DRW wins big versus CFTC – comprehensive commentary and reporting

Dec 4, 2018

DRW wins big versus CFTC – comprehensive commentary and reporting

Dec 4, 2018

First Read

Wilson goes all in against the CFTC and the industry wins
Jim Kharouf, JLN

There are traders who put their careers on the line every day in the markets. And then there’s Don Wilson, who put his career and firm on the line in court with the Commodity Futures Trading Commission, and won.

Yesterday, US District Court Judge Richard Sullivan cleared Don Wilson and his firm DRW in a case brought by the regulator back in 2013 during the contentious and combative tenure of Gary Gensler. The court case itself stretched across two years and three chairmen of the CFTC.

At stake was a lifetime ban for Don Wilson and his firm, DRW, and a $100 million fine. Instead of buckling, paying a fine, and “neither admitting nor denying any wrongdoing,” Wilson dug in and made his case, went through a multi-year legal process and won. And judging from Sullivan’s comments, Wilson’s team embarrassed the CFTC. For all of those who’ve felt Gensler and the CFTC have been heavy handed in their market manipulation cases, Wilson just earned himself a lifetime of free drinks for administering a legal butt whuppin’. He should put Sullivan’s quote on T-shirts for the office: “It’s not illegal to be smarter than your counterparties in a swap transaction.”

To read the rest of this article, go here


The Curious Case of Our Regulatory Environment (Part II), or Why the Earth Isn’t Flat.
Carl Gilmore for JLN

Two years ago I wrote about the Commodity Futures Trading Commission enforcement action against Don Wilson and his company DRW Investments alleging price manipulation in certain financial instruments. Back then, I (along with many other industry participants) suggested that DRW’s trading activity not only wasn’t manipulative, but that DRW’s discovery of pricing discrepancies in the relevant instruments that resulted from convexity bias, and DRW’s subsequent market activity actually corrected artificial prices rather than created them.

Yesterday in New York, U.S. District Court Judge Richard Sullivan dismissed all claims against Wilson and DRW, issuing an opinion that could be described as a CFTC “spanking.” In the case, the CFTC Division of Enforcement alleged, among other things, that Wilson and DRW attempted to create artificial prices by submitting bids near the close that the CFTC described as inflated and artificial. Wilson and DRW argued throughout the litigation that the prices they submitted weren’t artificial, that they stood ready to transact business at those prices and that they had identified a discrepancy in the valuation of those instruments that created an arbitrage opportunity.

To read the rest, go here.


Hits & Takes
JLN Staff

Congratulations to Don Wilson and DRW on winning the CFTC civil suit which alleged they manipulated the markets.~JJL

CFTC Chairman Chris Giancarlo had this to say (or really, not say) about Don Wilson’s case: “We acknowledge the Court’s long-awaited decision in this case, which involves the CFTC’s pre-Dodd Frank legal authority. We are reviewing the decision and will analyze it carefully in considering next steps. We will continue to vigorously enforce the Commission’s anti-manipulation provisions and to prosecute cases through trial where necessary.”~SD

U.S. markets will be closed Wednesday for a national day of mourning. While there will be no trades, the OCC will be open for usual processing. As there are Wednesday expirations, the OCC will use Tuesday’s (today’s) closing prices in those calculations. The exceptions are VIX futures and options which will use the price determined by Thursday’s SOQ. Stay up to date via OCC’s notices page. ~SD

For more details on U.S. exchanges’ and clearinghouses’ operations on Wednesday, see FIA’s post of relevant links.~SD

If you want a good visual timewaster, peruse this “Periodic Table of Investments” infographic and see if you agree with its layout.~SD


DRW statement on the decision in CFTC matter; DRW issued the following statement regarding the November 30, 2018 decision in CFTC v. Donald R. Wilson and DRW Investments, LLC:
“We are gratified by the Court’s decision, which confirms our longheld position that our trading activity was lawful, legitimate and in line with market regulation. Importantly, the Court affirmed that artificiality is required for market manipulation to have occurred. Today’s decision upholds the principles of price discovery, transparency and integrity in the markets.”


The U.S. Yield Curve Just Inverted. That’s Huge.
The move ushers in fresh questions about the Fed and the economy.
Brian Chappatta – Bloomberg Opinion
The U.S. Treasury yield curve just inverted for the first time in more than a decade.
It’s a moment that the world’s biggest bond market has been thinking about for the past 12 months. I wrote around this time last year that Wall Street had come down with a case of flattening fever, with six of the 11 analysts I surveyed saying that the curve from two to 10 years would invert at least briefly by the end of 2019.


Glencore CEO Says He Wants His Replacement To ‘Look Like Me’
Jack Farchy – Bloomberg
Ivan Glasenberg won’t say much about who will replace him as the next chief executive of Glencore Plc. But one thing is clear, it’s not likely to be a woman.
“I’ve got my eye on a few guys. There’s three to four guys who could potentially be there,” Glasenberg told journalists on Monday. “Do I see any woman in that pack today? No.”

****I guess he’s in the #Me2.0 crowd…~SD


Monday’s Top Three
Our top three stories ranged from women in the workplace to Eurex to bitcoin. Our readers have a wide and diverse set of interests. The top read piece was Bloomberg’s Wall Street Rule for the #MeToo Era: Avoid Women at All Cost, which shows how far (backwards) some men have come regarding women in today’s workplace. Second went to the never-ending saga of Eurex US v. CME Group in the FT’s Eurex plans to appeal CME antitrust case ruling. Both sides should watch War of the Roses. Third went to Marketwatch’s excellent analysis of what may happen with bitcoin prices and what is driving the exodus Bitcoin is close to becoming worthless


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Lead Stories

DRW’s Wilson scores big win in market-manipulation case; “It is not illegal to be smarter than your counterparties in a swap transaction.” That’s what a New York federal judge wrote while ruling in favor of DRW in a case brought against the big Chicago trading firm and its owner, Don Wilson, by the CFTC.
Lynne Marek – Crain’s Chicago Business
A New York federal judge has ruled in favor of DRW Trading in a case brought against the big Chicago trading firm and its owner, Don Wilson, by the Commodity Futures Trading Commission in 2013.

Judge Dismisses Market-Manipulation Case Against Don Wilson Jr., DRW; CFTC had sued Wilson and DRW in 2013, citing a large trade in interest-rate swap futures
Alexander Osipovich and Gabriel T. Rubin – WSJ
A federal judge sided with Donald Wilson Jr., founder and chief executive of proprietary trading firm DRW Investments LLC, in a showdown with U.S. regulators over whether Mr. Wilson’s firm had engaged in market manipulation.

Derivatives trader Don Wilson cleared in manipulation case; Ruling against CFTC is setback for regulator’s definition of market manipulation
Gregory Meyer – FT
A US financial regulator has been defeated in its pursuit of Don Wilson, one of the world’s leading derivatives traders, in a stinging ruling by a judge who derided the agency for bringing a misbegotten market-manipulation case.

U.S. CFTC loses case against prominent trader Donald Wilson, DRW
Jonathan Stempel – Reuters
A federal judge in Manhattan has dismissed a U.S. regulator’s lawsuit seeking to hold the prominent Chicago trader Donald Wilson and his firm DRW Investments LLC liable for market manipulation.

Brussels sets out plans for euro to challenge dollar dominance
Jim Brunsden and Mehreen Khan – Financial Times
Brussels is to set out plans to increase the use of the euro in “strategic sectors” such as energy, commodities and aircraft manufacturing, in a bid to challenge the dominance of the US dollar as the world’s reserve currency.
The European Commission will on Wednesday publish a blueprint to promote a “stronger international role” for the euro, saying policies pursued by Donald Trump have underlined the need to increase the EU’s economic sovereignty.

Justices Seem Likely to Reinforce U.S. Securities-Fraud Laws
Greg Stohr and Benjamin Bain – Bloomberg
Supreme Court hears arguments on SEC fraud case against banker; Banker was ‘big-deal participant’ in scheme, Breyer says
U.S. Supreme Court justices seemed likely to reinforce the Securities and Exchange Commission’s powers, hearing the case Monday of an investment banker accused of duping investors about a startup company’s financial condition.

Swedish banks considering Stibor alternative
Swedish banks will look at ways to revamp Stibor, an interbank rate used as a reference for billions of crowns of financial contracts, the Swedish Banker’s Association said on Tuesday, after worries about transparency and governance.

Aquis urges EU to allow investors to continue trading Swiss shares
Huw Jones – Reuters
The European Union should allow EU investors to continue trading Swiss shares from January and avoid a stand-off with Switzerland that would harm competition, a senior stock exchange industry official said on Monday.

After Amazon HQ2, Uproar in New York Over Real Estate ‘Insider Trading’
Josh Barbanel – WSJ
Amazon.com Inc.’s deal for a second headquarters in Long Island City, N.Y., has prompted a state senator to draft legislation that would prohibit the buying or selling of real estate based on any nonpublic government action.

High speed trading still a concern for Treasury market, says Fed’s Brainard
Joe Rennison – FT
High-frequency trading in the $15tn US Treasury market is still a cause for concern for regulators and policymakers, according to Lael Brainard, a governor at the Federal Reserve.

EU finance ministers strike eurozone reform deal; Agreement to bolster banking union and sovereign bailout fund to protect bloc from future financial crises
Jim Brunsden and Mehreen Khan in Brussels – FT
EU finance ministers have agreed on steps to bolster the eurozone against future financial crises, striking a deal after negotiations that went through the night and pitted French-led reform ambitions against the reluctance of northern European capitals to share more financial risk.

Brussels sets out plans for euro to challenge dollar dominance; EU seeks ‘stronger international role’ for single currency in face of Trump policies
Jim Brunsden and Mehreen Khan in Brussels – FT
Brussels is to set out plans to increase the use of the euro in “strategic sectors” such as energy, commodities and aircraft manufacturing, in a bid to challenge the dominance of the US dollar as the world’s reserve currency.

‘London Blue’ hacker group targets chief financial officers; List of 50,000 targets found by cyber security firm Agari
Hannah Kuchler – FT
A hacker group has compiled a list of 35,000 chief financial officers, some working at the world’s biggest banks and mortgage companies, so it can target them with requests to transfer money.

Investors bet on rate volatility as no-deal Brexit fears mount; Demand for derivatives contracts covering the Brexit deadline hit a record
Philip Stafford in London – FT
Growing concern over how a no-deal Brexit could unbalance the British economy has sparked a record-breaking surge in demand for derivatives contracts betting that the UK faces volatility in interest rates in coming months.

ABN Amro to clear Eurex FX futures and options; ABN Amro Clearing to provide support for classic FX derivatives contracts with monthly and quarterly expiries, as well as rolling spot futures.
By Hayley McDowell – The Trade
Dutch investment bank ABN Amro has started clearing Eurex foreign exchange (FX) futures and options for its clients.

CFTC adds four UK-based MTFs to SEF exemption list; With addition of four UK-based MTFs, the CFTC’s list of EU-based venues exempt from SEF registration now totals 20.
By Hayley McDowell – The Trade
Four UK-based multilateral trading facilities (MTFs) have been granted authorisation to operate in the US without having to register as a swap execution facility (SEF) with the derivatives regulator.

Exchanges, OTC and Clearing

The World Federation of Exchanges publishes report into attracting international investors to emerging market equities
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today published a report that seeks to identify factors that attract international portfolio investment into emerging market (EM) equities.

ICE Benchmark Administration Launches Survey on the use of LIBOR
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced the launch of a survey by ICE Benchmark Administration (IBA) on the use of LIBOR currencies and tenors.

CME Group Averaged 21.7 Million Contracts Per Day in November 2018, Up 21% from November 2017
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, reached average daily volume (ADV) of 21.7 million contracts per day in November 2018, up 21 percent from November 2017. Open interest at the end of November was 128 million contracts, up 4 percent from November 2017 and up 19 percent from year-end 2017.

OCC Surpasses Annual Cleared Contract Record With 4.81 Billion YTD; November volume up 10.4 percent year over year; ETF options volume up 32.7 percent, securities lending CCP activity up 4.2 percent
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in November reached 438,027,585 contracts, up 10.4 percent compared to November 2017 volume of 396,779,462. Year-to-date, OCC has cleared 4.71 billion options contracts and 4.81 billion total contracts, with both reaching new annual cleared contract volume records for the U.S. exchange-listed options industry. The previous records, set in 2011, were 4.56 billion options contracts and 4.60 billion total contracts.

EuroCCP Clearing Borsa Italiana Trades
EuroCCP is delighted to announce that regulatory approval was received to provide clearing services for trades executed on Borsa Italiana’s Regulated Markets and MTF – Mercato Telematico Azionairo (MTA), Borsa Italiana Equity MTF and ETFplus Market.

Moscow Exchange launches dollar vs. yuan, yen vs. rouble trading
The Moscow Exchange (MOEX.MM) has launched five new currency trading options to boost liquidity on its currency market, the bourse said on Monday.

Silicon Valley’s Backers of New Stock Exchange Seek Approval
Dave Michaels – WSJ
A Silicon Valley plan to create a stock exchange that appeals to its hottest startups kicked off the process Friday of seeking regulatory approval to operate.

NZX appoints next future director
The NZX board has appointed Anna Scott as its next future director, effective 1 January 2019. Anna is Development Director at Hobson Wealth Partners.
It is the second time NZX has appointed a future director, an initiative designed to help identify and grow the next generation of New Zealand directors.

Sky News Says Don Robert, Experian Chairman, Frontrunner To Replace Donald Brydon As London Stock Exchange Group Chairman
Sky News has announced that according to market sources, Don Robert, chairman of Experian, is the frontrunner to replace Donald Brydon as the new chairman of the London Stock Exchange Group, replacing Donald Brydon.

Revised lists of the Moscow Exchange Indices announced
Moscow Exchange announced today the results of the quarterly review for MOEX indices. All changes will be implemented from 21 December 2018. The Exchange has also set free floats for a number of companies.

Update: The Swiss Federal Council Takes Measures To Protect Swiss Stock Exchanges
On 30 November 2018, the Swiss Federal Council announced that it had adopted special regulations designed to protect Swiss financial markets infrastructures: the “Ordinance on the Recognition of Foreign Trading Venues for the Trading of Equity Securities of Companies with Registered Office in Switzerland (the “ORFTV”). The measure was announced only a few days after the European Commission indicated that it was considering not extending its equivalence decision for Swiss stock exchanges beyond December 2018.

MGEX Welcomes November 2018 into the Record Book
MGEX, a Designated Contract Market (DCM) and Derivatives
Clearing Organization (DCO), reports November 2018 as the second best November in
Exchange history with a total exchange volume of 246,638 contracts. In addition, this
past month is recorded as the 13th best month of all-time at MGEX.

ABN AMRO Clearing offers immediate support for Eurex FX derivatives; ABN AMRO Clearing today has started clearing Eurex FX futures and options for its clients.
ABN AMRO Clearing now provides immediate support for the Classic FX derivative contracts with attributes including monthly and quarterly expiries that are immediately familiar to existing FX derivative users, as well as the innovative Rolling Spot Futures product that is now live.

Strong November for Eurex Exchange: 12 percent increase in total turnover; In November, Eurex, Europe’s largest derivatives exchange and part of Deutsche Bˆrse Group, has again seen very strong demand for its products. A total of 149.5 million contracts were traded in November. This is 12 percent more than in last November (133.3 million).
European equity derivatives increased by 26 percent to 27.5 million traded contracts from 21.7 million in November 2017. Demand was also particularly high for European equity index derivatives (+5 percent) with 71.9 million traded contracts (68.8 million in November 2017). With a record turnover of 468,350 contracts the EURO STOXX 50Æ month-end options, introduced in July, were a great addition to the weekly options. Turnover in European interest rate derivatives increased 17 percent to 50.0 million traded contracts (42.8 million in November 2017).

Trading hours at Eurex Exchange on 28 December 2018
This year, Friday, 28 December 2018 will be the last exchange trading day at Eurex Exchange. This is also the last day of the year on which exercises can be done. On XetraÆ and at the Vienna Stock Exchange there will be shortened trading hours on the last trading day of the year 2018.

DFV Deutsche Familienversicherung AG new at the Frankfurt Stock Exchange
First exchange price at 12,30 Euro
Deutsche Bˆrse Group
DFV Deutsche Familienversicherung AG (ISIN: DE000A2NBVD5 ) is listed on the Prime Standard of the Frankfurt Stock Exchange today . The shares of the Frankfurt-based Insurtech company were listed at the start of trading at EUR 12.30 after an issue price of EUR 12.00.

Three Minutes With John Fennell, Chief Risk Officer At OCC; Supporting Market Innovations, Managing Industry Risk and Addressing Advancements in the Derivatives Space
Jessica Darmoni – Hehmeyer
“From a Central Counterparty Clearing (CCP) perspective, it is our role to provide stability and certainty behind the trading of a new asset class,” said Options Clearing Corporation (OCC) Chief Risk Officer John Fennell about clearing Cboe’s bitcoin contract. “It is important for OCC to support new asset classes like crypto and ensure we can provide confidence, both financially and operationally, in a manner comparable to existing products we clear.”


SONIA: Trading Opportunities in an Emerging Benchmark
Ahmed Heikal – Vela
Competition might be the hallmark of a healthy market, but when multiple providers offer an almost identical product, users need to be properly equipped to switch quickly from one to the other so that they can always be sure of getting the best possible service at the best possible price.

Trading system testing: a practitioner checklist
Vaibhav Shukla – Itiviti Blog
End-to-end testing of trading environments is essential for financial services firms today – yet it can seem daunting to implement these complex systems, especially if it involves an overarching overhaul of existing point or legacy solutions. Taking a step-by-step approach can break this down into a more manageable process, while the resulting benefits have the potential to streamline operations, improve efficiency and add value.

IPC and GreenKey Technologies Win 2018 American Financial Technology Award for
‘Best Partnership or Alliance’
Press Release
IPC, a leading global provider of secure, compliant communications and networking solutions for the financial markets community, and GreenKey Technologies, creator of patented voice software with integrated speech recognition designed specifically for the financial markets, today announced that they have jointly been awarded the 2018 American Financial Technology Award (AFTA) for “Best Partnership or Alliance.”

Digital newcomers out to disrupt South African banking
Tiisetso Motsoeneng, Nomvelo Chalumbira, Wendell Roelf – Reuters
Armed with low-cost operating models, three South African digital banks are betting on aggressive pricing and data analytics to attract tech-savvy, price-conscious consumers when they launch next year in a rare challenge to the old guard.

France and Germany abandon ambitious plans for EU digital tax; Narrower reforms will focus on garnering ad revenues
Mehreen Khan – FT
France and Germany have abandoned EU plans to impose a wide-ranging digital tax on tech companies, in favour of a narrow levy on advertising sales that would be likely to exclude giants like Amazon and Apple.


Fidelity, Nasdaq Ventures invest in cryptocurrency exchange ErisX
New cryptocurrency exchange ErisX said Tuesday it raised a total of $27.5 million from investors including Fidelity Investments and Nasdaq Ventures.
ErisX says it will offer investors the ability to trade the cryptocurrencies bitcoin, litecoin and ether on spot and futures markets starting next year, subject to regulatory approval.
Cryptocurrencies are virtual tokens that can be used as forms of payments on a variety of online applications. They can also be traded on dedicated online exchanges.

Crypto miners undeterred by market collapse, Argo Blockchain says; Steep fall in value of many virtual coins has failed to dent demand in mining subscriptions
Adam Samson in London – FT
Left HODL’ing the bag? London-listed Argo Blockchain on Tuesday said crypto enthusiasts are still clamouring for its coin mining services despite a market collapse that has severely dented the profitability of such operations.

OKEx Launches Perpetual Swap, Perfecting Its Derivatives Product Suites
Markets Insider
OKEx, a Malta-based world-leading digital asset exchange, today announced to launch a brand-new derivative product, Perpetual Swap, taking a big step forward to completing its crypto-based financial product suites. With the new addition, users of OKEx can now perform perpetual swap, futures contract, and spot trading with margin and leverage at one stop. Perpetual swap trading will be officially available at OKEx on December 11, 2018 at 01:00 (GMT+9).

Democratic Values: EOS Node Openly Offers Money for Votes
Simon Golstein – Finance Magnates
Starteos, a block producer for the EOS blockchain, has openly offered to share part of its income with users. This is significant because it suggests that the EOS network, which is one of the most valuable blockchains in the world, is not, in fact, decentralised or democratic at all, contrary to its own claims.

Bitcoin Miner Makes Bold Statement About ‘Bright’ Future After Market Rout
Billy Bambrough – Forbes
Bitcoin miner Argo Blockchain, a UK-listed company, has today sought to soothe shareholder unrest following a steep decline over the last month in the price of bitcoin and other cryptocurrencies, including Ripple’s XRP, ethereum’s ether, and stellar lumens.

Ripple’s XRP 8 pairs live on KuCoin: XRP USD ignores support
John Isige – FX Street
Ripple has been gaining traction in the Asian market in the last few months. Beside Ripple’s entrance into the region with its financial solutions, its official digital asset has today landed support on KuCoin exchange.

Bitcoin Will Regain Its Dominance In The Cryptocurrency Markets In 2019
Panos Mourdoukoutas – MarketWatch
Bitcoin, the “peoples” currency, is expected to regain its market dominance in the cryptocurrency markets by the end of 2019. In terms of market capitalization, that is.

How the Digital Asset Market Is Preparing for Institutional Traders
Edward Woodford and Sam Tegel, Seed CX – Tabb Forum
Since late 2017’s price rally, digital assets have captured the interest of institutional traders, offering growth potential in a new asset class and technology space. But the digital asset market still lacks the infrastructure necessary to support their trading needs. CEO Edward Woodford and chief strategy officer Sam Tegel of institutional digital asset exchange Seed CX detail six key areas where the digital asset market’s structure currently falls short for institutional adoption, along with the changes that will reduce friction for institutional traders.


White House seeks to end subsidies for electric cars, renewables
White House economic adviser Larry Kudlow said on Monday the Trump administration wants to end subsidies for electric cars and other items, including renewable energy sources.

Trump Comes Dangerously Close to Witness Tampering; His tweets about Roger Stone and Paul Manafort make you wonder what Robert Mueller is thinking.
By Timothy L. O’Brien – Bloomberg
President Donald Trump’s Twitter feed ó awash in daily musings, threats, cajoling, criticism and flagrant meddling in a federal investigation ó is a font of information and evidence for Special Counsel Robert Mueller’s investigators.

Trading on Uncertainty About Tariffs; Trade ambiguity makes investing in the U.S. more attractive
By James Mackintosh – WSJ
Investors supposedly hate uncertainty, but the uncertainty of a 90-day delay to extra tariffs on China turned out to be better than the certainty of extra tariffs. Stocks soared Monday and the dollar weakened as markets welcomed the cease-fire over the weekend in the U.S.-China trade war.

An alarming slowdown in global trade shows Trump’s tariff war is having a devastating impact
Will Martin – Business Insider
The negative impact of the ongoing trade battle between the US and China is plain to see in new data from Swiss freight giant Kuehne + Nagel.

Opinion: The stock market made President Trump and the Fed’s Powell blink
By Howard Gold – MarketWatch
“I used to think if there was reincarnation, I wanted to come back as the president, the Pope or a 0.400 baseball hitter,” President Clinton’s adviser and attack dog, James Carville, told Bob Woodward in 1994. “But now I want to come back as the bond market. You can intimidate everybody.”

Stock-Market Vigilantes Show Trump Who’s Boss
By Sarah Ponczek and Vildana Hajric – Bloomberg
Fed turns dovish, trade truce reached after equity correction; Dow vigilantes achieved Trump and Powell puts: Yardeni
The “Dow vigilantes” are back. At least, that’s what some say is the force behind the sudden truce in Donald Trump’s trade war with China and Jerome Powell’s dovish turn.

Investors’ New Lifeline: The Trump Put; Like the Federal Reserve’s tendency to put out a safety net for investors in time of turmoil, stocks’ volatility appears to have contributed to President Trump’s laying off China
By Justin Lahart – WSJ
Never mind the Fed put. It is the Trump put that investors need to pay attention to now.
The Fed put is a trade on the idea that the Federal Reserve will step in to assist whenever things get dicey in the stock market, offering the sort of insurance that a put in the options market does. Originally the “Greenspan put,” it is an idea that originated early last decade from the Fed’s tendency, under then-Chairman Alan Greenspan, to cut rates or hold off in response to market turmoil.

Trump’s Political Risk Spreads to Small-Town America, Poll Finds
By John McCormick – Bloomberg
His 2020 prospects best among those in purely rural areas; Less than a third say they definitely plan to vote for him
Donald Trump is nearly as unpopular in small towns as he is in suburban areas and cities, signaling potential trouble for his re-election prospects, according to a survey that highlights the Republican president’s vulnerabilities.

Don’t Like Trump? Your Financial Analysis Might Be Biased; Partisanship should have no place in a corporate-credit rating. A new study says it does.
By Barry Ritholtz – Bloomberg
The dangers of political bias for investors has long been one of my favorite rants. Politics is tribal, opinionated and typically one-sided. These are emotional hot buttons that lead to biased thinking. And as we have learned from both behavioral finance and decades of experience, those affectations are the enemy of good returns and smart investing.


US regulators push for new technology to tackle financial crime; mised not to penalise banks that use artificial intelligence tools to spot gaps in existing anti-money laundering programmes, paving the way for the use of new technologies to tackle illicit financial activity.
The Federal Reserve Board along with four other regulatory agencies – the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency – say they want depository institutions to explore innovative approaches to both meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations and to further strengthen the financial system against illicit financial activity.

China relaxes index futures trading rules
China’s financial futures exchange said on Sunday it was further relaxing index futures trading rules,reducing margin requirements,cutting trading fees and allowing more trading activities.

2018 G20: A Lot More Than a Photo Op
Russell Rhoads – TABB Forum
Nine years after the Pittsburgh G20 Summit kickstarted OTC derivatives reform, the G20 meeting in Argentina this year brings together more than 5,000 policymakers to discuss world events, including the progress of the 2009 directives intended to reduce systemic risk in the global swaps market.

Commission Statement on Passing of President George H.W. Bush
Our nation is mourning the passing of a great leader and statesman. President George Herbert Walker Bush embodied the spirit and promise of America. His unwavering commitment to our country and his deep belief in the power of each and every American to contribute to our society provide an example that should endure.

Joint Statement On Innovative Efforts To Combat Money Laundering And Terrorist Financing
Date 03/12/2018
The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Financial Crimes Enforcement Network issued today a joint interagency statement to encourage banks to consider innovative approaches in meeting their Bank Secrecy Act/anti-money laundering compliance obligations.

Remarks by Chairman J. Christopher Giancarlo at the Fourth Annual Conference the Evolving Structure of the U.S. Treasury Market, New York, New York; “The Complex and Dynamic Liquidity Hierarchy of the US Treasury Market”
Thank you. Good afternoon. I want to thank John Williams, Nate Wuerfel, and the New York Fed for inviting me to speak to you today.

CFTC Allows Additional UK Multilateral Trading Facilities to Operate without CFTC Registration as Exempt SEFs
The Commodity Futures Trading Commission (CFTC) today issued an amended order that will allow an additional four multilateral trading facilities (MTFs) authorized within the European Union (EU) to be exempted from the requirement to register with the CFTC as swap execution facilities (SEFs).

ASIC permanently bans convicted Victorian former brokers
ASIC has permanently banned Mr Najam Shah, formerly of Glen Waverley, Victoria, Mr Mohamed Ahmed of Hampton Park, and Mr Aizaz Hassan of Truganina, from providing financial services and engaging in credit activities.

ASIC cancels Solar Financial Advisory’s AFS licence
The Australian Securities and Investment Commission (ASIC) has cancelled the Australian financial services (AFS) licence of Sydney-based Solar Financial Advisory Pty Ltd (Solar), effective from 21 November 2018.

Major financial reporting changes and other focuses
Announcing its focus areas for 31 December 2018 financial reports of listed entities and other entities of public interest with many stakeholders, ASIC has called on companies to focus on new requirements that can materially affect reported assets, liabilities and profits.

The Structure of the Treasury Market: What Are We Learning?
Governor Lael Brainard – Federal Reserve
At “The Evolving Structure of the U.S. Treasury Market” Fourth Annual Conference Hosted by the Federal Reserve Bank of New York, New York, New York

Remarks of Commissioner Brian Quintenz at the 14th Annual China International Derivatives Forum (CIDF)
Thank you for that very warm welcome. It is a great honor to join you today at the 14th Annual China International Derivatives Forum (CIDF) in Shenzhen. I would like to thank Chairman Wang of the China Futures Association for inviting me and am grateful for the very productive dialogue with the China Securities Regulatory Commission Vice Chairman Fang Xinghai. Before I begin, let me quickly say that the views contained in this speech are my own and do not represent the views of the Commodity Futures Trading Commission (Commission or CFTC).

German criminal probe zeroes in on tiny unit sold by Deutsche Bank; Business being investigated was barely profitable and put up for sale in 2016=
Olaf Storbeck in Frankfurt – FT
The business at the core of Deutsche Bank’s latest money laundering probe was tiny, barely profitable and earmarked for sale since early 2016, according to several people briefed on the matter.

ESMA is seeking experts in financial innovation for its consultative group
ESMA is today launching the process to renew the Consultative Working Group (CWG) of the Financial Innovation Standing Committee (FISC). ESMA is calling for expressions of interest from stakeholders to become a member of the CWG by 15 January 2019.

ESMA appoints new Securities and Markets Stakeholder Group
The European Securities and Markets Authority (ESMA) has published the new list of members of its Securities and Markets Stakeholder Group (SMSG) following its approval by its Board of Supervisors. The selected individuals begin a 2Ω year term on 1 January 2019 and will replace the group whose mandate expires on 31 December 2018.

Unexpected Close of Securities Markets
On occasion, the securities markets may unexpectedly close for business, for example, on the national day of mourning declared in memory of President George H.W. Bush on December 5, 2018. This Notice provides guidance to members regarding SEA Rules 15c3-1, 15c3-3, 17a-5(a) through (d), Rule 204 under Regulation SHO, FINRA Rules 4210, 4230(b), 4521 and 4524, and Federal Reserve Board Regulation T in the event of such an unexpected close. The Notice addresses, among other things, the circumstances under which the day of the unexpected close should be considered a regular business day versus a non-business day for purposes of these rules.

FINRA System Closures for National Day of Mourning
In observance of the National Day of Mourning in honor of former President George H.W. Bush, FINRA will be closed on Wednesday, December 5, 2018. Firms should refer to Regulatory Notice 18-39 for information relating to an unexpected close of the securities markets. This closure includes the following systems:

CFTC Chairman Giancarlo Statement on the Decision in CFTC v. Wilson et al.
Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo issued the following statement regarding the December 3, 2018 decision in CFTC v. Wilson et al., which followed a bench trial that concluded on December 7, 2016.

Guidance on the annual affirmation requirement for entities currently operating under an exemption from CPO or CTA registration
The CFTC requires any person that claims an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under CFTC Regulation 4.5 or an exemption from CTA registration under 4.14(a)(8) (collectively, exemption) to annually affirm the applicable notice of exemption within 60 days of the calendar year end, which is March 1, 2019, for this affirmation cycle.

FCA publishes Decision Notice against former CEO of Sonali Bank (UK) Ltd for AML failings
The Financial Conduct Authority (FCA) has today published a Decision Notice in respect of Mohammad Ataur Rahman Prodhan, the former Chief Executive Officer of Sonali Bank (UK) Limited (SBUK), fining him £76,400.

ScamSmart prompts tens of thousands of pension holders to seek information
The number of people seeking information about pension scams has soared since the launch of the first joint campaign by the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) this summer.

Investing and Trading

Investors’ New Lifeline: The Trump Put
Justin Lahart – WSJ
Never mind the Fed put. It is the Trump put that investors need to pay attention to now.
The Fed put is a trade on the idea that the Federal Reserve will step in to assist whenever things get dicey in the stock market, offering the sort of insurance that a put in the options market does. Originally the “Greenspan put,” it is an idea that originated early last decade from the Fed’s tendency, under then-Chairman Alan Greenspan, to cut rates or hold off in response to market turmoil.

Misdiagnosing The Risk Of Margin Debt
Lance Roberts – Real Investment Advice
This past week, Mark Hulbert wrote an article discussing the recent drop in margin debt.

Goldman Sees Another Weak Year for Markets After a Lousy 2018
Chris Anstey – Bloomberg
Prospects for weaker economic backdrop unhelpful for risk; Goldman advises overweight cash, selective equity hedges
Slowing economic growth, shrinking central bank balance sheets and continued bouts of volatility will help make 2019 another poor year for risk-adjusted investment returns, with few obvious havens, according to Goldman Sachs Group Inc.

Investors Deserve a Peek at Bond Managers’ Tricks; Grading with benchmarks that better reflect investing styles would be a good start.
Nir Kaissar – Bloomberg
Active bond managers have dazzled investors by outpacing the bond market in recent years. But it’s a simple sleight of hand, and the big reveal is coming.

As Markets Wobble, Cash Is King; U.S. cash and cash equivalents are on track to be some of the best-performing assets in 2018
Riva Gold – WSJ
In a year of anemic returns and wild gyrations across most markets, cash is a star. U.S. cash and cash equivalents are on track to be some of the best-performing assets in 2018, enticing money managers struggling with a rare synchronized downturn in stocks, commodities and bond markets. Rising returns on cash make it more appealing for investors to move out of other investments, risking a turning point for markets as the global economy shows signs of slowing and the Federal Reserve slowly normalizes interest rates.

Cannabis Company Craters After Shortseller Calls It a ‘Black Hole’
Luca Casiraghi, Kristine Owram, Joshua Fineman and Matt Robinson – Bloomberg
Aphria falls as much as 29% in New York trading on Monday; Canadian company is latest targeted by Quintessential Capital
Aphria Inc., one of the biggest Canadian pot companies, fell 23 percent in New York after a short seller said it was a “black hole”.


Northern Trust Expands Newly Launched Alts Platform to Include Private Markets
Business Wire
Northern Trust announced today it has added private market capabilities to supplement the recently launched ArcLine Alternatives platform for the firm’s wealth management clients.

TD Ameritrade becomes first US brokerage to partner with Tencent’s WeChat in America; TD Ameritrade announced it is opening a portal on WeChat for U.S. users, following a similar launch in August for Hong Kong users.
Evelyn Cheng – CNBC
TD Ameritrade is partnering with Tencent as the U.S. brokerage firm looks to tap the massive user base of the Chinese technology company’s WeChat messaging app.

The ‘big squeeze’: Ray Dalio, founder of the world’s largest hedge fund, breaks down how the next financial meltdown will look different from the last
Joe Ciolli – Business Insider
When Ray Dalio talks about the future of the global financial landscape, everyone should listen.


Asia’s Retail Investors Are Looking To Futures
Christopher Fix, CME Group – Emerging Market Views
Asian retail investors are increasingly flexing their muscles and becoming important participants in the derivatives market. CME Group’s retail trading volume has risen 40 percent from 2015 to 2017, with the top three traded products in Asia Pacific being crude oil futures, E-mini S&P 500 futures and gold futures. Over the past two years, nearly half of all retail clients acquired globally by CME Group are from Asia Pacific, signifying that interest from this particular group of traders in this region is on the rise.

Why The Coal Markets Are Moving East
Owain Johnson – OpenMarkets
Before the emergence of oil and gas, there was coal. Cheap and plentiful coal powered the Industrial Revolution in Europe and the United States.
In recent years, coal consumption in those regions has declined, largely because of competition from natural gas, which also has fewer harmful emissions.
But demand for coal remains very strong in other parts of the world, particularly from the growing economies of Asia, which are adding more and more electricity production every year to power their industrialization strategies.

ETF Investors Pour Cash Into Politically Battered Mexico
Carolina Wilson, Aline Oyamada and Vinicius Andrade – Bloomberg
iShares Mexico fund had its best month of inflows since 2016; Biggest Brazil ETF takes in cash on optimism over Bolsonaro
The rush to invest in emerging markets is lifting one of the most politically volatile parts of Latin America — Mexico.

It’s Hard Out There for a Hedge-Fund Analyst
Katia Porzecanski and Nishant Kumar – Bloomberg
Fewer firms, passive investing, less research mean fewer posts; Experienced workers are most expensive, hence ‘juniorfication’
After 30 years in finance, David Goldburg’s dream was fading. His resume was good. Goldman Sachs prop desk. Managing money for Michael Milken. He tried to start his own hedge fund. His timing was bad. It didn’t work.

China Announces New Punishments for Intellectual Property Theft
Bloomberg News
Government announced a total of 38 different punishments; Violators banned from issuing bonds or other financing tools
Intellectual property theft is one of the main points of contention in China’s dispute with Washington, and just days after President Xi Jinping promised to resolve the U.S.’s “reasonable concerns,” China has announced an array of punishments for IP theft.

Europe’s tech startups suffer from ‘diversity debt’, survey finds; Study by investment firm finds 85% of funding deals are made with all-male founding teams
Alex Hern – The Guardian
Europe’s startup sector has a “shocking” lack of diversity, with 93% of all funds raised in 2018 going to all-male founding teams, according to a report by the investment firm Atomico.

Qatar Leaving Is an Ominous Sign for OPEC; It’s a relatively tiny oil-producer, but it exposes the organization’s growing weaknesses.
Liam Denning – Bloomberg
The immediate question raised by Qatar leaving OPEC is, of course, what to call this? Qatarexit, or even Qatexit, sound wrong. Qatar-ta-for-now has a nice ring to it, even if it’s a tad unwieldy. Maybe just go with Qatout.

Germany May Boost Offshore Wind Auction Capacity 33% by 2030
Brian Parkin – Bloomberg
Nation could increase tenders to 20GW after industry pressure; Details published in 162-page energy law passed Nov. 30
Chancellor Angela Merkel’s government is bowing to industry pressure to boost Germany’s offshore wind capacity, already among the biggest in Europe.


UK rakes in record 75 billion pounds in City taxes amid Brexit warnings
Iain Withers – Reuters
Financial services firms in Britain paid a record 75 billion pounds in taxes in the last financial year, but City bosses warned a chaotic Brexit could blow a hole in the industry’s tax receipts in future years.

FCA’s warning to Brexit-ing banks shows direction of travel; Somewhat late in the day, the regulator has woken up to some geographic realities
Matthew Vincent – FT
If the recently resigned Brexit secretary Dominic Raab is not prevailed upon by the Tory party ó or a grateful nation ó to become our next prime minister (and the odds are as short as 6-1), he could always join the Financial Conduct Authority. He seems sufficiently quick on the uptake.

U.K. Can Still Unilaterally End Brexit, EU Top Court Indicates
Stephanie Bodoni – Bloomberg
Advisory opinion says U.K. could revoke its notice to quit EU; Final EU court ruling in Brexit case will come at later date
The U.K. should be allowed to reverse Brexit, according to an advisory opinion from the European Union’s top court that will fuel the campaign to thwart the divorce.

The Brexit Short: How Hedge Funds Used Private Polls to Make Millions; Private pollsóand a timely ‘concession’ from the face of Leaveóallowed the funds to make millions off the pound’s collapse.
Cam Simpson, Gavin Finch, Kit Chellel – Bloomberg
At 10 p.m. on June 23, 2016, Sky News projected the words “IN OR OUT” across the top of a London building as an orchestral score ratcheted up the tension. “In or outóit is too late to change your mind,” declared Adam Boulton, the veteran anchor, seated in a makeshift studio across from Big Ben.

Carney defends BoE’s doomsday disorderly Brexit projection; Central bank chief faced criticism over forecast that showed deep contraction in worst case
Delphine Strauss – FT
Mark Carney has defended the Bank of England’s analysis of Brexit’s economic impact, telling a parliamentary committee that it had held back the details of its dire no-deal scenario for as long as possible rather than employing scare tactics.


Young people get tough with older generations over ‘messed-up planet’
Megan Rowling – Reuters
Older generations have “messed up the planet”, letting down younger people, who are “angry” about it and want it to stop, British naturalist David Attenborough said on Monday.

The First Book Written About a Stock Market Is Selling for $300,000; Joseph Penso de la Vega’s Confusion of Confusions was published in 1688.
James Tarmy – Bloomberg
On Tuesday the first book known to be written about a stock exchange went on sale at Sotheby’s Rare Books and Manuscripts online auction, carrying an estimate of $200,000 to $300,000. Written by Joseph Penso de la Vega in 1688, the Confusion of Confusions is a primer for the Amsterdam stock exchange, which was set up by the Dutch East India company in 1602. Bids close on Dec. 17.

John Lothian Newsletter

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Past Newsletters

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

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