CFTC, DOJ Enforcement Tag-Team Raising Stakes for Market Fraud

Nov 5, 2019

First Read

Hits & Takes
By JLN Staff

The signatures on the petition for Justice for Jitesh include some of the top technologists in our industry. They also include a former CFTC official, the head of a prominent FCM and leading compliance figures in our industry. We have over 1400 signatures. Join the fight for Justice for Jitesh.~JJL

Congratulations to Suzanne Cosgrove, whose first story for JLN about the FIA EXPO was the top read story last Friday. Suzanne is working two days a week for us, but has already made an impact.~JJL

Steptoe & Johnson LLP announced that Matthew Kulkin, the former director of the US Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) since 2017, has rejoined the firm as a partner and co-chair of the Financial Services Group. Kulkin, who had previously been a Steptoe partner for two years before joining the CFTC, will be based in Washington and will also work with colleagues in the firm’s Chicago and New York offices.~JJL

I had a nice talk with the folks at ErisX, who explained a bit more about how their two-markets, one platform model works. The futures market is operated and displayed in full compliance with CFTC regulations and fully subject to the CFTC’s authority. The CFTC does not regulate the spot trading. The spot market meets the same standards as the futures market, and its rules are enforced in accordance with the contractual relationship traders have with ErisX. That contract is established between a trader and ErisX before the trader ever gets access to the spot market. Spot trade settlement will be handled outside of the regulated clearinghouse. On the futures market, traders can have direct access – even to clearing – or use an FCM. ~Thom Thompson

Jim Falvey is speaking this Thursday, November 7, 2019, at an International Blockchain Congress roundtable at Microsoft (in the Aon Building) in Chicago. The focus is Blockchain governance, including smart contracts and the title of the program is “Chicago Blockchain Roundtable – The Future of Governance.”~JJL

K&L Gates invites you to join us for their 2019 Chicago Investment Management Conference, which will be presented live in Chicago at the K&L Gates’ office at 70 West Madison Street, Suite 3300 on November 14 from 8:30 AM to 1;30 PM.~JJL

Amy Shelly of the OCC has been named a finalist for FEI’s CFO of the Year. FEI is the Financial Executives International.~JJL

The Chicago Clearing Corp. Foundation has pledged a $25,000 donation to the LaSalle Street Trading Tech Awards fundraiser event to be held on Thursday. Special thanks goes to Dave Johnson and Peter Reitz, trustees for the foundation who helped make the donation happen. It is good to know that the impact of the Trading Tech program between our industry and the Boy Scouts of America and the Pathway to Adventure Council is appreciated near and far. Thank you, gentlemen!~JJL

Correction: In Thom Thompson’s piece, “FIA Expo – Another Perspective on Day Two,” the panel moderators were switched. In fact, Jason Radzik moderated the “Clearing – The Way Forward” panel and Jackie Mesa moderated the panel on risk. ~SR


US price-fixing prosecutions at historic low for third straight year; Trump administration brings fewer criminal antitrust cases than any government in 50 years
Kadhim Shubber – FT
Criminal prosecutions for price-fixing under Donald Trump have remained at historic lows for a third consecutive year, a drop-off in enforcement against big business cartels not seen since the 1970s.

*****What is the cost of this?~JJL


How climate change will transform the global balance of power; The shift from oil and gas will be as consequential as changes in weather patterns
Anatol Lieven – FT
In his remarks to the annual conference of the Valdai Club this autumn, President Vladimir Putin managed simultaneously to cast doubt on whether human-driven climate change is actually happening, and to assure his audience that Russia is doing everything possible to prevent it. This is also very close to the contradictory public positions of Prime Minister Narendra Modi of India.

*****In the end, it is the end.~JJL


Popeyes Chicken Sandwich Sells Out Again and Even Turns Deadly
Derek Wallbank – Bloomberg
Popeyes franchisees hired more staff to cope with the return of its hit spicy chicken sandwich. After a launch earlier this year that collapsed under the weight of its own success, the chain swore it was fully stocked up this time. At many locations across the U.S., from Chicago to Texas, the sandwich sold out anyway.

***** Are they putting crack in the chicken sandwiches or what?~JJL


Monday’s Top Three
Our top read stories of the day on Monday were led by WGN’s grim story about Michael Pelko in Chicago trader gets 55 years in killing of childhood friend. The second story addressed the question of how many people it takes to drive the bitcoin market. Answer: just one. The Wall Street Journal piece Large Bitcoin Player Manipulated Price Sharply Higher, Study Says explores a new study about what drove bitcoin prices to almost $20,000 in December 2017. Third was Business Insider’s Blockchain startup Digital Asset has lost 25% of its staff since April


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Lead Stories

CFTC, DOJ Enforcement Tag-Team Raising Stakes for Market Fraud
Lydia Beyoud, Jacob Rund – Bloomberg Law
Agencies are bringing parallel civil-criminal cases in record numbers; DOJ, CFTC increasingly using data analytics to pursue market manipulation
New data tools and strong relationships between top CFTC and Justice Department enforcers are yielding record enforcement numbers and a model of collaboration that both agencies see as the way of the future. Along the way, the Commodity Futures Trading Commission has adopted Justice-style enforcement and case building techniques and the Justice Department has honed its ability to pursue manipulation in markets long policed by the derivatives regulator.

***** If one member of the team got beat badly on a case, maybe the other one should drop the civil case. Just saying. Hint, hint.~JJL

Ion: the financial data group taking on Bloomberg; Andrea Pignataro has bought Mergermarket, Fidessa and Dealogic in a debt-fuelled spree
Philip Stafford, Robert Smith, Stephen Morris and Javier Espinoza – FT
In 1999, Andrea Pignataro followed in the footsteps of Michael Bloomberg: leaving the cut and thrust of bond trading at Salomon Brothers to build a financial data empire.

Will Christine Lagarde Do ‘Whatever It Takes’ to Save Earth? The ECB and the Bank of England need to tread carefully on global warming. This is a problem for democratically elected politicians to solve.
Ferdinando Giugliano – Bloomberg
For the past decade, politicians in the rich world have relied too much on central banks to solve their problems of weak growth and high unemployment. They may be about to do the same with climate change.

Wall Street Gets 3-Year Reprieve From SEC on MiFID Compliance
Benjamin Bain – Bloomberg
Agency to let brokers sell analysis in EU and not get sued; SEC chief says move will preserve investor access to analysis
Wall Street is getting a three-year reprieve from the Securities and Exchange Commission on Europe’s tough investment research rules, as the U.S. regulator said it needs additional time to evaluate sweeping changes affecting the brokerage industry.

SEC Urged to End Ratings Firms’ Conflicted Business Model; An advisory panel is considering whether to recommend a new dynamic
Cezary Podkul – WSJ
A panel of academics and former credit-ratings-firm executives urged the Securities and Exchange Commission on Monday to finally end the industry’s “issuer pay” business model in which entities that sell bonds also pay for ratings.

Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up
Claire Boston – Bloomberg
Lured by the bonds’ 5% coupons, investors are scooping them up; Bonds aren’t seen as problem now but reveal appetite for risk
The subprime mortgage-backed bond may be dead in America a decade after it helped trigger the global financial crisis, but a security with some of the same high-risk characteristics is starting to take off.

$11 Trillion U.S. Mortgage Market Has a Shadowy New Player
Rich Miller – Bloomberg
Financial oversight council discussed issue at last meeting; Rapid growth of shadow lenders seen as a potential concern
U.S. financial regulators led by the Treasury’s Steven Mnuchin and the Federal Reserve’s Jerome Powell have been put on notice about the risk of an economically damaging cash crunch in the $11 trillion home mortgage market.

Marijuana Laws Create Compliance Quandary for U.S. Broker-Dealers; Disparity in federal and state laws governing marijuana has complicated investment policies at U.S. brokerages
Mengqi Sun – WSJ
A patchwork of state and federal laws governing the use and sale of marijuana is creating compliance challenges for U.S. firms that manage accounts for investors and trade securities for them.

US shale to swamp Opec supplies over next five years; Exporter group forecasts falling demand for its crude over next five years
Anjli Raval – FT
Opec forecasts falling demand for its crude over the next five years as US shale oil and other production from outside of the cartel continues to dominate supply growth, the exporter group said on Tuesday.

Scramble for propane marks Mother Nature’s latest challenge for U.S. farmers
P.J. Huffstutter – Reuters
Months after historic floods ravaged the U.S. Midwest, farmers scrambling to harvest their crops face a new headache: finding fuel to dry their soaked grains.

Edmond de Rothschild chief warns private banks face crisis; Vincent Taupin puts blame on negative interest rates for problems facing industry
Sam Jones – FT
Europe’s private banks and asset managers are facing a crisis as business models are hollowed out by negative interest rates, the chief executive of Edmond de Rothschild has warned.

Why we are suing the SEC; The ISS’s legal action against its regulator aims to block rule changes for proxy advisers
Gary Retelny – FT
The US Securities and Exchange Commission in August issued an interpretation of a law Congress designed for those engaged in the solicitation of a proxy and applied it to the providers of proxy advice.

Watchdog warns UK fund managers to avoid Woodford liquidity trap
Huw Jones – Reuters
Asset managers must ensure effective liquidity management of their funds, even where investment decisions have been delegated to others, Britain’s Financial Conduct Authority said.

U.K. Regulator Tries to Prevent Repeat of Crisis That Hit Funds Run By Woodford
Silla Brush – Bloomberg
The U.K.’s top markets regulator heaped more pressure on the fund management industry to improve oversight of liquidity as it looks to prevent a recurrence of the crises that struck funds run by Neil Woodford and H2O Asset Management.

UK: The End Of LIBOR- What To Expect?
Yavan Brar – Mondaq
The globally recognised and crucial London Interbank Offered Rate (LIBOR) is understood to be the benchmark interest rate for a reported US $300 trillion worth of financial contracts worldwide, including around $30 trillion worth of financial contracts in GBP. However, the Financial Conduct Authority (‘FCA’) has recently once again stressed that banks should not assume that LIBOR would remain as a viable benchmark beyond 2021.

The End of Libor
Les Jacobowitz, Richard Newman, Arent Fox – JD Supra
For a variety of reasons, as has been widely reported, LIBOR is to cease to be published by the end of 2021 and this expected elimination of the index upon which financing transactions are based raises serious tax and non-tax concerns.

Hong Kong protests: could a financial crisis be the jolt that brings the unrest to a halt? While Hong Kong’s economy fell into a worse than expected recession last quarter, financial markets have remained resilient
Nicholas Spiro – South China Morning Post
It was the most widely anticipated piece of economic data. Yet, when it was finally published last week, even analysts were taken aback.

Ex-Google chief warns of need for AI co-operation with China; Eric Schmidt says US innovation will be hurt if it chooses to disengage from Beijing on tech
Demetri Sevastopulo and Yuan Yang – FT
Eric Schmidt, the former Google chief executive who chairs the National Security Commission on Artificial Intelligence, has warned the US will hurt its own innovation by barring co-operation with Chinese researchers. The comments come as some Trump administration officials push to decouple technology from China.

Exchanges, OTC and Clearing

Intercontinental Exchange Reports October Statistics: Futures and Options Open Interest up 8% Y/Y and up 17% From Year-End 2018
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported October trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at in the Monthly Statistics Tracking spreadsheet.

Nasdaq October 2019 Volumes
Nasdaq (Nasdaq: NDAQ) today reported monthly volumes for October 2019, on its investor relations website.

B3 announces new edition of its Market Maker Program for equities, BDRs and ETFs; The program will be extended following its success in 2018, when the daily traded volume of participating assets rose by 62%
Starting today, B3’s equities, BDR and ETF markets will have new market makers. The initiative is part of B3’s program focused on liquidity development and the performance of participating assets. This year, in addition to expanding eligible assets, the demand for market maker accreditation in the program has also increased with 13 new accredited institutions in the program, 5 of which are first-time participants. Altogether, 89 equities, 2 ETFs and 230 BDRs have been added, compared to 54 equities in 2018.

AFME Publishes 14 Industry Recommendations For Supporting The Adoption Of Public Cloud In Capital Markets
The Association for Financial Markets in Europe (AFME) has today published a new paper setting out 14 recommendations to help realise the full potential of public cloud computing across the capital markets industry.

Shenzhen Stock Exchange Releases Four Industry Information Disclosure Guidelines
On the basis of studying in depth the characteristics of industries and summing up regulation experience, SZSE has recently formulated and released four industry information disclosure guidelines for the industries of industrial robotics, integrated circuits, lithium batteries and non-metallic building materials. It is another measure adopted by SZSE to continue to improve the basic systems of the capital market, promote the construction of the systems of rules for industry information disclosure and put forth effort to enhance the effectiveness and pertinence of information disclosure.

Shenzhen Stock Exchange Issues Information Disclosure Guidance For Employee Stock Ownership Plan
SZSE recently issued the Guidance No. 4 of Shenzhen Stock Exchange on Information Disclosure by Listed Companies – Employee Stock Ownership Plans (ESOP) (hereinafter referred to as the “Guidance”). It is the latest progress made by SZSE in comprehensively streamlining and integrating the system of self-discipline rules and consolidating the basic regulations of the capital market, and also an important measure to improve the quality of listed companies and release the vitality of market players.

The Shenzhen Stock Exchange Revised Member Management Rules Improving Fundamental Systems Of The Market
The SZSE recently released the new edition of the Member Management Rules after revision with the approval of the China Securities Regulatory Commission (CSRC). The revision, with improving fundamental systems, guarding against financial risks and strengthening members’ responsibilities as the focuses, put forth effort to guard the market access, enhance supervision of the whole transaction process, and implement relevant requirements on deepening the reform of the capital market on all sides.

Shenzhen Stock Exchange Releases Guidelines On Interim Information Disclosure Of Asset-Backed Securities To Improve Institutional System And Promote Normative Development Of The Market
On November 1, SZSE released the Guidelines of Shenzhen Stock Exchange on Information Disclosure of Interim Reports on Asset-Backed Securities (hereinafter the “Guidelines”). It is another important measure adopted by SZSE to implement the self-regulation idea with information disclosure as its core, and continue to improve the quality of information disclosure of fixed-income products.

Speech by Loh Boon Chye, CEO of SGX at 2019 Singapore-China (Chongqing) Financial Summit – Singapore Exchange Ltd

Shanghai Stock Exchange: 2019 International Workshop For Stock Exchanges Held
From October 21 to 25, organized by the Shanghai Stock Exchange (SSE) and the Shanghai International Centre for Communication and Cooperation between Exchanges (SICCCE), the 2019 International Workshop for Stock Exchanges was successfully held in Shanghai.

Nodal Exchange Achieves Record Trading Volume and Open Interest in Both Power and Environmental Futures With Strongest Month Ever
Business Wire
Nodal Exchange achieved a new monthly trading record in monthly power futures with a total volume of 231 million MWh in October 2019 (notional value of $7.5 billion per side) and a 44% market share of traded volume. This represents an 84% growth rate over October 2018 and the 15th consecutive month of record calendar month trading volume in power futures. Nodal Exchange continues to improve its strong position in the North American monthly power futures markets achieving a record 44% market share of open interest as of October 31, 2019.

Adhering To High-Quality Development, Shanghai Stock Exchange-Listed Companies Perform Stably With Growth In Q3
By October 31, 2019, the 1,495 companies listed on the main board of the Shanghai Stock Exchange (SSE) and the 40 companies listed on the SSE STAR Market had disclosed their third quarter reports as scheduled. In the first three quarters of 2019, the SSE-listed companies recorded a total operating income of RMB26.60 trillion and a net profit of RMB2.55 trillion, up by 9.12% and 8.06% year-on-year, with nearly 70% of the companies posting increases in revenue and nearly 90% of the companies registering profits. Overall, the performances of the companies listed on the main board of the SSE remained resilient and stable with progress; the companies listed on the SSE STAR Market maintained continuous growth in performance and investments in research and development, with the profitability and quality improved steadily.

Euronext launches new Green Bonds offering; The Euronext Green Bonds offering is the first initiative of Euronext’s new three-year strategic plan ‘Let’s Grow Together 2022’.
Euronext today announces the creation of a new Euronext Green Bonds offering across its six regulated markets. The initiative, which was launched today at Climate Finance Week in Dublin, is operated out of Euronext Dublin, the group centre of excellence for Debt, Funds and ETFs, and is designed to encourage and promote more sustainable investment in Europe. The Green Bonds offering goes live today with more than 50 participating issuers, and marks the first product launch of Euronext’s new three-year strategic plan, ‘Let’s Grow Together 2022’, illustrating Euronext’s commitment to accelerating the transition towards sustainable finance, by developing sustainable products and services for the financial community.

CME Group, Kpler to Provide LNG Cargo Traders Access to Global Natural Gas Benchmark Futures and Options
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, and Kpler, the widely used provider of transparency solutions to commodity markets, today announced that Kpler users will now have access to CME Group’s LNG and natural gas futures and options products on CME Globex.

Upgraded Version of Tokyo Stock Exchange’s “arrowhead” – Operations start for new system, creating a safe and secure market –
Tokyo Stock Exchange, Inc. (TSE) and Fujitsu Limited today announced that TSE has completely overhauled its “arrowhead” trading system for the first time in four years, leveraging the latest technology from Fujitsu to enhance functionality and improve performance. The new version begins operation today.


Chip Makers Push Spending to the Extreme; Demand for ‘extreme ultraviolet’ gear and related tools fuels a surge in capital expenditures
Dan Gallagher – WSJ
Chip makers are seeing the light. And it is costing them. Companies including Taiwan Semiconductor Manufacturing, Intel Corp. INTC 1.95% and Samsung are racing to produce smaller and faster processors. But the latest manufacturing processes, which require new types of production tools, are pushing the bounds of physics. These include systems that use extreme ultraviolet light, or EUV, to produce chip circuitry at a much thinner width than was possible with more commonly used light sources.

The great data leap: how AI will transform recruitment and HR; Wearable tech will measure workers’ true productivity, supercharging capitalism
Hazel Sheffield – FT
The idea that machines will take over all jobs by 2050 is too simplistic: a close look at how artificial intelligence will affect the human resources department — including recruitment and monitoring performance — reveals a complex picture.

After Fidessa Exodus, Some Users Brace For Trouble; WatersTechnology spent three months examining Fidessa to see what has changed since the Ion acquisition. During a period of great change, a lot of questions—and worry—remain.
Rebecca Natale – Waters Technology
The banker winces and shifts uncomfortably in his seat. He has just been asked about service standards at Fidessa, following the trading technology vendor’s $1.9 billion acquisition by Ion Group last year.

YCharts Announces New Integration with Schwab Advisor Services™ Custody Platform, Schwab Advisor Center®
Mutual advisor-clients who custody with Schwab Advisor Services™ will have quick access to Schwab Advisor Center from YCharts’ comprehensive toolset, including Fundamental Charts, Stock/Fund Screeners, Model Portfolios and more
Today at Schwab’s annual IMPACT® conference, YCharts, an investment research, analytics, and client communications platform, announced it has become one of the first wave of providers to offer new, streamlined single sign-on integration into the Schwab Advisor Center® platform, part of a planned strategy to broaden technology solutions available to the more than 7,500 independent investment advisors who custody with Schwab.

The World in the Palm of the TT Platform
Brian Mehta – via LInkedIn
FIA Expo is upon us again. It is a week that brings many of our clients and partners from around the globe to Chicago to convene, strengthen relationships, debate and socialize. What strikes me every year is that it seems like the world is getting closer but broader, which is a good thing. This theme is very apparent at Trading Technologies. Over the last year, we have added more international markets, additional global connections and new offerings onto the TT platform.


BitMEX Says Quality Check ‘Failure’ Led to Email Privacy Breach
William Foxley – Nasdaq
BitMEX says its internal processes “failed” last week, subsequently exposing thousands of the exchange’s clients to privacy risks. In a company blog posting on Monday, the crypto-derivatives exchange said its mass emailing operation failed causing “most BitMEX users” to have their email addresses publicly exposed via carbon copy (CC) on Nov. 1.

PBoC’s Digital Currency Research Institute signs a deal with telecoms giant Huawei for fintech research
Yogita Khatri – The Block Crypto
The Digital Currency Research Institute of the People’s Bank of China (PBoC), the country’s central bank, has signed an agreement with telecommunications giant Huawei. Announcing the news on its official WeChat account on Monday, Huawei said that the “strategic cooperation” agreement is for financial technology (fintech) research, without disclosing further details. The agreement was signed during PBoC vice president Yifei Fan’s tour of the Huawei headquarter. Fan also praised the firm’s achievement in developing distributed databases and computing chips, according to Huawei’s WeChat post.

Binance may soon add support for Ukraine’s and Kazakhstan’s currencies for direct fiat-to-crypto trading
Yogita Khatri – The Block Crypto
Cryptocurrency exchange Binance could soon add support for Ukrainian hryvnia (UAH) and Kazakhstani tenge (KZT) for its direct fiat-to-crypto trading facility. The Block has learned that UAH and KZT currencies were today added to Binance’s application programming interface or API. Last month, when Binance added support for Nigerian Naira (NGN) on Oct. 24 and Russian ruble (RUB) on Oct. 31, it had added these two currencies to its API on Sept. 24 and Oct. 29, respectively.

Canadian crypto exchange Einstein shuts down; owes more than $12M to customers
Yogita Khatri – The Block Crypto
Canadian cryptocurrency exchange Einstein has closed its doors with more than 16 million Canadian dollars (~US$12.4 million) owing to customers. The British Columbia Securities Commission (BCSC) announced the news on Monday that it had recently been told by a lawyer representing Einstein that the exchange planned to shut down within 30 to 60 days due to a lack of profit. Einstein’s website is currently inaccessible. In a separate affidavit filing dated Nov. 1, BCSC lead investigator Sammy Wu said that he believes “Einstein improperly used their customers’ assets” and that it owes customers in millions of cash and cryptocurrencies.

Stablecoins, including Facebook-led Libra, could come under securities rules, says global watchdog
Yogita Khatri – The Block Crypto
The International Organization of Securities Commissions (IOSCO), a global securities watchdog, has said that stablecoin proposals and initiatives, such as the Facebook-led Libra project, could come under some existing securities market regulations. In a statement published Monday, Spain-headquartered IOSCO said that given the potential benefits and risks of stablecoins, a case-by-case approach is needed to establish which specific securities rules would apply. But, in general, stablecoins “can include features that are typical of regulated securities,” said Ashley Alder, Chair of the IOSCO board.

US Fed’s new job posting shows it is researching on how to integrate digital currencies to payments
Yogita Khatri – The Block Crypto
The U.S. Federal Reserve, the country’s central bank, is apparently researching on how to integrate digital currencies to its retail payments section. According to a job posting published Monday, the central bank is hiring a manager to oversee its traditional payments section, as well as to research on “digital currencies, stable coins, distributed ledger technologies, and broadly financial/digital innovation in retail payments.” The key responsibilities of the new hire would be to lead and manage the central bank’s retail payment services, including automated clearing house and check payments, and to address policy and regulatory issues concerning retail payment systems.

The Stellar Foundation has burned over 50% of the total XLM token supply, canceling airdrop programs
Celia Wan – The Block Crypto
The Stellar Development Foundation (SDF) has burned a total of 55 billion Lumens (XLM), worth $4.4 billion, in a push to reshuffle its development strategy. SDF, the non-profit organization that supports the development of the Stellar blockchain network, announced on Monday there are now a total of 50 billion XLMs in existence, in comparison to the 105 billion prior to the burn. The foundation will dedicate the majority of the remaining funds to develop the Stellar blockchain, foster use cases, and support network partnerships, according to a company blog post. Notably, 8 billion of the remaining Lumens will be a part of the Stellar Enterprise Fund to directly invest or acquire businesses “that have potential for the Stellar ecosystem,” per the blog post.

Congress Passes New BSA Laws Due To Threats Including “Decentralized Cryptocurrencies”
Jason Brett – Forbes
The COUNTER Act of 2019 (H.R. 2514), which stands for the “Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act of 2019,” passed the House of Representatives last week and is now under consideration by the U.S. Senate. The bill will modernize the laws for the Bank Secrecy Act, including new “Innovation Labs” at each of the U.S. federal regulators to advance the way BSA is applied by financial institutions.

Asian Financials Group Sets Roadmap for Tokenized Securities
Eric Lam – Bloomberg
Nomura, Standard Chartered are among the association members; Increased regulation of sector will help demand, group says
A group representing some of Asia’s largest asset managers and financial services companies has published a paper examining a future in which tokenized securities are part of the mainstream institutional toolkit, while also calling on additional regulatory clarity to pave the way.

Microsoft To Help Enterprises Mint Their Own Ethereum Tokens
Michael del Castillo – Forbes
Microsoft is taking its secret platform for creating tokens similar to bitcoin out for a test drive. The software giant, which was among the first to accept bitcoin for payment, has created a mint for issuing a wide range of crypto assets. Several companies, including a video game outfit and a virtual reality platform, have already used the mint to create a number of experimental assets while others like General Electric are waiting in the rafters to create their own. As of today anyone can apply to preview the technology.

Investor Lawsuit Argues Ripple Still Has to Answer Over Ongoing XRP Sales
Nikhilesh De , William Foxley – Coindesk
Ripple’s argument that an XRP holder waited too long to file suit has no precedent, a new legal filing claims. Bradley Sostack, the plaintiff in a putative class-action lawsuit, said Ripple’s statute of repose – a three-year period where victims can claim alleged wrongdoing – does not immunize the defendant from securities laws due to the on-going sales of XRP. In a new legal filing made public late on Monday, Sostack claimed Ripple’s monthly sale of XRP out of escrow constitutes on-going securities sales, as submitted in his response to Ripple’s motion to dismiss from September.

ATM Coin Founders Ordered to Pay $4.25 Million for Fraud
William Foxley – Coindesk
In a U.S. Commodity Futures Trading Commission-led case, a court has fined another cryptocurrency investment scheme for fraud and misappropriating client funds.


US formally withdraws from global climate pact; Trump pushes ahead with move to unravel Obama-era environment policy
Leslie Hook – FT
The US has officially asked to pull out of the Paris climate agreement, striking a serious blow to the global pact that seeks to limit global warming to well below 2C.

US sanctions members of Iran supreme leader’s inner circle; Measures announced on 40th anniversary of US embassy takeover in Tehran
Aime Williams – FT
The Trump administration has issued fresh sanctions on top aides and advisers to Ayatollah Ali Khamenei, Iran’s supreme leader, as Washington continues to apply economic pressure on Tehran.

A U.S. Shutdown Could Blur Economic Picture for Traders and Fed
Alex Harris – Bloomberg
Continuing resolution to fund the government expires Nov. 21; Last shutdown episode led to economic releases being delayed
The Federal Reserve is keeping a close eye on economic data as it “assesses the appropriate path” for monetary policy, but the central bank and traders in financial markets may find their vision blurred if Washington gridlock spurs yet another government shutdown later this month.

Trump’s accounting firm must hand over 8 years of tax returns, court rules
Brendan Pierson – Reuters
President Donald Trump’s longtime accounting firm must hand over eight years of his tax returns to New York prosecutors, a U.S. appeals court ruled Monday, the latest setback for Trump in his tenacious efforts to keep his finances secret.

Xi Zeroes In on Trump Trade Deal as China Acts to Steady Markets
Jeff Black and Charlie Zhu – Bloomberg
PBOC enacts symbolic cut in bank liquidity costs on Tuesday; Chinese, U.S. officials seek to ease tensions amid negotiation
President Xi Jinping stressed China’s commitment to the global trading order as his trade negotiators wrangle with the U.S. over rolling back punitive tariffs ahead of a phase one deal.

Pete Buttigieg Embraces Top-Tier Status With New Message of Unity
Tyler Pager – Bloomberg
Mayor greeted by one of largest crowds in Iowa campaign so far; Warren counters that a moderate approach is doomed to fail
Exuding a new confidence as a top-tier candidate, Pete Buttigieg is seizing on Joe Biden’s stumbles in Iowa and deepening questions about Senator Elizabeth Warren’s electability to pitch himself as the alternative to both — and the candidate best positioned to lead the Democrats against President Donald Trump.

US considers dropping some tariffs on China; Renminbi rallies as officials debate rolling back levies on $112bn of goods to secure broader ceasefire deal
James Politi – FT
Trump administration officials are debating whether to remove some tariffs on Chinese goods as a concession to seal a partial deal that would pause the trade war as early as this month.

Attack of the Wall Street Snowflakes; Why can’t financial tycoons handle criticism?
Paul Krugman – NY Times
Given all the recent focus on health policy, you might think that the medical-industrial complex would be heavily involved in the Democratic primary race, going all-out to block Elizabeth Warren. And a coalition of drug companies, insurers and hospitals is indeed running ads attacking “Medicare for all.”


SEC Announces Extension of Temporary Measure to Facilitate Cross-Border Implementation of the European Union’s MiFID II’s Research Provisions
Today the staff of the U.S. Securities and Exchange Commission issued an extension of an Oct. 26, 2017 no-action letter it provided to assist market participants regarding their U.S.-regulated activities as they engage in efforts to comply with the provisions relating to research in the Markets in Financial Instruments Directive II (MiFID II) and related implementing rules and regulations. Under the extension of the temporary no-action letter, the staff would not recommend enforcement action to the Commission under the Investment Advisers Act of 1940 (Advisers Act) against broker-dealers receiving payments in hard dollars or through research payment accounts from clients subject to MiFID II. This no-action letter, which was set to expire July 3, 2020, has been extended until July 3, 2023. Separately, the extension letter notes the continued ability of broker-dealers to receive payments for research under section 28(e) of the Securities Exchange Act of 1934 through client commission arrangements (CCAs), including that the use of CCAs does not affect whether the exclusion for broker-dealers from the definition of “investment adviser” under the Advisers Act may be available.

SEC Charges Issuer and CEO with Violating Whistleblower Protection Laws to Silence Investor Complaints
The Securities and Exchange Commission today filed an amended complaint against online auction portal Collectors Café and its CEO Mykalai Kontilai to add allegations that they unlawfully sought to prohibit their investors from reporting misconduct to the SEC and other governmental agencies. The SEC previously charged Collectors Café and Kontilai with a fraudulent $23 million securities offering based on false statements to investors, and alleged that Kontilai misappropriated over $6 million of investor proceeds.

CFTC Charges Companies and Associates with Failing to Register with the CFTC
The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Silver Star FX, LLC d/b/a Silver Star Live (SSL) of New Mexico and Silver Star Live Software LLC (SSLS) of Florida, and two officers of those firms, Candace Ross-Mahmoud and Hassan Mahmoud of California (collectively, respondents). In its order, the CFTC found that SSL and SSLS acted as unregistered commodity trading advisors and that Ross-Mahmoud and Mahmoud acted as unregistered associated persons of both SSL and SSLS. The order requires the respondents, who are jointly and severally liable, to pay a $75,000 civil monetary penalty and to cease and desist from future violations of the Commodity Exchange Act.

CFTC Charges Alabama Resident and His Company with Binary Options Fraud
The U.S. Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Northern District of Alabama charging Aaron B. Butler and his company, Negus Capital Incorporated (NCI), both of Alabama, with fraudulent solicitation, misappropriation, and registration violations in connection with binary options trading.

SEC Chairman Clayton, PCAOB Chairman Duhnke, and Members of SEC Staff Meet With Auditing Firm Representatives to Discuss Audit Quality in Emerging Economies and Markets
The Securities and Exchange Commission today announced that SEC Chairman Jay Clayton, Public Company Accounting Oversight Board (PCAOB) Chairman William Duhnke, and members of the SEC staff met last week with senior representatives of the four largest global network auditing firms to discuss the audit quality and certain of the challenges faced in auditing public company operations in emerging markets, including China, the largest emerging market economy.[1] The discussions emphasized the need for effective and consistent global firm oversight of member firms, including those operating in emerging markets. The discussions also focused on the design and implementation of audit procedures that are tailored to reflect changes in risk.

British Columbia Securities Commission Acts To Protect Customers Of Einstein Exchange Crypto-Asset Trading Platform
The British Columbia Securities Commission (BCSC) has taken action to protect customers of Einstein Exchange, a crypto-asset trading platform based in Vancouver.

SEC Proposes to Modernize the Advertising and Cash Solicitation Rules for Investment Advisers
The Securities and Exchange Commission today announced that it has voted to propose amendments to modernize the rules under the Investment Advisers Act addressing investment adviser advertisements and payments to solicitors. The proposed amendments are intended to update these rules to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of industry practices.

CFTC Charges Companies and Associates with Failing to Register with the CFTC
The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Silver Star FX, LLC d/b/a Silver Star Live (SSL) of New Mexico and Silver Star Live Software LLC (SSLS) of Florida, and two officers of those firms, Candace Ross-Mahmoud and Hassan Mahmoud of California (collectively, respondents). In its order, the CFTC found that SSL and SSLS acted as unregistered commodity trading advisors and that Ross-Mahmoud and Mahmoud acted as unregistered associated persons of both SSL and SSLS. The order requires the respondents, who are jointly and severally liable, to pay a $75,000 civil monetary penalty and to cease and desist from future violations of the Commodity Exchange Act.

Lawyer to the Rich Made His Own $56 Million Windfall in Tax Scam
Karin Matussek – Bloomberg
Lawyer removes disguise to testify at Bonn trial of 2 bankers; Controvesial practice led to $10 billion in lost tax revenue
One year ago, a man calling himself Benjamin Frey appeared on German television wearing a fake chin, a gray wig, and thick glasses. His voice artificially distorted, the man told how he helped bankers, investors and traders extract billions from the country’s taxpayers — and how about 50 million euros ($56 million) of that money landed in his own pockets.

Mystery Swiss Trader May Link Insider Groups on Two Continents
Gaspard Sebag, Franz Wild, and Alan Katz – Bloomberg
U.S. indictments provide new clues to global network; Geneva trader extradited to U.S. from Serbia may hold key
A mysterious Swiss trader may provide a link between U.S. insider-trading indictments unsealed last month and seemingly unrelated investigations in the U.K. and France.

SEC grants three-year extension to MiFID II relief period; The US securities watchdog has extended the relief period to July 2023, after stating it needs more time to evaluate the impact of unbundling under MiFID II.
Hayley McDowell – The Trade
US brokers will be able to continue charging clients separately for research and analysis, as implemented under MiFID II in Europe, for another three years.

ASIC acts against SMSF auditor misconduct
ASIC has moved to disqualify or add conditions to the registration of three auditors of self-managed superannuation funds (SMSFs).

Investing and Trading

Lack of demand forces UBS ETF to close six share classes; Total net assets in each share class below EUR20m
Ellie Duncan – Investment Week
UBS ETF has announced it is to liquidate the share classes of six of its ETF sub-funds, having “demonstrated a sustained small level of demand”.

US specialty coffee trader acquires failed UK sustainability coffee pioneer
Emiko Terazono – FT
US speciality coffee trader Sustainable Harvest has acquired the contracts and trading team of Twin Trading, the UK-based non profit coffee trader that ceased operations last month.

Growth fears prompt exchange traded funds to pile into gold; SPDR Gold Trust, the world’s biggest gold ETF, sees inflows of $6.5bn this year
Harry Dempsey – FT
The amount of physical gold held by exchange traded funds surged over the third quarter as investors looked for safe places to stash cash amid concerns over slowing global growth and looser monetary policy.

Ready to Boost Stocks: Investors’ Multitrillion Cash Hoard; Assets in money-market accounts are at a decade high, a bullish sign for some investors
Ira Iosebashvili – WSJ
As stocks cruise to fresh highs, investors’ $3.4 trillion pile of cash is reassuring some that the decadelong bull market can push still higher.


BNP Paribas: Renewables powering surge in green finance investments; Inflows up 30%
Toby Hill – Investment Week
Inflows to ESG bonds and equity funds have grown by almost 30% so far in 2019, driven by ballooning demand for sustainable finance products, according to BNP Paribas.

Goldman CEO Sees Small Chance of U.S. Recession
Matthew Miller – Bloomberg
The chances that the U.S. economy skids into a recession are “not significant” in the near term as American households extend the expansion and trade tensions appear to be easing, the chief executive of Goldman Sachs Group Inc said in an interview.

Elliott Raises $2 Billion for Buyouts, Preps $4 Billion Hedge-Fund Push; Paul Singer-led hedge fund, one of the world’s most prominent shareholder activists, gets serious about buyouts
Will Louch – WSJ
Elliott Management Corp., one of Wall Street’s best-known hedge funds, is accelerating its push into private equity.

Credit Suisse accused of lying over sexual assault probe; An email sent by the bank contradicts guidance the alleged victim received last year, as well as media reports
Chris Newlands – Financial News
The woman who triggered a serious sexual assault investigation at Credit Suisse has accused the Swiss bank of lying to her, the press and the public about the action it took against a male employee previously suspected of hampering the probe into her allegations.

BNP Paribas estimates EUR400 million revenue gain from Deutsche Bank deal; Deutsche Bank is transitioning its prime brokerage and electronic equities clients to BNP Paribas as part of a major restructure.
Hayley McDowell – The Trade
BNP Paribas has said it expects to gain around EUR400 million in additional revenues after agreeing to take on Deutsche Bank’s prime brokerage and electronic equities trading clients.

Citi global operational risk management head joins CLS; Deborah Hrvatin joined Citigroup in 2017 after spending 22 years with Deutsche Bank in various senior roles.
Hayley McDowell – The Trade
Foreign exchange settlement provider CLS has hired Citigroup’s global head of operational risk management for its institutional clients group as chief risk officer.

Hedge funds preparing for the machines to take over; Use of AI among hedge funds becoming a necessity to analyse data, predict corrections in supply and demand imbalances, and forecast market movements.
Joe Parsons – The Trade
Adoption of artificial intelligence (AI) and machine learning will soon become embedded into the day-to-day trading and operations for hedge funds, according to senior institutional investor experts.


Global Bond Sell-Off on China Trade Thaw Revives ‘Tantrum’ Fears
John Ainger – Bloomberg
French yields climb back toward 0% for first time since July; It’s starting to ‘smell’ like bond rout of 2015, says Danske
A sell-off across global bond markets deepened after further signs that trade tensions between the U.S. and China may be easing.

Erdogan Says He Told ‘New Friend’ at Central Bank to Cut Rates
Firat Kozok and Cagan Koc – Bloomberg
Turkish President Recep Tayyip Erdogan has a lot to show for installing a new central bank governor after firing his predecessor for not lowering interest rates.

Sweet Cheeses! The Milk Road to China Is Driving Dairy Prices Higher; Once wary of dairy, the country is relying on herds around the world to meet rising consumer demand
Lucy Craymer and Julie Wernau – WSJ
Milk prices are climbing around the globe and have reached multiyear highs, driven in part by a surprising surge in demand from China.

At Smithfield Foods’ slaughterhouse, China brings home U.S. bacon
Tom Polansek – Reuters
Smithfield Foods’ slaughterhouse in Virginia used to carve up pork for American sandwiches and holiday dinners. But workers now box up pig carcasses to ship to China, according to employees, local officials and industry sources.

BTG Pactual’s profit surges on higher trading gains, fees
Latin America’s largest investment bank, Banco BTG Pactual SA, reported a 56.6% rise in third-quarter net income on Tuesday on higher trading gains and investment banking fees.

KKR raises record European fund as buyout firms target region; US private equity firm has already committed about 30 per cent of the EUR5.8bn to deals
Kaye Wiggins – FT
Kohlberg Kravis Roberts, the US buyout group, has raised its biggest-ever European fund, as investors plough money into the region in search of higher returns.


Hedge Funds Flock to Support Johnson, Fueled by Fears of Corbyn
Harry Wilson, Liam Vaughan, and Nishant Kumar – Bloomberg
Financiers gathered in mid-June for secret fundraiser; Prospect of Labour government has helped rally City supporters
As Boris Johnson heads into a general election battle, he does so in the knowledge he can count on the support of at least one loyal constituency: hedge funds.

John Bercow Is Gone, But His Noise Will Echo for Years; Brexit means the role of Speaker remains crucial in British politics. It will be better for everyone if Lindsay Hoyle avoids any whiff of partiality.
Therese Raphael – Bloomberg
Britain’s House of Commons elected a new Speaker Monday. The fact that this is even news outside a small Westminster bubble reflects the enormous attention courted by the previous holder of the post, John Bercow. He was undoubtedly a historic figure, and a controversial one.

Brexit is a warning to Germany’s ECB-bashers; The country is not immune to the disease of mendacious Euroscepticism
The editorial board – FT
It is fitting that Christine Lagarde’s first official outing as European Central Bank president was to visit Berlin to honour Wolfgang Schäuble, the infamously disciplinarian former German finance minister. It underlines her biggest immediate challenge: to salvage and rebuild the fraying acceptance of ECB policies, above all in Germany. She cannot do that on their own; German leaders need to show more support for the ECB’s legitimacy.

Warburg Pincus Dealmaker Sees Brexit as ‘Huge’ Chance for Deals
Sarah Syed – Bloomberg
Brexit may have sown chaos in U.K. politics, but at least one private equity firm is enthusiastic about the potential it creates for deals.

Hedge Fund CQS Says Brexit Creates Opportunity in Distressed Companies
Katherine Doherty – Bloomberg
Head of special situations Ivelina Green talks on Bloomberg TV; Money manager preparing to own companies through a recession
Credit-focused hedge fund manager CQS sees distressed-debt opportunities spurred by Brexit and difficulties in the U.S. energy sector, even as low interest rates stymie many asset managers that invest in troubled companies.

Brexit Vitriol Triggers Exodus of Women Candidates
Jason Douglas and Paul Hannon – WSJ
Many midcareer female politicians are quitting rather than run for next month’s election. ‘Nobody in any job should have to put up with threats,’ says one. As Britain embarks on a high-stakes national election campaign, an unusually high number of midcareer women are quitting politics, saying anger over Brexit and virulent online abuse are staining British political life.


FCA: Senior jobs in finance ‘as male today as 15 years ago’; Some sectors remain ‘old boys clubs’
James Baxter-Derrington – Investment Week
Data published by the Financial Conduct Authority (FCA) on Friday (25 October) revealed that despite “bold targets”, senior levels of finance “are nearly as male today as they were 15 years ago”.

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CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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