff at the financial and media group’s new £1bn European headquarters in the City of London of littering the neighbourhood during smoking breaks.
/jlne.ws/2Fkf1sC

***** No field dressing the butts either.~JJL

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Monday’s Top Three
Our top read piece of the day was Pete Najarian on Twitter: “Well, I am shocked, excited, and thrilled for the New #MissNebraska2019 my little girl, Alexis Najarian…” Second was Business Insider’s piece on the new futures market, Small Exchange hopes to bring more retail customers to futures market. Third was Bloomberg’s Crypto Exchange Takes on Behemoths With Physical Bitcoin Futures

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Lead Stories

New Stock Exchange Is a Bad Trip Down Memory Lane; A member-owned market is the wrong response to rising fees.
Stephen Gandel – Bloomberg
Often, despite nostalgia, memory lanes don’t lead us back to better places, just the same wrong turns we’ve made before. That would be the case with Wall Street’s latest proposal to improve the stock market. The Securities and Exchange Commission should see it for the unsensible stroll it is.
/jlne.ws/2Rf1auV

Major Wall Street players plan new exchange to challenge NYSE, Nasdaq
Reuters
Morgan Stanley, Fidelity Investments, Citadel Securities LLC and a host of other financial companies have agreed to jointly launch a new low-cost bourse that will compete with the New York Stock Exchange and Nasdaq.
In a joint statement on Monday, the companies said the new exchange would look to increase competition, improve operational transparency, reduce fixed costs and simplify equity trading in the United States.
/goo.gl/KcAKc6

***Other sources: Bloomberg here, the WSJ here and CNBC here. The joint press release can be found here.~SR

London’s financial sector will take a knock in 2019; With or without a Brexit deal, the City’s pre-eminence will be shaken
The editorial board – FT
As trucks rehearse in Kent for border disruptions after a no-deal Brexit and Theresa May steps up efforts to get MPs to back her Brexit deal, Britain’s financial services industry appears, thankfully, to be one of the best prepared sectors for leaving the EU. This is a credit to the City of London’s international banks, asset managers and insurers — and to regulators. Yet, however well it has readied itself and whether Brexit happens via an agreed deal or not, 2019 will mark a fundamental knock to the City’s pre-eminence.
/jlne.ws/2RdkJ70

Stock-Exchange Veteran Chris Concannon Moves to Bond Platform; Cboe president and COO, an advocate of electronic trading, will hold same titles at MarketAxess
Telis Demos – WSJ
A pioneer of electronic stock trading is moving to the bond market. Chris Concannon is joining bond-trading venue MarketAxess Holdings Inc. MKTX 1.19% as president and chief operating officer, the company said. He comes from Cboe Global Markets Inc., CBOE -1.84% which operates stock, options and futures exchanges, where he held the same positions.
/jlne.ws/2SGE1OJ

Barclays threatened with boardroom shake-up as investor calls for vote
Kalyenna Makortoff – The Guardian
Barclays is being threatened with a boardroom shake-up after an activist investor announced plans for a shareholder vote on the bank’s leadership.
/jlne.ws/2FeHS1G

World Bank president Jim Yong Kim abruptly resigns; To join firm focusing on infrastructure investment in developing economies
James Politi – The Financial Times
Jim Yong Kim, the president of the World Bank, abruptly announced that he would be leaving his post on February 1, more than three years ahead of the end of his term.
/goo.gl/WHSvwb

WSJ Investigation: China Offered to Bail Out Troubled Malaysian Fund In Return for Deals
Tom Wright and Bradley Hope – WSJ
Senior Chinese leaders offered in 2016 to help bail out a Malaysian government fund at the center of a swelling, multibillion-dollar graft scandal, according to minutes from a series of previously undisclosed meetings reviewed by The Wall Street Journal.
/jlne.ws/2CUI44t

Ethereum Classic Movements Halted by Coinbase on Signs of Attack
Olga Kharif – Bloomberg
Coinbase Inc., one of the world’s largest cryptocurrency exchanges, said it halted the movement of customer funds on the blockchain that backs Ethereum Classic because of signs that network is under attack.
/jlne.ws/2RdZfH3

We must prepare now for the likelihood of a recession
Lawrence Summers – Financial Times
When people are fundamentally healthy, they do not yet know what will cause their death. An economic recovery is healthy if it is not clear what will cause the next recession. By this standard, the recovery from the 2008 financial crisis, although disappointingly slow, has been healthy for most of the last decade.
/jlne.ws/2CVkepr

What causes a flash crash?; Thin trading alone does not explain recent ones
The Economist
Most regular flyers will have experienced an “air pocket”, when their plane hits turbulence and suddenly dips, with unwelcome effects on their heart rate and digestive processes. In financial markets these have become known as “flash crashes” after a particularly volatile day for stockmarkets in May 2010.
/jlne.ws/2RhJtuU

High-speed trader Virtu parts ways with Europe chief Scholtes; Virtu is awaiting completion of its $1bn acquisition of ITG
Samuel Agini – Financial News
Virtu Financial’s head of markets in Europe, the Middle East and Africa has left after more than six years at the high-speed trader.
/jlne.ws/2FdC4GC

Stock Pickers Wanted Volatility. It Made Their Performance Worse
Charles Stein – Bloomberg
Stock pickers have long claimed they would prove their mettle when markets became more volatile. That didn’t happen in 2018.
/jlne.ws/2CUTzsU

Exchanges, OTC and Clearing

Wall Street Firms Plan New Exchange to Challenge NYSE, Nasdaq; Morgan Stanley, Fidelity and Citadel Securities among backers of new ‘Members Exchange’
Alexander Osipovich – WSJ
A group of financial heavyweights including Morgan Stanley , Fidelity Investments and Citadel Securities LLC plans to launch a new low-cost stock exchange to challenge the New York Stock Exchange and Nasdaq Inc., the companies said.
/jlne.ws/2RhKkvC

B3 Breaks New Record On Mini Ibovespa Futures Contracts
Mondovisione
B3’s Mini Ibovespa Futures Contract hit a record high today ending the day at 5.458.125 contracts. The previous record of 5.428.650 Mini Ibovespa Futures Contract was recorded on January 3rd 2019.
/jlne.ws/2RiknvO

Upstart MEMX exchange faces uphill battle against NYSE, Nasdaq
Kevin Dugan – NY Post
It’s going to take more than this to blitz the Big Board. Nine Wall Street powerhouses made a splashy announcement on Monday that they were forming a lower-cost rival to the New York Stock Exchange and Nasdaq — but the start-up has no employees or office space, and has already struggled to lure top talent, sources told The Post.
/jlne.ws/2C67zhL

Major US institutions to rival NYSE and Nasdaq with launch of ‘low-cost’ exchange; Morgan Stanley, Virtu Financial, Citadel Securities, UBS and Fidelity Investments are among the firms looking to establish a low-cost, transparent equities exchange.
Hayley McDowell – The Trade
Nine major financial institutions are aiming to establish a member-owned equities exchange to rival incumbents Nasdaq and NYSE, following bitter disputes over transparency and costs of trading in the US.
/jlne.ws/2C4BTt4

LCH reports record clearing volumes across operations for 2018; Clearing across equities, fixed income, and OTC derivatives reached record levels for LCH in 2018.
John Brazier – The Trade
UK clearing house LCH has announced it achieved record volumes for 2018 across its equities, fixed income, and OTC derivatives clearing operations.
/jlne.ws/2CcEaCq

Cboe veteran Chris Concannon departs for COO role at MarketAxess; Chris Concannon will leave Cboe later this month to take on the role of chief operating officer at MarketAxess.
Hayley McDowell – The Trade
Exchange operator Cboe has confirmed that its chief operating officer, Chris Concannon, will leave the company on 14 January to take on the same role at bond trading platform provider, MarketAxess
/jlne.ws/2C67KcV

Cboe’s Chris Concannon to join bond trading platform MarketAxess
Philip Stafford – FT
Chris Concannon, one of the best known executives in US equity and options industry, is leaving Cboe Global Markets to join MarketAxess, one of the world’s largest corporate bond trading venues.
/jlne.ws/2sfNqBl

Euronext announces volumes for December 2018
Euronext
Amsterdam, Brussels, Dublin, Lisbon, London and Paris – 8 January 2019 – Euronext, the leading pan-European exchange in the Eurozone, today announces trading volumes for December 2018.
/jlne.ws/2C6PrUU

Equity index derivatives: Introduction of futures on STOXX® ESG-X, Low Carbon and Climate Impact indexes
Eurex
Effective 14 February 2019, the following measures of Eurex Clearing will come into effect:
/jlne.ws/2CbJ3vt

More executed trades on the Frankfurt certificate exchange; Prolonged trading hours are used extensively, especially in the evening
Deutsche Börse Group
With 2.6 million orders executed, five percent more transactions in structured products were made on the Frankfurt Stock Exchange in the past year than in 2017. Overall, the trading volume on the certificates exchange was 13.7 billion euros, five percent less than in the previous year
/jlne.ws/2C7hTGf

TMX Group Limited announces release date for Q4 2018 financial results and analyst conference call
TMX
TMX Group Limited will announce its financial results for the fourth quarter and year ended December 31, 2018 in the evening of Wednesday, February 13, 2019. An analyst conference call to review the results will be held on Thursday, February 14, 2019 at 8:00 a.m. ET.
/jlne.ws/2CcFl4O

SGX partners CCI Administrative Bureau to deepen ties in Western China
SGX
Singapore Exchange (SGX) today signed a new strategic cooperation agreement with the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (CCI) Administrative Bureau, broadening its slate of collaborations with China as part of its efforts to support Singapore-China financial cooperation. CCI is the third inter-governmental project between Singapore and China.
/jlne.ws/2Caq5Fw

DTCC Receives Regulatory Approval To Provide Derivatives Trade Reporting Services In Switzerland In Support Of FinfraG
Mondovisione
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced that it has received regulatory approval from the Swiss Financial Market Supervisory Authority to provide trade reporting services in Switzerland via DTCC’s Global Trade Repository service (GTR)[1] in Europe.
/jlne.ws/2FftO91

Fintech

TD Integrates Artificial Intelligence-Powered Chatbot into its Top-Ranked Mobile App
Fintech.Finance
TD Bank Group (TD) today launched TD Clari (“Clari”), a new chatbot integrated into the bank’s top-ranked mobile app that empowers customers with in-the-moment personal spending insights and helps them make everyday transactions. Clari provides a personalized experience for customers by leveraging Kasisto’s leading Conversational Artificial Intelligence (AI) platform, KAI Consumer Banking.
/jlne.ws/2RkEWIg

IBM unveils first standalone quantum computer; Powerful new system could eventually leave today’s machines in the dust
Richard Waters – FT
This is one computer you will not be able to buy after the Consumer Electronics Show. IBM has built the first standalone quantum computer, packing some of the world’s most advanced science into a 9ft glass cube. But so far there is only one — and while IBM does not rule out one day selling such systems, its business plan calls for renting access to the hardware over the internet rather than shipping it to customers.
/jlne.ws/2RdYJJ7

Logging In to Your Bank Account Is Now a $3 Billion Business
Julie Verhage Gillian Tan, and Selina Wang – Bloomberg
Plaid is buying Quovo in a deal that could reach $200 million; Last year, Plaid sparked a bidding war among Square and VCs
When you link your checking account to Venmo or use it to buy Bitcoins, a startup called Plaid Inc. is likely facilitating the connection with your bank. You punch in your user name and password; Plaid checks those credentials with the financial institution and if they’re accurate, passes banking information back to the app. That’s it.
/jlne.ws/2RjOy5N

Bankers joining fintechs find adrenalin and bruised egos; Former bosses of Barclays and Citigroup describe the ups and downs of financial technology
Laura Noonan – FT
Bounding into a nondescript Manhattan conference room, former Citigroup chief executive Vikram Pandit is a powerful advertisement for swapping the banking world for the glamour and promise of financial technology.
/jlne.ws/2ReB5w8

Fintech Revolution Still Not Here a Year Into ‘Open Banking’
Edward Robinson – Bloomberg
Banks and credit card firms defend payment business with deals; Big change could be coming in September with new rules
When European lawmakers ushered in the era of “open banking” for consumers one year ago, both lenders and financial technology startups expected a sea change. For the first time, banks would be required to share account data with competitors as long as customers gave their permission.
/jlne.ws/2FhArrx

Cryptocurrencies

Coinbase Suspends Ethereum Classic After Blockchain History Rewrites
Nikhilesh De and Christine Kim – CoinDesk
Crypto exchange Coinbase has halted all ethereum classic transactions, withdrawals and deposits due to a series of blockchain history reorganizations on the network.
/jlne.ws/2CVXTrI

****Coinbase blog – Deep Chain Reorganization Detected on Ethereum Classic (ETC)

Almost $500,000 in Ethereum Classic coin stolen by forking its blockchain; Rollback attack let attackers spend 88,500 previously spent coins.
Dan Gododin – Arstechnica.com
Attackers have stolen almost $500,000 worth of the Ethereum Classic digital currency by carrying out a compute-intensive hack that rewrote its blockchain, officials with Coinbase, one of the leading crypto currency exchanges, said on Monday.
/jlne.ws/2RjJGO3

Winklevosses Stick to Bitcoin Script During ‘Ask Me Anything’ Chat
Olga Kharif – Bloomberg
Gemini Trust founders say they’re committed to Bitcoin ETF; Brothers encourage Bitcoin investors to continue holding on
Cameron and Tyler Winklevoss still believe in Bitcoin and are working hard to make a cryptocurrency exchange-traded fund a reality, the brothers said during Monday’s Ask Me Anything session on the popular discussion website Reddit.
/jlne.ws/2Rc5WcN

New crypto exchange looks to lure traders with Tether futures
Frank Chaparro – The Block Crypto
A new crypto derivatives exchange is launching with a variety of financial products, which its CEO hopes will draw large proprietary trading shops deeper into the market.
/jlne.ws/2ReZXDT

Colorado Senators File Bill to Exempt Cryptos from Securities Laws
Yogita Khatri – Coindesk
Two lawmakers from the U.S. state of Colorado have introduced legislation seeking to exempt cryptocurrencies and certain digital tokens from securities laws.
/jlne.ws/2Rf0oOx

Overstock’s tZERO Wins Patent for Integrating Crypto With Legacy Trading Tech
Nikhilesh De – Coindesk
Security token trading platform tZERO, a portfolio company of digital retail giant Overstock, has won a patent outlining how it may merge legacy trading systems with cryptocurrencies and digital asset tech.
/jlne.ws/2RgwJEV

Ethereum Foundation Grants $5 Million to Parity Technologies
Yogita Khatri – Coindesk
The Ethereum Foundation has just awarded a $5 million grant to Parity Technologies to support the firm’s work building the blockchain network’s next iteration, ethereum 2.0.
/jlne.ws/2ReA9rC

Kraken law enforcement requests tripled in 2018
The Block Crypto
Kraken, the largest U.S.-based crypto exchange by volume, released its so-called Compliance team’s 2018 Transparency Report showing that the exchange received 475 law enforcement requests in 2018, a nearly 300% increase from 2017’s 160 requests.
/jlne.ws/2RhIryM

Bitcoin Mining Chip Maker Canaan Considers U.S. IPO
Crystal Tse – Bloomberg
China’s No. 2 maker of crypto hardware mulls share sale in 1H; Company was earlier targeting to raise $1 billion from listing
Canaan Inc., China’s second-biggest maker of Bitcoin mining hardware, is considering listing in the U.S. after shelving plans for a Hong Kong initial public offering, people with knowledge of the matter said.
/jlne.ws/2ReKqE1

Politics

Tax Refunds Will Be Paid During Shutdown, White House Says; New policy meant to ‘mitigate the impact’ of shutdown, Vice President Mike Pence says
Richard Rubin and Peter Nicholas – WSJ
The Internal Revenue Service will pay tax refunds even though the agency is subject to the federal government shutdown, after the Trump administration reversed a longstanding policy.
/jlne.ws/2Rc57AJ

US government shutdown deprives markets of key data
State of economy unclear to Wall Street, policymakers and farmers
Gregory Meyer, Richard Henderson, Sam Fleming and Kiran Stacey – FT
Investors, policymakers and even farmers are being deprived of key economic data as the partial US government shutdown moves into its third week.
/jlne.ws/2RcGOm0

Trump Eyes Untested Emergency Power to Fund Wall, Skirt Congress
Justin Sink and Jennifer Jacobs – Bloomberg
White House may rely on provision in law governing military; Partial shutdown stretches into 18th day with no end in sight
President Donald Trump is eager to invoke a national emergency to bypass an unwilling Congress and build a border wall, according to two people familiar with his thinking, a dramatic move that would test the limits of presidential power.
/jlne.ws/2RdkgSi

Shutdown threatens IPOs, Schumer warns; Senate minority leader warns of staffing shortage at Securities and Exchange Commission
Will Bredderman – Crain’s New York
The government shutdown endangers both Main Street and Wall Street, Senate Minority Leader Charles Schumer argued on Monday.
/jlne.ws/2Rdlw7Y

Regulation

World Bank president Jim Yong Kim abruptly resigns; Official to join firm focusing on infrastructure investment in developing economies
James Politi and Sam Fleming- FT
Jim Yong Kim has abruptly announced that he will resign as World Bank president on February 1, more than three years ahead of schedule, leaving one of world’s top multilateral economic institutions grappling with confusion and uncertainty over its leadership.
/jlne.ws/2Rc5onf

World Bank Group President Kim to Step Down February 1
World Bank
World Bank Group President Jim Yong Kim today announced that he will be stepping down from his position after more than six years in which the institution’s shareholders provided strong support to multiple initiatives to ensure that the Bank Group retains strong leadership in the world of global development.
/jlne.ws/2RfrxBc

Nellie Liang Withdraws From Consideration for Fed Board Seat; White House had nominated former Fed economist, in 2018, but Senate didn’t act on nomination
Nick Timiraos and Andrew Ackerman – WSJ
Former Federal Reserve economist Nellie Liang, whom the Trump administration had nominated to serve on the central bank’s board of governors, withdrew from consideration Monday, a casualty of opposition from the banking industry which feared she would stymie efforts to loosen financial regulation.
/jlne.ws/2RivGUX

US court rejects Rajat Gupta’s bid to overturn insider-trading conviction
The Economic Times
In 2005, Gupta and Rajaratnam invested in another investment fund capitalised with USD 50 million; Gupta originally contributed USD 5 million
In a fresh setback to India-born former Goldman Sachs director Rajat Gupta, a US court here has rejected his bid to throw out his 2012 insider-trading conviction, affirming a lower court’s ruling in the case.
/jlne.ws/2Rfu2DA

Ex-UBS Employee Again a No-Show at Bank Data-Theft Trial
Hugo Miller – Bloomberg
Man accused of selling stolen data to German tax authorities; Accused’s lawyer says he has no information on his whereabouts
A former UBS Group AG employee charged with stealing data on the bank’s clients and selling it to German tax authorities failed to show up in court for a second day, forcing the tribunal to again delay the start of the trial.
/jlne.ws/2Rijvaw

ASIC releases consultation paper on reform of fees and costs disclosure for superannuation and managed investment schemes
ASIC
ASIC has today released a consultation paper seeking feedback on proposed changes to the fees and costs disclosure regime for managed investment schemes and superannuation.
/jlne.ws/2CaHHkI

NFA Amends Interpretive Notice Regarding Information Systems Security Programs—Cybersecurity
NFA
NFA recently amended its Interpretive Notice entitled NFA Compliance Rules 2-9, 2-36 and 2-49: Information Systems Security Programs (Interpretive Notice). The Interpretive Notice, which became effective in March 2016, requires that each Member adopt a written information systems security program (ISSP) to address the risk of unauthorized access to or attack of their information technology systems and to respond appropriately should unauthorized attacks occur. The amendments provide clarification on common questions related to training obligations and ISSP approval posed by Members to NFA, and impose a narrowly drawn notification requirement to ensure that Members notify NFA of cybersecurity incidents related to a Member’s commodity interest activities. The amendments will become effective on April 1, 2019.
/jlne.ws/2C68gYf

Brexit: further proposals to prepare our regulatory regime
UK FCA
Today we have published two further consultations to prepare for the UK’s exit from the EU. We have published proposals to introduce the financial services contracts regime (FSCR) as well as proposed fees for regulating securitisation repositories.
/jlne.ws/2C5sm52

Investing and Trading

Falling Mortgage Rates Raise Hopes for Battered Housing Market; Mortgage rates have fallen to around their lowest levels in eight months, offering a potential boost to the housing market after a rough patch in recent months
Ben Eisen and Laura Kusisto – WSJ
Mortgage rates have fallen to around their lowest levels in eight months, offering a potential boost to the housing market after a rough patch in recent months.
/jlne.ws/2RkEhqg

We must prepare now for the likelihood of a recession; Excess austerity is a bigger risk than fiscal profligacy
Lawrence Summers – FT
When people are fundamentally healthy, they do not yet know what will cause their death. An economic recovery is healthy if it is not clear what will cause the next recession. By this standard, the recovery from the 2008 financial crisis, although disappointingly slow, has been healthy for most of the last decade.
/jlne.ws/2CVkepr

Stock Traders Seem to Have Overshot to Downside; A lifting of the extreme gloom leads market commentary.
Robert Burgess – Bloomberg
Is the potential for an economic slowdown priced in to financial assets? There’s been no bigger question in global markets after riskier assets such as stocks melted down in December. Judging by the recent performance MSCI All-Country World Index, the answer seems to be yes.
/jlne.ws/2Rf0RjL

Triple-B movie: ‘Big Short’ star fears for debt-laden companies; In an economic slump, buyers for BBB-rated bonds may be hard to find
Robert Armstrong and Robin Wigglesworth – FT
Steve Eisman shot to fame after Michael Lewis’s book The Big Short, which homed in on his profitable bets on the US housing market collapse which tipped the world into recession. Now the New York fund manager is eyeing another menace to the financial system: corporate bonds hovering just above a junk rating.
/jlne.ws/2RdKaVY

Institutions

The Fed Is Ignoring the Biggest Lesson of 2008; Banks should be raising capital while they still can.
Editorial Board – Bloomberg
The 2008 financial crisis showed what happens when the banking system lacks an adequate foundation of loss-absorbing equity capital. Unable to raise what they needed from wary investors, banks were forced to slash lending at precisely the worst time for the economy. Ultimately, only the full faith and credit of the U.S. government — and a direct infusion of more than 200 billion taxpayer dollars — could prop them up.
/jlne.ws/2RdHmrU

Conviction stands for former Goldman Sachs director
Crain’s New York
A federal appeals court in Manhattan declined to throw out former Goldman Sachs Group Inc. director Rajat Gupta’s 2012 insider-trading conviction, upholding a lower-court ruling.
/jlne.ws/2RdZy4F

The Hedge Fund Comeback That Wasn’t: Steve Cohen’s Mediocre 2018
Hema Parmar – Bloomberg
Point72 is said to make less than 1% for investors in debut; Industry titan returned from federal ban to high anticipation
It was supposed to be his big comeback. Hedge fund titan Steve Cohen, who had been banned from trading client money for two years, opened Point72 Asset Management to investors amid fanfare. Anticipation that the man whose former firm, SAC Capital Advisors, had averaged annual returns of about 30 percent would be back in the game attracted $5 billion of capital to his fund, making it one of 2018’s biggest launches.
/jlne.ws/2RdJq38

Nomura to Switch to Merit-Based Pay for Japan-Based Brokers
Takashi Nakamichi – Bloomberg
Move is relatively rare in a country where seniority rules; Tight labor market is increasing competition for workers
Nomura Holdings Inc. will introduce a merit-based pay system at its domestic securities unit next year, moving away from the long-standing Japanese practice of rewarding staff mostly according to their age.
/jlne.ws/2RhIOta

Renaissance joins big hedge funds in defying 2018 gloom; Two Sigma, Citadel and DE Shaw also deliver stronger returns along lines of Bridgewater
Robin Wigglesworth and Lindsay Fortado – FT
The flagship investment vehicles of Renaissance Technologies, Two Sigma, Citadel and DE Shaw notched up hefty gains in 2018, underlining how some of the hedge fund industry’s biggest names have managed to thrive despite renewed financial market turmoil.
/jlne.ws/2RkGZfq

Regions

US-China: farmers count the cost of the trade war ; America’s soyabean exports to the world’s biggest market have all but disappeared, leaving farmers dependent on a $12bn bailout
Gregory Meyer – FT
The final 230 miles of the Mississippi river have long reinforced American might in global food markets. Ten grain terminals tower like fortresses along its bends, receiving crops from upstream farms, banking them in concrete silos and sending them over the levees into the holds of foreign ships. Together they can export 500,000 tonnes a day.
/jlne.ws/2RcBnDL

Brexit

Brexit: Banks are moving $1 trillion out of the UK
Ivana Kottasová – CNN
Brexit hasn’t happened yet but it’s already shrinking the United Kingdom’s financial services industry.
Banks and other financial companies have shifted at least £800 billion ($1 trillion) worth of assets out of the country and into the European Union because of Brexit, EY said in a report published Monday.
/jlne.ws/2sgJgJC

Why investment by UK companies continues to fall; Brexit uncertainty is driving cuts in transport and machinery spending, say experts
Gavin Jackson – FT
Investment by UK companies has fallen for three consecutive quarters, in a decline that highlights how uncertainty about Brexit is prompting consumers and businesses to tighten their belts.
/jlne.ws/2RhJWxa

Frankfurt real estate market booming as Brexit looms
Olaf Storbeck – FT
On the eve of Brexit, the commercial real estate market in Germany’s financial capital Frankfurt is booming like never before.
/jlne.ws/2RflYCM

EU ready to offer limited support to Theresa May on Brexit deal; Irish PM Leo Varadkar says ‘we don’t want to trap UK’ via backstop
George Parker and Tobias Buck – FT
Leo Varadkar, Irish prime minister, has confirmed the EU is ready to provide new “written guarantees, explanations and assurances” to help Theresa May surmount huge opposition to her Brexit deal in the House of Commons next week.
/jlne.ws/2Rc6KhP

Norway-style Brexit would allow UK to shape rules on finance; Inside EFTA and EEA, we would have a voice, a vote and right to reject regulations
Nicky Morgan – FT
The next two weeks will be a defining moment for Brexit and for the UK’s future. The parliamentary debates, and subsequent votes, will rank among some of the most important of the past century.
/jlne.ws/2RdMGM7

Miscellaneous

U.S. Carbon Emissions Surged in 2018 Even as Coal Plants Closed
Brad Plumer – NY Times
America’s carbon dioxide emissions rose by 3.4 percent in 2018, the biggest increase in eight years, according to a preliminary estimate published Tuesday.
/jlne.ws/2RiBY71

John Lothian Newsletter

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