Food groups’ fight over wheat manipulation re-erupts

Aug 16, 2019

First Read

Hits & Takes
JLN Staff

The CFTC Kraft/Mondelez Global announcement is not worth two bits. Claiming to win the case, without clarity of the specific actions that were manipulative, does not help the market and its participants. The CFTC says what they allege, but not what was admitted by the defendants. Something like this should have the highest level of transparency, not a gag order about its confidentiality. There should be fairness and integrity to the process that is apparent from the transparency. The cost of the settlement likely has more to do with the legal cost and nuisance cost facing Kraft and Mondelez Global than the “alleged gains.” To say the least, I am disappointed in the manner in which this was announced.~JJL

The FT has a series titled “Negative yields: Getting to grips with the great bond rally.”~JJL

According to BarclayHedge, hedge funds had another positive month in July, returning some 0.41%.~SD

Yet another embarrassing data breach – malware was installed on one of the ECB’s sites, leading to the theft of contact details for 481 newsletter subscribers.~SD

Today is the official launch of AFX’s Ameribor Futures on the Cboe Futures Exchange. The AFX web site has links to JLN’s Special Report on the launch, ICYMI. ~SR

Registration is now open for the Wall Street Rides FAR cycling event taking place October 5, 2019 to benefit the Autism Science Foundation. You can go here for more information and to register. Also, Wall Street Rides FAR will ring the NYSE Opening Bell on August 19. ~SR

Yesterday, SEC Chairman Jay Clayton came to Chicago and met with “Main Street investors” in an informal discussion about investing and access to capital. George Vukotich from Chicago’s FinTank got the ball rolling when he asked the chairman about the current state of the SEC’s blockchain regulations, noting that foreign jurisdictions seem to be progressing faster than the U.S. Clayton responded that he talks with foreign regulators and he is not concerned. It reminded him, he said, about when he was in private practice; clients who wanted him to give them more latitude would claim that others were getting away with it. He said the SEC in the blockchain space cannot ignore current rules just to accommodate a new technology. He also said the SEC will make sure that U.S. markets “can’t provide fertile ground for fraudsters.” In response to other wide-ranging questions, Clayton emphasized the importance he places on education, particularly educating women and minorities who have been underserved – and thus under trained – about investing, securities markets and financial services. ~Thom Thompson



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Kaspersky AV injected unique ID that allowed sites to track users, even in incognito mode
Feature Kaspersky added in 2015 also made it possible to be ID’d across different browsers.
Dan Goodin –
Antivirus software is something that can help people be safer and more private on the Internet. But its protections can cut both ways. A case in point: for almost four years, AV products from Kaspersky Lab injected a unique identifier into the HTML of every website a user visited, making it possible for sites to identify people even when using incognito mode or when they switched between Chrome, Firefox, or Edge.

***** I know this guy who has an unsubstantiated theory about a secret Kaspersky division that developed Bitcoin in order to create a more efficient means of laundering money. Just sayin’.~JJL


Thursday’s Top Three
Our top story of the day on Thursday was the Trading Technologies blog post Details of the TT Outage on August 13, 2019. What was refreshing was that TT’s Drew Shields clearly explained the problem, how they dealt with it and the plan forward. Kudos to TT on handling a tough day. Second was the New York Times’ story Why an Heiress Spent Her Fortune Trying to Keep Immigrants Out. Third was a Top 3 piece from Wednesday, Fortune’s The Death of Trading: Why More Big Banks Think the Business Is a Losing Bet


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CryptoMarketsWiki Coin of the Week: ZCash
ZCash is being removed from Coinbase’s U.K. exchange August 26th. Coinbase U.K. sent out emails to its users last week, saying that from August 26th on, Coinbase U.K. “will no longer be able to hold a Zcash balance.” This week, news broke that the removal was due to Coinbase’s new relationship with ClearBank, which will replace Barclays in providing banking services for Coinbase. According to an anonymous source close to the matter, the decision was “completely to do with” ClearBank’s attitude towards “privacy coins” like ZCash.


Lead Stories

Food groups’ fight over wheat manipulation re-erupts; CFTC in legal tussle with Mondelez and Kraft Heinz over gag order on $16m settlement
Gregory Meyer – FT
A long-running legal tussle between the food companies Mondelez International and Kraft Heinz and a US market regulator reignited in fury, just hours after it had been formally concluded by a federal judge.

Silicon Valley is eating the banks’ lunch; Assailed by Apple Card and Revolut, traditional lenders risk having their Kodak moment
Tom Braithwaite – FT
Back in 2014, JPMorgan’s Jamie Dimon warned that Silicon Valley was coming to eat the banks’ lunch. The technology companies are now starting to chow down.

Now the London Stock Exchange Is Back to Life, It’s Investigation Time; Ex-Goldman banker David Schwimmer has laid down a big strategic marker since becoming CEO, but operational matters are the lifeblood of this business.
Chris Hughes – Bloomberg
The London Stock Exchange’s trading failure on Friday came at a bad time for the markets but a relatively good time for its newish CEO David Schwimmer. The former Goldman Sachs Group Inc. banker has been enjoying a glorious honeymoon. It had to end at some point.

Kraft and Mondelez Global to Pay $16 Million in Wheat Manipulation Case
The U.S. Commodity Futures Trading Commission today announced that it obtained a $16 million penalty and injunction pursuant to a federal court’s entry of a consent order against defendants Kraft Foods Group, Inc. and Mondelez Global LLC. The order, entered on August 14, 2019 by the Honorable Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois, resolves the CFTC’s complaint alleging, among other things, manipulation of the wheat market.

****For more from the CFTC, see the Statement of the Commission and the concurring statement from Commissioners Berkovitz and Behnam.

LSE ‘trading issue’ delays opening of London’s main stock indices; Trading kicks off almost two hours late in FTSE 100 securities
Adam Samson – FT
London Stock Exchange on Friday faced an “issue” that forced it to delay the opening of trading of the biggest companies listed on the bourse for nearly two hours.

China Bans Six Tied to $4.3 Billion Fraud From Securities Market
Bloomberg News
China has banned six people linked to a $4.3 billion scandal at one of the country’s biggest listed drug makers from participating in the securities industry.

Data Errors Plague Stock Traders in Volatile Week
Alexander Osipovich – WSJ
Volatile stock markets, recession fears and the U.S.-China trade fight have traders on edge. Now, they are grappling with another problem: garbled data. The troubles started Monday with a glitch on a key market-data feed operated by the New York Stock Exchange. That was followed by what looked like calamitous drops in Vanguard Group mutual funds, incorrect prices for stocks like Apple Inc. being flashed over Bloomberg LP terminals and the Dow Jones Industrial Average suffering a mysterious outage.

Grains: Midsummer Rallies Turn to Fall Nightmares
Erik Norland – CME Group
Almost like clockwork for the past five years, corn rallied in the spring and early summer before topping out between May 30 and July 15. Similarly, wheat experienced midsummer rallies that were especially notable in 2015, 2017, 2018 and this year. In the case of wheat, the peaks came between late June and early August. In each case, these rallies related to concerns about the state of the North American planting and growing season. This was especially true this year when weather in the US Midwest was especially inclement, with extensive flooding delaying planting.

Two Sigma Makes Big Hire for Venture Business
Institutional Investor
Two Sigma Investments continues to build out its little-known venture capital business.The quant-driven hedge fund giant announced that Villi Iltchev has joined Two Sigma Ventures as a partner.

SIX Swiss Exchange denies report it could buy an EU-based bourse
Swiss financial infrastructure group SIX Swiss Exchange is not looking to buy a bourse based in the European Union, it said on Friday, denying a report it could do so amid squabbling between Switzerland and the EU over a stalled treaty.

ECB shuts down one of its websites following hack
Martin Arnold – Financial Times
Hackers have embarrassed the European Central Bank by breaching one of its websites, installing malware on to the site and stealing the contact details of 481 subscribers to a statistical newsletter.

AMERIBOR Interest Rate Benchmark Achieves Alignment With The International Organization Of Securities Commissions’ (IOSCO) Financial Benchmark Principles
American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced today that the AFX’s American Interbank Offering Rate (AMERIBOR) is in alignment with all nineteen Principles set forth by the International Organization of Securities Commission (IOSCO) for Financial Benchmarks.

You May Be Dead Before You Pay Off Your Student Loans; Escaping from debt often takes longerómuch longeróthan you think.
By Shahien Nasiripour – Bloomberg
The Wilsons are hardly the kind of couple you’d expect to find locked in a latter-day debtors’ prison. Jon works as a manager for an online transcription business. Vicky is a digital marketer for a semiconductor company. They’re both 37, and together the Austin couple makes more than $150,000 annually.

Would-Be Bitcoin Creator’s Motion to Dismiss Lawsuit Is Denied
By Olga Kharif – Bloomberg
Craig Wright had sought discharge on basis of jurisdiction; Estate of late business partner alleges billions were stolen
Craig Wright, the controversial entrepreneur who claims he created Bitcoin under a pseudonym, must defend a lawsuit claiming he stole cryptocurrency and intellectual property worth billions from a late business partner, a judge said.

Markets Are Questioning Central Bank Relevance; The torpor of low rates leads financial commentary. Plus attractive Japanese bonds and Brazil’s money moves.
By Robert Burgess – Bloomberg
Investors no longer need to imagine the day when a major central bank official goes all in on the need for extreme monetary stimulus, including even possibly buying equities, and markets yawn. That day came and went.

General Electric Has a Credibility Problem; The former icon’s investor relations are less than ideal, and it keeps hurting the stock.
By Mark Gongloff – Bloomberg
Back in June of 2018, when General Electric Co. was tossed from the Dow Jones Industrial Average, capping a string of indignities that had gutted the former corporate American icon, this newsletter suggested it might be a blessing: “Getting tossed from that weird, exclusive club is often a sign the worst is over,” we wrote.

Exchanges, OTC and Clearing

LSE’s Big Stocks Start Trade After Longest Glitch in 8 Years
Jan-Patrick Barnert and Harry Wilson – Bloomberg
Stock trading was delayed for FTSE 100, FTSE 250 members; Outage is also second for U.K. exchange in just over a year
The London Stock Exchange Group Plc resumed trading after its longest glitch in 8 years, just weeks after the three-century old exchange unveiled plans to become a data and trading powerhouse.

LSE market open delayed due to trading services issue; FTSE 100 and FTSE 250 stocks affected by market outage this morning on the London Stock Exchange.
Hayley McDowell – The Trade
The London Stock Exchange (LSE) was forced to delay its market open this morning as it investigates an issue with its trading services.

Trayport’s Monthly Report On European Commodities For July 2019: Monthly Contracts Up 12% MoM – Euro Gas Volumes Double YoY
Monthly contracts traded in July were up 12% vs June, to 9.225 million monthly contracts traded. All commodity groupings recorded month on month growth, with all bar UK Gas growing 10% or over MoM. YTD 2019 monthly contracts traded are up 22% vs. YTD 2018.

ASX explores further potential of DLT amid CHESS replacement; The exchange’s new DLT solutions team has been created to look at other ways the ASX can use the technology in the equities and non-equities space.
By Joe Parsons – The Trade
The Australia Securities Exchange (ASX) is looking to build on its adoption of distributed ledger technology (DLT) by creating a new team dedicated to finding more use cases.

ASX DLT System ‘On Track,’ Says Annual Report
Daniel Palmer – Coindesk
The Australian Securities Exchange (ASX) has released its full 2019 financial report, offering some insight into its upcoming distributed ledger-based settlement system.

Eurex Exchange Readiness Newsflash | T7 Release 8.0
Dear Eurex Participant, Our next major T7 Release is fast approaching. On 14 December 2018, Eurex announced the introduction of the T7 Release 8.0:

HKEX Consults Market on Proposed Microstructure Enhancements in the Securities Market
Hong Kong Exchanges and Clearing Limited (HKEX) today (Friday) published a consultation paper on proposed enhancements to the Pre-opening Session (POS) and Volatility Control Mechanism (VCM) in the securities market.

Forfeiture of Unclaimed Interim Dividend for 2013
As provided in the Articles of Association of Hong Kong Exchanges and Clearing Limited (“HKEX”), any dividend unclaimed after a period of six years from the date for payment of such dividend shall be forfeited and shall revert to HKEX. Accordingly, HKEX’s interim dividend for 2013 of HK$1.82 per share, payable on 30 September 2013 and remaining unclaimed on 30 September 2019, will be forfeited and will revert to HKEX.

CME-LCH basis collapses amid rates downturn; Brexit and recent LCH initial margin raise could also be factors
Robert Mackenzie Smith –
The recent US interest rate cut is said to be behind a dramatic collapse of the basis between interest rate swap rates at two rival clearing houses in the past month. The rate is hovering near zero, and even briefly went negative, following a surge of receive-fixed swap trading at CME from the buy side.


FIS appoints Christopher Thompson as Chief Accounting Officer
Maria Nikolova – FinanceFeeds
Prior to joining Fidelity National Information Services, Mr Thompson served as the Chief Accounting Officer of Worldpay.

How AI will change the way you manage your money; Data science is increasingly being used to compare products, find deals and give tailored guidance
James Pickford and Lucy Warwick-Ching – FT
It’s the heart sinking moment when you realise a call to your insurance company is going to be required. You have just pranged your car and are sizing up the damage ó as well as the hit to your no-claims bonus.

Ambitious start-up looking to take on legacy data platforms launches; FinTech firm Finbourne has released an early access programme for its flagship cloud-based investment data management platform, LUSID.
By Joe Parsons – The Trade
A start-up aiming to streamline and automate key operational data from custodians and prime brokers has gone live with a soft launch, offering participants a free 90-day trial.


Would-Be Bitcoin Creator’s Motion to Dismiss Lawsuit Is Denied
Olga Kharif – Bloomberg
Craig Wright, the controversial entrepreneur who claims he created Bitcoin under a pseudonym, must defend a lawsuit claiming he stole cryptocurrency and intellectual property worth billions from a late business partner, a judge said.

New money-laundering rules change everything for cryptocurrency exchanges
Mike Orcutt – MIT Technology Review
Complying with regulators could mean the difference between going mainstream and remaining forever on the margins of the global financial system.

IRS to Cryptocurrency Owners: Come Clean, or Else!; Tax specialists warn those who aren’t in compliance with rules to act quickly to avoid more woes
By Laura Saunders – WSJ
The Internal Revenue Service is on the war path against Americans who haven’t reported income from cryptocurrencies like bitcoin.

IRS Sends Second Round Tax Warnings to Cryptocurrency Investors
Lynnley Browning – Bloomberg
Some cryptocurrency investors are receiving a new round of letters from the Internal Revenue Service telling them that their federal tax returns don’t match the information received from virtual currency exchanges, a new front in the agency’s burgeoning scrutiny of the industry. The letters acknowledge that trading exchanges, not the taxpayers, may have made the errors.

New Zealand’s crypto salary plan is a big win for Facebook Libra
Nicole Kobe – Wired UK
Why get paid money each month, when you can earn in cryptocurrencies instead? New Zealand has become the latest country to lay out how cryptocurrencies would be taxed, making it easier for companies to pay salaries using such digital assets. But just because you can be paid this way, it doesn’t necessarily mean you should.

Dash Is Being Questioned as the Top Cryptocurrency in Venezuela
Michael LaVere – Crypto Globe
New reports are questioning whether Dash is the top form of crypto payment in Venezuela. Venezuela has become a target for cryptocurrency adoption due to the country’s ongoing economic struggles.

Crypto Exchange Poloniex to Delist 23 Trading Pairs Due to Low Volume
Ana Alexandre – Cointelegraph
San Francisco-based cryptocurrency exchange Poloniex is going to remove 23 trading pairs ostensibly due to low volume. In a tweet published on Aug. 15, Poloniex announced that it will be removing 23 trading pairs on August 16, 2019, due to low volume. After removing, each asset will continue to be independently tradable, the exchange notes.

These Portfolio Tracking Tools Will Also Prepare Your Crypto Taxes
Kai Sedgwick – News
Tax season is months away, which is why you need to start preparing for it now. Leave everything to the last minute and you’ll only end up cursing your procrastination. Organize your cryptocurrency activity in advance and you’ll breeze through tax deadline day without so much as flinching.

Crypto lending sector hits nearly $5B in value, but lenders earn less than 2% interest – Report
The Block
The cryptocurrency lending sector is booming, currently valued at over $4.7 billion, but lenders have earned back only $86 million (or 1.83 percent) in interest, according to a new report. Published Thursday by crypto credit assessment startup Graychain, the 26-page report shows that nearly 100% of crypto lending today is collateralized, meaning borrowers pledge an asset to secure the repayment of the loan. “But this will change,” says the report’s author Robert Walker Cohen, an analyst at Graychain.

Binance’s US Arm to Go Live ‘Within Two Months,’ CEO Says
Daniel Palmer – Coindesk
The dedicated U.S. arm of cryptocurrency exchange Binance will go live by November, according to Binance’s CEO. Changpeng “CZ” Zhao told Cheddar in an interview on Wednesday that, while the situation is still “in flux,” he expects the new platform would go live in “a month or two.”

Crypto Exchange Coinbase Acquires Xapo’s Institutional Custody Business
Wolfie Zhao – Coindesk
Cryptocurrency exchange Coinbase has acquired the institutional business of cryptocurrency wallet and custody service provider Xapo. Coinbase said in an announcement on Thursday that the deal will help expand its custody business and will increase its assets under custody to be more than $7 billion.

Hong Kong Protest Leader Hopes to Incite Run on Chinese Banks
Jamie Redman – News
The 11th week of protesting in Hong Kong has passed as the world has witnessed massive sit-ins at the national airport and demonstrations across several locations citywide. The 2019 anti-extradition bill protests have affected Hong Kong’s local economy, investors have dumped on the benchmark Hang Seng index, and now pro-independence activist, Chen Haotian, has called upon the country’s citizens to withdraw bank deposits.

Crypto Exchange Coinbase Acquires Xapo’s Institutional Custody Business
Wolfie Zhao – Coindesk
Cryptocurrency exchange Coinbase has acquired the institutional business of cryptocurrency wallet and custody service provider Xapo.

A Big Four Audit Firm Lost $1 Million In Bitcoin. Victims Are Losing Patience
Nikhilesh De – Coindesk
Former QuadrigaCX users are losing patience with their court-appointed lawyers and looking for answers about how more than 100 bitcoins were “inadvertently” lost.

Korea’s Third-Largest Crypto Exchange Publishes Listing Criteria
Richard Meyer – Coindesk
Coinone, a South Korean crypto exchange, has issued listing criteria, laying out in some detail what is required to be traded on the platform.


Europe Just Reminded Trump Why He’s Mad at Them on Trade
By Jana Randow – Bloomberg
If U.S. President Donald Trump wants to heave more trade threats at the European Union, a fresh batch of numbers just gave him a reason.

Trump Shows Interest in Buying Greenland. Denmark Isn’t Selling
By Christian Wienberg and Morten Buttler – Bloomberg
President Donald Trump reportedly wants to buy Greenland, the world’s biggest island. Denmark, unsure whether the former real estate developer is joking, isn’t selling.

Trump’s Oil Sanctions Leave Russian Exporters $1 Billion Richer
By Dina Khrennikova and Anna Andrianova – Bloomberg
U.S. sanctions on Iran, Venezuela boost demand for Russian oil; Urals blend of crude now regularly trades as premium to Brent
U.S. President Donald Trump’s sanctions against Iran and Venezuela have inadvertently increased demand for a Russian brand of crude oil, boosting revenues for the nation’s exporters.

The #TrumpRecession Label Is Going to Stick; Presidents usually get too much blame for economic slowdowns. This time is different.
By Barry Ritholtz – Bloomberg
Spend a decade or two writing about financial markets, and a few themes will begin to emerge. These are: No. 1. Politics and investing do not mix;

China Ramps Up Brazil Soybean Imports, Rebuffing U.S. Crops
Bloomberg News
State, private buyers purchased 25-30 cargoes from Brazil; China risks facing a supply shortage in the fourth quarter
China this week put in a large order of Brazilian soybeans as it increasingly turns to the South American nation to fill a supply gap after halting purchases from the U.S., according to people familiar with the situation.

Trump Thinks He Is Winning the Trade War. The Data Tell a Different Story
Shawn Tully – Fortune
Talk to anyone in Trumpland, and you’ll hear that America is winning the trade war. “The economic burden is falling vastly more on them than on us,” proclaimed the President’s chief economic adviser Larry Kudlow in early August as the conflict escalated. But if you look past the rhetoric and crunch the numbers, a strikingly different picture emerges. The more Trump ratchets up tensions, the more he hurts the U.S. economy. By forcing U.S. companies and consumers to pay far more for everything from sneakers to steel, Trump is inflicting a heavy price that could plunge the country into recession.

A Case for an Independent Federal Reserve; So long as the Fed sticks to central banking, i.e. monetizing a portion of the national debt with monetary base, it can expect to be an independent expert agency.
Em. Prof. J. Huston McCulloch – Ohio State University – WSJ
Regarding Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen ‘s “America Needs an Independent Fed” (op-ed, Aug. 6): So long as the Fed sticks to central banking, i.e., monetizing a portion of the national debt with monetary base, it can expect to be an independent expert agency.

Central Bankers in Glass Houses; The Fed was politicized long before Donald Trump got to the White House or even started tweeting.
By Charles W. Calomiris – WSAJ
What to make of the current battle over the politicization of the Federal Reserve? The past year has featured an unprecedented attack by President Trump on Fed leaders and their independence. Mr. Trump not only questioned the board governors’ judgment but even contemplated removing the chairman for the sin of not setting interest rates where the president wants them. In reaction, four past Fed chairmen recently co-wrote an op-ed on these pages to remind the country that short-term political pressures can undermine the proper long-term objectives of monetary policy.


SEC Charges Former CFO of Cash Advance Company With Defrauding Thousands of Retail Investors
The Securities and Exchange Commission today charged 1 Global Capital LLC’s former chief financial officer, Alan G. Heide, with defrauding retail investors. The now bankrupt Florida-based cash advance company allegedly fraudulently raised more than $322 million from 3,600 investors between 2014 and last year. The SEC previously charged 1 Global and former CEO Carl Ruderman with fraud and charged Henry J. “Trae” Wieniewitz, III for his allegedly unlawful sales of 1 Global securities. Ruderman and Wieniewitz have consented to final judgments.

SEC Releases Videos for Investors on Choosing and Working with a Financial Professional
The Securities and Exchange Commission today released a series of short educational videos designed to provide ordinary investors with basic information about choosing and working with a financial professional. The videos are now available at and

Indirectly Helping The Thinly-Traded Securities Segment
Kelvin To, Data Boiler Technologies
I applaud the SEC for including the thinly-traded securities topic (related trading make up less than two percent of all daily share volume) as one of the three matters in the 2019 Equity Market Structure Agenda. To make it easier for buyers and sellers to find each other and consummate trades in this segment of the market is the right thing to do, but the question is how. Some suggest modifying Unlisted Trading Privileges (UTP), others advocate for periodic auctions. I think these are all direct interference that pushes policy makers to pick winners. Instead, I have an alternate idea to indirectly help the sustainable development of thinly-traded securities segment.

Botai Technology impairs trade receivables
ASIC notes the decision by Botai Technology Limited (Botai), formerly known as Wonhe Multimedia Commerce Ltd, to impair its trade receivables by $6.4 million.

NFA bars George Town, Cayman Islands commodity pool operator and commodity trading advisor Beverstone Fund Management and its principal Roland Kaehler from membership
NFA has permanently barred Beverstone Fund Management (Beverstone), an NFA Member commodity pool operator and commodity trading advisor located in George Town, Cayman Islands, and its principal and sole associated person Roland Kaehler from membership and from acting as a principal of an NFA Member.

Upper Tribunal publishes decision on Andrew Tinney, the former COO of Barclays Wealth
Following contested proceedings, the Upper Tribunal has found that Andrew Tinney, the former Chief Operating Officer (COO) of Barclays Wealth and Investment Management (Barclays Wealth), breached his obligation as an approved person to act with integrity.

CFTC Staff Extends Relief With Respect To Certain Position Limit Aggregation Requirements – Finance and Banking – United States
Jan-Paul Bruynes and Jason M. Daniel – Mondaq
CFTC Staff Extends Relief With Respect To Certain Position Limit Aggregation Requirements – Finance and Banking – United States Mondaq News Alerts

OFR Confirms Volcker Rule Limits Businesses’ Ability to Raise Capital, Grow
Bill Hulse – US Chamber of Commerce
For years, the business community has raised concerns that prohibitions on proprietary trading embodied in the Volcker Rule would raise the cost of and reduce the ability of businesses to raise capital.

Investing and Trading

Madoff whistleblower: Red flags at General Electric is ‘more serious’ than Enron
Richard Morgan – NY Post
The financial analyst famous for blowing the whistle on Ponzi King Bernard Madoff has now set his sights on General Electric.

Some Investors Are Betting the Flight to Bonds Is Overdone; A group of traders and fund managers sees bond markets as overly pessimistic
Avantika Chilkoti and Anna Isaac – WS
The 2019 bond rally has reached epic proportions this summer. A hearty pack of skeptical investors is betting it is way overdone.

GE Rout Ambushes Hedge Funds After Second-Quarter Buying Spree
Brendan Case – Bloomberg
Shares dropped most in 11 years after report by Madoff accuser; CEO’s turnaround drive had won over investors during spring
General Electric Co.’s biggest plunge in 11 years came at an awkward time for some of Wall Street’s savviest investors.

Negative yields force investors to plunge into riskier debt; Feeble returns from safer bonds steer funds into longer, shakier instruments
Robin Wigglesworth – FT
When Prince William and Kate Middleton tied the knot at Westminster Abbey, they did so standing on red carpet made by Victoria. Last month, the carpet maker managed to get bond investors to the altar as well.

In Brave New World, U.K. Markets Don’t See Any BOE Hike, Forever
Tanvir Sandhu – Bloomberg
Higher interest rates in the U.K. are very much out of sight for the markets. Not just for the next few months or few years — but possibly forever.

Euro Traders Are Starting to Bet on a Break of $1.10 This Month
Vassilis Karamanis – Bloomberg
ECB stimulus, auto tariffs threat and charts back up bears; Jackson Hole symposium not seen a game changer amid trade woes
Options traders are starting to bet on the euro dropping below psychological support at $1.10 as the European Central Bank prepares a stimulus package amid a deepening global downturn and trade uncertainty.

One Thing’s for Certain About Investors’ Moment of Uncertainty; We don’t know whether globalization will break down, or the fears will prove overblown. Either way, today’s scramble for Treasuries will no longer make sense.
Conor Sen – Bloomberg
Many nations in recent years are trying to wall themselves off from the rest of the world, but financial markets are immune: Money is moving freely, showing financial markets at least remain as intertwined as ever.

Modern Monetary Theory Is Ancient; The Greeks and Romans tried it. Would that they had been the last.
By Jason De Sena Trennert – WSJ
With the presidential campaign under way, expect to hear a lot more about a shiny new toy of progressive economic thinking, “modern monetary theory.” It seems to be the only intellectual contortion that might allow candidates to promise virtually unlimited government spending without any deleterious effects on America’s currency, standard of living or liberty.


E*TRADE Announces the Appointment of COO Mike Pizzi to CEO
Business Wire
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced that Chief Operating Officer Michael A. Pizzi will assume the Chief Executive Officer role after Karl Roessner advised the Company of his decision to leave, following 10 years of service. The appointment of Mr. Pizzi is effective immediately, while Mr. Roessner has agreed to serve in an advisory capacity through year end to assist with the transition. Mr. Pizzi has also been appointed to the Company’s and Bank’s Board of Directors.

‘They Get Fired All the Time. And They Have No Idea Why.’
Amanda Cantrell – Institutional Investor
Pop culture lionizes the dazzling brilliance of money managers on the autism spectrum. Reality rarely measures up.

Mick McGuire’s Marcato Capital Loses 90% of Assets; McGuire is a protege of William Ackman and counted Blackstone as a client
Rachael Levy – WSJ
A well-known activist hedge fund that had the backing of billionaire William Ackman has lost more than 90% of its assets.

Capital One Cyber Staff Raised Concerns Before Hack; Cybersecurity employees reported what they saw as staffing issues and other problems to bank’s internal auditors, human-resources department and other senior executives
AnnaMaria Andriotis and Rachel Louise Ensign – WSJ
Before a giant data breach at Capital One Financial Corp. COF 0.26% , employees raised concerns within the company about what they saw as high turnover in its cybersecurity unit and a failure to promptly install some software to help spot and defend against hacks, according to people familiar with the matter.

PwC wins contract to manage remaining Northern Rock assets; Appointment comes despite criticism of Big Four group’s audits of failed lender
Tabby Kinder – FT
PwC has been handed a £16.5m contract to manage the UK government’s remaining assets in Northern Rock despite being accused of complacency in its audits of the failed lender when it collapsed in 2007.

Hong Kong unrest torches fortunes of city’s billionaires; Market sell-off following street protests wipes $15bn from top tycoons’ net worth
Hudson Lockett – FT
Hong Kong’s stock market rout has lopped about $15bn off the net worth of its 10 richest tycoons, as clashes between police and protesters that have weighed on asset prices show little sign of letting up.

Hedge Fund Seeking to Void Illinois Debt Made Wager on Default
Martin Z Braun and Shruti Singh – Bloomberg
Warlander bought derivatives that would pay if state defaults; Lawyer confirms allegations made by Nuveen, AllianceBernstein
Warlander Asset Management, the hedge fund seeking to invalidate $14.3 billion of Illinois bonds, bought derivatives that will pay off if the state defaults on the debt.


Tracking foreign capital
Christiane Kneer and Alexander Raabe – Bank of England Bank Underground Blog
Capital flows are fickle. In the UK, the largest and most volatile component of inflows from foreign investors are so-called ‘other investment flows’ – the foreign capital which flows into banks and other financial institutions. But where do these funds ultimately go and which sectors are particularly exposed to fickle capital inflows? Do capital inflows allow domestic firms to borrow more? Or does capital from abroad ultimately finance mortgages of UK households? Some of the foreign capital could also get passed on to the financial sector or flow back abroad.

Moscow Exchange launches USD-denominated RUSFAR
Press Release
On 19 August 2019, Moscow Exchange will launch USD-denominated Russian Secured Funding Average Rate (RUSFAR). With the launch of this gauge, repo and FX swap market participants will gain access to a USD-denominated market-based interest rate benchmark.

Investors Are Worrying About Hong Kong Banks as Protests Roll On
Alfred Liu – Bloomberg
Economic slowdown, trade dispute and weaker yuan also weighing; Citigroup sees growing earnings risk for lenders in the city
Investors are getting anxious about the impact anti-government demonstrations are having on Hong Kong’s banks.


Brexit’s useful lesson in the need for shared understanding of the nation; A bureaucratic test and guidebook has been ridiculed but it exposes a deficit in knowledge of Britishness
Frederick Studemann – FT
Name the fundamental principles of British life? How old do you have to be to buy a lottery ticket? What is the maximum amount that small claims courts in Scotland and Northern Ireland can consider?

The Most Important Brexiter Isn’t Boris Johnson; Dominic Cummings is hell-bent on pushing through a no-deal Brexit and ignoring parliament. His plan for what comes after is even more radical.
Therese Raphael – Bloomberg
Ithe highly entertaining Channel 4 drama about the 2016 referendum campaign “Brexit: The Uncivil War,” Benedict Cumberbatch, playing the mastermind of the Vote Leave campaign, is sometimes found crouched in the narrow pantry where he retreats to think. It’s not hard to picture the real Dominic Cummings doing just that.

Jo Swinson says she would work with Labour to avoid no-deal Brexit; Lib Dem leader also says she thinks Corbyn-led unity government would not win MPs’ confidence
Poppy Noor – The Guardian
The leader of the Liberal Democrats, Jo Swinson, has reiterated that she would work with the Labour party to prevent a no-deal Brexit amid pressure from other opposition leaders, but underlined her belief that a Jeremy Corbyn-led unity government would not win the confidence of the House of Commons.


July Was Hottest on Record; Climate change is largely responsible for driving average world-wide temperature last month past previous high in 2016, U.S. researchers say
Robert Lee Hotz – WSJ
This past July was the hottest month world-wide in more than a century of global record-keeping, with severe heat waves in Europe, Africa and parts of the U.S. boosting the overall global average temperature, federal climate scientists said Thursday.

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Past Newsletters

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