Banks Are Getting Squeezed by the Fight Against Dirty Money

Oct 5, 2018

Banks Are Getting Squeezed by the Fight Against Dirty Money

Oct 5, 2018

First Read

Hits & Takes
JLN Staff

Here is the agenda for today’s CFTC Technology Advisory Committee meeting in Washington, DC. The meeting should be live streamed if you are interested in watching any of it.~JJL

The CFTC and ASIC signed FinTech Cooperation Arrangement at the FinTech Forward conference at the CFTC in Washington, DC yesterday and I got to see it. I will always remember my first FinTech Cooperation Agreement witnessing.~JJL

As the Chicago Tribune reports, the “much-derided corporate moniker of Tronc” is going the way of the dodo. Welcome back, Tribune Publishing! ~SD

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Cinnober

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The Tinder for Markets Is Run on Crypto
Krista Gmelich
Data scientists to sell market predictions to hedge funds; New marketplace, known as Erasure, will run on blockchain
Richard Craib built his quant-driven hedge fund Numerai on the idea that if one data scientist is good, 40,000 are better. Now he’s inviting competing funds to draw from the same pool of brains for hire.
/jlne.ws/2Quo6S5

***** On a panel yesterday on AI at the CFTC’s FinTech Forward conference, it was suggested that this new technology was the perfect platform for anonymously trading inside information.~JJL

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ALTSO’s Rocktoberfest: The Financial Industry Rocks to Provide Prosthetic Limbs for Children in the Developing World
PRWeb
Leg To Stand On (ALTSO) has a new slogan: “Mobility is More than Movement.”
This slogan succinctly defines the mission of the non-profit who provides free prosthetic limbs, orthotic devices, appropriately fitted wheelchairs, and rehabilitative care to children in the developing world who live with untreated limb disabilities because they cannot afford treatment.
/jlne.ws/2NkuTM9

****Rocktoberfest is next Thursday, October 11. If you haven’t bought a ticket yet – listen up! Enter the promo code “Lothian” when purchasing tickets and you’ll get three tickets for the price of two. (Scroll to the bottom of the linked page to purchase tickets.) This year’s event will take up the whole of City Winery and feature an acoustic stage in addition to the mainstage – both firsts for Rocktoberfest in Chicago!~SD

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Finance, the media and a catastrophic breakdown in trust
John Authers – Financial Times
Finance is all about trust. JP Morgan, patriarch of the banking dynasty, told Congress in the 1912 hearings that led to the foundation of the US Federal Reserve, that the first thing in credit was “character, before money or anything else. Money cannot buy it.
“A man I do not trust could not get money from me on all the bonds in Christendom,” he added. “I think that is the fundamental basis of business.” He was right. More than a century later, it is ever clearer that, without trust, finance collapses. That is no less true now, when quadrillions change hands in electronic transactions across the globe, than it was when men such as Morgan dominated markets trading face to face.
/jlne.ws/2P8BpY5

**** This is John Authers’ last article for the Financial Times before he starts a new job with Bloomberg. ~JB

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Italian ‘Robin Hood’ banker sentenced over EUR1m pilfered for the poor
BBC
An Italian bank manager who robbed from the rich to give to the poor has narrowly escaped going to prison.
Gilberto Baschiera was the bank manager in the small mountain town of Forni di Sopra, where he stole about EUR1m (£0.9m) over seven years.
He took small amounts from wealthy clients and transferred it to those who couldn’t qualify for credit.
/jlne.ws/2zRdtTV

**** “He steals from the rich; and gives to the poor; Mr. Moore, Mr. Moore, Mr. Moore.” (can’t help myself…I grew up on Monty Python). ~JB

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The Big Hack: Amazon, Apple, Supermicro, and Beijing Respond
Bloomberg
Apple: Over the course of the past year, Bloomberg has contacted us multiple times with claims, sometimes vague and sometimes elaborate, of an alleged security incident at Apple. Each time, we have conducted rigorous internal investigations based on their inquiries and each time we have found absolutely no evidence to support any of them. We have repeatedly and consistently offered factual responses, on the record, refuting virtually every aspect of Bloomberg’s story relating to Apple.
/jlne.ws/2QwLlv3

**** There are more denials in that story, this is just one.~JB

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Thursday’s Top Three
ErisX was the big news Thursday. Our top read story was John Lothian News’ ErisX Enters the Crypto World With New Spot and Futures Platform. Next was Inc.’s American Airlines CEO: More Crowded Planes Are ‘Much More Comfortable’. And tied for third were two more ErisX stories, ErisX Announces New Exchange for Digital Asset Investors and Traders, from BusinessWire, and Bloomberg’s Eris Exchange to Create Crypto Market Backed by DRW, Virtu

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Lead Stories

Banks Are Getting Squeezed by the Fight Against Dirty Money; As governments make them the front-line defense against financial fraud, banks have to be more cautious. That’s hurting returns.
Paul J. Davies – WSJ
Every few months it seems some bank is nailed in a multi-billion dollar money-laundering scandal. The latest is Danske Bank (DNKEY -4.77%), which may win the prize for sheer audacity, with more than $230 billion of potentially suspicious cash flowing through a tiny branch.
/jlne.ws/2Qwr4Wh

Virtu Is Pursuing Takeover of Investment Technology Group
Nick Baker and Annie Massa – Bloomberg
Companies have been holding recent discussions about a deal; Potential transaction would follow Virtu’s purchase of KCG
High-speed trading firm Virtu Financial Inc. is seeking to acquire independent brokerage Investment Technology Group Inc. as pressure mounts for proprietary traders to branch out.
/jlne.ws/2Qt0n4M

Cryptocurrencies, Trading Scams Draw Increased Federal Enforcement; Derivatives regulator CFTC posts rise in fines in fiscal 2018; SEC to release figures later this year
Gabriel T. Rubin – WSJ
Enforcement actions and fines by the federal derivatives-market regulator ticked up in the last fiscal year, buoyed by cryptocurrency cases, spoofing schemes and settlements dating back to the financial crisis.
/jlne.ws/2Qvg4IC

Danske Is Now Europe’s Worst Bank Stock as Estonia Scandal Grows
Frances Schwartzkopff and Christian Wienberg – Bloomberg
Watchdog doubled extra buffer requirement amid Estonia scandal; Bank’s shares plunged as much as 11 percent on Friday alone
Danske Bank A/S lost a tenth of its market value on Friday as the fallout of its Estonian money laundering scandal turns Denmark’s biggest lender into the year’s worst financial stock in Europe.
/jlne.ws/2QxQy5Q

Danske Bank memo shows how Russians moved money; ‘Highly profitable’ mirror trades were used by clients to shift money out of country
Richard Milne in Oslo and Caroline Binham in London – FT
Danske Bank executed up to EUR8.5bn of controversial “mirror trades” for Russian customers in a single year, according to an internal memo that provides new insight into the scale and tactics behind its EUR200bn money-laundering scandal.
/jlne.ws/2QsShcr

No-deal Brexit has big implications for Europe’s derivatives market; About £38tn of swaps contracts could be forced to move venues in just three months
John Dizard – FT
Britain and the rest of Europe have this week been forced to face the reality of a what a no-deal Brexit would mean for the essential plumbing of the financial world.
/jlne.ws/2QBe9Td

Tesla’s Musk mocks SEC as judge demands they justify fraud settlement
Jonathan Stempel – Reuters
Tesla Inc’s Elon Musk on Thursday mocked the U.S. Securities and Exchange Commission, just hours after a federal judge ordered him and the regulator to justify their securities fraud settlement, which let Musk remain chief executive.
/jlne.ws/2QxQ1Ro

Tesla’s Musk, ordered to defend fraud settlement, takes aim at SEC
Jonathan Stempel, Sonam Rai – Reuters
Tesla Inc Chief Executive Elon Musk on Thursday mocked the U.S. Securities and Exchange Commission, hours after a federal judge ordered him and the regulator to justify their settlement of securities fraud charges.
/jlne.ws/2OGKSJa

****NYT’s take on the “Shortseller Enrichment Commission” tweet can be found here.

Commerzbank employee wins London sex and maternity discrimination case
Jane Croft – Financial Times
A senior bank employee who says she was “marginalised” when she came back from maternity leave has won a sex and maternity discrimination claim against Commerzbank.
Jagruti Rajput, a senior compliance officer at the German bank, took her claim to a London employment tribunal after she found substantial elements of her job had been transferred to another employee when she returned from maternity leave.
/jlne.ws/2OB3ASv

****Financial News with the story here.

Yale Invests in Crypto Fund That Raised $400 Million
Alastair Marsh and Lily Katz – Bloomberg
Paradigm was started by Coinbase’s Ehrsam, Sequoia’s Huang; Ivy League school targets 60% of 2019 assets in alternatives
Yale University, the Ivy League school that has invested in everything from Puerto Rican bonds to timber in New Hampshire, is getting into the market for cryptocurrencies.
/jlne.ws/2QwIMJj

Virtu and brokerage ITG shares jump on report of takeover talks
Nicole Bullock in New York – FT
Shares of Investment Technology Group and Virtu jumped on a report that the high-speed trader wants to buy the agency broker.
/jlne.ws/2Qw461t

Exchanges, OTC and Clearing

Launch of new FTSE ST Singapore Shariah Index
SGX
First index tracking Shariah-compliant companies listed on SGX; Constituents screened against a clear set of Shariah principles to create a robust Shariah-compliant index for the Singapore market; Meets growing investor demand for Shariah-compliant benchmarks
FTSE Russell, the global index, data and analytics provider, has launched a new Shariah-compliant index tracking companies listed on the Singapore Exchange (SGX). The FTSE ST Singapore Shariah Index has been designed to track Shariah-compliant companies listed on SGX and can used as the basis of investment products. Independent screening is carried out by Yasaar Ltd, an organisation with a global network of expert Shariah scholars. The indexes have been certified as Shariah-compliant through the issue of a Fatwa by Yasaar’s principles.
/jlne.ws/2QsVOHJ

Cboe Global Markets Reports September 2018 Trading Volume
Cboe
October 4, 2018 – Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today reported September monthly trading volume and average revenue per contract (RPC)/net revenue capture data
/goo.gl/MmptPX

Euronext Announces Volumes For September 2018
Euronext
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for September 2018.
/goo.gl/PGJ71W

India INX launches Global Access with connectivity to CME Group of exchanges
Times of India
BSE-owned India International Exchange (India INX) Wednesday announced the launch of a special purpose vehicle which will facilitate hedgers, traders and investors access international exchanges through a single centralised platform.
/jlne.ws/2OzQgxY

Board Of Directors Election Results Announced By MGEX
MGEX
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), announced the results of its annual Board of Directors (Board) election, held on October 4, 2018. Re-elected to the Board were Martin F. Farrell, Christopher T. Matzdorf, and Kerry L. Melius. Newly elected to the Board was Marc L. Gordon who previously served on the Board from 2011-2017. All were elected to serve two-year terms.
/goo.gl/fgWkxB

Dell Set to List on NYSE If Go-Public Plan Via Buyout Succeeds
Alex Barinka – Bloomberg
Dell Technologies Inc. has applied to list its shares on the New York Stock Exchange as part of a plan to take the company public again through a buyout of a tracking stock.
/jlne.ws/2QuxV2s

Tradeweb tops $100 trillion in trading volumes; Year-to-date trading volumes at Tradeweb surpassed the $100 trillion mark in September, topping its overall trading volume last year.
Hayley McDowell – The Trade
Tradeweb’s total trading volumes have hit $100 trillion so far this year, already surpassing its full-year volumes for all of 2017.
/jlne.ws/2QwI52t

TRADEWEB Sets Volume Record In September As Rising Yields Drive Surge In Global Trading
Mondovisione
For the month of September 2018, Tradeweb Markets set a new record for trade volume. Activity was higher year-over-year and month-over-month in nearly all products on the platform. Average daily volume (ADV) for Tradeweb Markets of $592 billion (bn) across rates, credit, money markets and equities in September 2018 increased 27.5 percent (%) compared to the prior year and 19.5% versus August, while average daily trades totaled 42,639. Year-to-date, total volumes have surpassed $100tn as well as full-year volumes for all of 2017.
/jlne.ws/2RtNjNI

Changes in the Liquidity Provider Schemes of selected products
Eurex
The Management Boards of Eurex Frankfurt AG and Eurex Deutschland took, in accordance with Eurex Clearing AG, the following decision with effect from 5 November 2018:
/jlne.ws/2QuB824

Intercontinental Exchange Completes Acquisition of MERS
ICE
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced it has acquired the remaining equity of MERSCORP Holding, Inc., owner of Mortgage Electronic Registrations Systems, Inc. (MERS). ICE has owned a majority equity interest in MERS since 2016. Price and terms of the transaction were not disclosed and will not be material to ICE’s earnings or have an impact on capital return plans.
/jlne.ws/2QsV3hR

EGX Launches Its Training Program On “Risk Management” For Brokerage Firms
MondoVisione
The Egyptian Exchange (EGX) has launched a training program on “Risk Management” in cooperation with the Investor Protection Fund. The training aims at developing the competences of the risk management departments’ employees of the brokerage firms to enable them to design effective policies that strengthen their companies’ in this regard for more stability in the securities industry. The Free training program includes two rounds each is four-days. The program started on Monday, July 9 and ends on Thursday, July 12. Approximately 70 brokerage firms attend each round from Cairo and Alexandria.
/jlne.ws/2QuDpu4

LME Proposes Requirements For The Responsible Sourcing Of Metal In Listed Brands
Press release via Mondovisione
LME position paper sets out detailed responsible sourcing requirements for listed brands
All brands required to undertake OECD red flag assessment to determine “higher” or “lower” focus classification – except for “automatic higher-focus metals” which include cobalt and tin
Special transitional provision for cobalt to enable LME to take action against brands where the market already demonstrates responsible sourcing concerns
/goo.gl/8sQP9F

Fintech

KKR, Tencent to invest $175 million for minority stake in Philippine fintech firm
Reuters
Private equity firm KKR & Co Inc and Chinese tech giant Tencent Holdings Ltd are acquiring a minority stake in the financial technology arm of Philippines’ PLDT Inc, the companies said on Thursday.
/jlne.ws/2QtO4Fi

EU Financial Regulator Budgets Over 1 Mln Euro for FinTech and Crypto Supervision
Ana Alexandre – CoinTelegraph
The European Securities and Markets Authority (ESMA) has budgeted over 1 million euro for monitoring fintech and crypto assets, according to a document published Oct. 4.
Founded in 2011 in Paris, the ESMA has an objective to develop a uniform rulebook for European Union (E.U.) financial markets, as well as provide market supervision. The authority has established Technical Committees in various industrial fields, including information technology (IT), and also works in the field of securities legislation and regulation.
/jlne.ws/2pEew3O

CFTC And ASIC Sign FinTech Cooperation Arrangement
Press Release
The U.S. Commodity Futures Trading Commission (CFTC) and the Australian Securities and Investments Commission (ASIC) today signed an arrangement to cooperate and support innovation through each other’s financial technology (FinTech) initiatives – CFTC’s LabCFTC and ASIC’s Innovation Hub.
/jlne.ws/2pCwZhf

Cryptocurrencies

Crypto Exchange Coinbase Says Institutional Platform Head Is Leaving
Julie Verhage – Bloomberg
Coinbase Inc., one of the largest U.S. cryptocurrency exchanges, said Adam White, head of the institutional platform group and its fifth employee, is leaving the company.
/jlne.ws/2Qyf4Ul

U.S. Court Cements Commodity Verdict on Cryptocurrency After Landmark Ruling
Wilma Woo – Bitcoinist
In a press release October 3, Senior Judge Rya W. Zobel of the U.S. District Court for the District of Massachusetts ruled in favor of the Commodity Futures Trading Commission (CFTC) in a case involving now-defunct cryptocurrency My Big Coin. Part of an ongoing legal battle, lawyers for My Big Coin attempted to halt prosecution for misleading claims about its nature by claiming the CFTC had no jurisdiction over virtual currency.
/jlne.ws/2QtRFTS

Yale Is Said to Invest in Crypto Fund That Raised $400 Million
Alastair Marsh and Lily Katz – Bloomberg
Yale University, the Ivy League school that has invested in everything from Puerto Rican bonds to timber in New Hampshire, is getting into the market for cryptocurrencies.
/jlne.ws/2pB81yv

Legendary Artist Soulja Boy Enter Crypto World With “Bitcoin” Rap
Nick Chong – Ethereum World News
“Watch him crank it, watch him roll,” claimed crypto investors, as Soulja Boy, a world-renowned, critically-acclaimed American artist, dropped a track on cryptocurrencies, arguably one of the hottest trends of the past two years. Taking to Twitter on Tuesday night, the Chicago-based artist released “Young Drako”, an album of his that has reportedly been in the works for months, if not years.
/jlne.ws/2NqK0UF

Institutions More Bullish on Bitcoin than Retail Investors: Fundstrat
CCN
There’s a general perception that retail investors are susceptible to rosy-eyed forecasts about the future of bitcoin, while institutions are more clear-headed about the prospects of this nascent asset class. However, a new survey conducted by Wall Street strategy firm Fundstrat suggests that once institutional investors are interested in bitcoin, they become even more bullish than their retail counterparts.
/jlne.ws/2DYp4Vf

Cryptocurrency Regulations Moving Towards Clarity, Says Investment Security Expert
Osato Avan-Nomayo – Bitcoinist
According to the Asia Times, Wood says the steady increase in suspicious activity reports (SARS) emanating from the cryptosphere has US financial regulators concerned. There are a reported 1,500 cryptocurrency-based SARS each month. Recently, the Wall Street Journal ran a piece alleging that cryptocurrency exchange platform ShapeShift was involved aiding and abetting money laundering. Outside of the US, last month UK MPs called for more regulations. Many in parliament see the cryptocurrency industry as maintaining a “Wild West” reputation.
/jlne.ws/2RsXTof

Public Sale of Venezuela’s State Crypto Petro to Commence on November 5
CCN
With the Petro now officially launched, the public sale of the state-backed cryptocurrency will begin early next month. In a televised address on October 1 during Venezuelan president, Nicolas Maduro announced that the public sale of the Petro will kick off on November 5. Though he did not list names, Maduro also indicated that the state-backed cryptocurrency is currently available on six international exchanges. Additionally, the state-backed cryptocurrency can be acquired using other established digital assets as well as popular fiat currencies.
/jlne.ws/2y3xDc0

Alibaba Files Patent for Blockchain System That Allows ‘Administrative Intervention’
Ana Alexandre – Cointelegraph
Chinese e-commerce conglomerate Alibaba has filed a patent application with the U.S. Patent and Trademark Office (USPTO) for a blockchain-based system that allows a third-party administrator to intervene in a smart contract in case of illegal activities. The USPTO published the patent application on Oct. 4.
/jlne.ws/2CsudDo

A $30 Million Manhattan Condo Was Just Tokenized on Public Ethereum Blockchain
CCN
Manhattan’s first major asset to be tokenized on the blockchain is a luxury condo recently valued at $30 million. The East Village building contains 12 condos, each with 1700 square feet of space and each now tokenized on the Ethereum blockchain. The real estate property is now represented with a sum of tokens available for purchase on the blockchain. A token represents a portion of the value of the property, allowing people to invest in luxury condos even with a small investment, something which was previously very difficult if not impossible.
/jlne.ws/2zTrW1J

Seoul Mayor Announces Five-Year Plan for Promoting Blockchain Industry
Helen Partz – Cointelegraph
The mayor of Seoul Park Won-soon has introduced a five-year plan for developing the blockchain industry in the city, Korean news agency Yonhap News reports Thursday, October 4. The project entitled “Blockchain City of Seoul” contains a number of measures for promoting and developing blockchain-related initiatives and education in the city from 2018 – 2022, Park revealed in a speech in the city Zug, Switzerland on Thursday.
/jlne.ws/2QtN6cg

Politics

Chip Hack a Sign of Chinese Cyber Threats to U.S., Officials Say
Toluse Olorunnipa and Billy House – Bloomberg
Attack aimed at about 30 companies including Amazon, Apple; Spies said to compromise components manufactured in China
The White House national security adviser said Chinese cyber attacks on the U.S. validate the Trump administration’s emphasis on offensive cyber operations of its own, after Bloomberg News reported that Beijing had hacked American computer networks using a microchip built by its spies.
/jlne.ws/2QumJmp

GRU revelations shatter spies’ code of silence; West ratchets up pressure amid determination to expose Moscow intelligence agency
David Bond, Security Editor – FT
For decades Russia’s military intelligence agency, the GRU, lived in the shadow of Moscow’s other better-known spy organisations like the KGB and, since the end of the cold war, the FSB.
/jlne.ws/2Qw6wxg

New York Regulators Examine the Trump Family’s Tax Schemes
Russ Buettner, Susanne Craig and David Barstow – NY Times
New York City officials said on Thursday that they had joined state regulators in examining whether President Trump and his family underpaid taxes on his father’s real estate empire over several decades.
/jlne.ws/2Qxl2Vd

Donald Trump and the golden age of America’s oligarchy; The US president shares basic traits with other scions of wealth
Edward Luce – FT
One of Donald Trump’s advantages is the illusion that he comes from a different species to America’s wealthy elites. Once asked by a foreigner what “white trash” meant, he replied: “They are just like me. Only they’re poor.”
/jlne.ws/2Qwa02O

Regulation

BoE & FCA call for urgent report of FI cyber risk
Rebekah Tunstead – bobsguide
British banks, clearing houses, and payments systems have been asked by the UK’s Bank of England (BoE) and Financial Conduct Authority (FCA) to complete reports on their exposure to, and plans to manage, IT outages and cyberattacks by October 5.
/jlne.ws/2OzpN3z

Prominent hairdresser pleads guilty to insider trading charges
Richard Morgan – NY Post
A prominent Manhattan hairstylist busted for insider trading pleaded guilty Wednesday to one count of conspiracy to commit securities fraud.
/jlne.ws/2QwuLeB

ESMA updates AIFMD Q&As
ESMA
The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers on the application Alternative Investment Fund Managers Directive (AIFMD).
/jlne.ws/2QwzHQG

ESMA updates its Q&As on MiFID II and MiFIR market structure and transparency topics
ESMA
MIFID – SECONDARY MARKETSMIFID II: TRANSPARENCY CALCULATIONS AND DVC
The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers regarding market structures and transparency issues under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).
/jlne.ws/2Qy9GR6

FINRA Application Programming Interface (API) Center;Quick access to important FINRA insights and analyses
FINRA
The FINRA API Center provides registered brokerage firms and their vendors with access to FINRA data, when you need it and how you need it. The API Center offers access to FINRA APIs in one convenient location, enabling you to receive a broad array of data in an automated, machine-to-machine fashion.
/jlne.ws/2Qw8n51

No 401(k)? No Problem. 5 Ways to Save for Retirement.
Kaitlyn Kiernan – FINRA
Saving for retirement can be daunting, so it’s no surprise that employer-sponsored retirement plans can be a key stepping-stone into the world of investing—and through your investments, to a healthy retirement nest egg.
/jlne.ws/2QsWU6j

SEC Approves Amendment to Require Alternative Trading Systems to Identify Non-FINRA Member Subscribers in TRACE Reports for U.S. Treasury Securities
FINRA
Effective April 1, 2019, large alternative trading systems (ATSs) will be required to identify non-FINRA member subscriber counterparties in TRACE reports for transactions in U.S. Treasury securities using FINRA-assigned market participant identifiers (MPIDs). This information will be used for regulatory purposes, and will not be made public.
/jlne.ws/2QsXAZp

CFA Institute and FINRA Foundation Study Debunks Common Myths about Millennials and Investing; New research finds millennials lack confidence making investment decisions, cite lack of investment knowledge as barrier to investing, and show limited interest in robo-advisors
FINRA
Conventional wisdom paints a picture of millennials as aggressive, knowledgeable, and confident when it comes to investing, but a new research study sponsored by CFA Institute and the FINRA Investor Education Foundation debunks common assumptions about millennial investors. The research, titled “Uncertain Futures: 7 Myths About Millennials and Investing,” explores the attitudes and behaviors of millennials when it comes to finances and investing.
/jlne.ws/2zSMk2T

Information for CPOs and CTAs—Avoiding financial ratio errors on NFA Forms PQR and PR
NFA
NFA Compliance Rule 2-46 and the related Interpretive Notice to NFA Compliance Rule 2-46 require commodity pool operators (CPO) and commodity trading advisors (CTA) to report quarterly two financial ratios regarding a CPO’s or CTA’s financial condition. As described in the Interpretive Notice, NFA Forms PQR and PR contain data fields for the Current Asset/Current Liability (CA/CL) ratio and Total Revenue/Total Expenses (TR/TE) ratio. A number of CPOs and CTAs are incorrectly reporting these financial ratios.
/jlne.ws/2QwxvbT

Investing and Trading

Anxiety Starts to Grow in Junk-Bond Market; Money pulled from high-yield-credit ETF at fastest pace since 2016 as investors hedge with options
Gunjan Banerji – WSJ
Investors are getting antsy about the junk-bond market.
They pulled money out of the biggest exchange-traded fund that bets on high-yield credit during September at the fastest pace in almost 2½ years. And some investors are snapping up protection, buying options contracts that would help them offset losses if junk debt sells off.
/jlne.ws/2OvGT2j

No Long-Term Value From Activist Attacks
Martin Lipton – Harvard
An important new study by Ed deHaan, David Larcker and Charles McClure, Long-Term Economic Consequences of Hedge Fund Activist Interventions, has found that on a value weighted basis, long-term returns are “insignificantly different from zero.” And, nearly all of the positive long-term returns are concentrated in companies that are acquired in the two-year period following the activist attack. Also, the authors found that there is no evidence that activist attacks result in long-term improvements in accounting performance measures including, return on equity, return on net operating assets, profit margin, asset turnover, and spread over borrowing costs. They concluded, “In sum, across a large battery of appropriately-matched tests, we fail to find consistent evidence that activists drive changes in accounting-based operating performance.”
/jlne.ws/2NnIOB2

LME storage not market dynamics driving aluminum stocks lower
Andy Home – Reuters
London Metal Exchange (LME) on-warrant aluminum stocks, metal not earmarked for delivery, are at their lowest since January 2006 at 608,050 tonnes — a far cry from the peaks hit over 2010-14.
/jlne.ws/2OxMEMT

Hedge Fund Criterion Capital to Shut Down After 16 Years
Rachael Levy and Rob Copeland – WSJ
Hedge fund Criterion Capital Management is shutting down after 16 years in business, the second large fund to announce its closure this week.
The San Francisco-based firm focused on picking stocks in the technology, media and telecommunications industries. It manages about $2 billion, according to people familiar with the firm.
/jlne.ws/2OGGA4w

World’s Richest Lose $63 Billion on Trade Tensions, Stock Slide
Sophie Alexander and Devon Pendleton – Bloomberg
The combined net worth of the world’s 500 richest people fell the most in six months on Thursday, according to the Bloomberg Billionaires Index.
/jlne.ws/2QwtynA

Women Investors Don’t Play It Safe; Gender stereotypes about risk tolerance are a myth.
Rebecca Greenfield – Bloomberg
A couple came into Mike Giefer’s Minneapolis office in late September for some financial planning advice. The woman presented herself as the risk-averse one and her husband as the financial maverick. Then Giefer had them take a test. “It turned out the exact opposite,” he says. Giefer, an adviser at the Johnston Group, uses Riskalyze, an online tool that gauges clients’ risk tolerance by walking them through various financial scenarios and then assigning them a “risk number.” The woman scored a 70. Her husband, only a 52.
/jlne.ws/2Qves1w

‘Ethical investing’ needs to find a true meaning; The industry must clearly define the words it increasingly bandies about
Merryn Somerset Webb – FT
Two new launches have summed up the state of the finances of the UK population over the past week or so.
/jlne.ws/2QygNch

Institutions

Blind Trust: With Great Algo Wheels Comes Great Responsibility
Surika Vosloo, TradingScreen – TabbFORUM
Algo wheels. The latest buzzword. The perfect response to MiFID II.
It’s not hard to recognize that having tools to fairly and intelligently distribute flow across electronic brokers is not just a luxury but an absolute necessity. Especially as more buy-side traders are working toward consolidation of their trading technologies and trading desks. We now need more tools to help simplify the workflow and become more systematic. The ability to automate more of the ordinary orders effectively frees up execution traders to focus on the trades where they can and will add the most value.
/jlne.ws/2RpfL3n

Barclays customers experience app outage in latest IT glitch
Reuters
Barclays customers said on Friday that they were unable to access its mobile banking app in the latest outage at a British bank in recent weeks.
/jlne.ws/2Qut9lC

European Banks Are Cheap So Investors Should Pile In, Citi Says
Ksenia Galouchko , Macarena Munoz Montijano , and Jan-Patrick Barnert – Bloomberg
Investors should ignore the uncertainty in European banking in the coming days and weeks and just snap up the shares, according to Citigroup Inc.’s strategist Jonathan Stubbs, who’s been bullish on the industry since early September.
/jlne.ws/2QvdORE

Regions

Tokyo’s legendary Tsukiji fish market closes; Move of ‘Japan’s Kitchen’ prompts introspection in a nation normally quick to embrace the new
Robin Harding in Tokyo, Annalee Mather and Juliet Thomas in London – FT
The rasp of tuna saws, the whirr of electric carts and the patter of the fishmongers — on Saturday they will all fall silent, as Tokyo’s legendary Tsukiji fish market closes for the final time.
/jlne.ws/2QxkcYz

India’s nascent corporate bond market takes big step back; A string of defaults at infrastructure group IL&FS has sparked turbulence
Simon Mundy – FT
Ravi Parthasarathy’s resignation in July from IL&FS, the infrastructure group he had led since its 1987 foundation, attracted almost no attention in the Indian media.
/jlne.ws/2QqqKIs

Canadian Insurers Fight Cattle Farmer’s Investment Strategy, Fearing Stampede; Legal battle could determine whether investors can funnel potentially limitless sums into accounts with high-interest payouts
Jacquie McNish and David Benoit – WSJ
Michael Hawkins, an Ontario consultant and farmer who owns about 50 head of cattle, was looking for extra income when he started buying Canadian life-insurance policies a decade ago. What he got was an unexpected legal battle that could lead to huge losses for some of Canada’s largest financial institutions.
/jlne.ws/2QxSlb4

Brexit

EU Is Working ‘Day and Night’ to Get a November Brexit Deal
Dara Doyle , Boris Groendahl , and Charlie Devereux – Bloomberg
U.K. is expected to present new Irish border proposal in days; Northern Irish party poses threat to getting divorce deal
European and U.K. officials struck an upbeat tone on Friday about the prospect of getting a Brexit deal in the next few weeks, as European Commission President Jean-Claude Juncker said negotiators were working “day and night” to clinch it.
/jlne.ws/2QvXErd

Ultra-rich shift assets as fear of Labour government mounts; Prospect of Jeremy Corbyn in No 10 is seen as a bigger threat than Brexit to wealthy
Alice Ross and Madison Marriage in London – FT
London’s ultra-wealthy are moving assets out of the UK and some are preparing to leave the country as concerns over a leftwing Labour government led by Jeremy Corbyn intensify among the super-rich.
/jlne.ws/2QtQlQQ

Brexit set to hit poorly educated men most, says IFS; Survey finds costs of leaving EU will weigh heavily against those least able to cope
Delphine Strauss – FT
Men with low levels of formal education are most likely to suffer from new barriers to trade with the EU after Brexit, according to research by the Institute for Fiscal Studies.
/jlne.ws/2QyKjP9

Miscellaneous

CEO Tenure Is Getting Shorter. Maybe That’s a Good Thing.
John D. Stoll – WSJ
John Flannery spent 25 years working his way into striking distance of the top job at General Electric Co. Then, he spent the next four winning a succession dance-off with four rivals. His prize was a paltry 14 months as chief executive.
GE’s board dumped Mr. Flannery amid missed financial targets and concerns about the pace of change. Directors, having endured years of meager returns under his predecessor, watched GE shares tumble by half during Mr. Flannery’s brief tenure even as the S&P 500 grew about 18%.
/jlne.ws/2OF10eg

FT journalist’s visa renewal denied by Hong Kong; Decision believed to be first rejection by local authorities of foreign correspondent
Ben Bland in Hong Kong – FT
The Hong Kong government has rejected the visa renewal application of the Financial Times’ Asia news editor, the first time an FT journalist has had such accreditation denied by local authorities.
/jlne.ws/2Qw4tJl

****** Free markets need free press.~JJL

How social media has changed the perception of financial media
Chris Roush – Talking Biz News
John Authers, who is leaving the Financial Times to join Bloomberg News later this month, writes in his last FT article about how social media has changed consumer’s perceptions of financial media.
/jlne.ws/2QsZglF

John Lothian Newsletter

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We visit more than 100 websites daily for financial news (Would YOU do that?)

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Past Newsletters

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Cboe Plans to Launch Enhanced Block Trading Service in Canada

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Ten global clearing firms make strategic investment in FIA Tech

First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff I am having a virtual fireside chat with former CFTC Chairman Chris Giancarlo today as part of the Chicago Bar Association Annual Seminar. Today Euronext launched its Euronext...

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First Read $42,416/$300,000 (14.1%) ++++ Hits & Takes John Lothian & JLN Staff Longtime industry executive K. James Kleinops has passed away, his son Jeffrey shared on Facebook. Condolences to his friends and family. -- Facebook JLN is working on its...

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

Market Narratives Have Pushed Aside Fundamentals

Market Narratives Have Pushed Aside Fundamentals

First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff We have a new and improved version of The Spread today. We have overhauled our approach to this video series and have the whole JLN team contributing to it. Suzanne Cosgrove has...

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