First Read

One Step Ahead: Can Silicon Valley Help, Compliance?
By Jim Kharouf, JLN
If you are chief compliance officer at a firm – brokerage or fund – what if you could tell if the customer or one of your traders was about to do something bad, wrong or illegal? The operative words are “about to.”

Chicago-based start-up Neurensic says its can do this now using artificial intelligence technology to identify behaviors that could threaten a firm’s well-being and prevent that firm, bank or broker from incurring regulatory actions that trigger hefty fines. Last fiscal year, the Commodity Futures Trading Commission reported a record $3.14 billion in civil monetary penalties with a focus on spoofing, market manipulation and supervision lapses. It fined Deutsche Bank $800 million last year, its largest penalty ever, for LIBOR manipulation.

Listening to Neurensic CEO David Widerhorn talk about how artificial intelligence and machine learning can take all the data a firm produces, identify behaviors of users of those systems and then notify compliance officers that one of those traders is likely to do something stupid, wrong or criminal, you get the feeling that this is the way this industry is going. Some would say, it needs to go here.

Almost weekly, we see stories on a trader or trading group doing something that only catches the bank or regulator’s attention long after the damage is done. Neurensic says its technology not only can work with the legacy trading and data systems that most firms use, but also bend and adjust to regulations as they too change. Neurensic has been working with Advantage Futures since its inception last year. And with an updated and broader offering for US and European regs coming up, Widerhorn said there are more firms and banks ready to follow. The firm has grown from just five founding members to 25 last November to 50 today. Besides the Chicago office, it has opened a Hong Kong office and plans to open an office in Silicon Valley, and expand its staff to 100 by year end.

Next up, the firm is looking at applying its technology to the operations side of the FCM and banking business. It has signed up 10 banks to date that will work with Neurensic on building a system that dives deep into their operations and examines the costs, revenues and risks with each customer. While this seems simple enough right now, Neurensic believes the current revenue, commission and sales models are so rigid they are preventing firms from maximizing profits, minimizing risks and keeping track of crucial capital requirements. The goal is to work with that consortium of banks, fierce competitors that at one time would never collaborate on well, anything, to develop a customizable solution that fits their various business models.

Comparisons to Minority Report aside, Widerhorn believes this is key for the industry, which is faced with a massive regulatory overhaul and strong profitability headwinds, and AI and machine learning technologies can create solutions that continually adjust and are “future proof.”
Whether this is the future of surveillance and operations is still to be decided by the marketplace. Neurensic and its investors have made a heavy investment that it is.


April Fools Day: 2016’s best pranks (and worst jokes) around the web
Happy April Fools Day 2016!
If you haven’t checked your calendar or noticed some weird stuff on the Internet today, it’s April 1 — which means April Fools pranks and jokes around the web. We’ve rounded up the best (and worst — like Google’s Mic Drop) gags so far

***** A very happy April Fools Day to you and yours.


A Word From Gary Katz of ISE On Autism Speaks
At this year’s Options Industry Conference, attendees will be participating in a 5K charity event to benefit Autism Speaks, a charity near and dear to my heart. I have pledged to match all individual donations, dollar for dollar. I invite you to support this event either by participating or donating (any donation amount will be appreciated).
Please click here to learn more about my son, Dylan.
****** Gary Katz and his son Dylan have raised just over $30,000 so far on his way to $50,000, with a dollar-for-dollar match from Gary. Friends, help him reach his goal, competitors make Gary pay!


2016 Exchange CEO Series: LSE’s David Weisbrod Talks Clearing And Openness

Weisbrod, who serves a dual role as US country head of the USA for LSEG and CEO of LCH.Clearnet US, has been focused on providing more access to customers to the London market and its clearing facility.

“We’re a big believer in open access, which enables market participants to use whichever clearing house they want or whichever exchange they want as it meets their own needs,” Weisbrod told John Lothian News at the FIA Boca Conference. “We don’t have a vertical silo which binds the participants to use the clearing house, the exchange, or vice versa.”
Watch the video »

Squeezing Pennies: Clearing Houses Reach For Compression, Margin Relief and Netting
By Sarah Rudolph and Jim Kharouf, JLN
It is an interesting time to be in the clearing space, as clearing firms offer a number of new services and some oldies aimed at clearing FCMs. Portfolio margining, which has been done more or less in a fragmented way by individual clearing houses in recent years but with limited success, may be finally finding an audience in today’s market environment. Clearing houses such as CME Clearing, LCH.Clearnet, Eurex Clearing, ICE Clear, OCC and others have all offered some form of portfolio margining services in recent months or years. LCH.Clearnet is attempting to push that concept further with its so-called “open access” on clearing, which essentially allows customers to choose where they would like to clear transactions with the markets it services. A London Stock ExchangeDeutsche Boerse merger could help, or depending on the German approach, alter the concept.


Financial News, Trading & Technology Reporter
Financial News, a specialist London-based financial publication of the Wall Street Journal, is seeking a Reporter to join its trading and technology desk.

***** Brexit will be a good story to cover for any London based journalist.


At Last, Brokers Must Put Your Retirement Needs First; The fiduciary rule Wall Street fought for years is almost upon us.
Ben Steverman – Bloomberg
How much investing jargon do you need to master while saving for retirement? The word “fiduciary” is a good example. A Financial Engines survey released Thursday finds that only 18 percent of Americans are sure what the word means. That kind of ignorance can be expensive: U.S. financial advisers are divided between “fiduciaries” required to put your interests first (like a doctor or lawyer), and others like brokers, more akin to salespeople, required only to push “suitable” products that may profit them more than you.


A Most Interesting Charity Challenge Without Cold Water
John Lothian
I have a challenge for the readers of the John Lothian Newsletter that does not involve cold water, but does include a donation to the Futures For Kids charity. The week before the FIA Boca Raton International Conference news broke that Dos Equis spokesman Jonathan Goldsmith, known as “The Most Interesting Man in the World” was being replaced by the beer maker with a younger replacement. In fact, Goldsmiths character is being sent to Mars
You could be the next MIMITW.
***** There is no deadline, but the most interesting man/woman in the world is always prompt.


Thursday’s Top Three
In yesterday’s click count race, first place went to Fidessa‘s Steve Grob and his look at the recent move by Eurex Clearing to offer direct membership to buyside clients, Has the futures industry just been Uberised?. Second place went to the newest installment of our Boca CEO series, featuring LSEG’s David Weisbrod. Rounding out the top three was the Bloomberg story, This Is Where Bad Bankers Go to Prison, featuring the island prison where the people held responsible for sinking Iceland’s banking sector during the financial crisis now reside.

Sponsored Content
Special Offer for JLN Readers…

FinTech Exchange 2016 – First 10 to Register with promotion code “LOTHIAN” get a free pass. ($199 value) – Register Today

Join us on April 21, 2016 in Chicago for the 2nd annual FinTech Exchange hosted by Barchart.

This one-of-a-kind event will showcase concise and engaging on-stage presentations from financial technology leaders like Google Cloud, Tally Capital, Amazon Web Services, Trading Technologies, Rival Systems, CME Group, CBOE Livevol, Quandl, Cantor Exchange, Narrative Science, Nadex, Neurensic, Alpaca and many more as they cover topics such as trading software, cloud infrastructure, artificial intelligence, Bitcoin and Blockchain, binary options, market data APIs, R&D tax credits and much more. Last year’s event was a sold-out show and space is limited, so be sure to register today.

Don’t miss out – Be one of the first 10 people to register here with promotion code “LOTHIAN” and get a free pass into the event.

Fintech Exchange 2016


Lead Stories

Wall Street Banks Have Basel’s Ear in Pushback on Market Risk
Jesse Hamilton, Silla Brush – Bloomberg
Regulators said to plan to meet with finance firms next month; Industry concerned rule will squeeze FX, interest-rate desks
Wall Street is used to getting the opportunity to influence bank rules before they are unveiled. Now financial firms are getting the chance to argue that a key capital requirement should be softened even after it was supposed to be finished.

***DA: Also see the Bloomberg story HERE, Plus yesterday’s John Lothian News story HERE

Nasdaq readies ‘Ocean’ dark pool for banks and brokerages
Nasdaq Inc is in negotiations with several brokers to host and run their private stock trading venues, or dark pools, within its data center, two of the exchange operator’s executives said on Thursday.

Global regulators move closer to regulating fintech
BY HUW JONES – Reuters
Global regulators have moved closer to regulating the fledgling fintech sector, which includes blockchain technology that supports bitcoin, to ensure the industry’s rapid growth does not pose any risks to the financial system.

Citi: Robo-Advisers Will Never Take the Place of Traditional Investment Managers; No robots for the rich.
Julie Verhage – Bloomberg
It’s OK, Charles Schwab Corp. and BlackRock Inc.: Robo-advisers won’t be taking away your high-net-worth clients.

Fed caution due to fears of Japan-style malaise, Evans says
By Greg Robb – MarketWatch
The Federal Reserve is being cautious about further interest rate hikes because inflation remains low and any stumble could put the economy in a Japan-like malaise, said Chicago Fed President Charles Evans on Thursday.

This Benchmark Chinese Interest Rate Shows That Finance Is Still the World’s Most Dangerous Game
Luke Kawa – Bloomberg
There’s a reason the axiom ‘don’t fight the Fed’—or any central bank, for that matter—is a tried-and-true one for investors.

Nasdaq interested in Oslo Bors, but feels Norwegian chill -exec
Transatlantic exchange operator Nasdaq Inc would consider acquiring Oslo Bors VPS Holding ASA if the Norwegian stock exchange operator was willing to sell, one of Nasdaq’s executives said on Thursday. A deal to acquire Oslo Bors would bring together all the major equity exchanges in the Nordic region on Nasdaq’s trading platform. The New York-based company runs stock exchanges in Denmark, Finland, Sweden, and Iceland, as well as in Latvia, Estonia and Lithuania.

SEC fears ‘eye-popping’ start-up values
Barney Jopson in Washington and Leslie Hook in San Francisco – FT
The head of the US market watchdog has warned Silicon Valley that the growing number of highly valued private tech groups — or unicorns — risks harming investors in ways that company managers have a duty to prevent.

Deutsche Bank’s CEO Struggles With Overhaul; Pressured by regulators and jittery investors, European lending giant tries to slash costs
On his first day as co-chief executive of Deutsche Bank AG, John Cryan sent a letter to employees outlining what he said were the “tough challenges” the company was facing. “I am not going to tell you that all will be sweetness and light in the coming months,” he wrote. “There will be ups and downs.”

MetLife ruling bolsters other firms arguing systemic unimportance
A federal judge’s ruling that MetLife Inc is not important enough to warrant special regulatory scrutiny has opened the door for other non-bank financial firms to try and unshackle themselves from the designation of “too big to fail.”

How Hedge Funds Held Argentina for Ransom
PERHAPS the most complex trial in history between a sovereign nation, Argentina, and its bondholders — including a group of United States-based hedge funds — officially came to an end yesterday when the Argentine Senate ratified a settlement.

U.S. judge rejects Lehman workers’ claims on stock awards
Former senior employees of Lehman Brothers Holdings Inc [LEHLO.UL] who once commanded seven-figure pay packages failed to persuade a federal judge to restore hundreds of millions of dollars of stock awards that become worthless after the Wall Street bank’s collapse.

Break Up the Banks! – Podcast
More than seven years after the Panic of 2008 and the collapse of Lehman Brothers, nearly six years after the passage of the Dodd-Frank reforms, there is still a pressing need for financial reform. Not only reform, but to actually break up the banks.

Just How Bad Will Wall Street’s Trading Be This Year?; After a poor first quarter, earnings estimates assume that this time it is different.
Many traders would prefer to forget the first quarter.

Nasdaq Building on the Blockchain
TABB Forum
The enthusiasm in the capital markets for blockchain, although still in its infancy, continues to build as firms search for the best application of the technology. Nasdaq, which is on the forefront of those efforts, explores the steps in blockchain’s evolution toward becoming a core, foundational technology in capital markets and some of the ways it will affect the financial industry.


CFTC shifting swap-dealer oversight to industry self-policer
Neil Roland, MLex
The US Commodity Futures Trading Commission has been transferring more and more oversight duties to an industry self-regulatory organization in recent months as a budget freeze was imposed on the federal agency.The National Futures Association, whose members include banks and commodity firms, stands to take on still additional responsibilities if the CFTC adopts an automated trading rule this year, as promised.

How Investors Can Avoid Getting Fooled
On the eve of April Fools’ Day – which also happens to be the first day of Financial Literacy Month – the Financial Industry Regulatory Authority (FINRA) offers five tips to help investors avoid being tricked out of their money. “April 1st is a day to indulge in silly hoaxes and pranks. But there’s nothing funny about a fraudster carrying out a scam – and no one will yell ‘April Fools’ to make the harm melt away,” said Gerri Walsh, Senior VP of Investor Education at FINRA. “So instead of offering practical jokes, we’re marking the start of Financial Literacy Month with practical tips for becoming a smarter investor.”

Appointments To Hong Kong’s Securities And Futures Commission Committees
Press Release
The Securities and Futures Commission (SFC) is pleased to announce new appointments and reappointments to the following committees with effect from 1 April 2016: Academic and Accreditation Advisory Committee, Disciplinary Chair Committee, Investor Compensation Fund Committee, Nominations Committee, Products Advisory Committee, Public Shareholders Group, Securities Compensation Fund Committee, SFC Dual Filing Advisory Group, SFC (HKEC Listing) Committee, Takeovers and Mergers Panel, Takeovers Appeal Committee.

ISDA Announces Annual Determinations Committees Outcome
The International Swaps and Derivatives Association, Inc. (ISDA) today announced the outcome of an annual process to determine the composition of five regional Determinations Committees (DCs). The DCs are responsible for determining whether a credit event has occurred in the credit derivatives market by comparing publicly available information to the legal conditions set out in the ISDA Credit Derivatives Definitions.

G.E. Asks for Removal of ‘Too Big to Fail’ Label From GE Capital
WASHINGTON — General Electric has asked regulators to lift the “too big to fail” label on GE Capital, saying in a filing on Thursday that its finance arm had shrunk to the point where it no longer met the definition.

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans

    • BATS: Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3 Thereto, to List and Trade Shares of the Elkhorn S&P GSCI Dynamic Roll Commodity ETF of Elkhorn ETF Trust (Release No. 34-77487; File No. SR-BATS-2015-105)
    • CBOE: Notice of Filing and Immediate Effectiveness of a Proposed Rule to Amend the Fees Schedule (Release No. 34-77479; File No. SR-CBOE-2016-026; March 30, 2016); see also Exhibit 5
    • ISE: Notice of Filing of Proposed Rule Change Related to Market Wide Risk Protection (Release No. 34-77489; File No. SR-ISE-2016-08); see also Exhibit 5
    • ISE Gemini: Notice of Filing of Proposed Rule Change Related to Market Wide Risk Protection (Release No. 34-77488; File No. SR-ISEGemini-2016-03); see also Exhibit 5
    • NASDAQ: Notice of Filing of Proposed Rule Change to Require Listed Companies to Publicly Disclose Compensation or Other Payments by Third Parties to Board of Directors Members or Nominees (Release No. 34-77481; File No. SR-NASDAQ-2016-013; March 30, 2016); see also Exhibit 5
      NYSE: Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 2, Amending Its Rules Relating to Pre-Opening Indications and Opening Procedures to Promote Greater Efficiency and Transparency at the Open of Trading on the Exchange (Release No. 34-77491; File No. SR-NYSE-2016-24); see also Exhibit 5
    • NYSE: Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, to Amend Rule 86 to Add Additional SMOrder Types to the NYSE Bonds Platform, Codify Functionality of Order Types Currently Available on NYSE Bonds, and Amend the Definition of Indicative Match Price in Current Rule 86(B)(2)(G) to Provide Greater Detail of How an IMP is Established with Respect to Bond Auctions (Release No. 34-77477; File No. SR-NYSE-2016-17; March 30, 2016); see also Exhibit 5
    • NYSE Arca: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting Requirements for the Collection and Transmission of Dat (Release No. 34-77484; File No. SR-NYSEArca-2016-52); see also Exhibit 5
      NYSEMKT: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting Requirements for the Collection and Transmission of Dat (Release No. 34-77478; File No. SR-NYSEMKT-2016-40; March 30, 2016); see also Exhibit 5
    • Phlx: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Partnerships (Release No. 34-77475; File No. SR-Phlx-2016-36; March 30, 2016); see also Exhibit 5


Exchanges & Trading Facilities

360 degrees – Eurex Exchange’s Equity Derivatives segment
Equity Derivatives are elementary instruments for every portfolio manager. That is why they belong to the core asset classes at Eurex Exchange. We spoke with Eurex’s Equity Derivatives experts Markus-Alexander Flesch and Cornelius Müller on the development of this segment, what is so unique about it and what are the future perspectives.

Market-Making quote parameters on the Common Report Engine
This circular is to inform you that a new XML file is now available on the Common Report Engine. This XML file contains the quotation parameters for Market-Making at Eurex Exchange.


The Credit Collapse Opened the Door for Trump and Sanders; The pain of deleveraging is “a big part of the political story.”
Sarah McGregor, Victoria Stilwell – Bloomberg
Americans lost so much in 2008 — jobs and homes, incomes and wealth — that the recession still dominates the public mood three elections later.

FUND MANAGER: Here’s why President Trump would be an economic disaster
Bob Bryan – Business Insider
Republican presidential candidate Donald Trump wants America to win economically again. Create jobs, produce more, grow the country’s GDP.

Elizabeth Warren Just Launched A New Attack On Wall Street; Financial firms are used to “saying whatever they want,” but Warren claims they went too far this time.
Ben Walsh – Business Reporter, The Huffington Post
Sen. Elizabeth Warren (D-Mass.) is calling on the Securities and Exchange Commission to investigate financial firms for allegedly making misleading statements about a federal effort to protect people saving for retirement.

Beginning on April 1, 2016, pending effectiveness of regulatory filings, NYSE Amex Options will be increasing all credits available in the ACE Program and modifying CUBE Transaction rates. Additionally, NYSE Arca Options will be lowering the threshold for one of the criteria by which a firm can achieve the Super Tier credit.
/ – AMEX
/ – ARCA

Hedge Funds & Managed Futures

Nations Awash in Debt: Fragile to Global Shocks
Erik Norland, CME Group
When debt levels are low, governments, households, and corporations can live beyond their means by borrowing money. Debt-fueled spending in excess of income expands GDP as spending by one is income for another. As debt levels rise, however, the nature of borrowing changes. At higher levels of debt, more money goes toward refinancing existing debt instead of spending. In turn, growth slows. When total debt levels become too high, either borrower or lender eventually becomes nervous and turns off the tap, causing a loss of confidence. This then threatens to send the debt-fueled economic expansion into a reverse spiral.

IPO market decrepit as going public loses its allure
Robin Wigglesworth – FT
There are more alternative funding avenues to Wall Street — and that is a good thing
In Corporate America, going public and entering the mighty US stock market is not just a handy way of raising capital, it used to be the ultimate validation of an entrepreneur’s years of hard work and late nights. But the dream appears to be fading.

Are premium bonds still worth it?
Naomi Rovnick – FT
Many of us dream of winning £1m on the premium bonds. But the chances of hitting this jackpot are about to be reduced, with the provider of the much-loved savings product also trimming the number of high value prizes.

France to allow funds to lend directly to businesses
Attracta Mooney – FT
France’s finance rules are being changed to allow investment funds to lend directly to cash-starved businesses, which have suffered from the banking industry’s retreat from lending.

U.S. companies overpaying for bonds; banks may be to blame: study
Wall Street banks appear to be routinely mispricing corporate bond issues, potentially costing U.S. companies billions of dollars in excess interest payments, according to a new study by London-based research firm Fideres.

Hedge Fund Momentum Trade Blows Up With Losses Worst Since 2009
Dani Burger – Bloomberg
Market neutral quants see largest quarterly drop since 2012; Bets against low-momentum backfire as most-shorted names rise
One of the most popular hedge fund trades just hit a wall.

Banks & Brokers

Vonnegut: Should Breakaway Brokers Build or Bolt On?
Norb Vonnegut – WSJ
“Should I start an RIA or join an existing organization?” a wirehouse adviser asked me over the phone. After a total of more than 20 years at several brokerage firms, he longed to be his own boss and to offer clients a better experience by operating as a registered investment adviser.
“It’s now or never,” the adviser said.
Still, the stakes are high: He is in his 50s, and his kids are in college. Each one generates education-related expenses around $50,000 a year. While successful, he isn’t independently wealthy. With retirement about 10 years away, he observed, “Now is the wrong time to blow it.”

U.S. asks Deutsche, JPMorgan to give details on 1MDB dealings -sources
Officials of the U.S. Department of Justice have asked Deutsche Bank and JPMorgan for details of their dealings with Malaysia’s 1MDB, as global investigations into the troubled state fund widen, banking sources said on Friday.

The Blockchain Would Not Have Saved Lehman Brothers, No, Not At All
Tim Worstall – Forbes
Here’s a really rather hopeful wish about new technology: that if the blockchain part of Bitcoin had existed back in 2008 and had been in use in the financial markets then it would have stopped the Lehman Brothers bankruptcy. This is not so: this is to get why Lehman went bust badly, badly, wrong. The blockchain would have been very useful indeed in preventing some of the chaos that followed, that’s entirely true. But Lehman and what followed were really not the same thing at all.

Brexit and Other Banking Risks
In an exclusive interview, Morgan Stanley CEO and Chairman James Gorman discusses the future of London as a financial capital, the future of European banking, and the secret to beating jet lag on long-haul flights.

A key trading business at Deutsche Bank is suffering
Matt Turner – Business Insider
One of Deutsche Bank’s big-name trading execs is in talks to leave the bank
Deutsche Bank’s rates-trading business, which had targeted ambitious revenue growth in 2016, is suffering amid the tough start to the year.

Clearing & Settlement

Don’t clear the clearers
The Economist
Much of the opposition to the mooted DB-LSE merger draws on predictable arguments: fear of foreigners taking over national stock markets and concerns about the new outfit’s pricing power. But the real objection to uniting Europe’s two largest stock exchanges is more alarming. The fees charged for listing and trading stocks accounted for less than a tenth of the total revenue of the two firms combined last year. The mainstay of both is clearing trades, notably interest-rate derivatives. Clearing-houses, like LSE’s LCH.Clearnet and DB’s Eurex, stand in the middle of trades, acting as a buyer to every seller and a seller to every buyer. If one party goes bust, the clearer will make the trade good.

ECC: ED&F Man Capital Markets Becomes New General Clearing Member
Press Release
European Commodity Clearing (ECC) welcomes ED&F Man Capital Markets, London, as a new General Clearing Member (GCM). As a GCM, the bank is now authorised to provide clearing services for all Non-Clearing Members of ECC as well as for all products and markets cleared by ECC.

SIX gains long-awaited clearing house approval
Financial News
The Swiss clearing house SIX x-clear, owned by SIX Securities Services, has finally gained approval to offer clearing services throughout the European Union after a two-and-a-half-year wait.

Eurex Clearing To Offer ‘Direct Contractual Relationship’ to Buy-Side Participants
Eurex Clearing unveiled plans to launch a new membership type that will allow buy-side participants to have a direct contractual relationship with the clearinghouse facilitated by a clearing agent. Dubbed ISA Direct, the service, which is scheduled to go live this summer, aims to address changes in the regulatory landscape, according to a press release. It will initially be offered for Eurex Clearing’s interest rate swaps and repo transactions of Eurex Repo’s Select Finance service, according to the release, with listed derivatives and securities lending transactions to be rolled out thereafter.

***DA: We featured this topic yesterday, in both outside stories plus our own take on the issue

Asset managers could see role in single-name CDS clearing; Large buy-side players may fill the void in the clearing space as banks pull back their capabilities.
By Joe Parsons – The Trade News
Buy-side firms may see an increased role in the clearing of single-name credit default swaps (CDS) in response to a diminished client-clearing business.

Indexes & Products

FTSE Russell Goes for Ghosh in Canada
Waters Technology
Index provider FTSE Russell has hired Sudip Ghosh as senior sales manager for Canada, based in Toronto, to help build the vendor’s brand and cross-sell products across the Canadian market.

S&P Dow Jones Indices Market Attributes: Index Dashboard Europe
The global recovery from a chaotic start to the year continued throughout March; the S&P Europe 350 completed the month with a 1.41% total return.

Can “Smart Beta” Get You In Trouble?
John Mauldin, Mauldin Economics, via ValueWalk
It certainly helps the popularity of smart beta ETFs and mutual funds that many of them have been on a performance tear of late. A lot of money is flowing into smart beta ETFs. At the end of the day, when I look at smart beta, it is really just another way to slice and dice the return stream in a particular portfolio. Thus you can have smart beta value funds, smart beta growth funds, smart beta momentum funds, smart beta…. There are literally multiple hundreds of smart beta funds available now.

MSCI renews talks on adding Chinese mainland shares to emerging index
Financial Review
Index provider MSCI said it would resume discussions with investors on including Chinese mainland-listed shares in its main emerging equity benchmark, though it expressed concern about barriers to investment. The company will make a decision in June on whether or not to include 5 per cent of A-shares’ (mainland) free float-adjusted market capitalisation.

Does ETF ‘Bottleneck Risk’ exist?; As global regulators look at liquidity pressure points, The TRADE asks what role do Exchange Traded Funds have to play in the next global crisis?
The Trade News
In recent months exchange-traded funds (ETFs) have been in the firing line of regulators amid ongoing liquidity concerns around the world.


US warned over ‘cyber jihad’ attacks
David J Lynch in Washington – FT
Conceptual digital image of lock on circuit background
A top Department of Justice official warned on Thursday that Islamist extremists were drawing closer to launching lethal “cyber jihad” attacks on the US.

JPMorgan, Deutsche Borse, DTCC and CME take leadership roles in Hyperledger Project
Financial firms will have strong representation in the Linux Foundation’s Hyperledger Project, as many of the newly announced leadership roles have been filled by financial industry players. The Hyperledger Project is a collaborative effort to build and sustain an open, distributed ledger platform to serve use cases across industries. The results of the project’s elections, announced on Tuesday, show that the 10-member steering committee will have dominant representation from the financial industry.

Craig Wright’s upcoming big reveal
Izabella Kaminska – FT
Bitcoinland is abuzz with speculation Craig Steven Wright will out himself as Satoshi Nakamoto, the cryptocurrency’s pseudonymous creator, within the next two weeks and that he is looking for backing in his verification from some of the industry’s biggest players.

You don’t know who the world’s largest fintech startup is
Ian Kar – Quartz
The world’s largest fintech startup is AliPay, the digital bank company that split from e-commerce giant Alibaba in 2011.

FX: Cryptocurrency trading venues snowball
By: Paul Golden Published – Euromoney
The emergence of new trading venues marks a notable advance in the development of cryptocurrencies, such as Bitcoin, although exchanges vary in their product offerings.


CFTC Charges Georgia Resident Hendrik A. Van Beuningen and His Company, DeBrink Trading Fund I, LLC, with Fraud, Misappropriation, and Registration Violations in Connection with Their Commodity Pool
The CFTC Complaint, filed under seal on March 28, 2016, alleges that, from at least January 2014 to at least January 2016, the Defendants fraudulently solicited and accepted at least $505,000 from at least five members of the public for the purported purpose of pooling funds to trade various futures contracts. The CFTC’s Complaint also charges the Defendants with registration violations concerning their commodity pool.

SEC: Navistar International and Former CEO Misled Investors About Advanced Technology Engine
Navistar, without admitting or denying the charges, has reached a settlement with the SEC and agreed to pay a $7.5 million penalty. Separately, in a complaint filed in federal court in the Northern District of Illinois, the SEC charged former Navistar CEO Daniel C. Ustian with misleading investors and with aiding and abetting violations by Lisle, Illinois-based Navistar.

SEC charges Navistar, ex-CEO with misleading investors
Navistar International Corp agreed to pay a $7.5 million fine to settle U.S. Securities and Exchange Commission charges that it defrauded investors into believing a diesel truck engine it was developing could meet tough federal emissions standards.

Bursa Malaysia Securities Publicly Reprimands Scan Associates Berhad And Fines 5 Directors A Total Of Rm350,000
Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded SCAN ASSOCIATES BERHAD (SCAN) and its 5 directors for breaches of the Bursa Malaysia Securities ACE Market Listing Requirements (ACE LR). In addition, the 5 directors were fined a total of RM350,000.

Environmental & Energy

Saudi Arabia Plans $2 Trillion Megafund for Post-Oil Era: Deputy Crown Prince
John Micklethwait, Glen Carey, Alaa Shahine, Matthew Martin – Bloomberg
Pot would be big enough to buy world’s four largest companies
First step will be sale of Aramco stake by 2018, prince says
Saudi Arabia is getting ready for the twilight of the oil age by creating the world’s largest sovereign wealth fund for the kingdom’s most prized assets.

How Close Are We to A Global Carbon Market?
Russell Blinch – CME OpenMarkets
A global carbon market is in the making and though its implementation will not be easy, it does look like it has crossed its Rubicon of acceptance.Consider this: Nearly one billion people are already living under the umbrella of carbon trading schemes that are meant to constrain the growth of dangerous greenhouse gas emissions. But, coverage could double to more than two billion people, if China adopts a national trading scheme, as expected, by next year.

US shareholder votes on climate change hit record
Ed Crooks – Financial Times
US companies are facing a record number of shareholder votes on climate change related issues at this year’s annual meetings, as pressure from investors has grown and regulators have become increasingly sympathetic. Proposals include calls for ExxonMobil and Chevron, the largest US oil groups, to lift their limits on returning capital to shareholders through dividends and buybacks, in order to avoid investment in assets that could be rendered unprofitable by climate policies.

How Wall Street’s Favorite Solar Company Spent Itself to the Brink
Brian Eckhouse – Bloomberg
SunEdison facing potential technical defaults for late report;To p renewable developer `began to drink their own Kool-Aid’
Just nine months ago, SunEdison Inc. was Wall Street’s favorite clean-energy company. It sopped up every dollar it could come by to finance a breathtaking buying binge of wind and solar farms, and in the process became the world’s largest renewable-energy company.

Layoff Announcements Spreading Away From Oil
U.S. companies have announced the most first-quarter layoffs since 2009, according to data from Challenger Gray.


Japan Inc mood sours to worst in three years
Robin Harding in Tokyo – FT
Business conditions in Japan’s manufacturing sector are at their worst since the early days of Abenomics in 2013 as a stronger yen takes its toll on corporate confidence.

Chinese Returns Part of Bangladesh Funds Stolen by Hackers
A Chinese casino junket operator on Thursday returned $4.63 million of the $81 million that hackers stole from the Bangladesh central bank’s account in the U.S. Federal Reserve Bank and laundered in Manila’s casinos, officials said.

S&P cuts outlook on China, Hong Kong to negative from stable
EJ Insight
Standard & Poor’s Ratings Services has lowered its outlook for the Chinese government’s credit rating, the second time in the past month that China’s creditworthiness has come in unfavorably. S&P kept its double-A minus rating on China’s sovereign debt but lowered the outlook to negative from stable.

Frontier Markets

Qatar Stock Exchange Listed Companies Reported Qr 43.9 Billion Net Profits For The Year Ended December 31, 2015
With the end of disclosure period for the 12 months ended December 31, 2015, forty two companies out of the forty three listed companies at Qatar Stock Exchange (QSE) have disclosed their financial statements results for the year ended December 31, 2015. The combined net profit of all companies as of December 31, 2015 amounted to QR 43.9 billion versus QR 45.6 billion for the corresponding period in 2014, a decline of 3.65%.

Islamic finance gaining momentum in developing economies
Pakistan Observer
Islamic finance is gaining momentum in developing economies around the world due to its asset-based structure, which makes it easier for cash-strapped nations to gain access to capital, as well as owing to its well-regarded ethical approach. The latest region seen as having big potential for Islamic finance is the Commonwealth of Independent States (CIS), comprising eight countries plus Russia that until 1991 were part of the Soviet Union. Being home for a large Muslim population, especially in Central Asian CIS member states, the area is emerging as a new frontier region for Islamic finance as banking penetration is relatively low and demand for financing is strongly growing.


The World May Have Too Much Food; For the first time in history, more people are obese than underweight.
John Tozzi – Bloomberg
The past 40 years have seen an unprecedented increase in the number of obese adults worldwide, climbing to about 640 million from 105 million in 1975. If the current trend continues, about one-fifth of adults will be obese by 2025.

How creative thinkers can thrive in a regulated industry
by Elad Benjamin – TechCrunch
So you want to change the world and help people — and you’ve started a healthcare startup.

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