Exchange giants take their rivalry to Texas as shale oil booms; Building the Members Exchange

Feb 12, 2019

First Read

Hits & Takes
JLN Staff

Key highlights from the World Federation of Exchanges’ 2018 Full Year Highlights include: a 14.9 percent drop in global domestic market caps, a 11.5 percent rise in equity volume and 19.3 percent rise in derivatives volume.~JK

Mark Wetjen has been appointed chairman of DTCC Deriv/SERV’s Board of Directors.~JJL

Jitesh Thakkar‘s Go-Fund-Me Defense Fund jumped to $1,537 of its $400,000 goal yesterday after a plug in JLN.

Anthony Crudele of Futures Radio Show has branched into video with the debut of Futures TV Show – Episode 1 here. ~SD

The FT’s opinion piece on Bill Gross – Bill Gross’s fall presages the decline of the investing genius – starts with this line: “We all take a nasty pleasure in seeing the great brought low, especially if the fallen committed the sin of flamboyance while at their peak.” Meanwhile, Buffett still doesn’t spend more than $3.17 on his McDonald’s breakfast. ~SD

I am a big fan of Chicago Neighborhood Initiatives. Here is an example of some of their good work.~JJL


Taking Wall Street Know-How to the Cannabis Industry

A Gallup poll at the end of 2018 found that 66 percent of Americans support the legalization of marijuana. These opinions run across demographics and party lines, too ó 53 percent of Republicans were for legalization and 59 percent of people over the age of 55 responded “ay” to legal cannabis. When Gallup first asked about legalization in 1969, only 12 percent of respondents favored the move.

Currently, two thirds of states have medical marijuana laws on the books while 10 have legalized it for recreational use.

Enter Sachin Barot, CEO of CERESLabs, a cannabis testing laboratory. Its ancillary services are required by state regulations. (Note: that means the company does not produce or distribute cannabis ó simply tests it for things like the absence of pesticides.)

A 20-year veteran of Wall Street with more than 10 years at FlexTrade, Barot is in the rare position to bring that entrepreneurial financial know-how to the burgeoning marijuana industry. In this video from STAC’s 93rd Annual Midwinter Meeting, he talks about what it’s like to pivot from the Street to California and cannabis.
Watch the video »


The future(s) of ESG
Zubin Ramdarshan, Head of Equity & Index Product Design at Eurex
The New Year is only a few weeks old, and at Eurex, we already reached a major milestone. On 14 February, we will launch three new products with which we will kick off the future(s) of ESG investing. I am excited to share this news with you as for us the launch means that we are entering a new segment to better serve market participants that focus on sustainability.

***** There is but one future and that is one that is sustainable.~JJL


In a Super Bowl office pool gone wrong, $375,000 went missing
Lila MacLellan – Quartz at Work
Playing Super Bowl squares is supposed to be a harmless distraction, a bonding exercise that livens up life at work for a week or two, may offer a refresher in statistics and math, and leaves a handful of people with modest winnings from their gamble. In Toronto this year, however, the story of a high-stakes game played by employees at the Toronto Stock Exchange has become a cautionary tale. One unnamed organizer lost $500,000 CAD in cash (US$375,00), the Globe and Mail reports (paywall); apparently he had been robbed.

****SD: Cost of entry was $5,000 per square and despite this year’s outcome, the pool will continue, but with some changes. Fool me once…


Monday’s Top Three
Our top three items were led by Jitesh Thakkar‘s GoFundMe page for his legal defense, by Tayloe Draughon: Programmer vs US Govt Legal Defense Fund. Second was TheBlockCrypto piece ICE CEO calls Bakkt a “moonshot bet”. Third was the New York Times’ Cryptocurrency Was Their Way Out of South Korea’s Lowest Rungs. They’re Still Trying


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Lead Stories

Exchange giants take their rivalry to Texas as shale oil booms; Battle of the contracts reflects Houston’s growing status as an energy trading hotspot
Gregory Meyer and David Sheppard – FT
The world’s two biggest energy exchanges have taken their fierce rivalry to Houston, Texas in pursuit of business linked to the millions of barrels of shale oil arriving in the city every day. Last last year, exchange operators CME Group and Intercontinental Exchange introduced duelling futures contracts that track the price of West Texas Intermediate crude as delivered at the coastal city.

Wall Street’s Biggest Traders Are Building Their Own Exchange; The goal with the proposed Members Exchange may be to pressure existing operators to lower their fees.
Nick Baker – Bloomberg
Does the U.S. need another stock exchange? There’s no shortage of places to trade: Nasdaq, Cboe Global Markets, and Intercontinental Exchange Inc.’s NYSE division each run multiple public exchanges, and there are dozens of private markets housed inside banks. Even so, a group of Wall Street trading titans has announced plans for a platform that it’s calling the Members Exchange. And despite the crowded field, there’s a good chance it could take offóafter all, the owners likely will be among the customers.

The Incredible Shrinking Singapore Stock Market; For the last five years, delistings have outnumbered listings. Does it matter? Not as much as you might think.
Livia Yap, Tom Redmond – Bloomberg
Robson Lee had a decision to make. In his more than two-decade career as a capital-markets lawyer in Singapore, he’d helped more than 30 companies list on the country’s stock exchange, bringing to market everything from a grocery store chain to a pawnbroker. Business had been good, but it was starting to dry up. Lee decided he had to get out. “I saw the decline,” he says. “That’s why I moved.”

Saudi Arabia goes on the hunt for global oil and gas; ‘The world is going to be Saudi Aramco’s playground,’ says energy minister Khalid al Falih
Anjli Raval and David Sheppard – FT
Saudi Arabia plans to develop an international energy exploration and production business for the first time, doubling down on oil and gas even as the kingdom seeks to curb its reliance on hydrocarbons.

The Island That Wealth Built
Bloomberg News
In January, the photographer Ore Huiying traveled around Singapore to capture scenes of life in the city-state, which is about half as large as Los Angeles geographically. Her imagesófrom a towering luxury-car “vending machine” to a crossback golden arowana, reputedly the world’s most expensive aquarium fishógive a sense of Singapore’s prosperity. The nation’s gross domestic product per capita, based on purchasing power parity, ranked third in the world in 2018, according to the International Monetary Fund. As recounted in a separate story in the February/March issue of Bloomberg Markets magazine, a shrinking stock market has done little to dull Singapore’s luster.

Swaps data: SOFR volume and margin insights
Amir Kwaja, Clarus Financial Technology –
This year promises to be an interesting one in derivatives markets, and with January volumes now in, I wanted to look at what the data tells us about two in-flight, high-stakes projects – interest rate benchmark reform and non-cleared margin rules. Let’s start with the Alternative Reference Rates Committee’s (ARRC) progress on introducing a smooth and orderly transition from US dollar Libor to its replacement, the secured overnight financing rate (SOFR), under its published transition plan. This expects that during 2019, increased activity in SOFR-linked futures and overnight interest rate swaps (OIS) will build price histories and help market participants develop a term structure for SOFR.

Nasdaq Agrees to Sell BWise to SAI Global
Nasdaq, Inc. (Nasdaq:NDAQ) announced today that it has entered into an agreement to sell BWise to SAI Global Pty Limited (“SAI Global”), a recognized leader of integrated risk management solutions. The closing of this transaction is subject to regulatory approvals, works council and other representative body consultations and notifications in applicable jurisdictions, and customary closing conditions, and is projected to occur in the first half of 2019.

SEF Trading Sees New Highs in 2019 as CFTC Aims to Rewrite the Rules
Colby Jenkins – Tabb Forum
Almost exactly five years after the first swap trade was executed on a Swap Execution Facility (SEF) in October 2013, a full complement of Commodity Futures Trading Commission (CFTC) commissioners convened on Nov. 5, 2018, to debate what can and should be done to fix a flawed system. By the time the meeting closed, two items had been voted on and passed: The committee was unanimous in requesting public comment on a lingering issue of post-trade name give-up for certain anonymous SEF executions and, with a 4-1 vote, passed a proposal to overhaul the existing regulatory framework of SEF trading within the US.

Why Banks Can’t Be a Bridge Over Troubled Markets; When prices fall, capital charges can rise at banks as recent earnings reports show
Paul J. Davies – WSJ
Banks are struggling to play their traditional role of supporting troubled markets. During the next crisis, central banks could be forced to take on the job.

The Benchmark Set to Replace Libor Suffers Volatility Spike; If SOFR proves unusually volatile or hard to predict, it would diminish the rate’s appeal to companies considering tying borrowing costs to it
Daniel Kruger and Telis Demos – WSJ
Recent volatility in the market for overnight cash loans is raising concerns about a new benchmark that could set interest rates for trillions of dollars in mortgages and corporate debt.

Plus500 plunges 30% on warning over tighter regulation hitting profits; Broker faces heavier European curbs on trading instruments used by retail investors
Naomi Rovnick – FT
Plus500 shed a third of its market value after the financial spread betting company warned this year’s profits would be “materially lower” than City forecasts because of tighter European regulation of the speculative trading instruments it sells to retail investors.

WFE 2018 FY Market Highlights
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today published its 2018 Full Year Highlights report.

Record Level Exchange-Traded Derivatives Volumes Were Led By Asia-Pacific And South America
Mayra Rodriguez Valladares – Forbes
The number of futures and options traded on exchanges around the world rose 20.2% to 30.28 billion contracts in 2018. This record high was primarily driven by exchange-traded derivatives transactions in Asia-Pacific and South America. Since the financial crisis, exchange-traded derivatives volumes have risen 71%.

Credit Suisse Is Said to Lose Money on Commodity Financing Deal
Jan-Henrik Foerster and Patrick Winters – Bloomberg
Employees in unit are said to be told their bonus is at risk; Loss not material, but adds to a difficult fourth quarter
Credit Suisse Group AG has told some employees they may not get their bonuses after the bank lost money on a commodity financing deal last quarter, according to people familiar with the matter.

Forget the 401(k). Let’s Invent a New Retirement Plan;. Ideas include allowing your savings to follow you wherever you go or however you work
Jason Zweig – WSJ
If we could reinvent retirement-saving plans from scratch, how would they differ from the rigid and often paltry 401(k)s that workers have today? In all sorts of ways.

Exchanges, OTC and Clearing

IMN: Future is forward-looking and data-driven
Maddie Saghir – securitieslendingtimes
The future of central clearing counterparties (CCPs) and their role in the securities finance ecosystem is data-driven, according to a panel at this year’s IMN’s Beneficial Owners’ International Securities Finance & Collateral Management Conference in Fort Lauderdale.

SGX reports market statistics for January 2019
Securities daily average value rises 18% m-o-m, as STI gains about 4% in January 2019; Commodities Derivatives volume increases to highest since November 2016

Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and MontrÈal Exchange Closed for Family Day
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and MontrÈal Exchange will be closed on Monday, February 18, 2019 for Family Day. The Exchanges will re-open and resume regular trading on Tuesday, February 19, 2019.

Equity index derivatives on STOXX ESG-X, Low Carbon, Climate Impact, Select 50 indices: Updated introduction date
The Management Board of Eurex Deutschland took the following decision:

OneChicago Presidents’ Day Holiday Trading Hours
OneChicago will follow the schedule below in observance of the upcoming Presidents’ Day Holiday, which is consistent with U.S. equity markets.


Hedge funds will spend $2 billion on web-scraping software to gain an edge, and it’s part of an investing gold rush
Bradley Saacks – Business Insider Prime
Hedge funds and asset managers scraping the web for investment purposes represented 5% of all Internet traffic in 2018, and is expected to increase rapidly. As investors look for new ways to beat the market, total spending on web scraping for investment purposes is expected to exceed $1.8 billion by 2020.

QuantHouse On-Boards Fenics US Treasuries – Delivering Access To The $500+ Billion Daily Turnover Of The US Cash Treasury Market Via The Qh API Ecosystem
QuantHouse, the leading independent global provider of end-to-end systematic trading solutions including innovative market data services, algo trading platform and infrastructure solutions, today announced direct access to the Fenics USTreasuries (“Fenics UST”) platform through the FeedOS API and QuantLINK global network.

Blanket bans on Chinese tech companies like Huawei make no sense; Technical judgments should be made on a clear-eyed view of the potential threat
Robert Hannigan – FT
The chorus of voices calling for Chinese companies to be frozen out of telecoms in western countries, especially future 5G networks, seems to grow daily. They cite a variety of concerns from cyber espionage to the dominance of the Chinese technology sector, underpinned by fears about the direction of China’s foreign policy.

A Human Just Triumphed Over IBM’s Six-Year-Old AI Debater
Olivia Carville and Jeremy Kahn – Bloomberg
First it was chess. Then Jeopardy! Now AI turns to debating; A six-year effort ended in a 25-minute argument over preschool
International Business Machines Corp. fell short in its latest attempt to prove machines can triumph over man. But it came close. The tech giant’s six-year-old artificial intelligence debating system, affectionately dubbed “Miss Debater,” went head-to-head with one of the world’s most decorated practitioners Monday. After a 25-minute rapid-fire exchange about pre-school subsidies — during which the female-voiced AI showed flashes of very homo sapien humor — the audience handed the victory to 31-year-old Harish Natarajan.

Reddit raised $300 million at a $3 billion valuation ó now it’s ready to take on Facebook and Google
Julia Boorstin – CNBC
What do Sen. Kamala Harris, Toyota, Charles Schwab and Jordan Peele’s new movie “Us” all have in common? They all turned to Reddit to deploy ad campaigns and connect with consumers. The social network’s growth in popularity with a broad range of advertisers has attracted new investors and is driving up its valuation.

BSO And Stake Capital Partner To Deliver Blockchain Staking-As-A-Service For Institutional Cryptocurrency Investors, Providing Proof-Of-Stake Delegation Solutions
BSO, the award-winning Ethernet network, cloud and hosting provider, is partnering with Stake Capital, an emerging leader in the staking services market, to provide highly secure and available investor delegation services.


Three Minutes With Kevin Darby, Managing Partner, BTS – Applying Options Methodology To Crypto Trading
Jessica Darmoni – Hehmeyer Blog
“When I think about blockchain and cryptocurrencies, the first thing that comes to mind is the potential for self executing derivatives– smart contracts with no counterparty risk and no third parties,” said Kevin Darby, Managing Partner at Blue Trading Systems. “Code that is written into the blockchain can be called upon to send currency to a specific address conditionally. For instance, a vanilla call option payoff could be easily replicated in a smart contract on the Ethereum network; the holder of the option could even send exercise instructions directly to the contract without aid of an intermediary – this is something that couldn’t be done before.”

Security Tokens Are the New Crypto – But You Probably Can’t Afford Them
Olga Kharif – Bloomberg
It was only last year that startups launching new digital currencies were raising ever larger sums through initial coin offerings, giving investors who hadn’t bought Bitcoin when it was cheap a chance to get in on the crypto craze. Then the main U.S. stock market regulator ruined the party, as it stepped up enforcement of its ruling that most ICOs were in fact securities that had to be registered with it. Now a bunch of startups are taking a different approach, asserting that they’re playing by the regulator’s rules by offering what they call security tokens. They’re marketing security token offerings, STOs, as the next hot crypto thing. They’re also pitching their wares only to the rich.

First U.S. Pension Funds Take the Plunge on Crypto Investing
Alastair Marsh – Bloomberg
Morgan Creek Digital has scored what it says is probably the first investment in the crypto asset universe from a U.S. pension fund.

Oracle’s First Dozen Cloud Blockchain Applications Are Now Live
Ian Allison – Coindesk
Despite years of hype and chatter, enterprise blockchain deployments actually in production are few and far between. But according to Oracle, the list just got a little bigger.

Binance’s Decentralized Exchange Is About to Launch for Public Testing
Yogita Khatri – Coindesk
Binance, the world’s largest cryptocurrency exchange by adjusted trading volume, is about to release its decentralized exchange, Binance DEX, for public testing. The firm’s CEO Changpeng Zhao tweeted Tuesday that the firm is targeting a date of Feb. 20 for the public testnet release of Binance Chain – the native public blockchain being developed to support the DEX.

A California asset manager has come up with a clever way to include bitcoin in an ETF
Frank Chaparro – The Block Crypto
A California-based asset manager has figured out a way to sneak bitcoin in an exchange-traded fund, and the CEO says it’s the best way to get a crypto fund approved by the Securities and Exchange Commission.

Bithumb Kicks Off Middle East Expansion With UAE Crypto Exchange
Yogita Khatri – Coindesk
South Korean cryptocurrency exchange Bithumb is planting its flag in the Middle East with the launch of a licensed fiat-to-crypto exchange in the United Arab Emirates (UAE).

We are too quick ‘in running away from anything labeled crypto,’ SEC commissioner
Aaron Hankin – MarketWatch
‘We rightfully fault investors for jumping blindly at anything labeled crypto, but at times we seem to be equally impulsive in running away from anything labeled crypto.’ – Hester M. Peirce, SEC Commissioner
That is the latest from the SEC’s Hester M. Peirce, who is suggesting that the financial industry shouldn’t be too eager to eschew the crypto market.
Peirce, who has earned the moniker Crypto Mom within the digital-currency community for her progressive stance on the opaque industry, made her recent statement during a Friday speech on at the University of Missouri School of Law on fostering innovation and entrepreneurship.

Venezuela introduces a 15% fee on cryptocurrency transactions
Tanya Abrosimova – FXStreet
Sunacrip, the national regulator of Venezuela, changed the requirements to the digital assets transactions, performed by individuals on the territory of the country. In accordance with the recent order, the sender shall pay a fee which is based on the amount of the transaction but should not exceed 15%. The minimal commission is 0.25 EUR per transaction. Apart from that, Sunacrip reserves the right to limit the size of cryptocurrency transactions set the exchange rates for digital assets in sovereign Bolivar and request transaction info from both senders and receivers.

Cryptocurrency Bear Market Taking a Toll on VC Valuations
Jen Wieczner – Fortune
As the cryptocurrency bear market stretches well past a year, companies that specialize in Bitcoin trading or other cryptocurrency services aren’t commanding the same high valuations from investors as they once did. “Given how much the volumes have decreased in the last year, I wouldn’t be surprised if we are seeing valuations come down on the secondary markets for some of these companies,” Jalak Jobanputra, founding partner of Future Perfect Ventures, said on the latest episode of Fortune’s “Balancing the Ledger.”

Their goal: make cryptocurrency less scary
Scott Kirsner – Boston Globe
If you have a tough time with the idea of putting even a dollar of your net worth into a digital cryptocurrency ó Bitcoin, Litecoin, Ethereum, and the like ó no sensible person would blame you. Aside from the price fluctuations, there’s the question of who’s protecting those digital assets. Is it an institution like QuadrigaCX, an exchange for cryptocurrency run from its founder’s laptop, which reportedly lost $140 million in customer funds after the founder died in India in December? Or one like Tokyo-based Coincheck, which had $532 million in cryptocurrency stolen by hackers in January 2018?

Stories from Alternative Crypto Sources

Twitter’s Jack Dorsey Explains Why He Believes No Cryptocurrency Will Ever Beat Bitcoin
Greg Thomson – CCN

A Bitcoin Bashing Nobel Economist Expects a Global Recession; Will Crypto Prove Him Wrong?
Mark Emem – CCN


Purely evidence-based policy doesn’t exist
Lars Peter Hansen – Chicago Booth Review
Recently, I was reminded of the commonly used slogan “evidence-based policy.” Except for pure marketing purposes, I find this terminology to be a misnomer, a misleading portrayal of academic discourse and the advancement of understanding. While we want to embrace evidence, the evidence seldom speaks for itself; typically, it requires a modeling or conceptual framework for interpretation. Put another way, economistsóand everyone elseóneed two things to draw a conclusion: data, and some way of making sense of the data.

Canadian beef producers enjoy TPP trade boost in Japan; Surge in imports illustrates consequences of US decision to withdraw from treaty
Robin Harding – FT
Japanese imports of Canadian beef have surged since a new trade deal began on December 30, traders say, in an early sign of the price US producers could pay for protectionist policy.

Trump Signs Executive Order Promoting Artificial Intelligence
Cade Metz – NY Times
President Trump signed an executive order Monday meant to spur the development and regulation of artificial intelligence, technology that many experts believe will define the future of everything from consumer products to health care to warfare.

Italian Populists Target Huge Gold Reserves and Some Cry Foul
Lorenzo Totaro – Bloomberg
Finance Committee to debate bill on $103 billion in holdings; Lawmaker denies plans to sell gold, wants clarity on ownership
Italy’s populists opened a new front in their clash with the country’s central bank, calling on lawmakers to pass legislation stating that its gold holdings worth almost $103 billion belong to the state.

Republicans Keep Admitting Everything They Said About Obama Was a Lie
Jonathan Chait – NY Magazine
White House chief of staff Mick Mulvaney, appearing on Fox News Sunday, repeated the official administration line that Democrats had to choose between legislation and investigation. Chris Wallace reminded Mulvaney that he had supported a Republican Congress that had engaged in continuous investigations of the White House, reopening probes to chase conspiracy theories even after they had been conclusively debunked.

Letting Trump Impose Tit-for-Tat Tariffs Would Be Disastrous; The Reciprocal Trade Act could blow up the free-trade system.
Ramesh Ponnuru – Bloomberg
A new bill in Congress would give the president the power to raise thousands of tariffs in the name of free trade. If that sounds to you like a self-defeating proposition, you’re right.

Mnuchin’s team dwindles amid exodus from Treasury
Victoria Guida – Politico
President Donald Trump’s Treasury Department is increasingly short-handed these days. The massive agency, which oversees everything from the nation’s debt to international sanctions, is supposed to have 16 top officials in the core of the department who have been vetted by the Senate. It could soon have as few as six.


Banks pressurize trading venues for SFTR filing clarity
Rebekah Tunstead – bobsguide
Major tier one banks are putting pressure on trading venues to provide a much more compliant Securities Financing Transaction Regulation (SFTR) confirmation file from the beginning, according to Jonathan Lee, a senior regulatory reporting specialist at Kaizen.

Interactive Brokers to pay $100,000 fine for allowing convicted felon to trade on its platform
Maria Nikova – FinanceFeeds
Three-time convicted financial felon Peter Zuck used Interactive’s online trading platform in a scheme to defraud New Jersey residents who invested in his Osiris Fund Limited Partnership.

FCA begins High Court Proceedings against Samuel Golding, Shantelle Golding, Digital Wealth Limited and Outsourcing Express Limited
On 4 February 2019 the FCA commenced proceedings in the High Court against Samuel Golding, Shantelle Golding and two of their companies, Digital Wealth Limited and Outsourcing Express Limited (the Defendants).

The Small Firm Report
Small firms represent a critical portion of FINRA’s membership and often face regulatory challenges that are unique from their large firm counterparts. In an effort to provide additional compliance education, FINRA launched The Small Firm Report last April, a free conference call series hosted by senior FINRA leaders who discuss trending topics, new rules and regulatory guidance and best practices.

Former Sydney FX trader sentenced for falsifying trading entries
Former Sydney Deutsche Bank FX options and futures trader, Andrew Donaldson, has been sentenced in the District Court in Sydney to 18 months imprisonment after pleading guilty to falsifying entries in Deutsche Bank’s internal financial records and systems.

Investing and Trading

‘Earnings recession is here,’ Morgan Stanley warns
Matthew Rocco – Financial Times
A string of disappointing forecasts from S&P 500 companies has led one of Wall Street’s leading market strategists to warn of a potential drop in earnings this year.

Traders Are Focusing on FANG Through Nasdaq Futures
Bruce Blythe – CME Group OpenMarkets
Consumers have sunk their teeth into the four companies behind the so-called FANG stocks. The same could be said about traders and a futures contract, CME Group’s E-mini Nasdaq 100, closely linked to those companies and the broader technology sector.

How Investing Works According to Hollywood
Ben Carlson – A Wealth of Common Sense
The biggest hole in my resume as an armchair TV critic is the fact that I never watched The Sopranos. I’m currently remedying this situation on the HBO Go app starting with the first season.

Investors Hedge a Stock Doomsday With Record Fixed-Income Inflows
Cecile Gutscher and Yakob Peterseil – Bloomberg
Investors are amassing an expensive insurance policy against market doomsday.
Confident that fragile economies will keep monetary policy makers in dovish straight-jackets, they poured another $490 million into the iShares 20+ Year Treasury Bond ETF last week — bringing its year-to-date inflow to a record $2.3 billion.

Investors Are Too Busy Buying the Dip to Read the Fine Print
Justina Lee – Bloomberg
Investors may be too busy buying the dip to worry about the fine print of this week’s upbeat headlines.

Traders With $515 Billion Boycott Stocks for Cash Despite Rally
Ksenia Galouchko – Bloomberg
Global stock allocation in February is lowest since 2016: BofA; Net cash investment is highest overweight since 2009 crisis
Investors with $515 billion surveyed by Bank of America Merrill Lynch aren’t convinced by the new-year equity rally and prefer cash to stocks. Global equity allocations in February fell to the lowest level since September 2016, according to BofA, even as the MSCI All Country World Index is up almost 8 percent in 2019. That indicates a deep lack of conviction in the sustainability of the rebound among traders. The share of investors who believe the S&P 500 Index has peaked at 2,931 jumped to 34 percent this month from just 11 percent in September.

Cristiano Ronaldo’s Juventus Is Said to Plan Debut Bond Offering
Maciej Onoszko – Bloomberg
Juventus Football Club SpA intends to make its debut in the euro bond market, offering investors a chance to finance Italy’s most-decorated soccer franchise.

Vanguard investment chief sees near 50-50 chance of recession in 2020
Trevor Hunnicutt – Reuters
The U.S. Federal Reserve could hike interest rates once more by June despite a growing, near 50-50 chance of a 2020 recession, Vanguard Group Inc Chief Investment Officer Greg Davis said on Monday.


Wholesaler’s lawsuit sheds light on Goldman’s business model; Bank’s expanding role in arranging deal finance lands it in legal battle with client
Sujeet Indap – FT
To appreciate how the business model of Goldman Sachs has evolved in recent years, there is no need to pore through its annual report. Instead, simply glance at the cover sheet of a lawsuit filed two weeks ago.

Bond ETFs grapple with fresh US sanctions against Venezuela
Colby Smith – FT
On page seven of the prospectus for BlackRock’s flagship emerging markets debt ETF, known as EMB, there appears the following risk about investing in Russia (emphasis ours):

Macquarie warns on Europe licence backlog; Australian investment bank puts contingency plans in place for a no-deal Brexit
Jamie Smyth – FT
Macquarie Group has warned that backlogs in licence applications with European regulators are forcing it to implement contingency plans to cope with the fallout in the event of a no-deal Brexit.

Plus500 Plummets After Warning of Hit From European Rules
Viren Vaghela – Bloomberg
Plus500 Ltd. plunged as much as 39 percent after the spread-betting firm said its earnings will be hit by European rules curbing sales of complex derivatives to retail investors.

The 34-Year-Old Hedge Fund Manager Who Bet Everything On A Stock That Tanked
Nathan Vardi and Antoine Gara – Forbes
Vadim Perelman was a young hedge fund hot shot not so long ago, overseeing a portfolio in the hundreds of millions at the age of 31, hopping on corporate boards, and issuing lengthy slide presentations about his favorite stock picks. But then Perelman placed an enormous bet on a single company, Walter Investment Management.


China’s demand for electric vehicles charges copper; Citi expects prices to hit $6,700 a tonne as metal is core to next motoring generation
Henry Sanderson – FT
Copper is a very ordinary building material that has become entwined in every facet of our lives, from the wires in our homes to our smartphones and, critically, electric cars, which use three times the amount of the metal as those in a conventional vehicle.

Australia hopes to cash in on new cobalt rush; Search for deposits driven by demand for electric vehicles and Congo supply concerns
Jamie Smyth and Henry Sanderson – Ft
It is one of Australia’s oldest mining towns that has built its wealth from a huge deposit of silver, lead and zinc. Now, Broken Hill is aiming to tap into the fast growing electric vehicle market by becoming a vital source of cobalt.

At Market’s Mercy, Turkey Central Bank Pays for Lost Credibility
Paul Abelsky and Cagan Koc – Bloomberg
High rates squeezing economy as it slides toward recession; Policy makers increasingly taking their cue from market
Past dithering on inflation is hampering the Turkish central bank’s ability to prop up the weakening economy today.

The Remote Island Sitting on $58 Billion of Gold and Copper
Aaron Clark and Dan Murtaugh – Bloomberg
Bougainville independence vote from PNG possible this year; BCL sees law change granting mining license to new company
A mining company claiming interests in copper and gold reserves estimated at $58 billion on the Pacific island of Bougainville said its rights are under threat by efforts to revive the resource sector in the run up to a independence referendum.

Matteo Salvini talks up seizing control of Italy’s gold reserves; Using asset to fund spending ‘an interesting idea’, says deputy prime minister
Miles Johnson – FT
Matteo Salvini has raised the possibility of wresting control of Italy’s sizeable gold reserves away from the country’s central bank in the latest in a series of threats to the independence of the Bank of Italy by Rome’s populist coalition.

Russia’s Trust Bank recovers 230 bln rbls in bad assets in 2018
Russia’s Trust Bank recovered 230 billion roubles ($3.51 billion) in bad assets last year, the head of the lender said on Tuesday.


The unanswered Brexit questions for traders; Market participants still seeking clarity on effects of a ‘hard’ EU exit
Philip Stafford – FT
The near-paralysis in the UK parliament over Britain’s exit from the EU has kept alive the risk that the country tumbles out of the bloc without a withdrawal agreement at the end of March. Regulators responsible for capital markets spanning both the EU and the UK have been forced to step up efforts to minimise disruption in the event of a “hard” Brexit.

Germany reluctantly prepares for Brexit; Many commentators have been in denial about near-certainty that train is leaving station
Tony Barber – FT
The closer the scheduled day of Brexit, March 29, the more apprehensive German politicians, business people and commentators are about the potential negative consequences for their country and Europe.

If You’re Wondering How Hard a ‘Hard Brexit’ Could Be
Bryce Baschuk – Bloomberg
The U.K. and the European Union are headed down to the wire on their divorce and there’s mounting concern about what the hardest form of Brexit ó one with no deal in place at all ó could look like. Without a withdrawal accord, the U.K. would be set to lose duty-free access to the world’s largest trading bloc on March 29, reverting to commercial rules negotiated in 1995 by members of the World Trade Organization. That could mean tariffs for U.K. exports to the EU ó which act like a tax on goods ó along with traffic-snarling customs controls at ferry terminals. Former Australian WTO negotiator Dmitry Grozoubinski has said that a “no-deal” Brexit would be like “downshifting a car at full speed from fifth gear to first.”


N.Y. Medical Pot Sellers Say Full Legalization Might Burn Them; A five-year-old industry wants some protections before being overwhelmed by a multibillion-dollar gold rush.
Maya Kaufman – Bloomberg
The gleaming new apothecary across from Brooklyn’s Barclays Center doesn’t offer kale smoothies or kombucha. What it does offer is pot.

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First Read $40,951/$300,000 (13.7%) Brian Duff ++++ JLN Editor-in-Chief Sarah Rudolph to Return to Full-Time Duties Monday; Suzanne Cosgrove Named JLN Deputy Managing Editor JLN Editor-in-Chief Sarah Rudolph has been working part time for the past few weeks and will...

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