First Read

Deep Breath
Jim Kharouf, JLN

Upon our return from Washington DC last week, there was the unanswered question still hanging in the air: “What will become of Dodd-Frank?”

Of course, no one really knows just yet. All the hyperbole from politicians in DC make for big headlines. But as the Wall Street Journal piece Republicans Get Ready to Roll Back Dodd-Frank Law pointed out, passage of new laws in the Senate will require 60 votes, and Replublicans hold 52 seats.

Will we see a rollback of Dodd-Frank? A rollback at Walmart means that dish detergent that was priced at $1.50 is now just a $1.25. Such is likely the case with Dodd-Frank. We may see some regulatory relief in areas that make sense, but in total, this may be more about tweaks than trashing the whole thing. There were certainly areas of the CFTC’s push of Reg AT that were considered alarming to many in the industry, if not worthy of a court challenge. There are dozens of other rules and areas that could use some attention depending on whom you ask.

Will we see cooperation and compromise in Washington on this? It’s probably best to take a deep breath and see how this process begins to unfold.


Dodd-Frank Bank Regulations Smacked Like a Skillet to the Head
It signals an end to postcrisis paranoia. From the view of ex- Goldman Sachs president turned President Trump financial adviser Gary Cohn, the new approach frees a banking sector and economy that has been hampered by meddling and compliance costs.

**JK: So who is playing Elmer Fudd and Sylvester the Cat now?


Per Sjöberg to step down as CEO of TriOptima
NEX Optimisation, a NEX Group business which helps clients reduce complexity and optimise resources across the transaction lifecycle, announces today that Per Sjöberg, Chief Executive Officer (CEO) of TriOptima, has decided to leave the business to pursue other ventures.

**JK: A rather short stay for Per Sjöberg.


January 30 to February 3 and February 6, 2017 (Making Regulation Great Again; Fraud-Based Manipulation; AML)
Gary DeWaal – Bridging The Week
President Donald Trump began to follow through on his campaign promise to reduce the quantity of all federal regulations and took initial steps to ensure that laws and regulations impacting financial services conform to his so-called “core principles” of effective regulation. Taking these steps appears to be the first salvo in an attack against the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, apparently at the Commodity Futures Trading Commission’s request, CME Group updated one of its rules to mirror the CFTC’s fraud-based manipulation rule.


The madness of mindfulness
Hattie Garlick – Financial Times
There can be few things in life less Zen than standing ankle-deep in Lego shouting: “Mummy needs three minutes to be mindful right now!” So it was that, last week, I deleted all three of the mindfulness apps that I had downloaded on to my phone. Each differed in small ways (one was supposed to make me better at productivity, another at parenting — as if these were not, in fact, the same thing). All, however, were designed to relax and focus me, perhaps even make me more content and compassionate along the way. For several months, they pinged and flashed into view throughout the day, reminding me that I urgently needed to chill out — this minute.

**JK: Breath deep Hattie. Just breath.


Hedge funds are tracking your every move, and ‘it’s the future of investing’
Still, many investment managers are struggling to put that data to good use. Almost a third of hedge fund and asset managers recently surveyed by Greenwich Associates said they had “difficulty understanding/working with data sets that are not customized.”

**JK: Do you know what quantamental is? You might want to.


Friday’s Top Three
Top of the charts Friday by quite a distance was Bloomberg’s Why Citadel’s Ken Griffin Can’t Keep His Star Hires. The story is pretty well summed up by its first sentence – “Ken Griffin isn’t a people person.” CME’s CEO Terry Duffy nabbed the silver medal with this story from Fox Business, CME Group CEO Terry Duffy: We Have a Moral Responsibility to Help Chicago and Other Struggling Cities. Completing the Chicago-centric trio from Friday was Crain’s story Why Chicago trading firms have a Twitter crush.


MarketsWiki Stats
92,953,206 pages viewed; 22,324 pages; 203,388 edits
MarketsWiki Statistics


Lead Stories

CME Group to broaden rules against wrongdoing after CFTC request
Tom Polansek – Reuters
Futures market operator CME Group Inc plans to broaden its rules against wrongdoing at the request of federal regulators, the company said on Friday, a move that is expected to ramp up disciplinary action against traders. Traders who engage in the manipulative practice known as spoofing are “the most immediate and likely target” of the rules changes, said Craig Pirrong, a finance professor at the University of Houston.

Republicans Get Ready to Roll Back Dodd-Frank Law
House Financial Services Committee Chairman Jeb Hensarling (R., Texas), who has been working on a package to undo parts of Dodd-Frank, is poised to unveil his plan, called the Financial Choice Act 2.0, people familiar with the matter said.

German minister calls for LSE-Deutsche Boerse HQ in Frankfurt
John O’Donnell and Andreas Kröner – Reuters
Deutsche Boerse and the London Stock Exchange should have their combined headquarters in Frankfurt not London because of Brexit, an influential German minister told Reuters in the clearest public demand for control of the group in Germany.

It will take a heroic effort to rescue the LSE merger
If Carsten Kengeter was feeling preoccupied last week, he certainly wasn’t showing it. The boss of Deutsche Börse delivered a very assured speech to guests at a City drinks reception hosted by the German stock exchange in the gilded surrounds of Merchant Taylors’ Hall.

Deutsche Bank to cut as much as 17 percent of equities staff: WSJ
Deutsche Bank (DBKGn.DE) plans to cut as much as 17 percent of its equities staff and 6 percent of its fixed-income staff around the world, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The paper said notices were to be sent to many employees next week. It cited one source as saying the cuts were part of Deutsche Bank’s previously announced plans to cut 9,000 staff

Barclays to overhaul back office operations to cope with ring-fencing
Lawrence White – Reuters
Barclays Plc (BARC.L) is about to overhaul its back office operations under a restructuring to help it comply with new post-crisis rules forcing British banks to ring-fence their retail operations from their riskier business.

Fund groups team up to attack ‘unjustifiable’ pay packages
Investment Week
Speaking to The Sunday Times, one unidentified fund manager said: “We are definitely taking a tougher stance than we have in previous years. We will be able to wave through unjustifiable pay deals. “The last thing we want is government intervention as it could prevent British companies from attracting global talent.”

China’s Demand for Gold Can’t be Met
Here’s what he said to me: “I’ve seen estimates out of China that over 375 million Chinese want to buy gold. But they can’t. They live in the remote interior of the country, not the more open, coastal cities. These Chinese have little or no access to gold markets. And even if they did have access, there’s not enough gold.”

Vincent Viola Said to Withdraw as Secretary of Army Nominee
Matthew Leising and Jennifer Jacobs – Bloomberg
Vincent Viola, the billionaire founder of trading firm Virtu Financial Inc., has withdrawn his nomination to be Secretary of the Army after distancing himself from his business ties proved too difficult, according to two Trump administration officials and a third person familiar with Viola’s decision.

Exchanges, OTC and Clearing

HKEX Monthly Market Highlights
The average daily turnover in January 2017 was $57.2 billion, a decrease of 30 per cent when compared with $82.2 billion for the same period last year.
The average daily turnover of futures and options in January 2017 was 646,892 contracts, a decrease of 31 per cent when compared with the 941,648 contracts for the same period last year.

Clearstream Successfully Migrates To TARGET2-Securities
During the weekend from Feb 3-5, 2017, Clearstream (Clearstream Banking Frankfurt and LuxCSD) successfully migrated to the ECB’s TARGET2-Securities (T2S) platform. The first business day is already in process and runs smoothly.

Market participants rely on Eurex FI Futures to navigate geopolitical risks
Eurex Exchange
Heightened global political uncertainty marked the start of 2017. Event risks around Brexit, the new US administration and economic challenges in Europe require efficient and innovative hedging tools. In addition, market participants anticipate increasing interest rate dynamics in combination with higher inflation expectation. This prompts strong demand for Eurex Fixed Income (FI) products. In January, 46.7 million FI contracts were traded on Europe’s largest derivatives exchange, an increase of 32 percent from January 2016.

TOCOM January 2017 Market Summary – TOCOM January 2017 Volume Averaged 107,394 Contracts, Up 7.4%
The Tokyo Commodity Exchange announced today that average daily volume for futures in January 2017 was 107,394 contracts, up 7.4% month-over-month. Volume increased for TOCOM’s largest contracts, including Gold Standard, which was up 10.4% to 27,061 contracts, Gold Rolling Spot, which was up 20.2% to 15,802 and Platinum Standard increased by 27.0% to 15,467 contracts. In addtion, Gold Option (calls) rose a significant 304.5% to 273 contracts.

DGCX Sees Strong Start To The Year On The Back Of Continued Global Volatility
The Dubai Gold and Commodities Exchange (DGCX) continued to be a safe haven for investors looking to insure against volatility stirred by a series of significant political events, with the Exchange trading an aggregate 1.37 million contracts in the month of January, valued at US $ 33 billion.


UBS signs global multi-asset deal with TradingScreen
The Trade
UBS has extended its long-term relationship with order and execution management system vendor, TradingScreen, through a global commercial agreement covering all listed asset classes.

UBS’ Dirk Klee on fintech, roboadvice, and China
The COO of UBS’ Wealth Management arm said banks are committed to working with fintechs rather than seeing them as competition.

Equinix buys IO UK’s data center business in Slough
Data Center Dynamics
Equinix has acquired IO UK’s data center operating business in Slough, and will rename the facility LD10. We toured the facility when it opened in 2015, which is designed to Tier III standards and makes use of BaseLayer’s Modular Data Center units.

Silicon Valley Hedge Fund Takes On Wall Street With AI Trader
Sentient Technologies won’t disclose its performance, but is being closely watched by the finance and artificial intelligence communities.
Adam Satariano, Bloomberg
Babak Hodjat believes humans are too emotional for the stock market. So he’s started one of the first hedge funds run completely by artificial intelligence.


Republicans Are Poised to Roll Out Their Roll Back of Dodd-Frank Law
Rachel Witkowski and Ryan Tracy – WSJ
Republicans in Congress are preparing to release plans to roll back the 2010 Dodd-Frank financial overhaul as early as this week, following an executive order by President Donald Trump seeking a broad review of the Obama-era law.

The $100 Billion Reason Investors Loved Trump’s Bank Order
Telis Demos and Peter Rudegeair – WSJ
The six biggest U.S. banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulation.

Trump Cites Friends to Say Banks Aren’t Making Loans. They Are.
Zeke Faux, Yalman Onaran, and Jennifer Surane – Bloomberg
As he prepared to sign orders designed to roll back bank regulations enacted to stop the next financial crisis, President Donald Trump said that the rules are stifling lending.

G.O.P. Hurries to Slash Oil and Gas Rules, Ending Industries’ 8-Year Wait
Eric Lipton – NY Times
The document carried the title “A Roadmap to Repeal,” a concise list of Obama administration environmental regulations that a Koch brothers-backed group was pressing President Trump and Congress to quickly reverse after Inauguration Day.

Wall Street Is Even More Craven Than We Thought
Zach Carter – Huffington Post
Democrats used to see Jamie Dimon as one of the good guys on Wall Street. Once hailed as a “progressive” by The New Republic, the JPMorgan Chase CEO counted himself friends with two different chiefs of staff to President Barack Obama and traveled to the first black White House no less than 16 times. In 2009, The New York Times described him as “Obama’s favorite banker.” He has publicly supported same-sex marriage and the legalization of undocumented immigrants.

Blockchain Technology Explored for US Homeland Security
The Department of Homeland Security (DHS) has announced that it is exploring the use of blockchain technology, which could facilitate security and privacy controls.

Investing and Trading

Assets of top funds up 6.2% to $9.4 trillion
Sona Menon said public funds are more focused on total return. Positive market returns for all major asset classes helped boost assets for the 1,000 largest U.S. retirement plans to $9.39 trillion as of Sept. 30, up 6.2% from 12 months earlier, Pensions & Investments’ annual survey found.

Trump Bump Boosts ‘Smart Beta’ Funds
Asjylyn Loder – WSJ
The Trump Trade has been a boon for so-called smart beta, the hottest trend in exchange-traded funds. ETFs that pick undervalued U.S. stocks have swelled to record size since the election, buoyed by the gains in financial and technology stocks that followed President Donald Trump’s victory. Value ETFs that invest in big U.S. companies have taken in $15 billion since the start of November, though inflows slowed in January, according to Morningstar Inc.

Where the Hindenburg Meets the Titanic
Tony Isola – A Teachable Moment
Some large insurers have created the nitroglycerin of investment products – The Buffer Annuity. This monstrosity of complexity is a variable annuity that does not use mutual funds in its sub-account. Instead it places one of the most indecipherable products on the planet, the structured product, as its replacement!


Deutsche Bank to cut as much as 17 percent of equities staff: WSJ
Deutsche Bank (DBKGn.DE) plans to cut as much as 17 percent of its equities staff and 6 percent of its fixed-income staff around the world, the Wall Street Journal reported on Friday, citing people familiar with the matter.

Lessons for Investors from the History of JPMorgan Chase
John Maxfield – Motley Fool
You may or may not know this, but JPMorgan Chase (NYSE:JPM) is the biggest bank in America. But even if you did know that, you probably don’t know how it achieved such an incredible feat. As you’ll see, the story behind JPMorgan Chase’s ascent is just as important today as at any time in history.

Tiger Hedge Funds Become Wall Street Prey
Juliet Chung – WSJ
Famed stock picker Julian Robertson and his protégés have ruled the Wall Street jungle for decades. After a down 2016, their reign is being challenged. For the year, hedge-fund losses at Tiger Global Management LLC were roughly $900 million from a 15.3% loss.


Forex swap margin treatment uncertain ahead of VM deadline

Ex Goldman attack dog gets teeth into Wall St reform
Ben McLannahan and Gregory Meyer – Financial Times
Gary Cohn stood at Donald Trump’s side in the White House as the president signed an executive order on Friday instructing agencies to begin work on loosening financial regulation. He then handed Mr Trump another order, on reviewing an Obama-era rule aimed at protecting small investors.

FCA overhaul risks deluge of contested enforcement probes
Ben Martin – The Telegraph
The City watchdog has unveiled plans to overhaul the way it carries out enforcement investigations to make it easier for firms and individuals to dispute probes, sparking speculation the regulator could now become swamped in even lengthier cases.

The Regulatory Road to Hell
Streetwise Professor
One of the most encouraging aspects of the new administration is its apparent commitment to rollback a good deal of regulation. Pretty much the entire gamut of regulation is under examination, and even Trump’s nominee for the Supreme Court, Neil Gorsuch, represents a threat to the administrative state due to his criticism of Chevron Deference (under which federal courts are loath to question the substance of regulations issued by US agencies).

Dodd-Frank Rollback Won’t Mean Swift Change for Nonbanking Companies
Tatyana Shumsky – WSJ
Companies outside the banking sector won’t get swift relief from a Dodd-Frank rollback. President Donald Trump signed an executive order Friday requiring an outline to pare down the 2010 Dodd-Frank financial overhaul act. The president is expected to direct the Treasury Department and other financial regulators to amend the rules Dodd-Frank put in place because the law cannot be repealed through executive action.

Gary Cohn Emerges From Trump Shadows Touting Dodd-Frank Overhaul
Dakin Campbell, Saleha Mohsin, and Shannon Pettypiece – Bloomberg
President Donald Trump’s economic policies have a new public face, and it belongs to a Wall Street banker barely a month out of the No. 2 job at Goldman Sachs Group Inc.

“Insane”: The head of the Financial Crisis Inquiry Commission on Trump’s plan to undo bank regulation
Eshe Nelson – Quartz
On Feb. 3, US president Donald Trump signed an executive order ordering the Treasury Secretary to review the laws and regulations governing the financial system. It was the first concrete step towards his promise, as a candidate, to dismantle the Dodd-Frank Act—the more than 800 pages (pdf) of laws, passed in the wake of the 2008 financial crisis, that were supposed to bring an end to “too big too fail” and stop banks using debt to trade for their own profit.


CLSA’s Slone Q&A: Rise of Asia’s awkward squad
Chris Wright – Euromoney
CLSA has always had a unique position in Asian finance – to its competitors it has been a curiosity, but one secretly admired for its independence. Three years after its purchase by Citic Securities, it’s now the means by which the Chinese brokerage aims to take on the world. Outspoken CEO Jonathan Slone insists the firm will flourish while keeping its identity. Can he make it happen?

Trump policies, higher rates may spark emerging market debt crisis
Anthony Rowley – Asia Times
US President Donald Trump has been accused of courting international trade friction and even currency wars by his proposed policies, but there is another danger that he could be risking (maybe unwittingly): A new international debt crisis.

Why Are Emerging Markets Resilient To Trump?
Shuli Ren – Barron’s
Emerging markets have held up well despite U.S. President Donald Trump’s tough talk on trade and immigration. The MSCI Emerging Markets Index is at its 19-month high and has recovered fully from a brief dip after Trump’s surprise win.

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