Banks Get Some Relief in Volcker-Rule Changes

Aug 21, 2019

First Read

Hits & Takes
JLN Staff

Trading Technologies Chief Technology Officer Drew Shields is leaving the company for a new opportunity in New York, a TT source said. His departure is not related to the recent outage at TT, but rather is just an unfortunate coincidence. We wish the best to Drew in his new endeavor. He has always been a terrific collaborator with John Lothian News from since we first met him even before he came to TT.~JJL

ICE reports that London Cocoa Calendar Spread Options (CSOs) will launch on September 16, 2019, subject to the completion of relevant regulatory processes. The new CSO contract, based on the price differential between the front spread month and the back spread month, offers alternative risk management and hedging capabilities for market participants exposed to spread price risk.~JJL

I have found some of my old commentaries for this newsletter on the WayBackMachine. They are being edited and then I will publish them on JohnLothianNews.com. Some of them are about exchange politics, including some about the mythical Society for the Promotion of Electronic Trading, or SPET.~JJL

As a reminder, we are looking for open outcry traders to interview for our Open Outcry Traders History Project. If you are interested in participating, or have someone to suggest, please contact me at johnlothian@johnlothian.com.~JJL

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Compliance Complexities in Communications Monitoring

JohnLothianNews.com

While Google Assistant, Siri and Amazon Alexa might make natural language processing seem perfectly ready for widespread, plug-and-play adoption, those offerings are for general use cases. Voice technology when it comes to monitoring and surveillance trading communications is a far different, more nuanced matter. In this video, Tony Foreman, a former pit trader and now head of sales for Fonetic, talks about the difficulties presented by trading environments and lingo. (Not every “pack” mentioned by a trader is a reference to eurodollars, after all. Maybe someone was just readying for a cigarette break.)

Watch the video »

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The One Job in Banking the Robots Can’t Take; Machines haven’t learned how to replace compliance officers—yet.
Elisa Martinuzzi – Bloomberg
When HSBC Holdings Plc thwarted a $500 million central-bank heist, sophisticated computer software didn’t raise the alarm. The funds flowed undetected from Angola’s reserves to a dormant company’s account in London. It was a teller at a suburban bank branch who became suspicious, declined a request to transfer $2 million, and triggered a review that uncovered the scam, according to one account of the episode.
/bloom.bg/2NirsJL

***** I can program a robot to say “NO” to any request. How hard can it be?~JJL

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Acuiti Derivatives Insight Report: Euribor Flash Rally Hits Proprietary Traders – A Spike In Trading In A Euribor Spread Caused Significant Losses To Several Proprietary Trading Firms In July
Mondovisione
An anomaly in trading in the Dec 20/Mar 21 Euribor spread on ICE has resulted in a number of proprietary trading firms reporting significant losses in July, the latest Acuiti Derivatives Insight Report found.
bit.ly/2Z8Xz5J

*****The latest report from JLN’s friend Will Mitting’s new venture.~JJL

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SEC fines Russian firm for failing to disclose paid-for ICO reviews
Katanga Johnson – Reuters
The U.S. Securities and Exchange Commission said on Tuesday that it has fined and settled charges against a Russia-based ratings firm for failure to disclose payments it received to publicize digital asset offerings of issuers it had rated.
/reut.rs/2Z7P8rh

***** I have had discussions about getting into the business, minus the corruption. The idea would be to create a model to value ICOs and maybe even offer investment banking related services. All on the drawing board.~JJL

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Dutch plan big Brexit beach party
RTÉ
Thousands of people have signed up on Facebook to a Dutch beach party for Brexit, featuring food from across the European Union to mark Britain’s departure.
Created by media worker Ron Toekook, the event calls for partygoers to meet at the seaside village of Wijk aan Zee near Amsterdam on 31 October, the date Britain is meant to leave.
bit.ly/2TMeULG

***** I love a good fireworks show from the beach.~JJL

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Tuesday’s Top Three
Our top story of the day on Tuesday was Thom Thompson’s JLN piece, CFTC v. Kraft/Mondelez: Agency Reserves Its 5th Amendment Rights Against Self-Incrimination. Second was the Crain’s Chicago Business piece Chicago titan Citadel just keeps growing. The rest of the city’s hedge fund industry, not so much. Third was The Block Crypto’s Calling Bakkt a ‘crypto exchange’ misses the mark on what they’re actually doing. JLN’s Thom Thompson is quoted in that piece as well, giving a stark comment on ICE’s overall performance.

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MarketsWiki Stats
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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

Banks Get Some Relief in Volcker-Rule Changes; Regulators finalize modifications to crisis-era law that restricts financial firms’ own trades
Lalita Clozel – WSJ
Banks are on the verge of getting some relief from Volcker-rule limits on speculative trading, one of the industry’s priorities in amending the regulations put in place after the financial crisis.
Two financial regulators on Tuesday approved changes relaxing trading restrictions for midsize banks and easing compliance for the biggest banks.
/on.wsj.com/2Z46564

****Also see CNBC, Bloomberg, the Financial Times and Reuters.

Former JPMorgan metals trader pleads guilty to spoofing charges
Kadhim Shubber – FT
A second former JPMorgan Chase precious metals trader has pleaded guilty to criminal charges of spoofing, the Department of Justice said on Tuesday.
/on.ft.com/2Z7glKz

*****Here is the Reuters version of the story.~JJL

Rip-roaring bond rally revives talk of ‘widow-maker’ trade; Shorting debt is back on the agenda as investors bet global growth fears are overdone
Robin Wigglesworth, Laurence Fletcher and Colby Smith – FT
Every investor has one trade that they rue more than any other. The most famous “widow-maker” trade in financial markets — one that has frustrated generations of money managers — is betting against Japanese government bonds.
/on.ft.com/2NlMU0k

Slowing Share Buybacks Remove a Pillar of Stock Market; U.S. corporations repurchase their shares at slowest pace in 18 months
Jessica Menton – WSJ
U.S. corporations are repurchasing their own shares at the slowest pace in 18 months, a potential sign of more volatility ahead as the buyback bonanza from the corporate tax overhaul wanes.
/on.wsj.com/2Z8I5P1

US-China trade war hits Bunge spending plans; Chief executive says global agricultural trader to pull back on pace of investments
Gregory Meyer – FT
The US-China trade war has contributed to a slowdown in capital spending at Bunge, the global agricultural trader with a large presence in the American farm belt.
/on.ft.com/2Nlderu

Guilt is good for corporate chief executives; Companies must be pressed to turn words into action on inequality and climate change
Amanda Mackenzie – FT
We live on a dying planet surrounded by desperate inequality. Corporate leaders like to say they are working to solve the problems: just this week one of the US’s largest business groups urged companies to consider the environment and workers’ wellbeing alongside their pursuit of profits. But how many of them are really doing everything within their power to change the status quo?
/on.ft.com/2Nn9TYM

Chief tech officer at Trading Technologies set to depart
Hayley McDowell – The Trade
Trading Technologies’ chief technology officer, Drew Shields, is set to leave the firm after just over five years with the company, The TRADE understands.
bit.ly/31OHwa2

Algo Wheels Spinning into Futures
Ivy Schmerken – FlexTrade
Algo wheels have become a popular technology in equities trading, but now there are signs that algo wheels are expanding beyond equities into multiple asset classes such as futures.
In equities the measurement tool, integrated with an execution management system, enables firms to automate the algo selection process, quickly switch from one strategy to another, and rebalance their allocation to each broker or algo strategy.
bit.ly/2zcMjpn

tZERO Crypto App to Add Ravencoin as Third Cryptocurrency; Blockchain Pioneer Announces Expansion of the Mobile Wallet App’s Cryptocurrency Offering
Business Wire
tZERO, the global leader in blockchain innovation for capital markets, through its tZERO Crypto unit, announced today its plans to offer to investors using both iOS and Android devices the ability to trade Ravencoin (RVN) on the tZERO Crypto app, in addition to bitcoin (BTC) and ethereum (ETH), which are already supported by the app.
/bwnews.pr/33KJgTA

****This is no Poe reference – the Ravencoin is named because of the role ravens play as messengers of truth in “Game of Thrones.” Per its website: “Ravencoin is a use case specific blockchain designed to carry statements of truth about who owns what assets.”~SD

EU Antitrust Probe Is Facebook-Led Libra’s Latest Headache
Natalia Drozdiak – Bloomberg
Regulators, politicians raised concern about new currency plans; A timeline of criticism from officials since announcement
The new Libra digital currency hasn’t even launched yet, but barely two months after the Facebook Inc.-led association announced its plans, it’s already facing a number of stumbling blocks. In the latest example of rising regulatory scrutiny into Mark Zuckerberg’s cryptocurrency project, Bloomberg on Tuesday reported that the European Union’s antitrust watchdog is investigating Libra, raising questions about the prospects of success for the digital coin.
/bloom.bg/2NnTPX0

The Rise of ‘Stakeholders’ Isn’t So Sudden; Public companies have been talking up their so-called stakeholders long before the Business Roundtable decided to make it official
Justin Lahart – WSJ
The Business Roundtable decided this week to change its mission to take into account “all stakeholders”—a group that includes employees, customers and society—rather than just shareholders. Predictably, this rekindled old arguments about self interest, invisible hands and the ingenuousness of the chief executives running the business lobby.
/on.wsj.com/2Nm77D7

Exchanges, OTC and Clearing

Euronext announces nominations to the Managing Board and Supervisory Board
Euronext
Euronext today announced that the Supervisory Board has made five nominations in the governance of Euronext N.V.. All five nominations are for four year terms, and are subject to approval by an Extraordinary Shareholders’ Meeting of Euronext N.V., as well as all the applicable regulatory non-objections.
bit.ly/2NmQjMz

Taking aim at rivals, CBOE Europe’s closing auction debuts with tiny volume
Josephine Mason – Reuters
Europe’s latest share trading platform debuted with a whimper this week as just 23,000 euros ($25,460) worth of stock changed hands in Monday’s first closing auction, but its parent Chicago-based CBOE said plenty of customers were lining up to use it.
/reut.rs/2z72YLc

SIX Reports Solid Operational Performance For First Half Of 2019
Mondovisione
After completing the strategic realignment last year, a resized but more focused SIX generated CHF 551.7 million in operating income in the first half of 2019. With the new organizational structure in place, SIX has undertaken a series of strategic investments in new products and innovation. In light of these developments SIX recorded a solid operational performance in terms of profit, which is expectedly lower compared to previous year’s period but proportionate to the new setup of the resized company.
bit.ly/2NlQpUw

Share of Investors in Financial Instrument Trading on GPW in H1 2019
GPW
Foreign investors generated the biggest part of trading in equities on the GPW Main Market in H1 2019. They contributed 59 percent of trading in equities, representing an increase of 3 percentage points year on year. Domestic institutional investors generated 28 percent of trading, i.e., 4 percentage points less than in H1 2018. Individual investors generated 13 percent of trading in H1 2019, an increase of 1 percentage point year on year and an increase of 1 percentage point half-year to half-year.

MIAX Options Exchange – Complex Auction Allocation Priority Change – Effective August 21, 2019
Mondovisione
Effective Wednesday, August 21, 2019, MIAX Options Exchange will use the less aggressive of the Complex Order’s original limit price or the Complex Order’s protected price at the conclusion of Complex Auctions and upon evaluation after ABBO uncrossings during regular trading to determine allocation priority.
bit.ly/2Nh1fv4

Fintech

Artificial Intelligence Beyond The Buzzword From Two Fintech CEOs
Philippe Branche – Forbes
AI seems to be well on its way to becoming the most overused buzzword of the tech industry, but don’t be put off by the hype. Some fintech companies in Asia are actually making use of natural language processing or machine learning for detecting fraud and making investment decisions. I recently interviewed two CEOs—Simon Loong from the Hong Kong unicorn WeLab and Jianyu Tu from MioTech—to better understand some of the recent developments in AI in Asia’s fintech industry.
bit.ly/2TQ6SS6

The Big Interview: Rob Mackay; Rob Mackay, CEO of Itiviti, talks to The TRADE about last year’s merger with Ullink, the firm’s ongoing work with Bloomberg, and why the enterprise vendor space is failing on legacy technology.
John Brazier – The Trade
How have the initial months at the helm of Itiviti been for you and what have been your first priorities during your first few months in charge?
bit.ly/2NsSmhQ

Itiviti And Blaze Portfolio Partner To Deliver Superior Trading Connectivity And TCA Services
PRNewswire
Itiviti, a leading technology and service provider to financial institutions worldwide, has partnered with Blaze Portfolio, a software provider focusing on scalable investment portfolio rebalancing and real-time trade order management technology. Partnering with Itiviti enables Blaze Portfolio to offer their clients access to Itiviti’s NYFIX suite of services including, its world-class FIX connectivity network, monitoring and execution reporting.
/prn.to/2Nhp0TL

Artificial intelligence promises to enhance sustainable investing; Computers and data scientists can unearth key themes missed by traditional research
Billy Nauman – FT
Investment managers within the environmental, social and governance sector are looking to gain an edge by using artificial intelligence, a computer-driven discipline already employed by some of the world’s most successful hedge funds.
/on.ft.com/2Z4KJW5

Emerging markets fintech Tala raises $110m; California-based lender that offers small loans to the ‘unbanked’ eyes expansion
Camilla Hodgson – FT
Tala, the fintech lender that offers small loans to millions of people in emerging markets, has raised $110m to expand its operations and take its total equity levels to $190m.
/on.ft.com/2NldC9q

Berlin’s Fintech Wealth Is Attracting at Least One Private Bank
Stephan Kahl – Bloomberg
Weberbank is betting on German capital as it tries to expand; Rivals have turned their back on city, blaming lack of clients
Berlin’s vibrant startup scene is creating a new generation of wealthy entrepreneurs who are increasingly looking for advice on how to manage their money.
/bloom.bg/2Nou1K3

Exchange Data International Launches a New Cost Basis Solution
Exchange Data International
Exchange Data International (EDI), a provider of global security corporate actions, pricing and reference data, announced today a new Cost Basis solution. Exchange Data International’s Worldwide Equity Cost Basis (WECB) enable users to track both a security’s cost basis, its evolution and its descendant’s cost basis & evolution up to the current date.
bit.ly/2Z9G7y0

Goldman CEO memo calls Apple Card ‘a beginning’ on launch day
Elizabeth Dilts – Reuters
Goldman Sachs Group Inc (GS.N) officially became a credit-card lender on Tuesday by rolling out its first product with Apple Inc (AAPL.O), but the bank has aspirations to grow much bigger in consumer lending, its chief executive said in an internal memo viewed by Reuters.
/reut.rs/2Z7XRtE

Cryptocurrencies

CoinFLEX rolls out market maker incentive program as it eyes moonshot triumph over BitMEX
Frank Chaparro and Aislinn Keely – The Block Crypto
Upstart crypto exchange CoinFLEX is hoping multi-million dollar incentives will lure big-ticket market makers to its venue — fresh off the heels of a $10 million fundraise.
bit.ly/2z97x7G

CEO CHAT: Vince Molinari, Templum
GlobalTrading
While much ballyhooing and bellybucking surround cryptocurrency and stablecoins, the future might just belong to digital assets and the trading of them, according to Templum Co-Founder Vince Molinari. His New York-domiciled firm is committed to the digital asset space âEUR” operating both a flagship broker-dealer subsidiary, Templum Markets, and a blockchain-enabled, regulated alternative trading system (ATS) for the primary sale and secondary trading of digital assets. Templum has also entered into a strategic partnership with the Miami Exchange Group (MIAX) to launch an SEC-regulated digital securities exchange.
bit.ly/2zcLkWd

Is cryptocurrency helping Russia to avoid US sanctions?
Elena Davies – Coin Rivet
The US has imposed a number of economic sanctions on Russia over the last few years as a form of retaliation against perceived disruptive activity on the world stage. Because of these sanctions, cryptocurrency has emerged as a useful solution for Russia to get around the issue of trade restrictions. Iran, North Korea, Russia, and Venezuela are all investing in cryptocurrencies in an attempt to counter US economic might.
bit.ly/2Zg0kS1

Cryptocurrency salaries are a bad flashback to company scrip
Izabella Kaminska – Financial Times
For most people, it would not be desirable to be paid in a highly volatile asset that routinely drops its value in double-digit percentage terms when compared with real-world currency. But an increasing number of cryptocurrency industry workers are choosing to waive regular payments in stable fiat money for bitcoin and other digital money equivalents of this sort.
/on.ft.com/2P4O037

A Cryptocurrency Custody Battle Is A-Brewing—The Ledger
Robert Hackett – Fortune
Talk about a custody battle. A slew of startups and established financial giants are vying to become the trusted vault for cryptocurrency investors’ wealth, a potentially lucrative business that could greatly boost the market for digital assets.
bit.ly/2ZhtmAH

Government Cryptocurrency Cop Heads to Law Firm
Dave Michaels – Fortune
WASHINGTON—The former government lawyer who managed Washington’s crackdown on cryptocurrency fraud is joining Davis Polk & Wardwell LLP, a white-shoe law firm whose clients include some of Wall Street’s biggest banks and stock exchanges.
/on.wsj.com/2TPx9Qt

Bitcoin was the 6th best performing cryptocurrency this year
Daniel Philips – Decrypt via Yahoo Finance
According to CoinMarketCap, there are nearly 2,500 cryptocurrencies in circulation, but few are as familiar or as dominant as Bitcoin. While most coins don’t even come close to Bitcoin’s overall wealth, there are some that have performed better as an asset than the crypto stalwart. Those holy five are: Chainlink, Binance Coin, Ren, Huobi Token and Tierion.
/yhoo.it/2TNtO4m

Vitalik Buterin: Increasing Transaction Costs Risk Limiting Ethereum Adoption
William Foxley – Coindesk
The increased cost of transacting on the ethereum blockchain is hurting the software’s adoption, says project creator Vitalik Buterin.
bit.ly/2Nni3Re

A Microsoft-backed NYSE operator is gearing up to roll out Bitcoin futures — and it could propel cryptos into the mainstream
Mekebeb Tesfaye – Business Insider
The company has announced that it will launch Bitcoin futures on September 23, bringing to end months of delays, per The Block Crypto. Bakkt, which is owned by Intercontinental Exchange (ICE), which also operates the New York Stock Exchange (NYSE), had originally planned to launch its physical Bitcoin futures as well as Bakkt Warehouse, its in-house custody solution to store Bitcoins for investors, at the end of 2018.
bit.ly/2MtudIB

Letter To European Commission – Joint EBA ESMA Response On Crypto-Assets
Mondovisione
bit.ly/2Nop9EQ

Facebook’s Libra faces EU antitrust probe: Bloomberg
Reuters
Facebook Inc’s (FB.O) proposed digital currency Libra faces anti-trust probe by European Union regulators, Bloomberg reported on Tuesday, citing a document seen by the organization.
/reut.rs/2Nm5vt

Politics

Move over, Illuminati. The conspiracy against Trump’s economy is massive.
Catherine Rampell – Washington Post
When Barack Obama was president and the economic statistics were good, then-candidate Donald Trump said they were fake. When Trump became president and inherited the exact same stats, they suddenly became real.Now that they’re turning south, they’re apparently fake once more.
/wapo.st/2Z7Imlw

Trump Says He Has Authority to Reduce Capital Gains Taxes
Alan Rappeport – WSJ
President Trump said on Tuesday that he was considering giving investors a big tax cut that would primarily benefit the rich, and that he believed he could do it without approval from Congress.
/nyti.ms/2NmPoLZ

Don’t Bet on Trump Rescuing the Stock Market; If the president cares so much about the stock market, why is he pursuing trade policies that are anathema to Wall Street?
James Mackintosh – WSJ
Should investors rely on Donald Trump underpinning the stock market by backing away from trade threats as stocks fall? In short: not as much as they seem to.
/on.wsj.com/2Z7EMI6

Trump Says Jews Who Vote for Democrats Show Ignorance, Disloyalty; Jewish voters have long leaned heavily Democratic, with 71% voting for Hillary Clinton in 2016
Alex Leary – WSJ
President Trump on Tuesday questioned how Jewish Americans could vote for Democratic candidates, as he stepped up criticism of a pair of Democratic congresswomen who have been critical of Israel.
/on.wsj.com/2Z1J6s6

*****History has a way of making these comments look pretty bad.~JJL

How Iran Is Using Currency Reforms to Withstand Trump
Paul Wallace – Bloomberg
U.S. sanctions are battering Iran’s economy. They have all but stopped Western companies from investing in the Islamic Republic, sent oil production crashing to its lowest level in more than three decades and led to a dire scarcity of foreign exchange. Inflation has accelerated to more than 50%, and some foods and medicines are running short. So far, Tehran is hunkering down rather than buckling to U.S. pressure to change its foreign policy, retreat from the region and renegotiate the 2015 nuclear accord abandoned by President Donald Trump. Iran’s latest attempt to ease the pain has been a reform of its currency system.
/bloom.bg/2Z7WE5D

Trump Seeks to Allay Farm-State Uproar in Oval Office Meeting
Jennifer Jacobs, Jennifer A Dlouhy, and Mario Parker – Bloomberg
Incentives for flex-fuel vehicles, high-ethanol fuel on table; Trump allies in oil and agriculture clash on biofuel mandates
President Donald Trump presided over a lengthy Oval Office meeting Monday in which he urged officials to soften the impact of recent policy moves that angered Midwestern farm states critical to his re-election.
/bloom.bg/2NoIFBc

American Families Will Pay $1,000 Per Year For Trump’s China Tariffs, JPMorgan Says
Amy Russo – HuffPost
Despite repeated assurances from Trump administration officials that U.S. consumers are not bearing the brunt of its tariffs on China, a new JPMorgan analysis predicts that the average American family will shoulder $1,000 per year.
bit.ly/2Zj7Lnk

Regulation

SEC Charges TherapeuticsMD With Regulation FD Violations
SEC
The Securities and Exchange Commission today charged TherapeuticsMD Inc., a pharmaceutical company headquartered in Boca Raton, Florida, with violations of Regulation FD based on its sharing of material, nonpublic information with sell-side research analysts without also disclosing the same information to the public.
bit.ly/2NnM4Am

SEC Charges ICO Research and Rating Provider With Failing to Disclose It Was Paid to Tout Digital Assets
SEC
The Securities and Exchange Commission announced today that Russian entity ICO Rating has agreed to pay $268,998 to settle charges that it failed to disclose payments received from issuers for publicizing their digital asset securities offerings.
bit.ly/2NnKRsS

FINRA Announces Nomination Process to Fill Upcoming Firm Vacancies on the National Adjudicatory Council; Petitions for Candidacy Due: October 4, 2019
FINRA
The purpose of this Election Notice is to notify members of an upcoming election to fill one large firm and one mid-size firm seat on the National Adjudicatory Council (NAC), and to announce the FINRA Nominating & Governance Committee (Nominating Committee) nominees for these vacancies. Eligible individuals not nominated by the Nominating Committee who obtain the requisite number of valid petitions may be included as candidates on the ballot by following the petition procedures set forth in FINRA Regulation’s By-Laws and as further described in this Election Notice.
bit.ly/2Z4MzGt

PODCAST; Collaboration, Expertise, Innovation and Responsibility: Introducing FINRA’s Values
FINRA
Corporate culture is defined as the way people act. But what helps people understand how to act, how to behave and how to make decisions? That’s the organization’s values.
bit.ly/2Za4A6c

ASIC to review industry transition towards ending grandfathered remuneration for financial advice
ASIC
ASIC is investigating the progress of transition away from grandfathered conflicted remuneration arrangements for financial advisers. The investigation, directed by the Treasurer following the Government’s commitment to end the practice by 1 January 2021, will review the steps taken by industry participants from 1 July 2019 until the 2021 deadline.
bit.ly/2Z1Gbj8

ASIC issues stop order on Investors Exchange Limited’s PDS
ASIC
ASIC has issued a stop order on a product disclosure statement (PDS) issued by Investors Exchange Limited (IEL). The PDS, Investors Exchange Craft Brewery Investment #1 (dated 15 March 2019), was for a class of interests in the Investors Exchange Investment Fund.
bit.ly/2Z7enKb

ASIC bans Superfunded director for eight years
ASIC
ASIC has banned Mr Max David Goldenberg from providing financial services and engaging in credit activities for a period of eight years.
bit.ly/2Z89xMI

SIFMA Statement On Revisions To The Volcker Rule
Mondovisione
SIFMA issued the following statement from President and CEO Kenneth E. Bentsen, Jr., on revisions to the Volcker Rule announced today:
bit.ly/2Z1POyi

SIFMA Fixed Income Market Close Recommendation In The U.S., The U.K. And Japan For U.S. Labor Day Holiday
Mondovisione
SIFMA has confirmed its previous holiday recommendation for a full market close on Monday, September 2 for the trading of U.S. dollar-denominated fixed income securities in the U.S., the U.K., and Japan in observance of the U.S. Labor Day holiday.
bit.ly/2Z9PrC0

Investing and Trading

Risk Parity Part I: Chasing Diversifiers
Mikhail Samonov – Two Centuries Investments
Although Risk Parity is as close as you get to a pure risk diversification play, just like other diversifiers, the benefits of Risk Parity were sold and bought when both the forward looking consensus about expected returns lined up with attractive recent returns.
bit.ly/31RZbO0

Fidelity Says Number of 401(k) Millionaires Hits Record High
Michael McDonald – Bloomberg
Fidelity Investments said the number of retirement savers with at least $1 million in their account hit a record, as did the employee savings rate, according to data from 401(k) plans that it administers.
/bloom.bg/2Nm4elL

John L. Bowman appointed Senior Managing Director of CAIA Association
ANI
The Chartered Alternative Investment Analyst (CAIA) Association, the global leader in alternative investment education, today announced that John L. Bowman has joined the CAIA Association and been named Senior Managing Director.
bit.ly/2NnhOpi

Junk-Bond Investors Turn Picky as Slowdown Talk Swirls; Issuance of high-yield debt has begun to slow
Daniel Kruger and Sam Goldfarb – WSJ
Debt investors are shying away from junk bonds with lower credit ratings, as concerns about the economic outlook ripple through financial markets.
/on.wsj.com/2Z6AWPb

Volatility Bogeyman Seen Lying in Wait With Event Risk Looming
Joanna Ossinger – Bloomberg
Tallbacken sees swings fueled by almost any Fed rate scenario; BofAML says options are underpricing a variety of risks
The decline in equity volatility from its early August highs looks overdone given the number of risk events that lie ahead, according to market participants.
/bloom.bg/2Z8Gw3B

Muni-Bond Buyers Are Desperate. Risky Borrowers Are Cashing In
Amanda Albright – Bloomberg
Yields on riskiest muni-debt drop to 4%, the lowest on record; Cash added to high-yield muni funds every week since January
Last month, a risky, new deal hit the municipal-bond market. It came from a small borrower in Colorado that was looking to finance the construction of 1,200 luxury homes in the foothills of the Rocky Mountains.
/bloom.bg/2Z4qcRr

How Central Banks, Governments Are Fighting Global Slowdown
Piotr Skolimowski – Bloomberg
Central banks re-arming fast to keep their economies afloat; Europeans loosen budget strings, U.S. weighs more tax cuts
The leaders of the world economy convene this week 8,000 kilometers apart with the same thing on their mind: What more stimulus do they need to support the weakest global growth since the financial crisis?
/bloom.bg/2NmLQJN

Institutions

Goldman Pursues Majority Stake in Its China Venture; Goldman Sachs applies for permission with the goal of taking over the local operation completely
Chao Deng – WSJ
Goldman Sachs GS -1.10% Group Inc. has applied with Chinese regulators to take a majority stake in an investment-banking joint venture, the most recent move by a foreign company to tap the nation’s vast financial sector.
/on.wsj.com/2Z4C0mE

BlackRock Unit Gets Approval to Take Russia-Linked Firm’s Stake in Cybersecurity Company; In an unusual deal, Cfius allowed a private-equity firm with some Russian backing to transfer its stake in Cofense, but retain a financial interest
William Louch and Dawn Lim – WSJ
A national-security panel that oversees foreign investment in U.S. businesses approved the transfer of a stake in cybersecurity company Cofense Inc. from a Russia-linked private-equity firm to funds managed by BlackRock Inc.
/on.wsj.com/2Z4vUTn

Hedge fund performance forces prime brokers to rethink risk; Prime brokers are stepping up their due diligence of hedge funds, becoming more forensic when looking to bring a hedge fund onto their balance sheet.
Joe Parsons – The Trade
Performances within the hedge fund industry last year are causing prime brokers to reassess the credit and counterparty risk of financing.
bit.ly/2Nlto41

Goldman Sachs claws its way into contention for Saudi Aramco IPO; Bank makes strides after charm offensive including former Trump official Dina Powell
Anjli Raval, Andrew England, James Fontanella-Khan and Simeon Kerr – FT
Goldman Sachs has clawed its way into contention for a role in Saudi Aramco’s planned stock market listing, after a months-long charm offensive by top executives, including former Trump administration official Dina Powell, said several people briefed on the matter.
/on.ft.com/2Z7Xrn7

Regions

Italy’s Prime Minister Giuseppe Conte says he’ll resign, attacks Salvini as ‘irresponsible’
Livia Borghese, Ivana Kottasova and Kara Fox – CNN
Italy’s Prime Minister Giuseppe Conte will resign on Tuesday, effectively averting a no-confidence vote tabled by the far-right League party’s leader Matteo Salvini.
In an hour-long speech at the Italian Senate on Tuesday afternoon, Conte launched a scathing attack on Salvini, the country’s Deputy Prime Minister and Interior Minister, who is thought to be vying for his job.
/cnn.it/31QuWqQ

China Resists Charge by Twitter, Facebook of Disinformation Effort; Social media sites blocked hundreds of accounts they said were Beijing-linked attempts to undermine pro-democracy protestors in Hong Kong
WSJ Staff
China’s government pushed back against moves by Twitter Inc. and Facebook Inc. to curb accounts the companies said were part of a state-sponsored disinformation campaign against Hong Kong protesters, saying the posts were simply Chinese citizens overseas expressing their views.
/on.wsj.com/2Z9MKQU

Gold’s prized status slips among Indians; Efforts are under way to reinvent most tangible of assets as one fit for India’s growing digital economy
Benjamin Parkin – FT
That a gold trader in London has to watch the progress of South Asian monsoon rains says something about the depth of India’s love for the precious metal.
/on.ft.com/2NlOxv6

German 30-year Bund sale faces weakest demand since 2011; First sale of Bunds of such long maturity with negative yield garners tepid investor interest
Tommy Stubbington – FT
Germany has sold 30-year debt at a negative yield for the first time, although demand at Wednesday’s auction was weak as some investors baulked at the prospect of paying to tie up their cash for three decades.
/on.ft.com/2NwYIx5

Collapse in Argentine bonds alerts distressed-debt specialists; Decline comes amid market rout that razed stocks and knocked value of peso
Colby Smith – FT
Bargain-hunters are beginning to circle Argentine assets after last week’s savage sell-off, but some investors say they would need prices to drop further before the risk of an Alberto Fernández presidency is fully factored in.
/on.ft.com/2Noexpu

Norway’s $1 Trillion Wealth Fund Ends Bet on Higher Rates
Sveinung Sleire and Mikael Holter – Bloomberg
Wealth fund holds $67 billion in negative yielding bonds; Fund now has relatively even duration to bond benchmark
Norway’s $1 trillion wealth fund ended a long-running bet on higher interest rates as market turmoil drove a quarter of its massive bond portfolio into yields below zero.
/bloom.bg/2NlTZ0N

Switzerland Has a New Way to Impose World’s Lowest Interest Rate
Catherine Bosley and Richard Jones – Bloomberg
SNB appears to have intervened recently to weaken franc; Some economists forecast it will have to cut rates as well
The Swiss National Bank has a new way of enforcing the world’s lowest interest rate. With the franc near a two-year high against the euro, the SNB’s decade-old battle against an overly strong currency is back in focus. There’s evidence it’s been intervening again and analysts are increasingly betting that it will soon follow with a rate cut.
/bloom.bg/2NlSW0T

Germany Moves to Cut Reunification Tax for All But the Wealthy
Raymond Colitt – Bloomberg
Chancellor Angela Merkel’s cabinet on Wednesday agreed to abolish a tax that was used to help finance reunification for all but the very wealthy.
/bloom.bg/2Za0TgQ

Brexit

Young Northern Irelanders Worry Bloody History Could Return After Brexit; Region faces the possibility that a new frontier after an abrupt British exit from the EU might again divide and inflame Ireland
Alexa Corse and Paul Hannon – WSJ
When Patsy Doyle was in his 20s, he and several friends set out from Belfast for a weekend away in Ireland. They never made it. They were stopped at a border checkpoint by British security forces, searched and detained for several hours before returning home.
/on.wsj.com/2Z90Amz

Boris Johnson Needs Something From Everyone at the G-7; Britain’s prime minister has to get them all on board with his Brexit vision. Unfortunately, history may come back to haunt him.
Alex Morales – Bloomberg
Boris Johnson wants something from everyone at the Group of Seven meeting in Biarritz, France this weekend. He’s hoping the half of the room that’s in the European Union will give him a better exit deal, and the half that isn’t will offer him free-trade deals.
/bloom.bg/2NmLHGf

EU rejects Johnson’s call to renegotiate terms of Brexit; Expectation of no-deal rises as prime minister prepares to meet Merkel and Macron
Sebastian Payne, Guy Chazan, Mehreen Khan and Arthur Beesley – FT
The EU rejected Boris Johnson’s latest call for a fundamental reworking of the terms for Britain’s withdrawal from the bloc on Tuesday as the UK prime minister prepared to meet German chancellor Angela Merkel for the first time since he took office last month.
/on.ft.com/2NjdxDb

Brexit has chilling effect on UK inward investment; FT analysis finds number of jobs created since EU referendum has fallen by 19 per cent
Valentina Romei – FT
The UK’s strong track record in securing overseas investment is being put at risk by Brexit, with the number of jobs created and foreign capital deployed in Britain falling sharply since the EU referendum, according to Financial Times analysis.
/on.ft.com/2Nob4Y0

Miscellaneous

Historic Rise of College-Educated Women in Labor Force Changes Workplace; Companies are restructuring their compensation and benefits packages to attract these qualified women
Likhitha Butchireddygari – WSJ
This year is shaping up to be the first year that women make up the majority of the college-educated labor force, a milestone that is already altering benefits packages offered by companies and one that could influence family sizes in the future.
/on.wsj.com/2Z1MtiK

Mediation needs more women and fewer corporate lawyers; London needs a more diverse pool of mediators to compete with the likes of Singapore
Madison Darbyshire – FT
Since the initial days of training courses for mediators in Britain in the 1990s, mediation as a practice in the UK has boomed. It tends, however, to be a field dominated by men.
/on.ft.com/2NsUEgW

More than half a billion bees dropped dead in Brazil within 3 months
Caitlin O’Kane – CBS News
More than half a billion bees dropped dead in Brazil within just three months, according to Bloomberg. Researchers say the main cause of death is pesticides, which could end up affecting more than the bees.
As some of the most integral pollinators in nature, bees contribute to the reproduction of various plants. About 75% of the world’s crops depend on pollination by bees, the United Nations Food and Agriculture Organization (FAO) reports.
/cbsn.ws/2KWTUy3

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