Bitcoin-Rigging Criminal Probe Focused Tether Ties; CFTC presses ISDA over reforms

Nov 21, 2018

Bitcoin-Rigging Criminal Probe Focused Tether Ties; CFTC presses ISDA over reforms

Nov 21, 2018

First Read

Hits & Takes
JLN Staff

A reminder to our readers that there will not be a JLN newsletter tomorrow, but there will be one on Friday. JLN Options will not be published Thursday or Friday. Happy Thanksgiving everybody!~SD

Last Wednesday’s T4Youth charity table tennis tournament raised $100k for the Chicago Tech Academy. The event featured a ton of trading and financial firms and was won by Hudson River Trading. Hope to see you there next year!~SD

The newest episode of the CFTC’s podcast is out – the guest is TLDR Capital’s Andre McGregor, a cyber security expert. McGregor was a technical consultant on the TV show “Mr. Robot.”~SD

A data point from the Bank of England’s Bank Underground blog regarding sovereign debt: “We estimate the total value of debt in default last year at US$216.4 billion, 0.3% of world public debt. Defaults had the biggest impact globally in the 1980s, peaking at 6.2% in 1990, and they have fallen substantially since then, even in 2012-2013 when Euro Area sovereigns were involved.”~SD

The Barclay CTA Index, after losing 1.29 percent in October, is now down 2.87 percent for the year. ~SD


WFE launches new website & members’ portal
The World Federation of Exchanges (WFE), the global industry group for exchanges and CCPs, has announced that it has launched a new website and members’ portal as part of its ongoing transformation programme, using digital communications as a key element of its engagement with industry stakeholders and its membership base.


To The Cloud and Back

“The coolest thing that is happening is these financial companies and high frequency trading companies are growing to where they not only depend on our infrastructure for trading, but to run the company itself from an enterprise standpoint.”

The cloud – you’ve probably heard about it. In this video, Apcela’s Director of Solutions Architecture Hamza Seqqat talks about what financial firms are thinking about when upgrading their networks.

Watch the video and read the rest »


Tuesday’s Top Three
Everyone can’t help watching a train wreck. And so it was with OptionSellers, which went bust with the owner giving a farewell apology on YouTube. The FT led with Options trading firm blows up amid natural gas volatility, followed by Spencer Doar’s coverage in JLN Options with OptionSellers Goes Kaput; Bond Volatility. Third was the video of OptionSellers’ James Cordier / James Cordier – Full apology video. Now move along folks, nothing more to see here. Oh, and Happy Thanksgiving.


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Lead Stories

Bitcoin-Rigging Criminal Probe Focused on Tie to Tether
Matt Robinson and Tom Schoenberg – Bloomberg
DOJ investigating whether Tether was used to prop up Bitcoin; U.S. case part of broader review of possible coin manipulation
As Bitcoin plunges, the U.S. Justice Department is investigating whether last year’s epic rally was fueled in part by manipulation, with traders driving it up with Tether — a popular but controversial digital token.

US derivatives regulator presses industry body over reforms; CFTC seeks timeframe for action on clean-up of credit default swaps market
Joe Rennison – FT
The main US derivatives regulator has raised the pressure for a clean-up of credit default swaps after a series of controversial trades shook the market this year. Christopher Giancarlo, chair of the Commodity Futures Trading Commission, wrote to Scott O’Malia, chief executive of the International Swaps and Derivatives Association, in September to “request an update on ISDA’s present progress and expectations for the timing of the completion of this work”.

US pick for global finance regulator shows quest for balance; Choice of Fed governor Quarles to chair FSB aims to foster Washington’s engagement
Claire Jones, Caroline Binham and Sam Fleming – FT
In an era where the multilateral institutions that set the global economic agenda face mounting challenges to their authority, not least from the US administration of President Donald Trump, it was never going to be easy to find a leader for one of the bodies policing the world’s financial companies.

Launch update + reader FAQs; Bakkt Warehouse to feature warm & cold wallet insurance
Kelly Loeffler, Bakkt via Medium
As we speed into the US holiday season and toward year-end, there’s no shortage of progress at Bakkt. Our efforts over the last few weeks have resulted in important new features to support our offering, so I wanted to provide an update on what’s in flight.
First, our team is hard at work with customer onboarding and securing regulatory approvals. We’re focused on helping participants prepare for our launch, and we appreciate the tremendous collaboration among our clearing firms and customers.

****Bakkt’s launch date for bitcoin futures has been moved from December to January 24, 2019. More coverage can be found in our “Exchanges” section.~SD

Theresa May casts doubt on possibility of no-deal Brexit
Henry Mance – FT
Theresa May has cast further doubt on the possibility of Britain leaving the EU without a deal. Although the UK prime minister once used the threat of no-deal to win support for her negotiating strategy, on Wednesday she appeared to take a different line ó arguing that hardline Eurosceptics could prevent Brexit altogether if they voted down her deal.

3 of the best-known crypto trading firms are banding together on a new venture to bring crypto to the next level
Coin Vigilance
Three major cryptocurrency over-the-counter traders ó Genesis Trading, Cumberland, and Circle Trade ó announced they would provide data for a new index, dubbed MVIS Bitcoin US OTC Spot Index. The new product, which is run by MVIS, a division of asset manager VanEck, is a standout given it draws data from OTC desks as opposed to exchanges, such as Coinbase and Kraken. “Transparency is coming to the over-the-counter market,” Gabor Gurbacs, head of digital asset strategy at VanEck said in an exclusive interview with The Block. “Before this no one would publish the price and it happened behind the scenes.”

Founder of Stricken Hedge Fund Promoted Naked Option Selling
Naureen S Malik, Isis Almeida and Marvin G Perez – Bloomberg’s James Cordier wrote book on options trade; Some of firm’s accounts held naked options positions: lawyer
James Cordier was a long-time proponent of using “naked” options to trade in the volatile energy market. In numerous articles and even a book, he touted the potential rewards, telling investors they can produce consistent results. Now it turns out that style of investing may have been at least partially behind the collapse of Cordier’s Florida hedge fund,

Seventeen Pilots
Themis Trading Blog
Since SEC Chairman Jay Clayton and Division of Trading & Markets Director Brett Redfearn took over last year, the SEC has been doing a tremendous amount of market structure work. While the tick size pilot and the proposed access fee pilot have received a lot of attention, there are other pilots that the SEC is reviewing. Earlier this year at an STA event in Chicago, Brett Redfearn said that there are currently 17 pilots being run out of the Division of Trading and Markets.

Hard Brexit: An Impact Assessment for US Market Participants and Entities Registered with the CFTC
This document highlights the issues that must be addressed in the case of a ‘hard’ Brexit. Specifically, it: -Identifies exiting US Commodity Futures Trading Commission (CFTC) equivalence determinations and no- action relief that is currently provided to the European Union (EU) and should be extended to entities registered with the CFTC in order to preserve continuity and market stability once the UK exits the EU. -Analyzes the impact of a hard Brexit on U S market participants, and where appropriate, proposes regulatory and contractual solutions to minimize any negative impacts a hard Brexit would have on US market participants

Texas Is About to Create OPEC’s Worst Nightmare
Javier Blas – Bloomberg
Total U.S. production rising at fastest pace in 98 years; Pipeline bottleneck in Texas set to ease by end of 2019
The map lays out OPEC’s nightmare in graphic form. An infestation of dots, thousands of them, represent oil wells in the Permian basin of West Texas and a slice of New Mexico. In less than a decade, U.S. companies have drilled 114,000. Many of them would turn a profit even with crude prices as low as $30 a barrel.

ABN Amro seeks UK licences to ward off Brexit threat; Dutch bank to set up a London-based unit of its clearing business
Philip Stafford – FT
ABN Amro has applied for UK licences to guarantee it can access the country’s critical market plumbing after it leaves the EU.

Bribery Scandal Sounds Alarm to Nations Along New Silk Road
Blake Schmidt – Bloomberg
Probe of oil giant CEFC hit deals in Eastern, Central Europe; Buying spree stalled after arrest of former Hong Kong minister
A chain of events that followed the arrest of former Hong Kong minister Patrick Ho a year ago in the U.S. has collapsed more than $10 billion of deals across Central and Eastern Europe, an embarrassment for China that could spur a change in the development of Chinese leader Xi Jinping’s grand plan for a New Silk Road.

Capitalism Is Working in the U.S.; From Warren Buffett to Jeff Bezos, today’s American capitalists are proving Adam Smith’s claim that free markets produce investment and growth.
Matthew A. Winkler – Bloomberg
The founder of modern capitalism, Adam Smith, published The Wealth of Nations in 1776, the same year 13 colonies declared their independence from Great Britain. It remains the most referenced guide to prosperity because of its moral force: Smith said the freest markets are led by an invisible hand benefiting everyone, not just the individuals and companies motivated by their own profit.

Exchanges, OTC and Clearing

Bakkt Bitcoin (USD) Daily Futures Contract Expected to Begin Trading On January 24, 2019
ICE Futures US
ICE Futures U.S., Inc. will list the new Bakkt Bitcoin (USD) Daily Futures Contract for trading on trade date Thursday, January 24, 2019, subject to regulatory approval. The new listing timeframe will provide additional time for customer and clearing member onboarding prior to the start of trading and warehousing of the new contract.

Bakkt has pushed back its bitcoin futures launch to 2019, but its plans with Starbucks are still on track
Frank Chaparro – The Block Crypto
Bakkt is pushing back the start date for its bitcoin futures to 2019; But a direct source says that doesn’t mean the project isn’t on track for phase two, which includes a partnership with Starbucks
Bakkt, the cryptocurrency platform led by Intercontinental Exchange, announced earlier Tuesday that it would push back the start date for its bitcoin futures product to 2019.

ICE Postpones Bakkt’s Bitcoin Futures Launch To January 2019
Rebecca Campbell – Forbes
The operator of the New York Stock Exchange (NYSE) is delaying the launch of its bitcoin futures platform until January, 2019.

T7 Release 7.0: Important information for production start
Deutsche Bˆrse Group will launch Release 7.0 of the T7 trading system on 3 December 2018. The connection test for T7 Release 7.0 will take place on Saturday, 1 December 2018, between 15:00 and 17:00 CET. Participation in the connection test is strongly recommended for all Participants and Multi-Member Providers.

STOXX introduces the ESG-X version of the STOXX Europe 600 Index
Deutsche Boerse Group
STOXX Ltd., the operator of the index business of Deutsche Boerse Group and a global provider of innovative tradable index concepts, has launched the STOXX Europe 600 ESG-X Index. The index was developed based on discussions with a number of asset managers. It is in line with their desire for a version of the main European benchmark index that reflects the exclusion criteria of their responsible investment guidelines.

Directorate Change
London Stock Exchange Group
LSEG appoints Chief Data Officer for its Information Services Division
David Nish has indicated his intention to step down from the Board of London Stock Exchange Group and will leave at the end of November. The Board is grateful to him for his counsel over recent years. Paul Heiden will reassume the role of Chairman of the Audit Committee until he retires, after approximately 9 years’ service, in 2019.


The ‘Neo-Banks’ Are Finally Having Their Moment
Nathaniel Popper – NY Times
After the financial crisis 10 years ago, unhappy customers were expected to flee the megabanks for smaller competitors. It didn’t happen. And the big banks became even more entrenched.

What NYFIX can do for the buy-side (VIDEO)
For the third year running, NYFIX was named “Best low latency network” in the Waters Buy-Side Technology Awards 2018.
In this video, Itiviti’s Chief Product Officer, Richard Bentley, talks about the past and future of the NYFIX network for buy-side clients.

KPMG unveils world’s leading fintech companies
Trade Arabia
Fintech investment firm H2 Ventures and KPMG Fintech recently released a report highlighting dynamic fintechs from around the world that are transforming the financial services industry, from digital payments and lending, to insurtech, to neo-banking, as they attract investment at a record pace.

Capital One adds another niche fintech
Will Hernandez – American Banker
Capital One has gobbled up another fintech company in a move it claims will provide customers more ways to manage their finances and purchasing decisions. The McLean, Va., company announced Tuesday that it had acquired Wikibuy, a startup that enables consumers to find real-time price comparisons across multiple retail websites, and then apply coupon codes at checkout. Terms of the deal were not disclosed.

Goldman’s digital retail bank has won over 100,000 UK customers with the promise of higher interest rates
Elizabeth Schulze – CNBC
Goldman Sachs’ new online retail bank Marcus has “exceeded every expectation” in its debut on the international stage, according to its managing director. Des McDaid at Goldman Sachs told CNBC that the digital bank has won over 100,000 U.K. customers since its launch at the end of September. Marcus’ online platform promises customers a 1.5 percent interest rates on their savings, the highest rate in the market for instant access accounts, according to data firm Moneyfacts.
/’s fintech unit promises to lower cost of pig farming with new digital tools
Meng Jing – South China Morning Post
Facial recognition technology is widely used in China for everything from opening bank accounts to catching jaywalkers – but the one thing these applications have in common is they target humans. Now the technology is being used on pigs and that may soon extend to cows and sheep if the finance arm of tech giant has its way.

Fintech is the Key to Facilitate the Unbanked Population in Egypt
Rinchi Marry – Tech in Africa
Egypt’s economic growth has been growing fast, in terms of the business market in Africa. However, the population of unbanked are still wide that needs an innovation to address that. The answer to that is financial technology (Fintech) where it helps to reach this wide range of the unbanked population in the country.


These Traders Paid a 100% Premium for Bitcoin at the Market Top
Michael Patterson – Bloomberg
Losing money as everything from stocks to oil to corporate debt tumbles? It could be worse. To see what may be one of the most poorly timed trades of the past year, take a look at the $1 billion Grayscale Bitcoin Investment Trust. On Dec. 18, the day before Bitcoin’s epic crash began, buyers of the trust propelled its premium over net asset value to more than 100 percent. In rough terms, it was like shelling out $40,000 for Bitcoins that were trading near $20,000 in the spot market.

Which Stablecoin Will Rule Them All? A Comparison
Rachel McIntosh – Finance Magnates
The number of stablecoins on the map from the beginning of 2018 to the end has grown exponentially. What was once a fringe concept is now a mainstay of the cryptocurrency markets – one that may be heading toward adoption into the mainstream economy.

Bitcoin ETF Backers Lobbying SEC’s New Republican, Records Show
Andrew Ramonas – Bloomberg Law
Bitcoin exchange-traded fund advocates were among the first people to snag a meeting with SEC Commissioner Elad Roisman after he took office this fall.

The Crypto Insurance Market May Total $6 Billion. That’s Nowhere Near Enough
Ian Allison – Coindesk
As Wall Street raises the stakes around cryptocurrency, large institutional players are circling this new asset class and bringing with them their own set of requirements.

The Great Cryptocurrency Scam
Jay Adkisson – Forbes
When I first wrote about The Great Bitcoin Scam in December of 2017, Bitcoin was trading at $15,433 after falling from its all-time high of $19,783 a few days earlier. As I write this article, Bitcoin is now trading at $4,359. Very simply, Bitcoin is in deep trouble. There are investigations about price manipulation, and the use of Bitcoin for payments is down 80% according to Reuters.

Italy’s Watchdog Turns Eye to Cryptocurrency Mining Operators
Aziz Abdel-Qader – Finance Magnates
Italy’s financial regulator today warned against two unlicensed crypto companies involved in schemes to encourage investors to mine or invest in cryptocurrencies. The regulator started gathering information about these platforms after receiving complaints about them. A lesser-known FX broker called Richmond Investing was also blacklisted by La Commissione nazionale per le societ‡ e la Borsa (CONSOB).

Bitcoin for payments a distant dream as usage dries up
Tom Wilson – Reuters
The use of bitcoin for commercial payments has dropped dramatically this year, even as the original digital coin starts to fulfill one of the basic features of any payment currency: stability.

Bitcoin plunges below $5,000 amid rough 2018 for cryptocurrencies
Jasmin Boyce – NBC News
Bitcoin plunged below $5,000 on Monday, adding to what has turned into nightmare 2018 for investors who touted the cryptocurrency. The continued declines come after bitcoin’s value shot up in December 2017, nearly touching $20,000. As of Tuesday, a single Bitcoin was trading around $4,400 ó its lowest level of the year.

WeTrust Spring Will Match Your Cryptocurrency Donations Through Giving Tuesday
Roger Huang – Forbes
Giving Tuesday is an opportunity for many people to sit back and help leverage their donations to create as much social impact as possible, a contrast to the over-consumption of Thanksgiving. Typically, charities individuals and employers will offer donation matching around this time of year, where somebody will multiply the effect of a donation to a charity by pledging more money towards it per each donation.

Cryptocurrency Tax: Spanish Treasury Identifies 15,000 Crypto Holders
David Kimberley – Finance Magnates
Efforts by Spanish tax authorities to identify those with cryptocurrency holdings appear to be paying off. After launching an investigation into a number of firms earlier this year, the country’s treasury appears to be looking at how it can now implement a form of cryptocurrency tax.

Bitcoin slump takes pressure off Britain’s regulators
Huw Jones – Reuters
A plunge in the value of bitcoin and other cryptoassets has eased the pressure on Britain’s financial watchdog to take radical action that could deter investment and financial innovation, government officials and regulators said on Tuesday.

VanEck launches Bitcoin price index for financial institutions
Tanya Abrosimova – FX Street
VanEck’s subsidiary MV Index Solutions has launched Bitcoin index MVIS Bitcoin US OTC Spot Index. This new investment product will show the spot Bitcoin price of bitcoin aggregated from three leading OTC liquidity providers – Genesis Trading, Cumberland and Circle Trade.


Treasury Seeks to Protect Millionaires’ Wealth Transfers; Proposal would smooth path for gifts now even if tax limits tighten as scheduled in 2026
Richard Rubin and Laura Saunders – WSJ
Multimillionaires would get more flexibility to make tax-free gifts to their heirs under a Trump administration proposal released late Tuesday.

White House trade adviser Peter Navarro ‘excluded from Xi Jinping-Donald Trump dinner’
Zhou Xin – South China Morning Post
Peter Navarro, the controversial White House trade policy adviser and a famous China hawk, will not be on the guest list when US President Donald Trump meets his Chinese counterpart Xi Jinping in Buenos Aires on December 1, according to a source with knowledge of the matter. “Navarro will not attend the summit,” the person told the South China Morning Post on condition of anonymity.

Harvesting in a trade war: U.S. crops rot as storage costs soar
Mark Weinraub, P.J. Huffstutter – Reuters
U.S. farmers finishing their harvests are facing a big problem – where to put the mountain of grain they cannot sell to Chinese buyers.

Trump Fans Sink Savings Into ‘Iraqi Dinar’ Scam
Will Sommer – The Daily Beast
Trump supporter Hayes Kotseos runs a North Carolina pool-maintenance company, but she’s got a side bet that she thinks might make her fabulously wealthy: the Iraqi dinar.
The currency is nearly worthless outside of Iraq, but Kotseos bought millions of dinars in April, after watching a video of President Trump at a 2017 press conference. In the clip, Trump says, with characteristic vagueness, that all currencies will soon “be on a level playing field.”

U.S. Accuses China of Continuing IP Theft as WTO Launches Probe
Shawn Donnan and Jenny Leonard – Bloomberg
New report details intensifying cyber-attacks by Beijing; Timing of report’s release sensitive ahead of G-20 talks
The U.S. accused China of continuing a state-backed campaign of intellectual property and technology theft as the World Trade Organization said it would establish a dispute panel to rule on the complaint.

Democrats take Bloomberg run seriously, but with skepticism about his chances
Amie Parnes – The Hill
Michael Bloomberg’s flirtation with running as a Democrat for the White House has run into some understandable skepticism.

Paul Tudor Jones Says Trump Tax Cut May Cause Debt Bubble to Pop
Katia Porzecanski and Katherine Burton – Bloomberg
Jones says stocks, bonds, credit, real estate all overvalued; If the Fed pauses in rate increases, stocks could rise
The hike in interest rates triggered by faster growth from U.S. tax cuts may cause the bubble in credit to pop, billionaire hedge fund manager Paul Tudor Jones said.

Trump Wanted to Order Justice Dept. to Prosecute Comey and Clinton
Michael S. Schmidt and Maggie Haberman – NY Times
President Trump told the White House counsel in the spring that he wanted to order the Justice Department to prosecute two of his political adversaries: his 2016 challenger, Hillary Clinton, and the former F.B.I. director James B. Comey, according to two people familiar with the conversation.


Small Banks to Get Relief From Postcrisis Financial Rules; FDIC proposes eased capital requirements for community banks
Lalita Clozel – WSJ
The Federal Deposit Insurance Corp. proposed easing rules for small banks as part of a broader Trump administration effort to loosen restrictions put in place after the financial crisis.

Financial regulator under pressure to broaden exit fee clampdown; Investment platforms say wealth managers and pension groups should face same ban
Kate Beioley – FT
The UK financial regulator is considering broadening a proposed ban on exit fees to include the largest wealth managers and pension companies, following intense pressure from online rivals.

Danske money laundering whistleblower labels UK structures a ‘disgrace’
Jacob Gronholt-Pedersen – Reuters
British company structures which hide the identity of those behind them were branded a disgrace by the whistleblower who brought to light an alleged 200 billion euro ($228 billion) money laundering scandal involving Danske Bank.

Trump’s Obama-Style Bank Heist; Justice misuses a 1989 law to become a shadow banking regulator.
The Editorial Board – WSJ
Bank robbers in the movies routinely wear masks to hide their identities. So maybe Justice Department lawyers should have worn Barack Obama and former Attorney General Loretta Lynch masks this month when they announced their latest bank stickup.

German financial markets watchdog urges greater focus on cyber crime
Banks need to do more to counter cyber crime, including spending more on identifying risks and paying greater attention to the issue at the management level, the president of Germany’s financial market watchdog Bafin said on Tuesday.

State One Stockbroking to pay $500,000 in connection with failures to comply with market integrity rules
The Federal Court has ordered State One Stockbroking Limited (State One) to pay penalties totalling $350,000 after the company failed to comply with ASIC’s Market Integrity Rules (MIRs).

FINRA Reminds Firms of Exercise Cut-Off Time for Options Expiring on the Friday After Thanksgiving
The national options exchanges are closing at 1:00 p.m. Eastern Time (ET) on Friday, November 23, 2018 (the Friday after Thanksgiving), which will modify the exercise cut-off time for expiring options. FINRA reminds firms that pursuant to FINRA Rule 2360(b)(23)(A)(viii), if a national options exchange or The Options Clearing Corporation announces a modified time for the close of trading in standardized equity options, then the deadline for an option holder to make a final decision to exercise or not exercise an expiring option will be 1 hour 30 minutes following the time announced for the close of trading on that day instead of the 5:30 p.m. ET deadline. Accordingly, option holders must make a final decision to exercise or not exercise options expiring on November 23, 2018, by 2:30 p.m. ET.

Millennials and Money: How to Get Started on the Road to Investing
FINRA Podcast
Contrary to popular belief, many millennials aren’t too keen on robo-advisors and would actually prefer to work with a professionalóbut don’t feel confident enough to know where to begin. What does that actually mean for young, would-be investors?

Podcast: CFTC Talks EP073: TLDR Andre McGregor
This week on CFTC Talks, we speak with TLDR’s Andre McGregor.

CFTC’s Market Risk Advisory Committee to Meet December 4 to Discuss Clearinghouse and Vendor Risk Management
The Commodity Futures Trading Commission’s (CFTC or Commission) Market Risk Advisory Committee (MRAC) will hold a public meeting on December 4, 2018 at CFTC’s Washington, DC headquarters. CFTC Commissioner Rostin Behnam is the sponsor of MRAC.

Investing and Trading

Federal Reserve Not Likely Swayed By Recent Stock Market Declines
Central bank officials have indicated they plan to proceed with a December rate hike
Nick Timiraos and Gregory Zuckerman – The Wall Street Journal
Market turbulence is leading some investors to call on the Federal Reserve to halt its campaign of interest rate increases, but the selloff in stocks and corporate bonds that accelerated Tuesday is unlikely to stop the central bank from raising rates when it meets again next month.

Making Sense of The Mysterious Strategic Petroleum Reserve
Bob Iaccino – CME Group
On August 20, The U.S. Department of Energy’s Office of Fossil Energy (FE) announced a “Notice of Sale” for crude oil from the Strategic Petroleum Reserve (SPR). The total sale or release was announced at 25 million barrels over the next three consecutive years. The Fossil Energy office will sell 11 million barrels in 2018, 5 million in 2019 and the balance in 2020.

‘I Can Be the Bank’: Individual Investors Buy Busted Mortgages; A decade after the housing crisis, new risk takers invest in nonperforming loansóoften written off by banksóand push the borrowers to start paying on them again
Ben Eisen and Cezary Podkul – WSJ
S·ndor Lau, once a filmmaker, found his calling on YouTube when he came across instructional videos about how to buy seemingly worthless home loans.

The lure of illiquid investments; Funds are backing everything from music rights to drug royalties
David Stevenson – FT
One of the biggest investment trends of the past few years has been the search for alternative sources of regular income. Even though interest rates are now slowly rising, they are still well below the long-term average. For many investors holding cash, this is in effect a wealth destroying strategy.

Investors struggle to deal with ‘Land of Oz’ markets; Tech-led sell-off feels like the start of new era for equities
Robin Wigglesworth – FT
When Judy Garland’s Dorothy turns up in the Land of Oz she tells her loyal little terrier Toto: “I’ve a feeling we’re not in Kansas any more.” It is a statement of discombobulation that many investors will now sympathise with.

The Stock Market Is Even Worse Than You Think It Is; The P/E ratio of the S&P 500, based on the next 12 months of earnings, is down 17 percent this year.
Stephen Gandel – Bloomberg
The stock market is no longer not just not great ó it’s downright awful. In fact, after the 550-point plunge in the Dow Jones Industrial Average on Tuesday, 2018’s market meltdown, at least in terms of valuations, now ranks among the worst of the past few decades.

Noble Group hit by regulatory probe, days before closing $3.5 billion restructuring deal
Anshuman Daga, Aradhana Aravindan – Reuters
Singapore authorities are investigating Noble Group Ltd (NOBG.SI) for suspected false and misleading statements, just days before the Singapore-listed company was to complete its $3.5 billion debt restructuring deal to prevent its collapse.

U.K. Midcaps Have a New Biggest Loser as Analysts Cut Indivior
Joe Easton – Bloomberg
Plunge makes drug-maker worst performer on FTSE 250 in 2018; Court ruling to see earnings hit by copycat drugs: analysts
Indivior Plc extended its two-day plunge to more than 50 percent after a court ruling that clears the way for a rival to resume selling a copycat version of one of its blockbuster opioid addiction treatments.

U.S. banking sector reports $62 billion profit in third quarter: FDIC
Katanga Johnson – Reuters
The U.S. banking sector reported $62 billion in profits in the third quarter, up 29.3 percent from the same period a year ago, according to quarterly data from the Federal Deposit Insurance Corporation.

Ray Dalio Says It’s Starting to Feel Like the 1930s for Investors
Barbara Kollmeyer, MarketWatch
When we look back on the biggest calls of 2018, no doubt the word “stupid” is going to stand out. In January, the manager of the biggest hedge fund in the world, Ray Dalio, made some headlines when he declared that investors holding cash were going to “feel pretty stupid” because they would miss out on the “blowoff rally” to come.


Cowen Inc to Acquire Quarton International AG and Entities
Celeste Skinner – Finance Magnates
Cowen Inc, a diversified financial services firm that provides sales, trading and prime brokerage services, announced today that it has signed a definitive agreement with Quarton International AG and affiliated Quarton entities (Quarton International) to acquire the firm.

Billionaire Investor Gabelli Builds Three Percent Stake in GAM
Patrick Winters and Paul Armstrong – Bloomberg
Billionaire U.S. money manager Mario Gabelli built a stake of around 3 percent in GAM Holding AG, according to a regulatory filing from the Swiss stock exchange.

Four Out of Five Legacy Banking Firms Gone By 2030, Analysts Warn
Steve Cocheo – The Financial Brand
Some 20 years after Bill Gates confidently predicted that banks would become dinosaurs, traditional banking executives still roam the earth.
But by the year 2030, that may no longer be the case if analysts with Gartner are correct. In 11 years, Gartner predicts that “80% of heritage financial firms will go out of business” or become so commoditized that they only exist in a nominal sense.

Bond Giant With $736 Billion Builds Defenses Against Credit Rout
Cecile Gutscher – Bloomberg
Aberdeen Standard’s Hickmore adds single-name default swaps; Money manager was already preparing for increased volatility
When Luke Hickmore doubled down on credit-default swaps to guard against an onset of volatility, even he didn’t anticipate the violent storm that would hit the market.

Morgan Stanley CEO Says He’s Not Surprised by Market Correction
Erik Schatzker and Cormac Mullen – Bloomberg
James Gorman sees impact of monetary tightening, politics; Says Morgan Stanley well able to deal with market turmoil
Tighter monetary conditions worldwide and political discord mean Morgan Stanley Chief Executive Officer James Gorman is not surprised there is an ongoing market sell-off.

Goldman Sachs is Dow’s worst performer in 2018
Andrew Bary – Financial News
Goldman Sachs Group stock has fallen below book value for the first time in more than two years and ranks as the worst-performing stock in the Dow Jones Industrial Average so far this year.


Pakistan receives $1bn forex boost from Saudi Arabia
Farhan Bokhari in Islamabad – The Financial Times
Saudi Arabia has lent $1bn to Pakistan to help boost its liquid foreign currency reserves, giving Islamabad some breathing space during protracted bailout discussions with the IMF.
The Saudi assistance is part of a $6bn package promised last month. Half of the Saudi package will go towards meeting payments for Saudi oil shipments to Pakistan during the financial year to June 2019 while the other half is meant to boost Pakistan’s depleting foreign currency reserves.

The Good News Hidden in China’s Slowing Economy
Kevin Hamlin and Enda Curran – Bloomberg
There’s good news hidden in China’s tumbling stock markets and slowing economy.
A government bid to curb risky lending, clean up industry, and restrain home prices is holding firm even as growth heads for its slowest annual pace in almost thirty years and the U.S. trade standoff threatens to deepen.

One of China’s Biggest Defaulters Has a $10 Billion Plan and It’s Scaring Investors
Carrie Hong and Ina Zhou – Bloomberg
Coal miner moves to commingle a subsidiary’s dollar bonds; Success may mean investors need yet further due diligence S
A move by one of China’s biggest corporate delinquents to include bonds sold by a healthier subsidiary in a workout proposal has stoked concerns about creditors’ rights in a market still getting used to the concept of defaults.

Investing in Asia: Grasping Corporate Governance Nuances Is Key
Lauren Foster – CFA Institute Enterprising Investor
What do swimming scallops have to do with investing in Asia?
A lot, according to S. Joyce Li, CFA, a portfolio manager at Matthews Asia.
It begins with a cautionary tale.
“Do you know scallops are good swimmers?” she asked the audience at the recent CFA Institute Equity Research and Valuation Conference 2018.

Danske whistleblower criticises UK over money laundering; Former executive says corporate structures have been abused for years
Richard Milne, Nordic Correspondent – FT
The British whistleblower who exposed the EUR200bn money laundering scandal at Danske Bank has lashed out at the UK for its role in facilitating corporate corruption.

Bribery Scandal Sounds Alarm to Nations Along New Silk Road
Blake Schmidt – Bloomberg
Probe of oil giant CEFC hit deals in Eastern, Central Europe; Buying spree stalled after arrest of former Hong Kong minister
A chain of events that followed the arrest of former Hong Kong minister Patrick Ho a year ago in the U.S. has collapsed more than $10 billion of deals across Central and Eastern Europe, an embarrassment for China that could spur a change in the development of Chinese leader Xi Jinping’s grand plan for a New Silk Road.

How Brewing Scandal Exposed Pressures on Polish Banks
Konrad Krasuski and Adrian Krajewski – Bloomberg
A scandal involving a Polish banking tycoon and the country’s financial supervisor has shaken the home, at least until now, of some of Europe’s strongest banks. A published transcript appears to show Marek Chrzanowski, head of the Financial Supervisory Commission, soliciting a bribe from Leszek Czarnecki, who controls small lenders Getin Noble Bank SA and Idea Bank SA. The allegations sent bank stocks tumbling and might complicate the ruling party’s pledged clean-up drive, which could include further re-nationalization of lenders.

Moneyball in Switzerland: A Bidding War for Private Bankers; Banque Pictet’s newest partner is bolstering ranks to add assets.
Jan-Henrik Foerster and Patrick Winters – Bloomberg
There’s a new status symbol for the world’s top private bankers: a phone call from Boris Collardi.

Share Buybacks, the Latest Tool to Calm Markets, Surge in China
Shen Hong – WSJ
Chinese companies have bought back record amounts of stock this year, helping offset souring market sentiment caused by trade tensions and economic weakness.

Short Sellers vs. Chinese Companiesóa War, Not a Battle
Jacky Wong – WSJ
Pinduoduo’s rapid rise on China’s e-commerce scene has been pretty astonishing. Its recent share-price rally is equally bewildering.


Germany lures Brexit bankers by easing labour laws; Berlin to make it easier for lenders to hire and fire highly paid senior staff
Olaf Storbeck in Frankfurt – FT
Angela Merkel’s government is following through on its pledge to make it easier for banks to fire highly paid senior staff, in a push to increase the country’s allure for London-based lenders relocating to the continent because of Brexit.

The City’s Brexit problem is not those leaving, it is those who will not come; Predictions of London’s demise have been exaggerated but it will attract far fewer EU candidates in the coming years
Pierre BrianÁon – Financial News
Even in the hardest of all possible Brexit scenarios, rumours of the death of the City of London are exaggerated. But the real pain for the City will not come from financiers who leave. It will be inflicted by all those who will no longer come.

Merkel Warns U.K. It Can’t Dictate Brexit Terms to Europe
Patrick Donahue, Arne Delfs and Iain Rogers – Bloomberg
German chancellor says nationalists are on wrong track; Pleads for multilateral approach in legacy speech to lawmakers
German Chancellor Angela Merkel warned the U.K. it can’t set unilateral terms for leaving the European Union as Prime Minister Theresa May heads to Brussels to try to complete a contentious Brexit deal.

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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

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