Big banks are struggling to get to grips with life after Libor

May 1, 2019

First Read

OCC Developments To Consider Before the Options Industry Conference

The Options Industry Conference kicks off today, May 1. Much has changed for the industry’s central counterparty, the OCC, since last year’s gathering in Amelia Island, Fla., and in this video, OCC CEO John Davidson walks viewers through those developments, such as alterations to its clearing fund methodology.

Watch the video »


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Coinbase packs up Chicago office, brings talent to California
Matt Raebel – John Lothian News

You know how coffee is best when it’s either hot or iced, but once it becomes lukewarm nobody wants anything to do with it? That’s about where the crypto markets are right now. Like a fresh cup of coffee, in late 2017 to early 2018 the crypto markets were hot and the more people indulged in them, the more excited – even borderline euphoric – they got about what seemed to many at the time to be a potentially limitless number of new opportunities for finance and technology through the magic of distributed ledgers and digital assets. Now, it’s 2019 and the caffeine buzz is wearing off, causing many companies to rethink their business models. Coinbase, which operates the second-largest U.S.-based crypto exchange in the world, is no exception.

To read the rest of this commentary, go here.


Hits & Takes
JLN Staff

Look for news from MIAX coming out during the Options Industry Conference in Miami, which MIAX is hosting.~JJL

On Wednesday, May 1, 2019 (today) at 10:00 a.m. ET, CFTC Chairman J. Christopher Giancarlo will testify before the U.S. House Agriculture Subcommittee on Commodity Exchanges, Energy and Credit on The State of the CFTC. This will take place at 1300 Longworth House Office Building, Washington, D.C. The hearing will be live streamed.~SR

A lawyer representing Tether, the stablecoin that was supposedly backed 1:1 by U.S. dollars, admitted yesterday that Tether is not backed 1:1 by U.S. dollars. Despite this, Tether’s website still says that it is.~MR

Patrick Thornton-Smith is running a 5K with his friend David Setters to raise money for Futures For Kids, and in honor of Bernadette Connolly, the FIA staffer who died last year of cancer. Those who know Dave know he has MND, also known as ALS, and is in a wheelchair. So Patrick will be pushing Dave for the race, unless Dave ends up with Patrick on his lap with someone else pushing both of them across the finish line. To donate, please go here. FFK is a great cause and both Patrick and Dave were there at the beginning of the charity that does so much for a variety of charities.~JK


Chase bank tried to be relatable on Twitter and got absolutely dunked on
Brands, may we remind you for the umpteenth time, that if you’re trying to get #relatable on Twitter, you’re opening yourself up to being completely and utterly owned. JPMorgan Chase was the latest brand to get shut down over a failed attempt at reaching the masses with a tweet that has since been deleted. However, the internet always keeps the receipts.

**People haven’t forgotten the bailout, and folks at Chase are wondering why people think cryptocurrencies seem like a good alternative to banks. Twitter’s Teppec posterized Chase with authority.~JK


ErisX adds $20 million to its Series B as it links up traders to its new spot market
Celia Wan and Frank Chaparro – The Block Crypto
ErisX announced on Tuesday that it’s raised another $20 million from a string of new investors as it prepares for life after the launch of its spot market.

**How does “cha-ching” sound in crypto?~JK


Billionaire hedge fund owner commits to Chicago
Citadel Chairman and CEO Ken Griffin declared his commitment to stay in the city despite its crime and “cronyism.”
Lynne Marek, Crain’s Chicago Business
Chicago billionaire Ken Griffin declared his commitment to Chicago today, saying he wouldn’t let the city’s crime, political cronyism or other problems drive him or his family out.

**The grass is always greener, Ken. This is your home.~JK


Tuesday’s Top Three
Our top story of the day Tuesday was the New York Times piece Bridgewater’s Ray Dalio Tops the List of Hedge Fund Manager Compensation. Second was the Medium piece Step Into The Matrix: A “Market Wizards” Retrospective With Tony Saliba, Part One. Third was the JLN aggregation of Reflections on Bart Chilton, who died on Saturday.


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Lead Stories

Big banks are struggling to get to grips with life after Libor; Some say the cost of shifting to new borrowing benchmarks could top Brexit
Katie Martin – FT
The reform of financial benchmarks may lack the romance and drama of defining moments in western political history, but it is still the biggest and potentially most destabilising upheaval in banking and markets that almost nobody is talking about.

China Unveils Plans to Further Open Up Banking and Insurance Sectors
Regulator to remove single shareholding caps for local lenders; Easing also offers foreign insurers greater access to China
China took another step in opening its $44 trillion financial sector to the world, announcing plans to remove limits on ownership in local banks and scrap size requirements for foreign firms that operate onshore.

LSE Says Brexit Hasn’t Changed Client Behavior at Clearing Arm
Viren Vaghela – Bloomberg
London Stock Exchange Group Plc said the U.K.’s looming departure from the European Union isn’t deterring firms from closing deals on some of its markets despite challenging conditions.

Copenhagen Stock Exchange Starts New Trading Period at Close
Christian Wienberg – Bloomberg
Nasdaq Inc.’s stock exchange in Copenhagen will introduce a new trading period at the end of each day where investors can continue to buy and sell shares at the closing auction price.

Bitcoin Is Trading at $300 Premium on Exchange Accused of Mischief
Vildana Hajric – Bloomberg
Bitfinex, Tether accused of obscuring loss of money last year; Tether says its stablecoin is backed 74% by cash, securities
Bitcoin is trading at a more than $300 premium on the embattled Bitfinex cryptocurrency exchange amid speculation investors are exiting the Tether stablecoin in the wake of allegations the affiliated companies that control both the exchange and the stablecoin engaged in a cover-up to hide hundreds of millions in losses.

UK regulator boosts Lloyds by cutting capital requirements; A review by the Bank of England set a lower rate for Lloyds’ ‘systemic risk buffer’
Nicholas Megaw – FT
Shares in Lloyds Banking Group climbed on Wednesday after an update from regulators allowed it to free up around £1bn in capital and raised the prospect of further share buybacks for investors.

Ken Griffin decries socialism as he’s named 3rd ‘richest’ hedgie
Carleton English – NY Post
Ken Griffin may be one of the smartest guys on Wall Street, but he still can’t understand why millennials are attracted to socialism.

**And this, Citadel CEO, Ken Griffin, on Capitalism from Bloomberg Radio.

Judge Approves Deal Spelling Out Oversight of Elon Musk’s Tweets; Order lists financial milestones, other events that Tesla chief executive can’t tweet about without preapproval
Dave Michaels – WSJ
A federal judge approved a new deal clarifying how Tesla Inc. TSLA -1.15% must oversee Elon Musk’s use of Twitter , an outcome that erases the risk its chief executive would be punished for violating the original agreement.

Exchanges, OTC and Clearing

London Stock Exchange first quarter boosted by clearing house; Quarterly income at LCH operations rise 17 per cent to prop up LSE earnings
Philip Stafford – FT
The London Stock Exchange Group shrugged off a weak first few months for trading and new listings as banks poured their swaps business through its LCH clearing operations.

Traiana Enhances Credit Risk Hub to Boost FX Prime Broker Control
CME Group
Traiana, the leading infrastructure service for trade life-cycle and risk management solutions, today announced significant enhancements to its Credit Risk Hub. FX prime brokers (FXPBs) can now define trade information in more detail to increase credit risk controls and reduce the risks of credit over-allocation.

London Stock Exchange Group Plc Trading Statement Including Revenues And KPIS For The Three Months Ended 31 March 2019 (Q1)
London Stock Exchange Group
Good overall Q1 income performance against challenging market backdrop; Q1 total income up 5% year-on-year to £546 million; Group continues to develop and invest for growth, with the acquisition of minority stake in Euroclear and launch of new services in Post Trade and Information Services

2019 Macquarie Australia Conference Speaking Notes

2019 Macquarie Australia Conference Presentation


Vela enters into strategic partnership with Enyx
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, and Enyx, a leading developer and provider of ultra-low latency technologies and solutions for the financial industry, today announced a partnership to provide Vela clients with access to Enyx’s FPGA-based technology, initially focused on ultra-low latency market data solutions.

Fidelity’s cloud computing head joins MarketAxess as tech chief; Michael Baker led Fidelity Investments’ digital transformation to the cloud for the past two years.
Hayley McDowell – The Trade
The head of enterprise cloud computing at Fidelity Investments has left the role after more than two years to join MarketAxess as its chief technology officer.

TradeStation Securities Signs with Trillium Surveyor for Trade Surveillance
Trade Station
Trillium, a proprietary trading and trading technology company, announced today that TradeStation, a Monex Group company and award-winning* online broker-dealer and futures commission merchant, will now use Trillium’s Surveyor platform for trade surveillance.

MapsPeople Announces Partnership with Maven Wave to Further Develop Its MapsIndoors Offering
Press Release
MapsPeople announces its strategic partnership with Maven Wave to further develop its MapsIndoors solution, an indoor navigation platform that is customizable to each company’s specific needs, with the ability to scale alongside your business.


Nasdaq Adding Index for XRP Cryptocurrency to Global Data Service
Yogita Khatri – Coindesk
Stock exchange operator Nasdaq is adding yet another cryptocurrency index – this time for the world’s third-largest cryptocurrency, XRP. The company announced Monday that, through its partnership with New Zealand-based blockchain data and research firm Brave New Coin, it will offer “real-time” index information for XRP starting May 1. Specifically, the XRP Liquid Index (XRPLX) will offer a spot or reference rate for the price of XRP, quoted in U.S. dollars and “based on the most liquid ends of their markets.”

DTCC Shines A Surprising Light On Enterprise Cryptocurrency
Michael del Castillo – Forbes
Cryptocurrency took center stage at the annual Fintech Symposium hosted by the Depository Trust and Clearing Corporation, which keeps the master record for $48 trillion worth of stocks, bonds, and other assets. Literally. While other hot technologies like artificial intelligence and cloud were all highlighted in various ways, the only two panels at the event, featuring DTCC clients, were on cryptocurrency and the underlying technology that makes it possible, blockchain.

Australian Tax Agency Goes After Cryptocurrency Traders in Exchange Data Push
William Suberg – Cointelegraph
Australia’s tax agency, the Australian Tax Office (ATO), will seek to contact cryptocurrency traders personally about tax issues as part of a new data collection scheme, officials confirmed in a statement on April 30. The ATO, which is working in conjunction with the Australian Securities and Investment Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC), says it will demand information on operations from local cryptocurrency exchanges.

U.S. Charges Pair With Bank Fraud in Cryptocurrency-Trading Case
Christian Berthelsen – Bloomberg
Federal prosecutors accused an Arizona man and an Israeli woman of providing illicit financial services to people using cryptocurrency, claiming they concealed the true nature of hundreds of millions of dollars flowing in and out of banks around the world. Reginald Fowler, of Chandler, Arizona, and Ravid Yosef, of Tel Aviv, were accused of buying and selling cryptocurrency with counterparts around the world and misrepresenting the payments as real estate proceeds to banks where they had set up accounts.

US, Japan, and South Korea Record the Highest Number of Cryptocurrency Exchange Visits
Hassan Maishera – Blokt
A look at the number of visits to the top 100 most popular cryptocurrency exchanges reveals that most of the visitors are from the United States. Japan and South Korea come in second and third places respectively despite recording figures that are far less than that of the US.

Cryptocurrencies Edging Slowly Lower
Jim Preissler – Forbes
The week began with the market edging downward. Nine of the top 10 coins by market capitalization were lower with the exception rather ironically being Tether (USDT). Bitcoin (BTC) started the week at $5,150 and Ethereum (ETH) at $151.80. USDT had rallied up to $0.9770.

Two Charged With Running ‘Shadow Banking’ Service for Crypto Exchanges
Stan Higgins – Coindesk
The U.S. Department of Justice announced Tuesday that it has hit two individuals with bank fraud charges in connection to a system for depositing funds to cryptocurrency exchanges. In a statement, U.S. Attorney’s Office for the Southern District of New York alleged that Reginald Fowler of Arizona and Ravid Yosef, said to live in Tel Aviv, Israel, were part of a scheme that involved using bank accounts to move money into a series of unnamed cryptocurrency exchanges.

U.S. Charges Pair With Bank Fraud in Cryptocurrency-Trading Case
Christian Berthelsen – Bloomberg
Federal prosecutors accused an Arizona man and an Israeli woman of providing illicit financial services to people using cryptocurrency, claiming they concealed the true nature of hundreds of millions of dollars flowing in and out of banks around the world.

Crypto Community Reacts to Tether Admitting USDT Not Fully Backed
Rick D – NewsBTC
According to the company behind it, stablecoin USDT is not fully backed by fiat currency deposits. It was revealed today that the controversial crypto asset firm Tether only holds around 74 percent of the total value of USDT’s current circulating supply. Tether and the crypto exchange Bitfinex are currently defending allegations from the New York Attorney General’s office that the latter borrowed $600 million from Tether to stay afloat after the trading venue reportedly lost $850 million.

Tether Says Stablecoin Is Only Backed 74% by Cash, Securities
Olga Kharif – Bloomberg
Tether, Bitfinex backers seek to vacate New York injunction; New York alleges firms engaged in coverup to hide losses
The companies behind the digital exchange Bitfinex and the cryptocurrency Tether said the so-called stablecoin is backed by cash and short-term securities equal to 74 percent of the outstanding coins rather than completely pegged to the U.S. dollar.


Trump Promised to Bring Back $4 Trillion in Offshore Cash. He Missed by $3.3 Trillion
Laura Davison and Jeff Kearns – Bloomberg
Corporate America brought $664.9 billion of offshore profits back to the U.S. last year, falling short of the $4 trillion President Donald Trump said would return as a result of the 2017 tax overhaul.
Companies repatriated $85.9 billion in the fourth quarter of 2018, the lowest sum for the year and down from $100.7 billion the previous quarter, Commerce Department data showed Wednesday.

Republican doubts grow about naming Stephen Moore to the Fed; Former Trump campaign adviser faces backlash over comments about women
Sam Fleming – FT
Stephen Moore is facing growing opposition to securing a nomination to the Federal Reserve as a number of Republican senators raise questions about his candidacy.

Trump Wants to Block Deutsche Bank From Sharing His Financial Records
David Enrich – WSJ
Over two decades, Deutsche Bank lent Donald J. Trump billions of dollars, even as his tarnished financial record put him off limits for most of Wall Street.

For Trump, Stalling Deutsche Bank Subpoena May Be Victory Enough
Bob Van Voris, Greg Farrell, and Erik Larson – Bloomberg
Suit by president’s family isn’t slam dunk, legal experts say; A ‘direct showdown’ over executive and congressional powers
President Donald Trump doesn’t have a slam-dunk legal case for keeping his banking records away from congressional investigators, legal experts say.


CFTC Commissioner Behnam Issues Letter Regarding Diversity & Inclusion at the CFTC
Commodity Futures Trading Commission (CFTC) Commissioner Rostin Behnam today issued a letter regarding diversity and inclusion in the CFTC workforce. The letter is addressed to the Director of the CFTC’s Office of Minority and Women Inclusion (“OMWI”). Commissioner Behnam’s letter sets out data regarding underrepresentation of minorities and women at the CFTC, particularly in management positions, and asks questions regarding the CFTC OMWI program and how this underrepresentation can be addressed and remedied.

FCA begins review of financial advice market
The Financial Conduct Authority (FCA) has today launched a Call for Input asking for feedback on its proposed approach to reviewing the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).

SEC’s Office of the Advocate for Small Business Capital Formation to Host Roundtable to Kick Off National Small Business Week
The Securities and Exchange Commission today announced that its Office of the Advocate for Small Business Capital Formation will host a roundtable on May 6 to hear from small businesses and their investors. The roundtable will celebrate the kickoff of National Small Business Week, which is May 5-11.

Beyond Hollywood: Money Laundering in the Securities Industry
When three hapless employees inadvertently embezzle a bunch of cash in the movie “Office Space,” they decide the best way to cover it up is to launder it. But the thing is, they don’t even really know what money laundering is and they learned that even the dictionary couldn’t fill them in.

MiFID II: ESMA makes new bond liquidity data available
The European Securities and Markets Authority (ESMA) has started today to make available new data for bonds subject to the pre- and post-trade requirements of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) through its data register.

MiFID II: ESMA delays the publication of the systematic internaliser regime data for equity, equity-like instruments and bonds
The European Securities and Markets Authority (ESMA) has decided today to delay the publication of the systematic internaliser (SI) regime data for equity, equity-like instruments and bonds.

Democratic commissioner objects to SEC settlement with Musk; Robert Jackson issues rare dissenting statement in dispute over Tesla chief’s tweets
Kadhim Shubber – FT
A Democratic commissioner at the Securities and Exchange Commission has objected to the regulator’s latest settlement with Elon Musk.

Investing and Trading

Big companies are tying themselves in ethical knots; The likes of JPMorgan and BlackRock cannot ignore such concerns, but also have a duty to make money
Brooke Masters – FT
JPMorgan Chase chief executive Jamie Dimon thinks it is time for his fellow corporate chieftains to take a stand. “CEOs: Your country needs you,” he wrote in early April in a letter to shareholders. “It’s not enough just for companies to meet the letter and the spirit of the law. They can also aggressively work to improve society?.?.?.?And they can decide, with proper policies and regulatory oversight, with whom and how they will do business.”

Alphabet’s Sergey Brin, Larry Page, Erc Schmidt Lose $9 Billion
Tom Metcalf – Bloomberg
Larry Page, Sergey Brin and Eric Schmidt had about $9 billion wiped from their net worths in early trading Tuesday after Alphabet Inc. reported slowing ad sales.

NASA Says Aluminum Fraud Caused $700 Million Satellite Failures
David Stringer – Bloomberg
Norsk Hydro unit supplied faulty materials: investigation; Supplier earlier agreed to resolve criminal, civil cases
Faulty materials supplied by a unit of Norsk Hydro ASA, one of the world’s top aluminum producers, led to more than $700 million of losses in two failed NASA satellite launch missions, according to an investigation by the space agency.

One of Wall Street’s Last Stock Bears Goes Completely Bullish
Luke Kawa – Bloomberg
Wells Fargo hikes S&P 500 price target to 3,088 for 2019; Fed pivot, strengthen in financials informed bullish view
The U.S. equity market’s torrid start to the year has converted one of its last doubters.

Bond Traders Dabble With Irrational Exuberance; Debt market overconfidence leads financial commentary.
Robert Burgess – Bloomberg
History shows that betting against the bond market is a fool’s errand. There’s no shortage of smart people over the years who have prematurely called the end of the bull market that began in the early 1980s. And while the market hasn’t avoided some rough patches, with the Bloomberg Barclays U.S. Treasury Index posting relatively small losses in 1994, 1999, 2009 and 2013, there’s been nothing like the “bondageddon” predicted. Even so, it’s hard not to think that bond traders are a bit too overconfident these days.

Uber IPO Is Oversubscribed by Day Two of Roadshow
Ruth David and Eric Newcomer – Bloomberg
Ride-hailing giant plans to sell 180 million shares next week; IPO will raise up to $9 billion at top of targeted range
Uber Technologies Inc. has demand for all of the shares offered in its initial public offering days after it began marketing the sale, people familiar with the matter said.


Hedge funds pile into bets on continued calm; Central banks’ pause in monetary policy tightening has easing financial conditions and reinvigorated stock market rally
Joe Rennison – FT
Investors are making record bets on stock market calm after a U-turn in monetary policy helped erase losses from a sharp sell-off in the fourth quarter of last year.

Edward Bramson does not deserve to rule Barclays; The activist investor has to prove his worth before dictating how the bank is managed
John Gapper – FT
There has barely been a dull moment at Barclays’ corporate and investment bank since it was created 33 years ago with the acquisition of a stock broker and a jobber leading up to the 1986 deregulation of the City of London. Nor have there been many times where it was both as profitable and reliable as Barclays’ retail bank.

David Cameron falls short of target for $1bn China fund; Office of former UK prime minister hopes first fundraising round will be concluded soon
Jim Pickard – FT
David Cameron has failed to raise the cash he was targeting for his planned $1bn China investment fund 16 months after it was announced, with one person who was asked to invest describing the project as “moribund”.

Danske Says Bank Has Excess Capital to Reward Shareholders
Frances Schwartzkopff – Bloomberg
Bank will review options regarding share buyback at year-end; Estonian dirty-money case continues to overshadow business
Danske Bank A/S has built up enough extra capital to commit to dividends and, at the end of this year, will look into the option of resuming share buybacks.

JPMorgan’s Brunei Boycott Deserves a Small Cheer; JPMorgan has joined firms protesting the sultanate’s anti-gay laws. Banks’ attachment to Saudi Arabia shows the limits of their moral high ground.
Elisa Martinuzzi – Bloomberg
JPMorgan Chase & Co. is the latest global bank to take a stand against Brunei after the oil-rich sultanate introduced legislation that punishes gay sex with death by stoning. The idea that financial leaders will choose their business partners on the basis of ethical principles marks a notable shift. But praise for this push onto the moral high ground should be limited.

Interactive Brokers UK Profit for 2018 Rises by 11.3% YoY; The company also managed to report a solid increase in turnover for the financial year.
Celeste Skinner – Finance Magnates
Interactive Brokers (U.K.) Limited (Interactive Brokers UK) has filed its annual report and financial statements for the year ended December 31, 2018, revealing an overall solid performance from the company during the year.


UK redress scheme accused of misleading London Capital & Finance investors; FSCS apologises for ‘confusion’ it may have caused over whether mini-bonds were protected
Caroline Binham, Kate Beioley and Jonathan Ford – FT
Retail bondholders facing the wipeout of their savings in a £236m investment scandal are accusing the UK’s financial compensation scheme of giving misleading information over the protection they should expect.

Turkey: The Country Where Crypto Exchanges Are Beating the Bear market
Leigh Cuen – Coindesk
With the Turkish lira dropping to a six-month low against the dollar last week, bitcoin is continuing to pick up even more traction in Istanbul.
Andy Cheung, head of operations at the global crypto exchange OKEx, told CoinDesk that over 30,000 Turkish users signed up for the platform since it expanded services to Turkey on March 26. Turkey’s growth as a leading bitcoin market is supported by other data as well.


Why Boris Johnson looms large over the Brexit endgame; The prospect of the former foreign secretary becoming prime minister permeates all debates on what comes next
George Parker – FT
It was just after 11am on March 12 that hope died in Downing Street. Several hours earlier a relieved Theresa May had arrived back in Number 10 bleary-eyed, believing “clarifications” she had secured in Strasbourg from European Commission president Jean-Claude Juncker would finally help her get her Brexit deal through the House of Commons.

Theresa May Faces Triple Brexit Questions as She Runs Out of Moves
Kitty Donaldson and Robert Hutton – Bloomberg
Negotiations between May’s Tories and opposition continue; Prime minister wants the talks wrapped up by next week
The U.K.’s main opposition Labour Party predicted Theresa May will have to accept a customs union with the European Union as the price for getting her Brexit deal ratified in Parliament.

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Past Newsletters

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