First Read

The Case That Changed the Industry
Jim Kharouf, JLN

Back in 2005, I began covering a major development in the financial industry – patents. More specifically, I began covering the patent infringement cases by Trading Technologies against a number of firms including CQG.

That case, which lasted almost 12 years with appeals, is now essentially settled by the US Court of Appeals for the Federal Circuit, which affirmed the validity of TT’s patents, and essentially backed a lower court’s finding that CQG infringed on TT’s patents. The settlement awarded in the lower court was for $16 million.

TT’s patent litigation is well-known in the industry by now. But in the early 2000s, after TT secured a patent from the US Patent and Trademark Office for its now famous MD Trader (and its price ladder), patents on software in the industry were largely unknown. And the idea of defending that patent against competitors and customers alike was met with disbelief and in some corners, disgust. More than one executive said they would fight TT’s patents till the bitter end.

Read the rest here.

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Women’s March Draws ‘Duty-Bound’ From Wall Street
Kate Kelly – NY Times
Hillary Ripley was on a stair climber at her Brooklyn gym when her 16-year-old daughter texted. A women’s march was being organized in Washington, the teenager wrote, to protest the incoming administration of President-elect Donald J. Trump and to speak up for gender equality. Ms. Ripley hopped off the machine and began searching for a bus-charter company.
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***** And so it begins.

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Trump, His Children, and 500+ Potential Conflicts of Interest; President-elect Donald Trump’s complex holdings place him in an unprecedented position
Joel Eastwood, Coulter Jones and Julia Wolfe – WSJ
In a bid to steer clear of conflicts of interest during his presidency, President-elect Donald Trump has said his hundreds of businesses would be placed in a trust managed by his adult sons. But ethics experts say the scale of his holdings in the U.S. and around the world, and the close involvement of his children, mean the trust wouldn’t extricate him from all potential conflicts of interest.
/goo.gl/fv7hU8

***** What is 500+ conflicts among friends?

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Financial Firm Allegedly Hunted Down Whistleblowers Amid SEC Accounting Inquiry
Samuel Rubenfeld – WSJ
A Seattle-based bank agreed to settle allegations from the Securities and Exchange Commission that it conducted improper accounting and later took steps to impede potential whistleblowers.
/goo.gl/u8Q5Hi

****** It is not the hunting I have a problem with, it is the skinning alive.

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Fed. Circ. Finds Trading Patents Survive Alice In $16M Case
Law360
The Federal Circuit on Wednesday upheld a lower court’s decision that two Trading Technologies International Inc. electronic trading patents are not invalid under the U.S. Supreme Court’s Alice ruling, leaving intact a $16 million jury verdict the company won against CQG Inc.
jlne.ws/2iGazut

****** A long time ago, I found out about the TT MD Trader patent. I thought it was too big of a story for a then one man newsletter and tried to pass the story on to the reporter at the Chicago Tribune who covered the industry. Fast forward to today and how things change. Today John Lothian News is just the place for breaking that kind of news. Who knew?

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Thursday’s Top Three
Our top read stories from Thursday were likely led by click traders, or perhaps other HFT traders. The top story from thereformedbroker.com was How to beat a high frequency trader. Second was CNBC’s interview with Ray Dalio, Populism is number one market concern: CEO of largest hedge fund. Finally, Coindesk’s piece about ASX and blockchain Digital Asset’s New Challenger: DLT Disillusionment

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MarketsWiki Stats
92,540,448 pages viewed; 22,311 pages; 203,276 edits
MarketsWiki Statistics

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Lead Stories

EU Said to Warn Deutsche Boerse-LSE Merger May Crush Rivals
Aoife White and Stephanie Bodoni – Bloomberg
Deal may see clearing rivals with little chance to compete; EU sees companies competing directly for integrated clearing
European Union regulators told Deutsche Boerse AG and London Stock Exchange Group Plc that their $12 billion deal to create the region’s dominant exchange operator risks eliminating rivals for clearing services, according to two people who’ve seen the statement of objections.
/goo.gl/HccM1V

Citigroup Punished for Treasury Market Spoofing by Five Traders
Bloomberg
Five Citigroup Inc. traders manipulated the U.S. Treasury futures market more than 2,500 times, according to regulators, who imposed a fine of $25 million on the bank, the highest profile firm to be penalized for the illegal trading strategy known as spoofing.
/goo.gl/ETYEet

IPSX selects Cinnober to help launch new real estate exchange
IBS Intelligence
The International Property Securities Exchange (IPSX) has selected Cinnober to power its new real estate stock exchange. IPSX has applied with the Financial Conduct Authority in the UK for a Recognised Investment Exchange licence and anticipates the launch of its new venture in early 2017.
jlne.ws/2jRnuGR

Soros Says Markets to Slump With Trump, EU Faces Disintegration
Simone Foxman and Saijel Kishan – Bloomberg
Billionaire investor says incoming U.S. president will fail; U.K. premier won’t last long as nation prepares to leave EU
It’s tough to be gloomier than billionaire George Soros right now.
America has elected a would-be dictator as president, the European Union is disintegrating, U.K. Prime Minister Theresa May won’t last long as her nation prepares to secede from the EU, and China is poised to become an even more repressive society, the investor told Bloomberg Television’s Francine Lacqua from the World Economic Forum in Davos.
/goo.gl/45gttV

Davos Elites See an ‘Abyss’: The Populist Surge Upending the Status Quo
Alexandra Stevenson – NY Times
For the investors and market-movers at the annual World Economic Forum here, a threat lurks. At cocktail parties where the Champagne flows, financiers have expressed bewilderment over the rise of populist groups that are feeding a backlash against globalization. In the halls of the Davos Congress Center, where many of the meetings this week are taking place, investors have tried to make sense of the political upheaval.
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What’s at stake for Chicago exchanges as Trump takes the oath
Lynne Marek – Crain’s
Financial exchanges in Chicago have had a lot at stake lately with the Securities & Exchange Commission—including an acquisition, a sale and a major structural change.
/goo.gl/npzYHB

Libor’s lost: inside the scandal that shook the City; An account of how an obscure financial benchmark was rigged reads at times like a thriller
by: Patrick Jenkins – FT
If anyone had pitched a mainstream book about the London Interbank Offered Rate a decade ago, publishers would have rebuffed the idea out of hand. That was before the Libor scandal led to the sacking of a chief executive (Bob Diamond of Barclays), the embarrassing of a central banker (Paul Tucker, then deputy governor of the Bank of England) and the multibillion-dollar fining of banks and brokerage houses.
/goo.gl/c3DU4A

Hong Kong exchange urges wider review on new company listings; Call for examination of smaller stocks as lack of transparency sparks concerns
by: Jennifer Hughes in Hong Kong – FT
The head of Hong Kong’s stock exchange has suggested the city dramatically widen the scope of an “emotional” review of its process for listing new companies — potentially offering regulators a way of dealing with the tricky issue.
/goo.gl/VPJkYH

Welcome to the Jungle: Understanding Speed in the Capital Markets
Larry Tabb – TABB Forum
Understanding the role of speed in trading is imperative to understanding how to trade and what happens with your order. And understanding what speed means to the trading process requires a knowledge of exchange infrastructure and how speed is employed by the markets.
jlne.ws/2jQp37N

JPMorgan Boosts CEO Dimon’s Annual Pay 3.7% to $28 Million
Anders Melin and Hugh Son – Bloomberg
Bank awards $19 million compensation packages to four deputies; Stock surged 31% last year, mostly after presidential election
JPMorgan Chase & Co. gave Chief Executive Officer Jamie Dimon a $1 million raise after the bank’s stock climbed 31 percent last year.
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George Soros says Trump will fail and market’s dream will end
Reuters
The billionaire investor George Soros said on Thursday that global markets will falter given the uncertainty of incoming U.S. President Donald Trump’s policies.
/goo.gl/d5g431

Brexit

US bankers hatch two-stage Brexit plan for City;Executives seek to win time to decide how many jobs to shift out of London
Martin Arnold and Ben McLannahan – FT
Senior US bankers are privately drawing up contingency plans for Brexit that would give them more time to decide how many jobs to move out of London, in contrast with the industry’s public rhetoric about mass relocation.
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Bank Execs in Davos Privately Say London Clearing Probably Safe
Stephen Morris and John Detrixhe – Bloomberg
London will probably end up winning the battle over its clearing industry, according to four top bankers in Davos, adding to the debate over whether the U.K.’s financial industry will be stripped of a crown jewel.
jlne.ws/2jRg4U4

May Insists Banks of ‘Huge Value’ as They Step Up Plans to Exit
Robert Hutton and Timothy Ross – Bloomberg
Prime minister gives strongest backing yet to City of London; May says she believes banks will stay in U.K. after Brexit
Theresa May offered her strongest support yet for London’s financial district, insisting that banks are of “huge value” to the U.K. economy as executives signaled they were accelerating plans to move staff abroad after Brexit.
/goo.gl/wpxZEe

Exchanges, OTC and Clearing

NYSE drops initial fees for switching companies in listings war
Reuters
Jan 19 The New York Stock Exchange has waived the first partial year of annual listing fees for companies that transfer their stock to the Big Board from another exchange, a move that could help it poach more companies from rival Nasdaq.
jlne.ws/2jRvSGk

Bitcoin exchange BTCC: China hasn’t said margin trading illegal
Brenda Goh – Reuters
The head of Chinese bitcoin exchange BTCC on Thursday denied media reports that the central bank had ruled it was offering margin loans illegally, and he said the platform is operating normally.
/goo.gl/kjlSlU

Hong Kong’s Securities And Futures Commission Signs MoU With SEC To Enhance Supervision Of Cross-Border Regulated Entities
Mondovisione
The Securities and Futures Commission (SFC) has entered into a memorandum of understanding (MoU) with the U.S. Securities and Exchange Commission (SEC) providing for consultation, cooperation and exchange of information related to the supervision and oversight of regulated entities that operate on a cross-border basis in Hong Kong and the United States of America.
jlne.ws/2jRkt9z

Silexx Adds Data from OTC Markets
Joanne Faulkner – WatersTechnology
Florida-based Silexx Financial Systems, a developer of professional trading, analytics and risk management systems, has begun distributing real-time Level 1 and Level 2 data from New York-based over-the-counter exchange operator OTC Markets.
jlne.ws/2jRvOq4

Canadian OTC clearing mandate set for April; Mandatory clearing of OTC derivatives will come into force in Canada from April this year.
By Paul Walsh – The Trade
The Canadian Securities Administrators (CSA) will introduce mandatory clearing for over-the-counter (OTC) derivatives trading in Canada in April this year.
/goo.gl/utWIxE

Politics

Issues of Riches Trip Up Steven Mnuchin and Other Nominees
Alan Rappeport – NY Times
Steven T. Mnuchin, President-elect Donald J. Trump’s pick to head the Treasury Department, came under withering fire on Thursday for foreclosing on homes in California, managing an offshore investment account and initially failing to disclose almost $100 million in assets.
/goo.gl/94IvqS

Mnuchin Says He Supports Dodd-Frank’s Volcker Rule
Tara Jeffries – Morning Consult
Steven Mnuchin, President-elect Donald Trump’s pick for treasury secretary, said Thursday he supports the Volcker Rule, but suggested that he wants to make some changes to the Dodd-Frank regulatory framework.
/goo.gl/BFzhKg

Investing and Trading

Investors pull cash from stock funds ahead of Trump inauguration
Trevor Hunnicutt – Reuters
Investors pulled $3.1 billion from U.S.-based stock funds over the last week, Lipper data showed on Thursday, showing a waning appetite for risk ahead of Donald Trump’s inauguration as U.S. president.
/goo.gl/41Mr9N

The end of active investing?; Technology and low returns have delivered a killer blow to a once-dominant industry
Charles D. Ellis – FT
Since index funds deliver the market rate of return through a widely diversified portfolio with no more than the market level of risk, the only justification for actively managed funds must be either more returns or less risk or both — increasingly recognised as the investment world’s version of the triumph of hope over experience.
/goo.gl/tMC6lt

Trump’s energy revolution poses challenge for investors; Fossil fuel industry’s glee will be harder to translate into returns
by: Gregory Meyer in New York – FT
As Donald Trump moves into the White House, it would be hard to dream up a cabinet friendlier to fossil fuels.
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Trump’s vigorous and unexpected impact on markets — in charts; S&P 500 index has climbed 6% since election day
by: Adam Samson in London, and Robin Wigglesworth and Nicole Bullock in New York – FT
Donald Trump’s November victory ignited the steepest rally from election day to inauguration for a first-term president since John F. Kennedy won the White House in 1960.
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Institutions

Citigroup pays $25m to settle US ‘spoofing’ charges; Bank becomes first big lender to be caught in crackdown on illegal trading move
by: Philip Stafford – FT
Citigroup will pay a $25m penalty to settle US charges of “spoofing” the US Treasury market, making it the first bank to be caught in the crackdown on the illegal trading practice.
/goo.gl/do8z9f

Citigroup faces questions on missing its financial targets
Alistair Gray – Financial Times
When Michael Corbat took the helm of Citigroup in 2012 he had a mantra: be more accountable.
jlne.ws/2jRyT9r

How Deutsche Bank Made a $462 Million Loss Disappear; A dubious trade leads to a criminal trial for Europe’s most important bank.
Vernon Silver and Elisa Martinuzzi – Bloomberg
On Dec. 1, 2008, most of the world’s banks were still panicking through the financial crisis. Lehman Brothers had collapsed. Merrill Lynch had been sold. Citigroup and others had required multibillion-dollar bailouts to survive. But not every institution appeared to be in free fall. That afternoon, at the London outpost of Deutsche Bank, the stolid-seeming, EUR2 trillion German powerhouse, a group of financiers met to consider a proposal from a team led by a trim, 40-year-old banker named Michele Faissola.
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Ex-BOE’s King Raps Central Banks for Losing Focus, Humility
Lucy Meakin – Bloomberg
Central bankers need to stick closer to their inflation remit; Economists shouldn’t pretend to be able to forecast, he says
It would seem that Mervyn King isn’t a fan of what central bankers have been doing since he departed their ranks.
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Hedge fund returns reach three-year high in 2016, says Preqin
Hedgeweek
The Preqin All-Strategies Hedge Fund benchmark posted returns of 7.40 per cent in 2016, marking the best performance year for the industry since 2013 and more than tripling the 2.03 per cent gain made through 2015.
jlne.ws/2jRylAC

Deutsche Bank Sued in U.S. by Jewish Trust Over $3 Billion
David Voreacos and Susannah Nesmith – Bloomberg
Wertheim trust seeks assets first deposited before Nazi rise; Suit says money deposited at Credit Suisse moved to Deutsche
Deutsche Bank AG was sued in Florida by a Jewish charitable trust that claims the firm wrongly withheld as much as $3 billion from the heirs to a wealthy German family.
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Exclusive: HSBC begins cutting around 100 senior bankers globally – sources
Reuters
HSBC has begun cutting around 100 jobs in its investment banking division worldwide this week, according to sources with direct knowledge of the matter.
/goo.gl/fg8vo1

Commodity fund suspension lifted
By Katherine Denham – FT Adviser
A fund managed by Montreux Capital Management has now reopened after it was suspended for 12 months when it failed to meet payment deadlines.
/goo.gl/6IcKvo

Fintech

On the Bitcoin Blockchain: Looking Under the Hood
All About Alpha
More than a year ago, the Capco Institute Journal of Financial Transformation (Journal) ran a “critical assessment,” by Robert Sams, of bitcoin blockchains as a means of distributed clearing. With both bitcoins and blockchains newly in the news, Sams’ informed assessment is worth another look.
/goo.gl/wVDAnm

smartTrade Ready for MiFID II Challenges
BusinessWire
smartTrade Technologies, a multi-asset electronic trading solutions pioneer, has been working with a number of institutions on MiFIR/MiFID II implementations.
/goo.gl/yzvIg2

Fintech labs could be at saturation point
Kimberley Long – Euromoney Magazine
Fintech labs have been a way for banks to work with start-ups to develop the products and services the incumbents need. With so many banks now taking this same approach, what’s the chance of true innovation?
jlne.ws/2jRxJeh

2016 Was a Record Year for Data Breaches
Olga Kharif – Bloomberg
U.S. companies and government agencies suffered a record 1,093 data breaches last year, a 40 percent increase from 2015, according to the Identity Theft Resource Center.
jlne.ws/2jRkI4h

Tech firm creates Trump monitor for stock markets
Reuters
Just in time for his inauguration, London-based fintech firm Trading.co.uk is launching an app that will generate trading alerts for shares based on comments made on social media by Donald Trump.
jlne.ws/2jRFW1Z

Eze Software opens Toronto office
Automated Trader
Eze Software Group, the provider of investment management technology, has opened a new office in Toronto.
/goo.gl/iwxKD9

Regulation

Citigroup Punished for Treasury Market Spoofing by Five Traders
Matthew Leising and Dakin Campbell – Bloomberg
Five Citigroup Inc. traders manipulated the U.S. Treasury futures market more than 2,500 times, according to regulators, who imposed a fine of $25 million on the bank, the highest profile firm to be penalized for the illegal trading strategy known as spoofing.
/goo.gl/ETYEet

Democrats ask U.S. brokerages if they support delay to fiduciary rule
Reuters
One of the strongest proponents of the Democrats on financial regulation demanded on Thursday that big brokerages come clean about whether they would support delaying a new rule by the U.S. Department of Labor if President-elect Donald Trump’s administration makes a move to do so.
/goo.gl/LldI8F

Western Union settles U.S. money laundering allegations for $586 million
Joel Schectman and Diane Bartz – Reuters
Western Union Co (WU.N) agreed to pay $586 million and admitted to turning a blind eye as criminals used its service for money laundering and fraud, the U.S. Department of Justice and the Federal Trade Commission said in statements on Thursday.
/goo.gl/qnK3CE

FIA welcomes Myriam Condon as Vice President of Member Services and Business Development
FIA
FIA is pleased to announce the appointment of Myriam Condon as Vice President Member Services and Business Development.
jlne.ws/2jQmoej

CFTC’s Enforcement Division Issues New Advisories On Cooperation
Mondovisione
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Enforcement today issued two new Enforcement Advisories outlining the factors the Enforcement Division will consider in evaluating cooperation by individuals and companies in the agency’s investigations and enforcement actions.
jlne.ws/2jQxpfQ

Enforcement Director Aitan Goelman To Leave CFTC
Mondovisione
U.S. Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad today announced that Division of Enforcement Director Aitan Goelman will leave the agency on February 3, 2017. During Mr. Goelman’s tenure, the Division brought a number of first-in-kind cases utilizing the new enforcement authorities created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
jlne.ws/2jQtOyb

SEC Chief Of Staff Andrew J. Donohue To Leave Agency
Mondovisione
The Securities and Exchange Commission today announced that SEC Chief of Staff Andrew J. “Buddy” Donohue will be leaving the agency at the end of January.
jlne.ws/2jQkXwA

Gregory Dean Joins FINRA as Senior Vice President, Office of Government Affairs
FINRA
The Financial Industry Regulatory Authority (FINRA) announced today that it has named Gregory J. Dean, Jr. as its Senior Vice President for the Office of Government Affairs. Mr. Dean will start at FINRA on January 30.
jlne.ws/2jRGQLW

Former Los Angeles investment banker pleads guilty to fraud
Nate Raymond – Reuters
A former Los Angeles investment banker once dubbed “Porn’s New King” pleaded guilty on Thursday for the second time in a year to engaging in securities fraud, admitting to participating in a scheme that cheated investors and a Native American tribe.
/goo.gl/IiJ1tT

Ex-Sentinel chief loses bid to void conviction, 14-year prison term
Jonathan Stempel – Reuters
A federal appeals court rejected former Sentinel Management Group Inc chief Eric Bloom’s bid to void his conviction and 14-year prison sentence over an estimated $666 million fraud that led to the demise of his suburban Chicago firm and a big writedown for Bank of New York Mellon.
/goo.gl/iGa38j

Ex-Visium fund manager convicted of fraud by Manhattan jury
Nate Raymond – Reuters
A former portfolio manager at Visium Asset Management LP was convicted of securities fraud on Thursday, following a trial that stemmed from a federal investigation that led to the New York-based hedge fund’s closure last year.
/goo.gl/U0ugqe

Canadian Securities Regulators Adopt Rules for Over-the-Counter Derivatives Clearing
AMF
The Canadian Securities Administrators (CSA) today announced two new national instruments affecting over-the-counter (OTC) derivatives trading in Canada. The national instruments are part of Canada’s ongoing implementation of commitments to reform the global OTC derivatives markets.
jlne.ws/2jRD8Sz

Regions

A Default Storm Is Brewing Over China Junk Bonds
Bloomberg News
A record amount of bonds rated AA or lower will mature in 2017; Net note sales turn negative in December, lowest on record
A default storm is brewing for China’s lower-rated corporate bonds with a record amount maturing just as borrowing costs surge.
/goo.gl/JU5xaE

Indonesia’s worried about market ‘psychology’ with JPMorgan report
Eveline Danubrata and Gayatri Suroyo – Reuters
Indonesia’s reform-minded finance minister seemed to invoke memories of the 1997-98 Asian financial crisis this week when explaining why she came down so hard on JPMorgan Chase & Co for downgrading the country’s equity market.
/goo.gl/VR2JPJ

Miscellaneous

BuzzFeed and online media rivals seek new models; The latest publishing tyros are desperately seeking new ways to create revenues
Matthew Garrahan – FT
When Donald Trump called BuzzFeed “a failing pile of garbage” last week, after it published a dossier about him filled with lurid, unsubstantiated claims, he inadvertently gave the website a new way to generate revenue.
/goo.gl/604847

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