R.J. O’Brien on an international binge; IEX struggles to transform trading

Jun 10, 2019

First Read

Hits & Takes
JLN Staff

The great Steve Grob has left Fidessa. He posted the following message to LinkedIn to announce the news.~JJL

“So, after over 15 years I am moving on from Fidessa following its acquisition by ION last Summer. Fidessa has been an amazing experience and I have had the great pleasure to work with, learn from and be inspired by so many talented and committed individuals. My time at Fidessa has also shown me the value of teamwork and mutual respect and how they contribute to getting successful results.

Capital markets still have a long way to go as they seek to embrace workflow automation, Big Data and Machine Learning in the ways they need to. There are many new technology firms out there that solve pieces of this puzzle and I am excited as I plan out my next adventure.”~Steve Grob

We at JLN wish Steve well. He has been a long-time JLN reader and supporter and has presented at our MarketsWiki Education World of Opportunity twice, one in 2016 on The Innovator’s Dilemma and in 2014 on “The Finance Industry: The Case for the Defense.”~JJL

May was a great month for SGX’s stock index futures. The SGX FTSE China A50 Index was up 82 percent from a year earlier, SGX MSCI Taiwan Index futures up 28 percent, and SGX Nikkei 225 Index futures up 36 percent. The SGX MSCI Singapore Index posted a record month with more than 1 million contracts traded.~JK

Freight is gaining steam at EEX. In May, the exchange posted 4,400 contracts in freight futures, up from 1,435 contracts a year earlier. Small but growing market. Meanwhile, forward freight agreement futures at SGX volumes were 114,001 in May, up 39 percent.~JK

CNBC reports that “Goldman Sachs says half of all the junior bankers it hires must be women.” This is a good step towards 50:50.~JJL

It appears that Bitcoin Magazine’s website is down. June 8 was the last time it posted new stories on Twitter, although the pages for these articles all lead to a nonfunctional page on BitcoinMagazine.com. Its store, price data, and block explorer functions appear to be functioning normally, but every other page on the website is mostly blank. I couldn’t find any news about it on the Internet anywhere. Bitcoin Magazine is one of the oldest news sources for cryptocurrency.~MR

On June 8, thirty-six years ago, the movie Trading Places was released. Here is our interview with Joe O’Neill, who was the technical advisor to the film.~JJL

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Options Industry Leader Series: On-Screen Risk, Open Outcry Trading and Liquidity – BOX
JohnLothianNews.com

In this video from the Options Exchange Leader Series, BOX CEO Ed Boyle talks about protecting liquidity providers and developing BOX’s complex order book and regulatory tools.

Watch the video »

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Neil Woodford episode raises issues for financial regulators; Fund’s inability to meet investor withdrawals suggests the rules are not working properly
Andrew Bailey – FT
The decision to halt withdrawals last week from UK fund manager Neil Woodford’s flagship equity income fund has raised important questions about Britain’s regulatory approach towards investment in illiquid assets. The answers matter not just for the way financial markets operate but also the way the UK fosters investment in the broader economy.
/jlne.ws/2I9WHUt

*****Bad hedge fund manager!~JJL

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Citadel Crushed It in May, Widening Lead Over Fund Rivals
Katia Porzecanski – Bloomberg
Griffin’s flagship funds gain 2.4% last month, 12.6% in year; Cohen’s Point72 posts returns of 1% in May, 8.65% in year
Ken Griffin’s good year keeps getting better. In a month that saw stock markets roiled by the escalating U.S.-China trade war and global growth concerns, the billionaire’s three equity businesses led profits for Citadel’s flagship hedge funds, which gained 2.4%, according to a person with knowledge of the matter. The firm’s commodities and quantitative strategies were also top performers.
/bloom.bg/2I8l3hm

*****Good hedge fund manager!~JJL

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Bridging the Weeks: May 20 – June 7, and June 10, 2019 (O Canada ICO!, Disruptive Trading, New Supervisory Rules; Whose Best Interest?)
Gary DeWaal – Bridging the Weeks
Last week, a Canada-based social media company was sued by the Securities and Exchange Commission for purportedly conducting an unregistered securities offering to United States persons in connection with an initial coin offering of digital tokens. The firm previously asserted in a so-called Wells submission to the SEC that its cryptoassets were not securities, but in any case, purchasers in its ICO would not have expected profits through the efforts of the firm and its agents, but rather solely through secondary market transactions. Separately, in recent prior weeks, the Chicago Mercantile Exchange brought a disciplinary action against a member for liquidating large positions in post-trade settlement periods without considering the impact of the orders on market prices, while the National Futures Association proposed a major overhaul of its guidance on branch office and guaranteed-introducing broker oversight.
bit.ly/31oQpYA

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Friday’s Top Three
Our top story on Friday was the FT’s Digital Asset Holdings’ pivot raises doubt over blockchain future. Second was The Wall Street Journal’s Mirror, Mirror: Who’s the Most-Photographed NYSE Trader of All? about Peter Tuchman. Third was Thom Thompson’s JLN piece about Bcause, Mining Troubles Take Down Ecosystem

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CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.

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Lead Stories

Futures broker R.J. O’Brien is on an international binge; The 105-year-old firm is banking on expansion to survive in a dog-eat-dog environment.
Lynne Marek – Crain’s Chicago Business
Chicago futures broker R.J. O’Brien & Associates is a survivor, outlasting and outsizing local rivals over its 105-year history. Now its future hinges on international expansion.
bit.ly/2IAP8oH

‘Flash Boys’ challenger IEX struggles in quest to transform trading; Exchange accounts for 3 of every 100 stocks traded in the US despite initial excitement
Richard Henderson – FT
Brad Katsuyama was once a low-key Wall Street trader shuffling between Manhattan skyscrapers in a fleece vest. But five years ago, he was thrust into the spotlight as a hero, shielding ordinary investors from the high-tech excesses of Wall Street.
/jlne.ws/2I4NZXs

European regulators investigate Nasdaq and BME over pricing; Probe comes amid rising tensions between venues, brokers and regulators over the way stock market price data is sold
Samuel Agini – Financial News
Two of Europe’s biggest exchange operators, Nasdaq and Spain’s Bolsas y Mercados EspaÒoles, have been investigated by competition regulators over concerns they are charging too much for stock market data, Financial News can reveal.
bit.ly/2I8iGLu

Wall Street Outguns Europe’s Banks, Again; Transaction banking should be a boon for Europe’s beleaguered financial industry. But the battle could see more casualties.
Elisa Martinuzzi – Bloomberg
Pity Europe’s banks. For years, they have been in retreat, losing business in their own back yards to Wall Street rivals. Now the battlefront is shifting – but what looks like an opportunity to gain ground may be just the opposite.
/bloom.bg/2IwRpB8

QuantHouse and Eventus partner on trade surveillance; Eventus has joined QuantHouse’s API Ecosystem and adds QuantFEED to its trade surveillance platform.
Hayley McDowell – The Trade
Trade surveillance specialist Eventus Systems has teamed up with QuantHouse to bolster its cloud platform with global market data for trade surveillance and market risk.
/jlne.ws/2I56OK2

FCA head says fund rules may need to change after Woodford meltdown; Watchdog finalising new requirements for funds holding illiquid assets
Caroline Binham and Siobhan Riding – FT
The head of the UK’s financial watchdog has said the rules around investment funds may need to change in the wake of the meltdown of Neil Woodford’s flagship fund, which suspended investor withdrawals last week.
/jlne.ws/2I793MU

Cboe Seeks to Add ‘Speed Bump’ to Stock Exchange; Proposed delay could undermine fast traders that zip orders via microwave from Illinois to New Jersey
Alexander Osipovich – WSJ
Cboe Global Markets Inc. CBOE 0.22% is proposing to hit the brakes on high-frequency trading by introducing a split-second delay to one of its stock exchanges, according to a new regulatory filing.
/on.wsj.com/2I6DSRT

LME progresses plan to provide pricing solutions for the lithium industry
London Metal Exchange
Over the past 18 months the London Metal Exchange (LME) has been working closely with the global lithium industry to meet the need for transparent and robust reference prices. Following extensive market engagement, the LME is announcing today that it is partnering with price reporting agency Fastmarkets to promote market uptake of a transparent and representative global lithium price. Continued adoption of reference pricing across the industry will pave the way for launch of a LME lithium futures contract.
bit.ly/2I6noZV

Five Myths About Commodities Investing; It might be time to diversify your portfolio, but first, understand what you’re getting into
Suzanne McGee – WSJ
Gold prices are hovering near 52-week highs, propelled upward by speculation that Federal Reserve policy makers will cut interest rates. Swine flu is wreaking havoc in China, the world’s largest pork producer, boosting prices for lean-hog futures. Corn and other agricultural commodities are trading at or near their three-year highs, thanks to cool, rainy weather in the U.S. and floods that have delayed planting and raised fears of meager harvests.
/jlne.ws/2I4Pc0W

Rewrite of Bank Rules Makes Little Progress, Frustrating Republicans; Many efforts to retool postcrisis financial rules remain unfinished; Republicans want faster action
Andrew Ackerman and Gabriel T. Rubin – WSJ
Trump-appointed regulators came into office saying they would pare back Wall Street’s postcrisis rulebook. More than two years into the administration’s tenure, most of the work remains unfinished, particularly for the biggest banks.
/jlne.ws/2I4eEn4

‘Trade of Our Lives’: After Mueller, UBS Banker Faces Questions
Stephanie Baker – Bloomberg
UBS vice chair fights lawsuit over allegedly rigged Yukos bids; Court filings suggest banker’s deep ties to the Kremlin
The email from Moscow was tantalizing: the deal with the Kremlin, the banker wrote, could be “the trade of our lives.” More than a decade later, that message, and others like it, lie at the center of a legal drama that’s about to unfold in a London court Monday.
/jlne.ws/2I7BQB8

Crypto Startups Are Raising Money Again, With a Twist; ‘It’s like ICO 2.0.’: Investors are jumping into initial exchange offerings as cryptocurrency prices rebound
Steven Russolillo – WSJ
The market for initial coin offerings is mostly dead. Instead, entrepreneurs are flocking to a new way to raise money with digital tokens.
/on.wsj.com/2IwTVr4

SEC action threatens billions raised in initial coin offerings that ostensibly targeted only wealthy investors; U.S. markets regulator charges Kik for an unregistered offering because it allegedly combined an exempt raising of funds with a retail sale of tokens
Francine McKenna – MarketWatch
A lawsuit brought by the Securities and Exchange Commission this week could set a precedent against initial coin offerings that started out raising money from wealthy investors but then targeted a broader base.
/on.mktw.net/2IvezYF

Exchanges, OTC and Clearing

Euronext now controls 97.7% of Oslo B¯rs VPS capital
Euronext
Euronext, the leading pan-European exchange, announces today that it now controls, through direct ownership, irrevocable commitments and acceptances of its offers of 14 January 2019 and 31 May 2019, 97.7% of the total issued and outstanding share capital of Oslo B¯rs VPS.
bit.ly/2Islnq0

SGX reports market statistics for May 2019; Significant growth in volumes across derivatives products, following increased demand for risk management as a result of the ongoing US-China trade war; SGX welcomed four equity listings in May, including the third and fifth largest IPO in Asia ex-Japan year-to-date
SGX
Singapore Exchange (SGX) today released its market statistics for May 2019. The US-China trade war remains a dominant theme in global financial markets. Total derivatives traded volume grew 46% year-on-year (y-o-y) to 24.2 million contracts, as global investors managed overall Asian exposures and macro risks. Amid market uncertainty, the month of May saw broad-based declines across most Asian equity indices. In Singapore, total securities market turnover value was up 5% month-on-month (m-o-m) to $23.1 billion.
bit.ly/2I5N0Ge

NASA Holds Press Conference at Nasdaq MarketSite to Open International Space Station to New Commercial Opportunities, Private Astronauts
GlobeNewswire
Today NASA held a press conference at the Nasdaq MarketSite to announce the opening of the International Space Station to new commercial opportunities and private astronauts.
bit.ly/2I6rYHx

Kees Woodward Joins IncubEx as Senior Vice President
INCUBEX
IncubEx, a developer for exchange traded environmental products, services, and technology solutions, is pleased to announce that Kees Woodward has joined as Senior Vice President.
In his role with IncubEx, he will lead sales and marketing services to customers on IncubEx’s North American environmental markets focused on renewable fuels. He will be based in Chicago and report to Dan Scarbrough, IncubEx President and COO.
bit.ly/2WrNMRZ

EURO STOXX/STOXX Europe 600-Banks Futures: Reduction of the smallest price change (tick) for futures calendar spreads; Adjustment of minimum block trade size
Eurex
The Management Board of Eurex Deutschland decided to reduce the smallest price change (tick) for standardised futures strategies (futures calendar spreads) for the EURO STOXX/STOXX Europe 600-Banks Futures (FESB/FSTB).
bit.ly/2I4ztyN

Forex trading volumes fall 9.6% to $1.62 trillion in May: CLS
Reuters
Average daily foreign exchange trading volumes fell 9.6% year-on-year in May to $1.62 trillion, CLS said on Monday, as calmer currency markets discouraged investors from placing trades.
/reut.rs/2IANJhV

Fintech

IMF’s Lagarde highlights potential disruptive nature of fintech
Leika Kihara – Reuterts
International Monetary Fund Managing Director Christine Lagarde warned on Saturday that the increasing presence of technology giants using big data and artificial intelligence could cause a significant disruption to the world’s financial system.
/reut.rs/2IurH08

Neptune chief executive to depart by end of year; Fixed income bond axes network Neptune has confirmed that Grant Wilson will step down as CEO by December this year.
Hayley McDowell – The Trade
Neptune Networks, the fixed income axe indications network, has announced that its chief executive officer, Grant Wilson, will step down from the role by December this year.
bit.ly/2I6BZEN

Record London Tech Investments Show Scale of U.K. Divide
Nate Lanxon – Bloomberg
Capital’s startups saw $3.3 billion VC funding in 2019 so far; London accounts for 80% of all tech investment in the U.K.
Technology startups in London attracted a record 2.56 billion pounds ($3.26 billion) of venture capital investment in 2019 through May 31, according to data published by London & Partners, the city’s official lobbying arm.
/jlne.ws/2I78J0E

The Fintech Bubble Floats Toward a $64 Billion Pin; New EU rules insisting on two steps of authentication for online shoppers spell very bad news for the highly valued payments processing industry.
Lionel Laurent – Bloomberg
Flashy fintech startups love to cultivate their cool, customer-friendly vibe in ad campaigns and at big conferences, where slogans like “delight and deliver” get pride of place and the fine print of financial regulation is dismissed as “the unsexy stuff.”
/bloom.bg/2ItU9iK

Cryptocurrencies

Cryptocurrencies “highly probable” to be the future of international money transfers, MoneyGram executive says
The Block
Cryptocurrencies are likely to be the future of cross-border money transfers, MoneyGram’s global head of product and innovation Youri Bebic has said in an interview with The Institute for Robotic Process Automation and AI.
bit.ly/2I8kWCs

A Bitcoin ‘Millionaire’ Is Planning To ‘Resurrect’ $20,000 Per Bitcoin By 2020
Billy Bambrough – Forbes
Bitcoin was pronounced dead by teen bitcoin and cryptocurrency “millionaire” Erik Finman late last year in the midst of a bitter bitcoin and cryptocurrency bear market that left most major tokens down almost 90% in value and sparked fears the great crypto experiment could come to an abrupt end.
bit.ly/2ZeCMcp

International crime task force investigating 60 cryptocurrency-related cases, from the US to Australia
The Block
Money laundering investigators from the US, Australia, Britain, Canada, and the Netherlands have teamed up to crack down on cryptocurrency-related crimes, including tax avoidance, Sydney Morning Herald writes. J5 was formed last year by the U.S. Internal Revenue Service and bands together investigators from the 5 countries to look into tax avoidance, cybercrime and cryptocurrency abuse. As of now, J5 has 60 investigations underway. According to the reports, however, an additional 50 cases may soon be under the microscope.
bit.ly/2F4s5BM

Crypto Exchange Bittrex to Block US Users From Trading in 32 Cryptos
Adrian Zmudzinski – Cointelegraph
Cryptocurrency exchange Bittrex announced that it will block its United States-based users from trading in 32 cryptocurrencies. The exchange revealed the news in a post on its blog on June 7. Per the announcement, after June 21, U.S. traders won’t be able to access a slew of coins listed on the exchange, including QTUM and STORJ. The exchange noted that U.S. users will receive an email with explanations concerning what they are and are not allowed to do with the aforementioned assets. The options cited by the exchange include selling them for assets that will stay available to them, canceling orders and moving them off the exchange.
bit.ly/2WAik8U

G20 Reaffirms It Will Apply Expected Tough New FATF Rules on Crypto
Daniel Palmer – Coindesk
The G20 group of nations has reaffirmed it will align with standards for anti-money laundering (AML) and countering the funding of terrorism (CTF) set to be finalized by the Financial Action Task Force (FATF) this month.
bit.ly/2I5KZtR

Cryptocurrencies “highly probable” to be the future of international money transfers, MoneyGram executive says
The Block Crypto
Cryptocurrencies are likely to be the future of cross-border money transfers, MoneyGram’s global head of product and innovation Youri Bebic has said in an interview with The Institute for Robotic Process Automation and AI.
bit.ly/2I8kWCs

Arabian Bourse receives Initial Approval for Crypto Asset Exchange & Custodian
Press Release via Zawya
GMEX Group (GMEX), a leader in digital business and technology solutions for exchange and post-trade operators, and Arshad Khan, regional exchanges founder and business expert are pleased to announce the completion of the latest phase in the creation of their joint venture, Arabian Bourse (ABX), set up under Abu Dhabi Global Market (ADGM).
bit.ly/2X2pPVC

Binance DEX: Navigating Country-Specific Cryptocurrency Trading Restrictions
Osato Avan-Nomayo – Cointelegraph via Yahoo Finance
At the start of June 2019, reports emerged that Binance DEX’s website was blocking users with IP addresses from 29 countries. This news immediately caused confusion with some commentators, using it as an opportunity to reaffirm their stance that Binance DEX is not truly a decentralized exchange (DEX).
/yhoo.it/2K6HGot

Russia may set up offshore zone for cryptocurrency and FX trading on Chinese border
Carol Gaszcz – The Block via Yahoo Finance
Russia is considering setting up an offshore financial centre for cryptocurrency and international trading, beincrypto writes. The special zone would be located on Bolshoy Ussuriysky Island, located on the Chinese-Russian border. Leonid Petukhov, the head of the Agency of the Far East for Investments and Exports (IPA), proposed the venture during the St. Petersburg International Economic Forum Saturday. According to Petukhov, the new financial centre would serve as a hub for cryptocurrency trading and crypto-related stock exchanges, as well as foreign exchange markets.
/yhoo.it/2KBEsss

Polish Cryptocurrency Exchange Shuts Down Overnight, Taking Funds With It
John Biggs – Coindesk
A polish cryptocurrency exchanged called Coinroom shut down on April 2, 2019, taking multiple customer accounts worth up to $15,000. The site is currently down and there is no way to contact the founders. “We don’t know how much they took,” said one user named Maciej. “But it is definitely a lot of cash.” Polish news site Money.pl first discovered the exit scam on May 31.
bit.ly/2ZjY7RT

Vancouver Saw the First-Ever Bitcoin ATM. Now Its Mayor Wants to Ban Them
Daniel Kuhn – Coindesk
Bitcoin ATMs have become “an ideal money-laundering vehicle,” according to the Vancouver Police Department, prompting a proposed city-wide ban by the mayor, and potential federal legislation, The Star reports. The 76 machines within the city limits have come under police fire twice already this past year due to perceived regulatory issues. Though, most recently in February 2019, Sergeant Alvin Shum took aim not only at Bitcoin ATMs, but also the ideological underpinnings of blockchain generally.
bit.ly/2WrTGCD

Samourai, Nodl to Launch Bitcoin Lightning Node With Mixing Features
Leigh Cuen – Coindesk
The mobile bitcoin wallet project Samourai Wallet is partnering with the French hardware retailer Nodl to create a bitcoin node device that syncs with Samourai’s privacy-centric mobile wallet. Revealed exclusively to CoinDesk, Nodl co-founder Michel Luczak said this new product will be a “full, self-validating, bitcoin and lightning node” that allows people to use the mobile wallet app without relying on Samouri Wallet’s servers. This has long been a point of contention, as critics argue the wallet’s privacy features are insufficient if users’ transaction data is stored on a centralized server anyway.
bit.ly/2WrAhBZ

Reserve Bank of India Denies Involvement in Draft Bill to Ban Cryptocurrencies
Daniel Kuhn – Coindesk
The Reserve Bank of India is denying any knowledge of a proposed ban on cryptocurrencies ó despite reports that a number of governmental agencies have backed the draft legislation ó according to a Right to Information request filed on June 4.
bit.ly/2ItStFY

Stolen Bitfinex BTC Is on the Move
John Biggs – Coindesk
Stolen bitcoins have been spotted moving on the blockchain after three years of lying dormant. In a series of transactions beginning at 06:00 UTC Friday, 172.54 BTC or about $1.37 million moved from a wallet that had previously held funds taken in the 2016 Bitfinex hack. The theft, which cost the exchange $60 million, remains unsolved.
bit.ly/2IB4EAH

Politics

Want to Know How Trump’s Trade War Ends? Look to the War of 1812
Shawn Donnan – Bloomberg
War of 1812 yielded calls for ‘decoupling’ aimed at British; Historian argues Cold War and Japan offer flawed parallels
President Donald Trump’s escalating trade war against China has drawn plenty of historical parallels. The Chinese like to invoke the 19th-century Opium Wars and the national humiliation that followed. In the U.S. the comparison is increasingly to the Cold War against the Soviet Union, or the 1980s trade wars against Japan.
/bloom.bg/2IuW5Ym

Mexico Doesn’t Back Up Trump’s Twitter Claims of Big Farm Deal
Nacha Cattan and Eric Martin – Bloomberg
Envoy says USMCA passage would create more agricultural trade; Mexico already a major importer of U.S. grains, meat, dairy
President Donald Trump hinted at additional measures between the U.S. and Mexico, a day after he vowed that Mexico would soon make “large” agricultural purchases from the U.S. as part of a deal on border security and illegal immigration that allowed Mexico to avoid U.S. tariffs.
/jlne.ws/2I6j0Kr

Donald Trump is making America scary again; The more the president deploys weapons of economic destruction, the more he undermines trust in the US
Gideon Rachman – FT
Donald Trump’s domestic critics have often compared him to a mafia boss. James Comey, who Mr Trump fired as head of the FBI, said that dealing with the US president reminded him of his earlier career, “as a prosecutor against the mob”.
/on.ft.com/2I5s9Ty

A Surprise Winner From the U.S.-China Trade Spat: Russian Soybean Farmers; Commercial conflict has choked American soy exports to the bean’s biggest market, China, providing Russian farmers an opportunity
Thomas Grove and Anatoly Kurmanaev – WSJ
The Partizan collective farm in this Siberian village should have been swept into the dustbin of history like thousands of others like it that collapsed after the Soviet Union’s fall. Instead it just raked in the biggest harvest of its 90-year history, bought new machines and paid out record bonuses.
/on.wsj.com/2IwUh0S

Trump Unleashed Animal Spirits and Then He Crushed Them
By Sarah Ponczek , Vildana Hajric , and Liz McCormick – Bloomberg
30-year yields are as low as when Trump was elected in 2016; Trump’s stock market doesn’t look much different from Obama’s
If there was one thing investors thought they knew about Donald Trump, it was that he was on their side. He was the president who was going to reflate the economy, unleash animal spirits and drive up returns. Now that certainty has been demolished by a trade war, and two years of market history is being rewritten.
/bloom.bg/2IskFZS

Regulation

FINRA Foundation Honors Top Student Researchers for Advancing Understanding of Financial Capability in the United States
FINRA
The FINRA Investor Education Foundation (FINRA Foundation) today announced the recipients of its higher-education awards created to recognize outstanding analyses by researchers-in-training who seek to advance understanding of consumer well-being the complex relationships among financial literacy, financial capability and financial well-being.
bit.ly/2I7X7dX

Allied Wallet Limited; Allied Wallet Limited has been required to cease trading.
UK FCA
Allied Wallet Limited (Allied Wallet) is authorised and supervised by the Financial Conduct Authority (FCA) to issue e-money and provide payment services under the Electronic Money Regulations 2011 (the EMRs).
bit.ly/2I9ZZqN

Diversity: delivering excellence for the future
UK FCA
Speech delivered by Nausicaa Delfas, Executive Director of International at City and Financial: Women in Finance 2019, London
bit.ly/2I4RLQC

Britain may need to revise rules on illiquid assets in investment funds: FCA chief in FT
Reuters
Britain may need to revise its rules on illiquid assets in investment funds after prominent investor Neil Woodford suspended withdrawals from his flagship equity fund last week, the head of the financial regulator said on Sunday.
/reut.rs/2IwSBEC

Investing and Trading

Volatility Fear Drives Investors to Bond ETFs; Some in the industry say investors are looking at ETFs as a risk-management tool because of their flexibility and convenience
Gerrard Cowan – WSJ
As Investors see increased volatility on the horizon, many believe that bond-focused ETFs can help guide them through the storm.
/jlne.ws/2I79JSs

Harvard Course Helps Rich Millennials Do Good (and Make Money)
David Ramli – Bloomberg
On a crisp morning last October, a few dozen students with wildly diverse backgrounds and expertise filed into the red-brick building of Harvard University’s Kennedy School. Three things united them: they were young, they wanted to do good and they were all staggeringly wealthy.
/jlne.ws/2I4mFIB

If Supply and Demand Set Stock Prices, U.S. Market Has a Problem
Lu Wang – Bloomberg
Announced buybacks fell in May while share offerings jumped; Corporate actions in market tilt less favorable to investors
The U.S. stock market has been staging a vanishing act for years. Which is to say, it’s gotten smaller, due to a combination of takeovers, buybacks and fewer new listings. Investors don’t mind this. They often cite the contraction as part of a bull case premised on scarcity.
/jlne.ws/2I9VH2F

Why investors should be wary of stock-based compensation; If an employee is paid with options or restricted stock, it will hit your share’s value
Aswath Damodaran – FT
As an investor, the two words that you should dread the most in a financial statement are “adjusted earnings”, as companies take accounting earnings and tweak them for sundry items.
/on.ft.com/2I7IeIz

This ‘Bubble Portfolio’ is all assets the media warned about ó it surged 80% in 2017, but then came 2018
Shawn Langlois – MarketWatch
‘You’d be nuts to buy any of this stuff here’
Back in the second quarter of 2017, Bloomberg’s Joe Weisenthal suggested on Twitter TWTR, +3.66% that going long assets that journalists flag as bubbles would make for a great exchange-traded fund.
/on.mktw.net/2IvupTg

Institutions

JPMorgan and BAML raise most money for ‘contentious’ companies; First study to look at banks’ underwriting work through an ethical lens finds Wall Street banks have the least scruples
Mark Cobley – Financial News
JPMorgan, Bank of America Merrill Lynch and Morgan Stanley are the three banks that have made the most money by raising capital for heavy polluters, arms manufacturers and other contentious companies, according to a new analysis
bit.ly/2I4plWF

Hermes Investment Management overhauls multi-asset risk model with FactSet; Hermes Investment Management will implement FactSet’s analytics and multi-asset risk platform.
Hayley McDowell – The Trade
Hermes Investment Management has called in FactSet to implement an analytics and risk management platform across its multi-asset investment portfolio.
bit.ly/2I6mGfd

Conflicts of interest in fund manager market exposed by Woodford; Celebrated investor’s decision to run an open-ended fund suited everyone except investors
Jonathan Ford – FT
In the days since Neil Woodford shuttered his Equity Income Fund to redemptions, many have questioned why the celebrated asset manager ever structured this one-time £10bn monster as an open-ended investment scheme.
/jlne.ws/2I6JzPI

Hargreaves Lansdown apologises to customers locked in Woodford fund; Woodford Equity Income Fund was on investment platform’s favourite funds list
Kate Beioley – FT
Hargreaves Lansdown chief executive Chris Hill has apologised to tens of thousands of customers affected by the suspension of Neil Woodford’s £3.7bn equity income fund, which the company continued to support until the fund was frozen to investor withdrawals.
/jlne.ws/2I5ptoY

Woodford Internet Nemesis Claims Vindication; Blogger Winnifrith says money manager’s decision to freeze withdrawals bears out years of criticism over investment strategies
By Nishant Kumar and Harry Wilson – Bloomberg
It began two years ago as a skirmish made for the social-media age: a renegade blogger badgering a pillar of the establishment who had made his name over decades of investing other people’s money.
/bloom.bg/2Ixg8FC

Hedge funds circle Woodford’s investment trust; Patient Capital Trust is most bet-against investment trust in FTSE 350
Owen Walker and Peter Smith – FT
Hedge funds are circling Neil Woodford’s investment trust, along with several companies he invests in, as the fallout from the trading freeze on his largest fund is set to continue into a second week.
/jlne.ws/2I4enk2

Neil Woodford blocks customers from seeing full list of investments; Fund manager had previously taken unusual step of publishing complete holdings
Owen Walker – FT
Neil Woodford has blocked investors from seeing the complete holdings in his three main funds as he drastically readjusts his portfolios to meet redemption requests.
/jlne.ws/2I5XeXq

Wall Street Giants Battle a Secret Deal Whisperer on Tech IPOs; As Qatalyst works the sidelines of IPOs, Morgan Stanley and other banks seek assurances from startups to avoid losing advisory fees
Sarah McBride and Liana Baker – Bloomberg
When Pagerduty Inc. hired investment banks for its initial public offering earlier this year, Morgan Stanley turned the conversation to another possible outcome: a sale of the startup. The Wall Street giant wanted to make sure it would still be an adviser if Pagerduty ended up getting acquired instead of listing on the New York Stock Exchange as planned.
/jlne.ws/2I6TDbt

Thomas Cook Stock Still Worth Nothing, Citi Says After Fosun Bid
Joe Easton – Bloomberg
Stock briefly erased drop that followed zero pence PT call; Citigroup’s Ainley reiterates call, saying still sees no value
Shares of Thomas Cook Group Plc are soaring today after the company confirmed it received an offer for its tour-operator business. But analysts at Citigroup Inc., who slashed their price target for the travel agency to zero pence last month, still think they are worth nothing.
/jlne.ws/2I5ZHRJ

Barnes & Noble Is Sold to Hedge Fund After a Tumultuous Year
Alexandra Alter and Tiffany Hsu – The New York Times
Barnes & Noble has been acquired by the hedge fund Elliott Advisors for $638 million, a move that has momentarily calmed fears among publishers and agents that the largest bookstore chain in the United States might collapse after one of the most tumultuous periods in its history.
/nyti.ms/2wKyHAD

Regions

Flows to India Stocks Funds Revive as Modi Win Spurs Risk Demand
Ameya Karve and John Xavier – Bloomberg
Flows into Indian equity mutual funds in May rebounded from the smallest in 31 months as Prime Minister Narendra Modi’s comfortable electoral win spurred appetite for risk assets.
/jlne.ws/2I4lNnj

Emerging Markets Caught Between Rate-Cut Euphoria and Trade Woes
Netty Idayu Ismail, Robert Brand, and Karl Lester M Yap – Bloomberg
Fidelity International sees ‘some opportunities re-emerging’; Russia may cut rate, while Turkey to hold borrowing costs
Two opposing forces are at play in emerging markets. The first is excitement over the dollar’s decline as speculation grows that the U.S. will cut rates soon. And the second is dread over President Donald Trump’s trade war.
/jlne.ws/2I6TzbJ

The African Nation Built on Gold Loses Its Crown to a Rival
Felix Njini – Bloomberg
South African gold miners sell, close unprofitable mines; Ghana gold output boosted by smaller miners, Chamber says
South Africa’s struggling gold industry has suffered yet another humiliation, losing its status as continental leader to Ghana.
/bloom.bg/2IJJIYH

Massive Crowds Take to Streets in ‘Last Fight’ for Hong Kong; Organizers estimate protesters at over one million in challenge to Beijing’s authority over law that would allow China to extradite people to mainland
Natasha Khan – WSJ
Demonstrators staged the biggest rally challenging China’s authority over the city since Britain ceded control in 1997, marching through streets for hours to protest a proposed law that would let Beijing take people across the border to stand trial in the mainland.
/on.wsj.com/2ICg8UC

Venezuela Defaults on Gold Swap With Deutsche Bank
By Patricia Laya – Bloomberg
Missed payments result in acceleration of gold swap agreement; Second time this year Venezuela has failed to pay bank swaps
Venezuela has defaulted on a gold swap agreement valued at $750 million with Deutsche Bank AG, prompting the lender to take control of the precious metal used as collateral and close out the contract, according to two people with direct knowledge of the matter.
/bloom.bg/2IvR95n

FTT: now Germany has moved expect others to follow!
By Daniel Carpenter, Head of Regulation at Meritsoft (a Cognizant company)
First France, then Italy and Spain, now its Germany. No, not the results of Eurovision, but the order in which European countries are enforcing financial transaction taxes (FTT). This after the German finance minister stated that his country would press on with its own FTT earlier this month.
bit.ly/2IA1eyc

Brexit

Sweeping reform needed after Brexit, says French regulator; Speech by Robert OphËle raises spectre of new French push to win City business
Chris Flood and Siobhan Riding – FT
One of France’s top financial regulators has called for sweeping changes to Europe’s investment rules in a speech that emphasised the profound challenges awaiting the UK’s finance industry after Brexit.
/jlne.ws/2I6VoW7

Brexit uncertainty drives investment boost for other EU countries; Cross-border data show 30% fall in capital entering UK since referendum
Valentina Romei and Gavin Jackson – FT
Brexit uncertainty in the UK has boosted foreign investment into the EU’s other 27 countries in the three years since the referendum, according to a Financial Times analysis.
/jlne.ws/2I4wial

Scottish Labour backs Brexit referendum policy
BBC News
Scottish Labour’s ruling body has committed to backing another Brexit referendum. Leader Richard Leonard said he was pleased that members supported the plan. Scottish Labour will now campaign for any Brexit deal to be automatically put to the people in a confirmatory vote. The party will now campaign for that ballot paper to have a clear option to Remain and that Scottish Labour would campaign to remain in the EU.
/bbc.in/2wM9SEs

Tory leadership contest: Boris Johnson pledges income tax cut for high earners
BBC News
Boris Johnson has pledged to cut income tax bills for people earning more than £50,000 a year if he wins the race to succeed Theresa May as prime minister. The former foreign secretary told the Telegraph he would use money currently set aside for a no-deal Brexit to raise the 40% tax rate threshold to £80,000. Labour’s shadow chancellor John McDonnell said the proposal showed “how out of touch the Tories are”. Tory MPs have until 17:00 BST to enter the race to become party leader and PM.
/bbc.in/31mcEOJ

UK signs post-Brexit free trade deal with South Korea
BBC News
The UK and South Korea have signed an outline free trade agreement (FTA) that seeks to maintain existing trade arrangements post-Brexit. International Trade Secretary Liam Fox signed the deal with his South Korean counterpart Yoo Myung-hee in Seoul. The preliminary agreement marks the first post-Brexit trade deal the UK has secured in Asia. The agreement is roughly in line with the terms of the existing Korea-EU FTA.
/bbc.in/2I4DraF

Miscellaneous

Hedge Fund Founder John Griffin Buys Most Expensive NY Townhouse
Katherine Burton and Claire Ballentine – Bloomberg
Griffin paid $77.1 million to ex-hedge funder Phil Falcone; House previously belonged to Penthouse founder Bob Guccione
John Griffin, founder of hedge fund Blue Ridge Capital, spent the most ever for a residential townhouse in New York City this week when he paid $77.1 million to Philip Falcone and his wife Lisa, according to people familiar with the transaction.
/jlne.ws/2I5K8cq

“1984” at Seventy: Why We Still Read Orwell’s Book of Prophecy
Louis Menand – The New Yorker
George Orwell’s “1984,” published seventy years ago today, has had an amazing run as a work of political prophecy. It has outlasted in public awareness other contenders from its era, such as Aldous Huxley’s “Brave New World” (1932), Ray Bradbury’s “Fahrenheit 451” (1953), and Anthony Burgess’s “A Clockwork Orange” (1962), not to mention two once well-known books to which it is indebted, Yevgeny Zamyatin’s “We” (1921) and Arthur Koestler’s “Darkness at Noon” (1940). “1984” is obviously a Cold War book, but the Cold War ended thirty years ago.
bit.ly/2IvORDj

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