EU must act now to beat the bad guys behind money laundering

Mar 13, 2019

First Read

Chinese Day Traders Manipulating US Markets
Jim Kharouf – JLN

Chinese-based day traders are taking increasingly sophisticated steps to manipulate stocks traded on US markets, according to a surveillance firm executive.

Research and analysis conducted by Eventus Systems, a compliance, surveillance, and risk management firm, has detected regular instances of manipulation by Chinese-based traders trading predominantly Chinese companies listed on US stock exchanges.

Travis Schwab, co-founder and CEO of Eventus Systems, said traders use a complex scheme involving multiple brokers to execute buys and sells of various stocks on multiple exchanges to avoid detection. Eventus is developing a tool called Relationship Finder, to filter and decipher trading patterns and activities, using a diverse set of data.

“We see manipulation every day, spoofing and layering activities,” said Schwab, in an interview at the FIA Boca conference. “But with the cross-firm, cross technology platform, cross market, we’ve seen up to 12 different parties involved in market manipulation schemes. That’s 12 different accounts doing the manipulation.”

To read the rest of this article, go here


Hits & Takes
JLN Staff

Chuck Mackie has his Boca roundup here and below, reporting for JLN this year.~JJL

During the first panel of the FIA Boca conference, after Walt Lukken’s opening comments, Don Wilson was making a comment about diversity when there was a well-known loud laugh from the back of the room. “Hello Kim,” Don said in reaction to former CME Group executive Kim Taylor’s humorous outburst.~JJL

I was approached at the conference by a peripheral industry salesman now pushing questionable server technology supposedly popular with some of the biggest names in high frequency trading. I was introduced to the lead executive for the server company, who asked TT’s CEO Rick Lane, who was also standing there, if he knew anything about technology. It was an epic and spectacular fail. And, BTW, none of the three people from this server company had conference badges, so they appeared to be free-loaders. Not cool.~JJL

I interviewed Rama Pillai of SGX for our history of financial futures documentary series about the start of SIMEX. I also was able to grab former MEXDER CEO Jorge Alegria for an interview about the start of futures trading in Mexico. It turns out petroleum-backed bonds were a trigger when crude oil shot up during the Kuwait war in the 1990s. And I interviewed former FIA President John Damgard about the start of the CFTC and FIA. The documentary project keeps humming along.~JJL

The Intercontinental Exchange (ICE) has a couple of announcements this morning – one, it has extended its global product licensing agreement with Eris Innovations, the intellectual property licensing company, and two, ICE will hold its 2019 Annual Meeting of Stockholders on Friday, May 17, 2019 at 8:30 a.m. ET at The St. Regis Atlanta. A live audio webcast and replay of the annual meeting will be available on the company’s website at in the investor relations and media section.~SR


SGX Looking At New Interest Rate Contracts
Jim Kharouf – JLN

Singapore Exchange (SGX) is looking to dive into the securitized lending space in the coming months with a new interest rate-based contract for Japanese stocks.

Michael Syn, executive vice president and head of derivatives, said the Japanese market is primed for a futures product for Japanese stock lending due to the ongoing low interest environment in Japan. The reasoning goes that many investors looking at retirement products have been forced to invest in equities because Japan’s interest rates have been essentially zero for years. It now stands as a $700 billion market.

As such banks, insurers and other institutions have created equity-based structured products for customers looking to retire. To hedge those positions, SGX believes its interest rate contract, essentially a Repo futures, will allow institutional players to take positions 10- to 20 years out to managing funding and collateral.

The contracts are due for launch in the next three to six months, pending regulatory approval.



Boca Bits: FIA Boca Day One
Chuck Mackie – Medium

Over 1,100 market professionals and regulators descended on southern Florida for the first of three days as the 44th annual FIA Boca conference kicked off on Tuesday. The day followed the typical FIA script with a series of individual presentations from derivatives exchanges followed by an introduction from FIA CEO Walt Lukken and a final panel on the health of the industry. Of note, the lineup of exchange presentations consisted of three usual suspects and one intriguing rookie, while the name change for the afternoon panel implied a trace of negativity. In other words, with no big announcements or fireworks to speak of, it wound up being necessary to note the little things in order to derive some takeaways from the goings on. In any case, the first day was a little light on revelations, just as the first day of FIA Boca generally is.

To read the rest of this commentary, go here


EU to Commit to Taking Gender Into Account in Picking ECB Chief
Nikos Chrysoloras – Bloomberg
Government envoys to make commitment in letter to EU assembly; Previous promises for diversity were not followed through
European governments are poised to commit to taking gender balance into account when picking the next president of the European Central Bank, in what could signal a boost to the chances of potential female candidates for one of the most important jobs in the euro area.

*****They always have taken gender into consideration. Just one gender, but they did consider gender.~JJL


How to Bribe Your Kid Into College, According to Rich People
Erik Larson, John Gittelsohn, and Sabrina Willmer – Bloomberg
Gordon R. Caplan, one of New York’s top lawyers, was fretting last summer that his daughter couldn’t get into his alma mater, Cornell University. He wasn’t prepared to take any chances, federal prosecutors say.
On June 15, 2018, the senior mergers attorney and co-chair of Willkie Farr & Gallagher LLP rang up William Singer, the founder of a corrupt college counseling and test-prep business who would later become a cooperating witness in a massive admissions-bribery case, government investigators in Boston said Tuesday in a criminal complaint.

***** What happened to the good old “legal” ways of paying to get your kids in college like endowing a library or buying some exercise equipment for the gym? ~JB


How a Bitcoin Evangelist Made Himself Vanish, in 15 (Not So Easy) Steps; Step No. 10: Buy a decoy house to fool the D.M.V.
Nathaniel Popper – NY Times
In October 2017, a SWAT team descended on Jameson Lopp’s house in North Carolina. Someone — it still isn’t clear who — had called the police and falsely claimed that a shooter at the home had killed someone and taken a hostage. After the police left, Mr. Lopp received a call threatening more mayhem if he did not make a large ransom payment in Bitcoin.

***** Misdirection is always a good strategy.~JJL


Bomb cyclone to strike central US
Madison Park, Allie Mazurek and Judson Jones – CNN
An intense and ferocious winter storm — a “bomb cyclone” — is expected to bring hurricane-force wind gusts, blizzard conditions and a flood threat across a swath of the US heartland Wednesday.
A bomb cyclone occurs when there is a rapid pressure drop, falling at least 24 millibars (which measures atmospheric pressure) over 24 hours known as bombogenesis.

*****I never knew a “bomb cyclone” was a thing. It certainly grabs your attention! ~JB


Tuesday’s Top Three
Our most-read story on Tuesday was from FinancesOnline, Top 10 Richest Companies in the World in 2018 by Revenue. Spoiler – No. 1 is Walmart. Next was a Crain’s Chicago Business story about Don Wilson’s efforts in Chicago chases the pot o’ crypto. And third was the news from CME Group in The Wall Street Journal’s Do You Want to Trade Futures? ‘Micro’ Contracts Could Make it Easier.


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Lead Stories

EU must act now to beat the bad guys behind money laundering; The entire financial system is in danger – we cannot fight this threat nationally
Magnus Billing – FT
News that the Swedish Financial Supervisory Authority is to investigate Swedbank over allegations of money laundering is grave indeed. What began as a bubbling concern in the Baltics before spreading to Denmark and the other Nordic states now threatens to become a European crisis.

Speculators to be banned from market for biofuel credits; US regulator proposal would restrict trading to counter suspicions of price-rigging
Gregory Meyer – FT
The US government intends to push speculators out of the shadowy market for fuel ethanol credits, in an attempt to counter suspicions of price-rigging.

The Battle Over Broker Rules Goes Local; Some states want to force advisers to act in clients’ best interests.
Neil Weinberg – Bloomberg
Ordinary investors face a confusing situation when it comes to sizing up the people doling out financial advice. Can they can be trusted to act in their clients’ best interests, or should they be treated with caution—like a car salesman?

Theresa May’s Brexit Deal Routed With Extension Now Seen as ‘Inevitable’
Tim Ross, Robert Hutton, and Kitty Donaldson – Bloomberg
Parliament votes 391-242 to reject revised divorce agreement; Attorney General Geoffrey Cox says postponement is inevitable
U.K. Prime Minister Theresa May’s Brexit deal was rejected once again by Parliament, throwing the country deeper into political crisis and raising the prospect that the divorce will be delayed or even reversed.

Deutsche Bank Faces Merger Pushback as 30,000 Jobs Seen at Risk
Steven Arons and Nicholas Comfort – Bloomberg
Some supervisory board members oppose deal with Commerzbank; Shareholders, regulators also wary about merger’s rationale
Deutsche Bank AG faces stiff resistance from some supervisory board members to a merger with German competitor Commerzbank AG as the deal raises the prospect of tens of thousands of job cuts.

Former SEC commissioner joins US market maker GTS as advisor; Michael Piwowar will work closely with the CEO at GTS and provide the business with legislative and regulatory advice.
Hayley McDowell – The Trade
Michael Piwowar, a former commissioner and acting chairman of the US Securities and Exchange Commission (SEC), has been appointed senior advisor at market maker GTS.

British Panel Calls for Stricter Antitrust Rules on Tech Giants
Adam Satariano – NY Times
The expanding power of technology companies has become a talking point in the United States presidential race, a subject of debate in India and a top focus of regulators in the European Union. Now, Britain is adding its voice to the worldwide backlash.

College Arms Race Goes Too Far With Wealthy ‘Gaming the System’
Amanda L Gordon and Ben Steverman – Bloomberg
Scheme exposed by U.S. on Tuesday shows some cross legal line; Many parents ‘desperate’ to get kids into selective colleges
In the American blood sport of college admissions, the rich have long had more levers to pull. It starts as early as a private kindergarten ($20,000 to $50,000 a year depending on location), then to boarding school (another $50,000-plus) and continues with tutors, consultants, test prep and exotic trips that become fodder for college essays.

TPG’s McGlashan Stripped of Duties in Wake of College-Admission Scandal; Several private-equity and venture-capital figures were charged with trying to bribe their children’s way into college
Chris Cumming – WSJ
Private-equity firm TPG has put William McGlashan Jr., founder of its growth investment unit and head of the firm’s impact investment team, on indefinite administrative leave following allegations he participated in a college admissions cheating scandal.

The Man Behind the Alleged $25 Million College-Admissions Cheating Scandal
Douglas Belkin and Jennifer Levitz – WSJ
The man at the center of what prosecutors allege is a more than $25 million scam to help wealthy families bribe their way into elite colleges is 58-year-old William Rick Singer.
A self-described serial entrepreneur who helped start an online private high school, along with several call centers, Mr. Singer appears to have found a lucrative niche counseling young people to help them get into college.

Former PIMCO CEO Doug Hodge Named In Fraud Complaint Alongside Aunt Becky From “Full House”
Thornton McEnery – Dealbreaker
Imagine surviving years of working with Bill Gross only to be taken down by bribing your kid into college.

New crop data providers cash in on US shutdown; Alternative platforms step in to fill void left by agriculture department’s key reports
Gregory Meyer and Emiko Terazono – FT
The longest government shutdown in US history was a marketing bonanza for the “alternative data” industry, and nowhere more than in agricultural markets.

Alan Howard’s Elwood Targets Big Investors for Digital Assets
Alastair Marsh – Bloomberg
Elwood Asset Management, owned by hedge-fund billionaire Alan Howard, plans a range of products to lure big institutional investors into digital assets.Barclays Got Amber Alert After

Failing to Predict Trading Losses
Harry Wilson and Stefania Spezzati – Bloomberg
Downgrade meant bank had to hold extra capital buffer; In six months of 2018, models failed to predict certain losses
As an activist investor targets Barclays Plc for taking on too much risk, the London-based lender has disclosed how its internal models failed to predict a series of trading losses at its investment bank.

Silicon Valley’s Worst Nightmare Is Ready for Her Next Act; Margrethe Vestager ends her term as EU antitrust chief this year, but she’s not ready to leave the world stage.
Aoife White – Bloomberg
South by Southwest long ago ceased to be just an annual film, tech, and music festival. The Austin conference—so popular it’s been known simply as SXSW for much of its 32 years—is now the haunt of ambitious politicians. This year, they’ve come to bash the tech giants. At one event was Democratic Senator Elizabeth Warren of Massachusetts, who promised legislation that could break up Facebook Inc. or Alphabet Co.’s Google. At another was Senator Amy Klobuchar (D-Minn.), who declared that she wants to make antitrust “cool again”—a clear swipe at the same companies. And then there was the European bureaucrat who’s won global notoriety and who probably more than almost anyone else makes U.S. technology executives quake in fear and anger: Margrethe Vestager.

Trading Surge in Oil Options Creates a Whirl of Speculation
Catherine Ngai , Sabrina Valle , and Alex Longley – Bloomberg
Brent $60 puts through 2019 see surge in volume this week; Total 16 million barrels trade in June, August, September
Global oil options markets this week were the busiest since November after a flurry of buying from what appeared to be a large producer protecting against a drop in prices.

Benjamin de Rothschild’s Family to Take Its Swiss Bank Private
Albertina Torsoli – Bloomberg
Edmond de Rothschild (Suisse) will be delisted in Zurich; Swiss bank’s structure simplified as new CEO appointed
Benjamin de Rothschild’s family plans to take its Swiss bank private as it simplifies the group’s legal structure and prepares it for expansion, which may include acquisitions.

Exchanges, OTC and Clearing

Federation Of Euro-Asian Stock Exchanges (FEAS) And Its Member Armenia Securities Exchange (AMX) Join The “Ring The Bell For Gender Equality” Initiative – “Think Equal, Build Smart, Innovate For Change”
For the first time in Armenia, FEAS and its member AMX joined the “Ring the Bell for Gender Equality” initiative to open the market in celebration of International Women’s Day 2019.

CME Group Receives Approval From the Dutch Minister of Finance to Operate in Amsterdam
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that its new legal entity CME Amsterdam B.V. has received approval from the Dutch Minister of Finance.

CME Group approved for Amsterdam entity ahead of Brexit; US exchange operator CME will transition some BrokerTec and reporting services from the UK to the Amsterdam entity.
Hayley McDowell – The Trade
CME Group has been handed regulatory approval by authorities in the Netherlands to establish a legal entity in Amsterdam ahead of Brexit.

Equity Index Highlights – March 2019 edition
February was a busy month for new product launches at Eurex and especially our innovative ESG derivatives segment was off to a promising start. The open interest in the STOXX® Europe 600 ESG-X in particular is building up nicely.

Eurex to launch suite of derivatives using MSCI Dividend Point Indexes
Eurex, one of the largest derivatives exchanges, has selected MSCI Inc. (NYSE: MSCI), a leading provider of indexes, critical decision support tools and services, to provide the indexes for a new range of dividend futures contracts.

CQG Partners with the Small Exchange, Enhancing Futures Accessibility for Market Participants Worldwide
Press Release
The Small Exchange, a new futures exchange (pending regulatory approval) backed by award-winning innovators focused on retail customers, announced partnering with CQG, a leading global provider of high-performance solutions for trading, market data, technical analysis, and risk and account management. Through CQG’s platform, market participants will have global Direct Market Access to The Small Exchange and its future suite of products.

San Juan Mercantile Exchange Announces Strategic Partnerships that Provide Unprecedented Access to Dark Pool Trading in the Digital Asset Market
Press Release
BOCA RATON, Fla., March 13, 2019 – The San Juan Mercantile Exchange, Inc. (SJMX) and its affiliate, the San Juan Mercantile Bank & Trust International Corp. (SJMBT), today announced three key strategic partnerships that pave the way for the initial launch of SJMX’s integrated digital assets exchange and banking solution.


The Rise of Silicon Valley’s New Mafias
Tim Enthoven – NY Times
Riley Newman, a former head of data science at Airbnb, set out in mid-2017 to raise a venture capital fund that would invest in a multitude of tech trends.

AI academics under pressure to do commercial research; Tech giants ramp up recruitment of university scientists with big salaries and resources
Madhumita Murgia – FT
When Joelle Pineau arrived at McGill University as a professor in 2004, she assumed she would be an academic for life.

PanXchange and CQG Announce Market Data Partnership
Collaboration gives CQG clients access to benchmark frac sand pricing data
Press Release
PanXchange, a Denver-based OTC physical commodity exchange and price discovery platform, today announced a partnership with CQG, a leading global provider of high-performance solutions for trading, market data, technical analysis, and risk and account management. Through this new partnership, CQG’s global clients gain access to PanXchange’s cutting-edge frac sand pricing data.


Crypto Assets Hit With Warning From Global Bank Regulators For The First Time
Ted Knutson – Forbes
A consortium of global bank regulators is warning about crypto assets for the first time.
“The continued growth of crypto asset trading platforms and new financial products related to crypto assets has the potential to raise financial stability concerns and increase risks faced by banks,” the Basel Committee said in a statement released today.

Bitcoin Momentum Indicator Suggests Rally Risks Winding Down
Vildana Hajric – Bloomberg
Bitcoin’s recent rally appears to be losing momentum. Technical gauges signaling long-term buying demand for Bitcoin are deteriorating, potentially showing that selling pressures could intensify. After logging its first positive returns in seven months during February and rising off its 52-week lows, Bitcoin’s Moving Average Convergence Divergence indicator has been steadily falling since mid-February.

Stellar (XLM) Rises As SatoshiPay Announces New Partnership
Jim Preissler – Forbes
Both Bitcoin (BTC) and Ethereum (ETH) were leading the broader market lower on Monday and in the short term at least, upside momentum appears to be waning. On the flip side, there’s no specific catalyst for the drift lower, just a market that cannot sustain the current rally. The one standout exception is Stellar coin (XLM). Currently ranked 9th by market capitalization, up over 4% on the day.

IBM Quietly Enters Crypto Custody Market With Tech Designed for Banks
Ian Allison – Coindesk
IBM is coming to the crypto custody space. Later this month, Shuttle Holdings, a New York investment firm, will launch the beta version of a custody solution for digital assets built on IBM’s private cloud and encryption technologies. The companies won’t be storing cryptocurrencies and tokens themselves, but offering tools for others to do so. Potential users include banks, brokers, custodians, funds, family offices and high net worth investors who want to do self-custody, as well as exchanges, Brad Chun, Shuttle’s chief investment officer, told CoinDesk.

Binance’s Trust Wallet Adds Support for XRP, Credit Card Payments
Yogita Khatri – Coindesk
Cryptocurrency exchange Binance’s official wallet, Trust Wallet, now lets users buy cryptos with credit cards. The new payment option is being offered in partnership with Israel-based payments processor Simplex, according to an announcement from Binance on Tuesday. At the same time, the exchange said, Trust Wallet is adding support for XRP, the third largest cryptocurrency by market capitalization.

The SEC’s Crypto Czar Is Hitting the Road – And She Wants to Meet You
Nikhilesh De – Coindesk
The U.S. Securities and Exchange Commission (SEC) is going on tour in hopes of meeting with crypto entrepreneurs who otherwise might not engage with the regulator. FinHub, the SEC’s branch dedicated to interacting with tech startups, posted a notice last week that it would be visiting major U.S. cities, allowing individuals or teams to set up face-to-face meetings with agency staffers to ask questions or provide feedback about issuing tokens or other issues under the regulator’s purview. The road trip begins in San Francisco on March 26, at the SEC’s local office, with the next visit planned for Denver.

Bcause, the World’s First Full-Stack Cryptocurrency Ecosystem, to Launch on Nasdaq Market Technology
Press Release
Nasdaq Inc. (Nasdaq:NDAQ) and Bcause LLC, creator of the world’s first full-stack cryptocurrency ecosystem, today announced that Bcause’s markets will operate on Nasdaq’s matching engine, clearing and market surveillance technology via the Nasdaq Financial Framework platform. The technology is expected to go live in 1H 2019 with the launch of the new Bcause spot cryptocurrency market. In addition, Bcause has filed with the U.S. Commodity Futures Trading Commission to become a designated contract market (DCM) and to establish a derivatives clearing organization (DCO).The full line of Bcause market offerings will soon operate on the most widely used market infrastructure technology in the world.

Crumbs! It’s CRYPTO: the movie!
Jamie Powell and Jemima Kelly – FT
Today, for your viewing pleasure: a trailer for a film about crypto. Called . . . CRYPTO! Because that’s exactly what we all deserve.

It’s Getting Harder to Send Bitcoin’s Lightning Torch – Here’s Why
Alyssa Hertig – Coindesk
An experiment designed to push the boundaries of crypto payments, bitcoin’s “Lightning Torch” has so far grown from a single transaction worth less than one-thousandth of a cent to a global game whose users have included Twitter CEO Jack Dorsey and LinkedIn founder Reid Hoffman.
But in the process of passing the Lightning Torch from one person to another, each recipient adding value each time, users have brought to light a lesser-known problem with the lightning network itself.


Trump’s Secretary of State Wants Energy Companies to Help Spread U.S. Values; Mike Pompeo says oil and gas exports are central to thwarting Russia, China, promoting free enterprise globally
Timothy Puko – WSJ
Secretary of State Mike Pompeo implored a room full of energy executives on Tuesday to help the U.S. use its growing status as an oil and gas superpower to counter foreign rivals and promote free trade and democracy around the world.

Donald Trump’s trade chief warns that China talks could fail; Robert Lighthizer says right to raise tariffs if there are violations must be maintained
James Politi – FT
US President Donald Trump’s trade chief has warned that negotiations to end the tariff war with China were at risk of failing, saying “major, major issues” needed to be resolved before an agreement was reached, and he could not “predict success at this point”.


NFA bars former El Segundo, Calif. commodity pool operator Quants Capital Management, Inc. and its former principal Gokhan Kisacikoglu from membership for one year
NFA has barred former El Segundo, Calif., commodity pool operator Quants Capital Management, Inc. (Quants) and its former principal and associated person Gokhan Kisacikoglu from membership for one year. NFA also permanently barred Quants and Kisacikoglu from acting as a principal of an NFA Member.

Is it a Wonderful Life?
Speech by Charles Randell, Chair, FCA delivered at the Retail Banking Conference 2019 in London.
All bankers should watch ‘It’s a Wonderful Life’. It captures the range of feelings people have about bankers. George Bailey is the good banker who has the interests of Bedford Falls at heart. Henry Potter is the bad banker who comes to town with a plan to drive Bailey Building and Loan out of business so that he can exploit the town’s citizens.

SEC Announces March 28 Meeting of Investor Advisory Committee
The Securities and Exchange Commission today announced the agenda for the March 28 meeting of its Investor Advisory Committee. The meeting will begin at 9 a.m. ET in the Multipurpose Room at SEC headquarters at 100 F Street, N.E., Washington, D.C. and is open to the public. The meeting will be webcast live and archived on the committee’s website for later viewing.

Fee Rate Advisory #2 for Fiscal Year 2019
The Securities and Exchange Commission today announced that starting on April 16, 2019, the fee rates applicable to most securities transactions will be set at $20.70 per million dollars.

Proposed Rule Change to Amend Capital Acquisition Broker (“CAB”) Rules Governing
Qualification, Registration and Continuing Education of Associated Persons of CABs
Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a proposed rule change to amend the Capital Acquisition Broker (“CAB”) Rules governing qualification, registration and continuing education of associated persons of CABs (CAB Rules 119-125) to reflect new consolidated FINRA qualification and registration rules and changes to its continuing education requirements which took effect on October 1, 2018 (collectively, the “Consolidated Rules”).

ASIC industry funding invoices due 15 March 2019
ASIC urges organisations and individuals that hold a licence and operate in an industry sector covered by the Government’s laws for industry funding of ASIC’s costs to pay their invoice on time to avoid penalties.

Senate Economic References Committee – Opening Statement by ASIC Commissioner John Price; Commonwealth Registers Bill 2019 and 4 related bills [Provisions]
ASIC welcomes this package of Bills, which together lay the foundation for a government registry regime that is modern, flexible, streamlined and user-friendly. The implementation of the new regime will substantially reduce the current risk of technology failure and deliver wide-ranging benefits to all users of the registry. Further, the introduction of a director identification number will assist ASIC and other regulators in the vital work of detecting, deterring and disrupting phoenix activity.

Regulator Slams Wells Fargo After CEO Testifies to Congress; Democrats and Republicans confront Timothy Sloan on bank’s continued problems
Rachel Louise Ensign and Andrew Ackerman – WSJ
Wells Fargo WFC -0.22% & Co. received a rare rebuke from a top regulator on Tuesday, minutes after its chief executive finished testifying before a combative House panel.

Lumber Liquidators pays $33m settlement over US fraud charges; Charges stem from the company’s response to accusations of unsafe laminate flooring
Matthew Rocco – FT
Lumber Liquidators on Tuesday agreed to pay $33m to settle US charges of fraud over the company’s initial response to accusations that laminate flooring made in China did not comply with health regulations.

SEC Charges Lumber Liquidators With Fraud
The Securities and Exchange Commission today announced charges against Lumber Liquidators Holdings Inc. for making fraudulent misstatements to investors. The charges stem from Lumber Liquidators’ false public statements in response to media allegations that the company was selling laminate flooring that contained levels of formaldehyde exceeding regulatory standards. Lumber Liquidators agreed to pay more than $6 million to settle the SEC action.

Elon Musk Claims He’s Avoiding SEC Disputes. His Tweets Say Otherwise.
Craig Trudell – Bloomberg
Tesla Inc.’s Elon Musk told a federal judge he’s taken his settlement with the U.S. Securities and Exchange Commission seriously and has tried to steer clear of run-ins with the regulator. Followers of his Twitter feed and television interviews may beg to differ.

Investing and Trading

How GE Built Up and Wrote Down $22 Billion in Assets; GE’s goodwill move enabled conglomerate to avoid costs that would have reduced its earnings
Michael Rapoport – WSJ
When General Electric Co. GE -1.41% bought Alstom SA’s ALO 0.61% power business in 2015, it cost it a little more than $10 billion. But when GE put the acquisition on its books, something odd happened: The company recorded $13.5 billion in goodwill.

Palladium has the catalysts to extend record run; Price of the metal used in cars has gained more than 80% in past 7 months
Neil Hume – FT
If, as the cliché goes, the cure for high prices is high prices, then palladium should be heading for a spectacular crash.

One in three asset managers could go, predicts Invesco chief; Head of Georgia-based firm says pressures on fees and costs are relentless
Robin Wigglesworth – FT
A third of the asset management industry could disappear over the next five years, as mounting fee pressures and rising costs spur more closures and consolidation, according to Invesco’s chief executive.

Investors Lose a Major Justification for Holding Tobacco Stocks
Lisa Pham – Bloomberg
BAT had worst year on record in 2018 amid regulatory risks; Swedish, Dutch pension funds among investors quitting tobacco
It wasn’t so long ago that the stellar performance of tobacco stocks such as British American Tobacco Plc and Philip Morris International Inc. was enough justification for asset managers to hold onto their investments, despite a broader push toward socially responsible investing.

The Fed Has Given MMT Proponents Ample Ammunition; The idea that the government can print money to spark the economy is not that much different than quantitative easing – with one big exception.
Jim Bianco – Bloomberg
Modern Monetary Theory is a poorly conceived idea that might get its day in the sun. Thank – or blame – the Federal Reserve and its “extraordinary measures” monetary policy for laying the groundwork.

Low Inflation Is Federal Reserve’s Maddening Unsolved Mystery
Christopher Condon – Bloomberg
Research points the finger at a long line of usual suspects; Inflation expectations may be the Fed’s person of interest
It’s like a cold case that still baffles investigators. After years of rock-bottom interest rates and with unemployment at 3.8 percent, where is the inflation? It’s a whodunit that hangs heavily over the Federal Reserve.

This Negative-Fee ETF Will Pay Investors to Invest
Crystal Kim – Barron’s
While the biggest exchange-traded fund shops such as BlackRock and Vanguard battle for fresh money by undercutting each other on fees, small and relatively new entrants of ETF-land are going whole hog.


Wells Fargo rebuked by regulator over risk management; OCC issues unusual public criticism of US bank’s response to recent scandals
Robert Armstrong and Kiran Stacey – FT
One of Wells Fargo’s regulators has issued a stinging and highly unusual rebuke of the US bank, saying that its efforts to reform its governance and risk controls to date have been a failure.

Martin Gilbert to step down as co-chief of Standard Life Aberdeen; Keith Skeoch becomes sole chief executive of investment group
Siobhan Riding – FT
Standard Life Aberdeen’s Martin Gilbert is stepping down as co-chief executive of the UK fund house, bringing an end to the asset managers’ unorthodox joint leadership structure put in place after its merger.

UBS women, ‘doom loop’ returns and DBank merger options
Patrick Jenkins and guests discuss UBS’s treatment of its women employees in Switzerland, the return of the banking ‘doom loop’ and the prospects for a merger between Germany’s two biggest banks Deutsche Bank and Commerzbank. With special guest Katie Bennett, director of diversity and inclusion in PwC’s consultancy practice.

Goldman Sachs to Open Up In-House Moneymaker to Outside Investors; Bank plans to raise outside money for its special-situations group, one of its most profitable businesses
Liz Hoffman – WSJ
A Goldman Sachs GS 0.34% Group Inc. profit machine that has invested the bank’s own money in Asian property, African startups and troubled U.S. retailers, among other ventures, is opening up to outside investors.


Hong Kong Spends Nearly $700 Million to Bolster Currency; A glut of cash in Hong Kong’s financial system has pushed down market interest rates, depressing the city’s currency
Saumya Vaishampayan – WSJ
A glut of cash in Hong Kong’s financial system has pushed down market interest rates, depressing the city’s currency and forcing authorities to spend $692 million of foreign reserves defending its long-running link to the U.S. dollar.

China bars brokerages from aiding grey-market margin financing – report
China’s securities watchdog is barring brokerages from facilitating grey-market margin financing, warning against risks of another credit-fuelled bubble, the 21 Century Business Herald reported on Wednesday.

BNP Seeks to Beef Up China Operation on Investment Flows Bet
Bloomberg News
Firm is looking at ventures in onshore brokerage, futures; China reaffirmed plan to open $40 trillion financial sector
BNP Paribas SA, France’s biggest lender, plans to expand its China operations to include brokerage, futures trading and wealth-management ventures, as the bank anticipates further foreign investment flows into the world’s second-biggest economy.

China Data Dump to Show Investment Recovery Continuing in 2019
Bloomberg News
China’s first batch of major official indicators this year are forecast to show that an investment recovery that began in mid-2018 is set to continue, but the economic slowdown and trade war are still undermining factory output and consumption.


EU’s Barnier questions point of extending Brexit
The European Union’s Brexit negotiator Michel Barnier questioned whether there was any point in delaying Britain’s departure from the EU beyond March 29, saying on Wednesday that the British government would need to justify any request.
“Extend this negotiation — what for?” Barnier asked in a speech to the European Parliament in Strasbourg. “It’s over.”

Brexit Deal’s Failure Prolongs Corporate Uncertainty; British lawmakers’ rejection of a proposed deal on the terms of the U.K.’s exit from the European Union leaves companies exasperated
William Boston and Denise Roland – WSJ
For businesses, British lawmakers’ rejection of a proposed deal on the terms of the U.K.’s exit from the European Union prolongs uncertainty that has exasperated executives for months.

Business leaders call for new approach to Brexit; ‘Enough is enough’: MPs urged to reject UK crashing out of EU without deal
Jonathan Ford – FT
Business leaders on Tuesday night called for a “new approach” to Brexit as Theresa May’s Brexit deal fell to its second major defeat in the House of Commons. “Enough is enough,” said Carolyn Fairbairn, director-general of the Confederation of British Industry.

UK sets out trade plans to limit no-deal Brexit damage; Bid by May government to pressure Eurosceptics ahead of showdown vote on EU divorce
Jim Pickard and James Blitz – FT
The price of food and cars imported from Europe would jump steeply under a no-deal Brexit, UK officials revealed on Wednesday in a bid to pressure Tory MPs to back a showdown vote in parliament to prevent Britain leaving the EU without a withdrawal agreement.

Hedge Fund Warns Markets Are Too Complacent of Hard Brexit Risk
Ruth Carson and Chikafumi Hodo – Bloomberg
Ensemble Capital sees weaker sterling before a proper recovery; U.K. lawmakers back to polls Wednesday to decide on Brexit
Investors continue to underestimate the risk of a hard Brexit that could push the pound even lower, according to an artificial intelligence-driven hedge fund run by two former JPMorgan Chase & Co. derivatives traders.

U.K. Weighs No-Deal Brexit Vote as May Is Thrown Into Crisis
Tim Ross , Kitty Donaldson , and Robert Hutton – Bloomberg
Parliament rejects premier’s divorce deal by 391 votes to 242; May warns delay could lead to second referendum or no Brexit
Britain will confront head-on the threat of a no-deal Brexit in a parliamentary vote with huge ramifications for Prime Minister Theresa May.


MMT Debate: Three Keys to Understanding Its Significance
Mohamed A. El-Erian – Bloomberg
Despite having been slammed by several prominent economists, policymakers and top Wall Street corporate leaders, modern monetary theory is not going away anytime soon. If anything, the debate over MMT will continue to fuel an interesting conversation among academics, politicians and policymakers. The more this happens, the greater the need for market participants to be aware of the following three issues:

Ripple’s Xpring helps launch $100 million fund for game developers
Xpring, Ripple’s grant network for developers launched last May, is stepping into the $140 billion global gaming industry.
The project has partnered with the gaming blockchain startup Forte to create a $100 million fund to support game developers, the companies announced on Tuesday.

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