CQS hires Xavier Rolet for growth push; DTCC’s Thompson Retires

Dec 21, 2018

CQS hires Xavier Rolet for growth push; DTCC’s Thompson Retires

Dec 21, 2018

First Read

Scott Gordon: In Being Acquired By Marex Spectron, RCG Retains Name, Management, And Gains Global Reach
Sarah Rudolph, John Lothian News

Rosenthal Collins (RCG) has roots going back nearly 95 years, so the news that it is being acquired is big…but the name will live on, as will much of the management and staff of the company. Marex Spectron is set to take over the customer business of RCG, one of the top independent FCMs, in January, with RCG’s current president and CFO Jason Manumaleuna as CEO and Scott Gordon, current chairman and CEO, as vice chairman. RCG will become a division of Marex Spectron.

In an interview with JLN, Gordon said Marex was “keenly interested in having RCG run the company with no change to the management or the customer side….customers will still be talking to the same people and getting the same service.”

Gordon will step back from the day to day operations he has been involved in at RCG for the past 15 years or so. He will leave the daily management to Manumaleuna, who Gordon said is the perfect person to be CEO. “When we hired him, I was hoping someday this would happen,” he said. Gordon will remain as an advisor.

Read the rest HERE.


Hits & Takes
JLN Staff

Today is the last edition of the John Lothian Newsletter until after Christmas. Monday is the Christmas Eve holiday and we won’t be publishing. During the break between Christmas and New Years, we will publish JLN every day. JLN Options will be on a reduced publication schedule. The JLN team will be working from home between the holidays and taking some much needed time off too.

We wish you all Happy Holidays, Merry Christmas and a safe and happy break from the markets.~JJL

For the record, I really love what I do. I love the people I work with, the readers and sponsors we have and am thankful to all of you for letting me do what I and we do. I believe in what John Lothian News does. I believe in market based solutions and smartly regulated efficient markets. I believe in the people who do their best to make the markets the best they can be for not just their own benefit, but for the benefit of all. There is justice in market based solutions. There is also a need to help those who are left behind and this industry is amazing in the number of ways they do that. Thank you for letting me run on from the heart.~JJL

I have asked to be reappointed to the CFTC’s Technology Advisory Committee, which is being renewed after the TAC membership expired last fall.~JJL

Scott Gordon is one of my heroes. He and the owners of RCG did not just sell the RCG customer business, they sold it to a firm where everyone got to keep their jobs. That is being trustworthy and loyal to the people who have worked so hard for RCG over the years. Well done!~JJL

I accidently posted today’s Pat Arbor story to my church’s Facebook page. I deleted it immediately when one of my ministers inquired about it. For my part, it was a Christmas story and we need to be caring of those in prison. Maybe my oops had more meaning than first thought.~JJL

DTCC’s Larry Thompson will retire at the end of this year after more than three decades at the company, the DTCC has announced. ~SR

The upstart free-trading firm Robinhood has not had the best December – its options trading platform went down for part of December 12, irritating customers. Then the broker, which sports unicorn status, announced it was launching a checking and savings account service that pays out three percent interest and is insured up to $250k by SIPC. It turns out that SIPC had a different take (summed up as, “We’re providing what now?!”) And yesterday, U.S. senators wrote to regulators asking for more information about how they “carefully monitor fintechs who, intentionally or not, blur financial products for a competitive advantage.” So, if you’re a lawyer and in the market for a job, Robinhood is hiring regulatory counsel.~SD

Please don’t give your children bitcoin for Christmas.~MR

It is a fact, you can turn coal into bitcoin.~JJL

Please don’t give your children coal for Christmas.~MR


FIA Announces Five New Staff in London and Washington
FIA President and CEO Walt Lukken today announced five new staff members who have recently joined the FIA team; Stuart Bailey is FIA’s new Vice President of Clearing Policy and Operations in the London office; Steve Adamske is the new Vice President, Head of Communications and Public Affairs; Kyle Glenn is FIA’s new Director of Government Relations in the Washington, D.C. office; John Graham is FIA’s new Director of Regulation working in the London office; Sabina Hussain is FIA’s new events manager working out of its London office.
FIA President and CEO Walt Lukken today announced five new staff members who have recently joined the FIA team. “These individuals strengthen an already talented and experienced legal, regulatory and outreach staff at FIA,” said Lukken. “Our members, and our industry broadly, are fortunate to have these experienced and talented individuals as advocates to policymakers, legislators, regulators and media.”

***** Nice additions to the FIA team. A special congratulations to Steve Adamske, whom we work with directly.~JJL


SEC Operational Status
In the event of a federal government shutdown, the SEC will remain open for a limited number of days, fully staffed and focused on the agency’s mission. Any changes to the SEC’s operational status will be announced here in accordance with the agency’s plan for operating during a shutdown. As that plan contemplates, we are currently making preparations for a potential shutdown with a focus on the market integrity and investor protection components of our mission.

*****Deja vu all over again.~JJL


As holidays approach, judge keeps ex-CBOT chief, 82, in jail over divorce fight
Mark Brown – Chicago Sun Times
Eighty-two-year-old former Chicago Board of Trade chairman Patrick Arbor came to court Thursday in a wheelchair wearing his Cook County Jail uniform.

***** Arbor’s lawyer said Arbor was not a flight risk. The judge did not agree.~JJL


A Data-Driven Christmas
Cloud Quant

‘Twas the week before Christmas at the North Pole
finishing all the projects was the Head Quant’s Goal.

Santa was wanting the newest naughty and nice list.
Presents are needed for all good engineers and analysts.

Click HERE for the rest of the poem.

***** Tayloe Draughon has already gotten too deep into the eggnog.~JJL


Wednesday’s Top Three
Our top read piece of the day was the announcement, Marex Spectron To Acquire Chicago-Based FCM Rosenthal Collins Group’s Customer Business. Second went to Crain’s Chicago Business’ CME Group CEO Terry Duffy may expand board of directors. Third was the Wall Street Journal’s piece about ICE’s new initiative Bakkt, in First Futures Contract to Pay Out in Bitcoin Poised for Green Light


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Lead Stories

CQS hires Xavier Rolet for growth push
Laurence Fletcher – FT
CQS, the fund management firm set up by trader Michael Hintze, has hired former London Stock Exchange chief Xavier Rolet in a bid to grab a slice of the billions of dollars that have been pouring into passive funds.

DTCC’s Larry Thompson Retires After More Than Three Decades at the Firm; Thompson Served as DTCC’s General Counsel Since 2005 and, Most Recently, As Vice Chairman
Larry Thompson, who served in a variety of senior-level roles at The Depository Trust & Clearing Corporation (DTCC), including General Counsel and, most recently, Vice Chairman of the firm, will retire at the end of this year after more than three decades at the company.

Ex-Deutsche Bˆrse chief nears alleged insider trading settlement; Carsten Kengeter willing to pay EUR5m if prosecutors drop case
Olaf Storbeck, Philip Stafford and Patrick Jenkins – FT
Former Deutsche Bˆrse chief executive Carsten Kengeter is nearing a settlement to a criminal investigation into alleged insider trading at Germany’s largest stock exchange, and is willing to pay about EUR5m if the prosecutors drop the case, people familiar with the matter told the Financial Times.

Longtime Chicago firm to sell futures brokerage business; British firm Marex Spectron will absorb 14,000 client accounts and 150 employees from Rosenthal Collins Group.
Lynne Marek – Crain’s Chicago Business
The 95-year-old Chicago futures commission merchant Rosenthal Collins Group signed an agreement to sell its brokerage business to British firm Marex Spectron, the two firms said in a statement.

China poised to buy more U.S. soybeans soon
China is poised to buy another round of soybeans from the United States, two sources familiar with the matter said on Thursday, amid a truce in a trade war with the United States.

Treasury chief calls market reaction to Fed ‘overblown’
U.S. Treasury Secretary Steven Mnuchin said on Thursday that investors’ reaction to the Federal Reserve’s interest rate hikes was “completely overblown”, in an unusually direct comment on financial market activity.

How Bad Will It Get for the Stock Market?
Vildana Hajric, Sarah Ponczek, Lu Wang and Elena Popina – Bloomberg
Traders look at technicals, historical precedent for assurance; Corrections typically last 119 days; this one’s 91 days in
While it feels like it won’t stop, someday it will. To get a handle on when equities might bottom out, analysts and investors turn to everything from valuations to technical analysis and history.

Hong Kong takes global IPO crown, looks to a quieter 2019
Julia Fioretti – Reuters
A flurry of initial public offerings (IPOs) in Hong Kong propelled the financial center to first place for IPO volumes globally, but next year is unlikely to see as many big-ticket listings.

Singapore to Expand 1MDB Criminal Probe to Include Goldman
Andrea Tan – Bloomberg
Authorities focus on whether fees flowed into local unit; Singapore introduced deferred-prosecution system this year
Singapore has expanded a criminal probe into fund flows linked to scandal-plagued 1MDB to include Goldman Sachs Group Inc., which helped raise money for the entity, people with knowledge of the matter said.

Rogue Bankers Don’t Explain Goldman’s 1MDB Mess; The Wall Street bank’s internal checks weren’t robust enough to stop its involvement with the scandal-plagued investment fund.
Nisha Gopalan – Bloomberg
Whether or not you believe that Goldman Sachs Group Inc. deserved those high fees for its work with a scandal-ridden Malaysian investment fund, or that rogue bankers got it in this hot mess, one thing’s for sure: The bank’s internal checks just weren’t good enough.

Malaysia finance minister wants $7.5bn from Goldman; Lim Guan Eng calls for highest targeted reparations over bank’s dealings with 1MDB
Stefania Palma and Robert Armstrong – FT
Malaysia’s finance minister says Goldman Sachs should pay $7.5bn in reparations over its business with the scandal-ridden 1MDB state investment fund, piling on to the criminal charges Kuala Lumpur filed against the Wall Street bank earlier this week.

Exchanges, OTC and Clearing

Euronext acquires Commcise
Euronext, the leading pan-European exchange in the Eurozone, today announces the acquisition of 78% of the capital of Commcise, a Software as a Service (“SaaS”) provider of award-winning research evaluation and commission management solutions for financial services firms, from its founders for an initial cash consideration of £27 million.

Euronext acquires research and commissions service provider; Euronext acquires 78% of Commcise for an initial cash consideration of £27 million.
By Jonathan Watkins – The Trade
Euronext has purchased a majority stake in Commcise, a Software as a Service (SaaS) provider of research evaluation and commission management solutions for financial services firms.

Eris Swap Futures Volume Surges at CME Group
CME Group
Just two weeks since transitioning to become a CME product on December 1, Eris Swap Futures Average Daily Volume (ADV) has surged.

New Record Open Interest for Cboe S&P 500 Options Surpasses 20 Million Contracts
Matt Moran – Cboe Blog
While many investors are concerned that benchmark indexes for major investment classes are down year-to date, it appears more investors are using S&P 500 options to manage risk and enhance income

Xavier Rolet to Join Asset Manager CQS as Chief Executive; Rolet will oversee an expansion of CQS that will attempt to broaden the firm’s ability to manage larger pots of money
By Alex Frangos – WSJ
Former London Stock Exchange boss Xavier Rolet will become chief executive of CQS, taking helm of the privately held London-based credit markets focused investment house as it looks to expand beyond its hedge fund roots.

***** Here is The Trade’s version of the story.~JJL

Erik M¸ller: Ensemble, c’est tout; Together with our clients, we have a created a real alternative for clearing interest rate swaps within the EU
Erik M¸ller, CEO of Eurex Clearing AG, talks about the Partnership Program for the interest rate derivatives segment, repo and FX, how Eurex Clearing is providing an alternative to clearing in London and how the clearing house significantly reduces the systemic risks inherent to financial markets.

Reporting by Eurex Clearing according to Article 9 EU Regulation No. 648/2012 (EMIR): Updated version 2.3 of the Member Information available
According to Article 9 EMIR (European Market Infrastructure Regulation), both Eurex Clearing and its Clearing Members are obliged to report transactions in exchange-traded, off-book and OTC derivatives since 12 February 2014. Since 12 August 2014, also collateral and valuation reports have to be submitted.

EurexOTC IRS: Update of liquidity factors with effect from 28 December 2018
The liquidity factors for EurexOTC IRS are part of a regular review and will be updated prior to the first intraday calculation run on 28 December 2018.

Launch of refined LSOC service offering; Amendments to the FCM Regulations of Eurex Clearing AG
This circular contains information with respect to Eurex Clearing AG¥s (“Eurex Clearing”) LSOC (Legally Segregated Operationally Commingled) service offering.

Variance Futures: Fee holiday for transaction fees from 1 January 2019 until 30 June 2019
Effective 1 January 2019, the following measure of Eurex Clearing will come into effect: The transaction fees for EURO STOXX 50Æ Variance Futures, pursuant to section 3 of the Price List of Eurex Clearing AG, will be waived between 1 January 2019 and 30 June 2019.

Eurex Clearing expands US distribution network
Deutsche Bˆrse Group
Eurex Clearing, one of the world’s leading central counterparties, is expanding its US distribution network and will also be offering future clearing of swaps to Futures Commission Merchants (FCMs) clients. So far, Eurex only settles futures in the US.

Nasdaq Welcomed 185 IPOs and 20 Exchange Transfers in 2018; Seven of the 10 largest technology IPOs by proceeds raised listed on Nasdaq
By GlobeNewswire
Nasdaq (Nasdaq:NDAQ) announced today that in 2018 it welcomed 185 initial public offerings (IPOs) and 20* exchange transfers. Nasdaq has extended its IPO leadership to 20 consecutive quarters in the U.S. with a 72 percent win rate, with new listings raising a total of $27.7 billion.

Following the formal adoption on 19 December 2018 by the European Commission of an equivalence decision in relation to the UK, LME Clear is pleased to confirm that it appears likely that it will be able to continue to provide clearing services to all members following the UK’s withdrawal from the European Union. Accordingly, LME Clear does not propose issuing a notice of service withdrawal in relation to the provision of clearing services for any of its members. As a result of the publication of this equivalence decision, ESMA is now able to formally process an application for recognition from LME Clear. LME Clear has therefore prepared an application under EMIR Article 25 and is engaging with ESMA on preparatory work to achieve recognition as a third country CCP.

Additional Non-business Days in Connection with New Emperor’s Accession to the Throne and Enthronement Ceremony
The government of Japan has promulgated and enforced a decree that designates the day of the new Emperor’s Accession to the Throne and the day of the Enthronement Ceremony as national holidays (Act No. 99 of 2018). Accordingly, Tokyo Stock Exchange, Inc., Osaka Exchange, Inc., and Japan Securities Clearing Corporation have also determined that the following four dates in 2019 shall be non-business days in accordance with their respective business rules and regulations.


Does the M&A Trend Among Technology Vendors Present a Real Value Proposition for the Buy Side?
Klaus Holse, SimCorp – TABB Forum
The acquisition trend in the investment management software vendor space has gathered pace and widened to include asset servicers broadening the scope of their offerings. In the summer alone, SS&C acquired EZE Software and State Street Global inked a deal for Charles River Development. The sustained acquisition trend in the financial software market has a long-term impact on the market landscape, not least for the end-user.

U.S. senators write to regulators on Robinhood’s botched checking plans
Katanga Johnson, Anna Irrera – Reuters
A bipartisan group of U.S. senators sent a letter to regulators on Thursday expressing concern that financial technology startup Robinhood may not be offering full transparency to its customers over the botched launch of its new cash management service.

Boosting Algo Performance with Venue and Routing Analysis
Larry Tabb – Tabb Forum
The equity trading world is virtually all electronic. The US equities market – which consists of 13 exchanges, 35 or so equity ATSs and a host of other electronically accessible trading venues – executes approximately $330 billion in notional value via 6.6 billion shares through 34 million trades a day. There is virtually no practical way that any trade ó other than those executed purely by hand, which tend to be large blocks ó can be executed effectively and consistently without the aid of sophisticated trading and routing technology. CNBC banking correspondent Hugh Son reinforced this point on May 10, 2018, when he reported that 99% of JP Morgan’s equity orders were executed electronically.

Statpro contract highlights LDI search for delta
Investment Europe
StatPro, the provider of online analytics and pricing services provider, says it has secured a three-year deal with a European insurer worth more than £1m for its Revolution Delta service. The insurer is an existing customer using the Delta service to manage its liability driven investments.

India’s fintech companies struggle for an alternative to Aadhaar
Pratik Bhakta – Economic Times, India
Imagine driving steadily on a hilly road and suddenly having to brake hard as a landslide blocks the path ahead, leaving the journey incomplete and the destination elusive. This gives a sense of the state India’s financial technology or fintech industry found itself in after the Supreme Court’s Aadhaar judgement.

Google gets e-money licence in Lithuania
Henry Vilar – Banking Tech
Bank of Lithuania has granted Google Payment an electronic money institution licence authorising to issue and redeem electronic money as well as provide payment services. “The end of this year reflects our efforts and experience of the past few years in actively developing a fintech-conducive ecosystem in Lithuania. Our regulatory environment and the benefits it offers have been acknowledged by both start-ups and world-class fintech companies,” says board member Marius Jurgilas.


UK government ‘ready’ to allow regulator oversight of crypto assets
Caroline Binham – FT
The UK government said it “stands ready” to give the financial regulator more power to oversee cryptocurrency assets after parliamentarians warned of a “Wild West” crypto market that poses risks to consumers.

Bitcoin Cash’s 180% Bounce Looks Like a Dead Cat
Lionel Laurent – Bloomberg
There’s a great website that tracks the number of times obituaries have been written on Bitcoin (this column will be added to them). The expected punchline is no doubt that the crypto-currency will outlive all the people writing about it. That’s possible. After hitting a year’s low of about $3,143, down about 80 percent from January highs, Bitcoin has risen 27 percent this week. Short-sellers are closing their positions, while fans smell fresh opportunity.

***** I enjoy anytime I can put the words “dead cat” into the newsletter.~JJL

Wall Street’s Biggest Bitcoin Forecaster Gives Up Forecasting Bitcoin
Eric Lam – Bloomberg
Fundstrat founder has stopped giving crypto price targets; Both bulls and bears had trouble forecasting Bitcoin in 2018
For a sense of how tough 2018 has been for Bitcoin forecasters, look no further than Tom Lee’s latest cryptocurrency research report.

History Shows This Week’s Bitcoin Rally Could Be Fleeting
Eddie van der Walt – Bloomberg
This week’s more than 25 percent rally in Bitcoin is impressive, but it doesn’t signal a return to its erstwhile boom years, if its price history is a guide.

Litecoin Founder Who Beat 90% Plunge Now Finds Shadow Over Coin
Olga Kharif – Bloomberg
Litecoin founder Charlie Lee says he’s focusing on increasing use of the eighth-largest cryptocurrency rather than dwelling on his fortuitous decision a year ago to sell all his holdings at the height of the digital-asset market bubble.

Facebook Is Developing a Cryptocurrency for WhatsApp Transfers, Sources Say
Sarah Frier and Julie Verhage – Bloomberg
Facebook Inc. is working on making a cryptocurrency that will let users transfer money on its WhatsApp messaging app, focusing first on the remittances market in India, according to people familiar with the matter.

Make The Most of Your Failed Bitcoin Gamble: Sell Now; The popping of the crypto bubble has been painful, but a quick sale (and repurchase, if you choose) may lower your taxes
Laura Saunders – WSJ
Almost the only good thing about investing in cryptocurrencies in 2018 was the tax break. These assets have been crushed this year. Bitcoin’s price, for example, has fallen from about $15,000 to about $4,000.

Lawmakers look to change SEC’s 72-year-old securities definition to exclude cryptocurrencies
Kate Rooney – CNBC
Congress may finally bring the cryptocurrency industry what it has been loudly calling for: regulatory clarity. Two congressmen are introducing a bill Thursday that would exclude digital currencies from the decades-old definition of a security. The legal definition might seem like an insignificant change, but it has become a heated issue for those in the industry who say the law is outdated for a digital asset class.

Investors Still Interested In Cryptocurrency But Crave More Education
Donna Fuscaldo – Forbes
Cryptocurrency may be down, but according to a new survey by eToro, the Tel Aviv-based online trading company, it isn’t out. In fact, investors are still interested in trading digital tokens despite a precipitous decline in the price all year, with education the biggest roadblock to more investor adoption.

Coinbase launches in more markets and plans ‘aggressive’ 2019 expansion
Ryan Browne – CNBC
Coinbase has launched its cryptocurrency trading platform in more markets as the firm plans an “aggressive” international push next year. The company said Thursday it had expanded its product to several European countries and overseas territories, including Lithuania, Iceland, Andorra, Gibraltar, Guernsey and the Isle of Man.

Stories from Alternative Crypto Sources:

Coinbase Wants You to Earn Crypto While Learning About Crypto

Brazilian Supermarket Chain Starts Accepting Cryptocurrency Payments

Binance CEO Bullish on Cryptocurrency. Says 2018 Was Just a Correction That Doesn’t Worry
Ethereum World News

5 Types of Cryptocurrency Entrepreneurs Should Know About


Russian Agents Sought Secret US Treasury Records On Clinton Backers During 2016 Campaign
Anthony Cormier and Jason Leopold – BuzzFeed News
US Treasury Department officials used a Gmail back channel with the Russian government as the Kremlin sought sensitive financial information on its enemies in America and across the globe, according to documents reviewed by BuzzFeed News.

The Trump Volatility Risks; The President indulges his worst impulses and loses a defense chief.
The Editorial Board – WSJ
It is well known that President Trump invests fervent belief in the stock market as a performance measure. When it’s rising, as it often has during his Presidency, he says that his policies are responsible. But what about a week like this with markets in decline, including a steep two-day drop in the Dow Jones average? No logic exists that will allow Mr. Trump to take responsibility only for sunny days.

Treasury Secretary Says Market Has Overreacted to Federal Reserve; Secretary Steven Mnuchin added that investors are disappointed in some of Fed chairman’s comments
Kate Davidson – WSJ
Treasury Secretary Steven Mnuchin said Thursday that market reaction following the Federal Reserve’s two-day policy meeting this week has been completely overblown, and he suggested the central bank may not need to raise rates at all next year if inflation remains low.

Shutdown Nears With Congress at Impasse Over Trump’s Border Wall
Erik Wasson, Anna Edgerton and Laura Litvan – Bloomberg
After House adds wall money, stopgap goes back to Senate; Money for several agencies set to run out Friday night
The U.S. government is just hours away from a partial shutdown with Congress at an impasse over funding President Donald Trump’s border wall.

Mattis Puts Trump’s Presidency in Peril; This resignation stings because it’s not about policy, it’s about values.
Eli Lake – Bloomberg
Donald Trump may not know it yet, but his presidency is collapsing. His tweets Thursday announcing the resignation of Defense Secretary James Mattis by the end of February were polite and respectful. And it would be easy to attribute this resignation to a difference in policy: Trump ignored Mattis and went forward with a hasty and ill-considered withdrawal of U.S. forces from Syria. It looks like Trump is about to do the same thing in Afghanistan.

Mattis Eviscerates Trump Worldview in Blunt Resignation Letter
Nick Wadhams – Bloomberg
Pentagon chief cites his ‘four decades of immersion’ in policy; Resignation letter praises Pentagon staff, troops — not Trump
The world long wondered what Defense Secretary Jim Mattis thought about Donald Trump’s approach to the world. Now it knows. In a scathing two-page letter that Mattis said reflected his “four decades of immersion” in national security issues, the four-star general praised U.S. leadership in global alliances, called out Russia and China for authoritarian behavior and said American leaders need to be “clear-eyed” about separating friends from foes.

Mattis Exit Stirs World of Worries From Brussels to Beijing
David Tweed – Bloomberg
The abrupt resignation of U.S. Defense Secretary Jim Mattis has governments from Seoul to Brussels on edge, as the reliability of American alliances and the direction of policy under an erratic leader comes under question.

Russia Goes After BBC as U.K. Threatens to Ban RT TV Channel
Alexei Anishchuk – Bloomberg
Russian watchdog starts probe in response to U.K.’s move on RT; Kremlin spokesman Peskov says BBC’s coverage is “tendentious”
Russia’s communications watchdog, Roskomnadzor, announced it’s beginning a probe into the BBC’s legal compliance, a day after the U.K. announced a possible ban of the Kremlin-funded TV channel RT for breaching impartiality rules.

Hemp Is Now Legal Thanks to the Farm Bill. Here Comes the FDA
Anna Edney – Bloomberg
Now that hemp is legal in the U.S., the Food and Drug Administration says it plans to figure out how it will oversee an expected explosion in products containing the compound CBD.


FINRA Sanctions Merrill Lynch $6 Million for Selling IPOs to Industry Insiders
FINRA announced today that it has fined Merrill Lynch, Pierce, Fenner & Smith Inc. for improperly selling shares in initial public offerings (IPOs) to industry insiders, including its employees’ immediate family members and customers who were brokers at other brokerage firms. Merrill Lynch will pay a $5.5 million fine, and disgorge $490,530 it earned as revenue from the sales.

FINRA Publishes Report on Selected Cybersecurity Practices – 2018
FINRA today published its Report on Selected Cybersecurity Practices – 2018, a detailed review of effective information-security controls at securities firms. The report represents the newest initiative in FINRA’s ongoing effort to help broker-dealers – including small firms – further develop their cybersecurity programs.

SEC Office of Compliance Inspections and Examinations Announces 2019 Examination Priorities
The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) today announced its 2019 examination priorities. OCIE publishes its exam priorities annually to promote transparency of its examination program and provide insights into the areas it believes present potentially heightened risk to investors or the integrity of the U.S. capital markets. This year, particular emphasis will be on digital assets, cybersecurity, and matters of importance to retail investors, including fees, expenses, and conflicts of interest.

US Agencies Propose Update To Management Interlock Rules
The federal banking agencies on Thursday invited public comment on a proposal to update rules restricting the ability of a director or other management official to serve at more than one depository institution or depository holding company. The proposed changes would provide relief for community banks and better align with other rules.

CFTC Staff Acts to Expand U.S. Customer Options for Clearing Swaps
The U.S. Commodity Futures Trading Commission’s (CFTC) staff today issued permission to Eurex Clearing AG (Eurex) to begin clearing swap transactions on behalf of customers of futures commission merchants (FCMs), providing U.S. customers with another option for clearing their swap transactions. CFTC staff permission was issued in the form of three letters from the Division of Clearing and Risk and the Division of Swap Dealer and Intermediary Oversight.

Statement of Commissioner Brian Quintenz on Staff No-Action Relief for Eurex Clearing AG
Over two years ago, the European Commission (EC) and the CFTC agreed to a common approach to the regulation and supervision of cross-border CCPs (CCP Agreement).[1] The CCP Agreement was intensely negotiated for three years, and, in my opinion, the end result produced an agreement that promoted regulatory deference as well as prioritized supporting the vibrancy and liquidity of our global derivatives markets.

The SEC Isn’t OK With Spouses Who Eavesdrop; People who are in a marriage and overhear merger news as part of their marriage can’t trade on it.
Matt Levine – Bloomberg
I worry a little that I have been a little too successful in convincing people that “insider trading is not about fairness, it’s about theft.” (And also not successful enough in convincing people that nothing in this column is legal advice.) We talked yesterday about a guy named Peter Cho, who settled insider trading charges with the Securities and Exchange Commission after he overheard his investment-banker fiancÈe talking about a deal at their apartment and bought short-dated call options on the target’s stock. Several people emailed or tweeted to say: Wait, I thought trading on material nonpublic information that you overhear is just fine?

U.S. Bank Regulators Warn of ‘Living Will’ Shortcomings at Four Foreign-Owned Banks; Regulators faulted Barclays, Credit Suisse, Deutsche Bank and UBS Group
Andrew Ackerman – WSJ
U.S. bank regulators on Thursday faulted Barclays, Credit Suisse Group, Deutsche Bank and UBS Group for shortcomings with their “living will” plans for winding themselves down in a crisis.

ASIC warns Coffs Harbour locals to watch out for super spruikers
The Australian Securities and Investments Commission (ASIC) is warning the public that superannuation spruikers promoting illegal use of self-managed super funds (SMSFs) are operating in the Coffs Harbour area.

Notice of ESMA’s Product Intervention Renewal Decision in relation to binary options
On 14 December 2018, the European Securities and Markets Authority (ESMA) adopted a Decision under Article 40 of Regulation (EU) No 600/2014 to renew the prohibition on the marketing, distribution or sale of binary options to retail clients. The Decision renews ESMA Decision (EU) 2018/795 on the same terms as the previous renewal decision, ESMA Decision (EU) 2018/1466.

ESMA amends guidelines on the application of C6 and C7 under MiFIDII
The European Securities and Markets Authority (ESMA) has today published amended guidelines on the application of C6 and C7 of Annex 1 of MiFID II. The amended guidelines, which are an update to the guidelines originally adopted under MiFID I, will be adapted to the new MiFID II regulatory framework without any change to the substance.

Investing and Trading

Why Currencies Were Less Oil-Linked in 2018
Paul Golden – OpenMarkets
OPEC’s decision to cut oil production beginning in January 2019 might have been expected to boost oil-linked currencies, but other factors are taking their toll.

American Eagle gold, silver coin demand reaches 11-year lows
Renita D. Young – Reuters
In a sign of precious metals demand, sales of U.S. Mint American Eagle gold and silver coins are closing out their weakest year since 2007, as investors favored higher-yielding assets, despite volatility in global stock and bond markets late in the year.

Wall Street’s Billionaire Machine, Where Almost Everyone Gets Rich
Tom Metcalf, Tom Maloney, Sally Bakewell and Christopher Cannon – Bloomberg
He has the familiar trappings of the ultra-wealthy: a Beverly Hills estate, a superyacht, art by Rothko and Pollock. But Eric Smidt is a new kind of super-rich. He made his fortune by transforming an old-fashioned business into a giant ATM, an overhaul aided by one of the hottest plays on Wall Street: collateralized loan obligations.

Twitter Plunges as Citron Says the ‘Toxic’ Site Is ‘Uninvestable’
Selina Wang – Bloomberg
Researcher cites Amnesty International analysis of tweets; Tech companies have become targets of social activists
Twitter Inc. shares plummeted after Citron Research said a report by Amnesty International documenting the abuse of women on the platform shouldn’t be ignored by investors.

Euro Stoxx 50 Flirts With Bear Market as Stocks Tumble Worldwide
Jan-Patrick Barnert – Bloomberg
The Euro Stoxx 50 sank 1.3 percent on Friday, flirting with the bear market threshold after losing 20 percent from a peak in November 2017. The gauge is following other European indexes like Germany’s DAX and Italy’s FTSE MIB which entered bear territory earlier this year.

Why Palladium’s Suddenly an Especially Precious Metal
Rupert Rowling, Eddie van der Walt – Bloomberg
For the first time in more than a decade, palladium is rivaling gold in value. A key component in pollution-control devices for cars and trucks, the metal’s price has surged as much as 50 percent in about four months, making it at times more expensive than gold. The rally shows few signs of fizzling.

An Investor’s Guide to Emerging-Market Risks in 2019
Paul Wallace – Bloomberg
Rising U.S. rates, trade wars and big elections lurk next year; More than $5 trillion wiped off emerging stocks since January
Emerging markets are tentatively picking themselves up from the floor after a rout that’s wiped more than $5 trillion off the value of stocks since January. But the reprieve may not last long.

Wall Street set for worst December since 1930s as global stocks retreat; Threat of federal government shutdown adds to fears over economic growth and trade war
Peter Wells and Nicole Bullock and Michael Hunter – FT
US markets were on course for the worst December since the 1930s amid a widespread sell-off of stocks across Europe and Asia, as investors nervously waited for a threatened federal government shutdown later on Friday.


Petrobras suspends oil and fuel trading with Vitol, Trafigura and Glencore
Andres Schipani and Neil Hume – Financial Times
Petrobras said on Thursday it has halted oil and refined products trading with Vitol, Trafigura and Glencore just hours after Brazilian prosecutors charged 12 people in relations to an alleged bribery scheme aimed at benefiting global traders.

UBS Intensifies Succession Planning for CEO Sergio Ermotti
Jan-Henrik Foerster, Patrick Winters and Eyk Henning – Bloomberg
Ermotti said to tell investors that bank is working on a plan; Chairman Axel Weber is said to favor external candidate as CEO
UBS Group AG is intensifying succession planning for Chief Executive Officer Sergio Ermotti and will consider external candidates to lead Switzerland’s largest bank, according to people familiar with the matter.

Deutsche Bank, Credit Suisse Targeted by EU Bond Probe
Aoife White, Steven Arons and Jan-Henrik Foerster – Bloomberg
Four lenders get EU scrutiny over suspected agency-bond cartel; Deutsche Bank doesn’t expect fines, Credit Suisse cooperating
Deutsche Bank AG, Credit Suisse Group AG and Credit Agricole SA were targeted by a European Union probe into a suspected cartel for sovereign-bond trading.

Banks Say They Aren’t Cashing In on This Market Turmoil
Lananh Nguyen and Michelle Davis – Bloomberg
Citi, Natixis are among the victims of dramatic market swings; BofA’s Moynihan reverses previous forecast of a trading gain
Financial-market turbulence is supposed to be a good thing for Wall Street trading desks — not so this quarter.

For Hedge Funds, 2019 Offers Risks and Rewards on Fannie-Freddie
Elizabeth Dexheimer – Bloomberg
Treasury is determined to come up with a fix for the companies; FHFA nominee’s record offers mixed bag for shareholders
For hedge funds that have been hoping the Trump administration would deliver a windfall on their investments in Fannie Mae and Freddie Mac, 2019 could be a make-or-break year There are reasons for cautious optimism after years of heartbreak.

Credit Suisse Is Setting Its Sights on a New Generation of Wealthy Australians
Emily Cadman – Bloomberg
Credit Suisse Group AG, which doubled assets at its Australian private banking business in the past three years, is focusing on a younger generation of internationally minded, tech-savvy customers to overcome the challenges that forced international rivals like UBS Group AG out of the market.

Quant investors face test of faith in 2019; Sharp reversals in market trends has hurt performance of some big quant funds this year
Laurence Fletcher – FT
Investors have been piling into computer-driven hedge funds in recent years, betting that advances in areas such as artificial intelligence and big data will help quants beat human traders. For many, 2018 has severely tested their resolve.

Loan funds suffer record outflows; Asset class hit by credit quality fears and lower expectations for rate rises
Nicole Bullock and Joe Rennison – FT
Loan funds suffered record outflows over the past week after the Federal Reserve signalled a slower pace of interest rate increases for next year and investors weighed increasingly shrill warnings of deteriorating credit quality.

Former Barclays boss Bob Diamond on being fired and the future of finance; ‘Anyone asking me for PR advice would need their head examined’
Robert Armstrong – FT
When I arrive at the Smith and Wollensky grill, barroom of the midtown Manhattan temple of grilled meat and red wine, Bob Diamond is in warm conversation with the manager. I wait as they catch up. Diamond notices me and extends his hand, and soon I am in one of those cocoons of hearty masculine bonhomie indigenous to steakhouses. Diamond has me firmly by the hand, the maitre d’ has his hand on my shoulder. Jokes are made. What scoundrels we are. We laugh. To a spectator, it could have been a scene from the boom times of investment banking: middle-aged men in suits, about to celebrate their good fortune over a lavish meal.

Bill Ackman and his activist peers limp to end of dismal year; Hedge fund managers have not been spared in the recent market turmoil
Lindsay Fortado – FT
Bill Ackman’s hopes of achieving his first positive year in four are hanging in the balance after a stock market rout that eliminated the 17 per cent gain his hedge fund held earlier this year.


Danske Case May Turn Out to Be Hybrid Warfare, Estonia Says
Ott Ummelas – Bloomberg
One of Europe’s largest money-laundering scandals centered around the Estonian branch of Danske Bank A/S could be a type of hybrid warfare waged by the Baltic nation’s former Soviet master Russia.

Crude refusal: China shuns U.S. oil despite trade war truce
Florence Tan, Chen Aizhu – Reuters
China, the world’s top oil importer, is set to start 2019 buying little or no crude from the United States despite a three-month truce in a trade scrap between the two nations, with relatively high freight costs and political uncertainty choking demand.

India throws another lifeline at its struggling government banks
Nupur Anand – Quartz
India wants to expedite the process of pulling its ailing state-owned banks out of the woods. The government will soon seek parliament’s nod to sanction an additional Rs41,000 crore ($5.85 billion) to recapitalise public sector banks (PSBs), finance minister Arun Jaitley said at a press conference in New Delhi. This is over and above the Rs65,000 crore that the government had promised the banks this financial yearóthough only Rs23,000 crore has been granted till now.

Japanese asset manager Rheos Capital Works postpones $159 mln IPO
Japanese asset management firm Rheos Capital Works said on Thursday that it had shelved plans for an 17.7 billion yen ($158.96 million) initial public offering (IPO) next week, saying it identified corporate governance matters that it needed to address.

China Pledges More Stimulus in 2019 as Economy Seeks Bottom
Bloomberg News
More tax cuts, easier monetary policy on the cards for 2019; China to seek to implement Argentina trade deal with Trump
China’s top policy makers confirmed that more monetary and fiscal support will be rolled out in 2019, as the world’s second-largest economy grapples with a slowdown that’s yet to show signs of ending.

Asia’s Mega Rich Take a Hit With $137 Billion in Losses in 2018
Venus Feng, Yoojung Lee and Blake Schmidt – Bloomberg
Seven Chinese tech tycoons saw $45 billion wiped from assets; Lei Jun, Tadashi Yanai were among the year’s winners
The world’s fastest growing source of mega-wealth hit a speed bump this year. The 128 people in Asia with enough money to crack the 500-member Bloomberg Billionaires Index lost a combined $137 billion in 2018, the first time wealth in the region has dropped since the ranking started in 2012.


Brexit uncertainty has ‘intensified considerably’, Bank of England warns; Policymakers hold interest rates steady in unanimous decision
Chris Giles, Economics Editor – FT
The Bank of England warned that Brexit uncertainties had “intensified considerably” during the past month as it left interest rates unchanged at 0.75 per cent.

May Is Hatching Secret Plan B to Avoid No-Deal Chaos
Tim Ross, Robert Hutton, Kitty Donaldson and Alex Morales – Bloomberg
If Parliament kills the deal, the people may need to decide; May’s authority is draining away and leadership threat remains
As cars lined up in the rain outside London’s Lancaster House, the diplomats gathered within sipped wine and sought intelligence on where Brexit is headed at the Foreign Office Christmas party.

London’s Loss Is Luxembourg’s Gain as Funds Face Brexit Flux
Stephanie Bodoni – Bloomberg
Grand Duchy a magnet for U.K. funds’ management operations; Passport rules mean funds need a so-called AIFM on EU soil
Britain’s Brexit limbo is helping to give Luxembourg’s booming funds industry a boost at the expense of jobs in the City of London.

Brexit: David Gauke doubts PM would back no-deal
BBC News
Justice Secretary David Gauke has said he would be “very surprised” if the prime minister was prepared to back a no-deal Brexit, if her deal fails. Mr Gauke also said he would find it “very difficult” to stay in cabinet, if that became government policy. Cabinet splits have emerged over what should happen if the PM’s withdrawal deal is rejected by MPs next month. Andrea Leadsom has suggested a “managed no deal” Brexit while Amber Rudd said a new referendum was “plausible”.


Is wealthy philanthropy doing more harm than good?; Two books look at how society has flattered the wealthy into believing they are the source of answers
Edward Luce – FT
Ten years ago, the authors Matthew Bishop and Michael Green coined the term “philanthrocapitalism” in a book that described “how the rich can save the world”. By applying their moneymaking acumen to social investing, people such as Bill Gates, the founder of Microsoft, could help rid the world of disease, want, exclusion and ignorance.

How Fortnite Triggered an Unwinnable War Between Parents and Their Boys; The last-man-standing videogame has grabbed onto American boyhood, pushing aside other pastimes and hobbies and transforming family dynamics
Betsy Morris – WSJ
Toby Ghassemieh is an inquisitive 12-year-old boy with a pet gecko named Coco and the makings of an ant colony in a bedroom cupboard. He built a forge in his backyard with plaster of Paris to melt aluminum into ingots. He wants to be a physicist when he grows up.

*****There’s one every generation.~MR

John Lothian Newsletter

So you want to know what’s happening in the financial markets?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 Newsletters

The Four Biggest Ways That Robinhood Changed Investing

The Four Biggest Ways That Robinhood Changed Investing

First Read $51,906/$300,000 (17.3%) ++++ Options Continue to Lead Derivatives Volume Uptrend, but Q2 Lags, FIA Data Show Suzanne Cosgrove - John Lothian News Global futures and options volumes continued to trend higher in the first half of 2021 compared to both 2020...

Libor’s Final Days Begin With Push to Shake Up Swaps Market

Libor’s Final Days Begin With Push to Shake Up Swaps Market

First Read $51,906/$300,000 (17.3%) ++++ Hits & Takes John Lothian & JLN Staff The SEC issued an "Opinion of the Commission" on Monday in a case between ABN AMRO Chicago LLC and Chicago Board Options Exchange, Inc. and C2 Options Exchange, Inc. Here is a...

Crypto-based ‘shadow financial market’ spooks regulators

Crypto-based ‘shadow financial market’ spooks regulators

First Read $51,906/$300,000 (17.3%) ++++ Hits & Takes John Lothian & JLN Staff The Cboe received approval from the Dutch for their new European derivatives market to trade equity index derivatives. Their EuroCCP clearinghouse also received approval to clear...

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

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

The Four Biggest Ways That Robinhood Changed Investing

The Four Biggest Ways That Robinhood Changed Investing

First Read $51,906/$300,000 (17.3%) ++++ Options Continue to Lead Derivatives Volume Uptrend, but Q2 Lags, FIA Data Show Suzanne Cosgrove - John Lothian News Global futures and options volumes continued to trend higher in the first half of 2021 compared to both 2020...

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