Global regulators give banks capital relief on derivatives

Jun 21, 2019

First Read

Hits & Takes
JLN Staff

We have added Julie Armstrong, the chief revenue officer of ChartIQ and formerly of the CME Group, as a speaker for the MarketsWiki Education series in Chicago. Also, Ray McKenzie had to withdraw after a conflict emerged. We have added David Silverman, a former CME Group board member, as a speaker. Right now we sit at 11 men and 11 women speakers. We have room for 1 more of each if there are some suggestions for speakers.~JJL

I have asked Spencer Doar, star of JLN’s “The Spread,” to be the master of ceremonies at this years MarketsWiki Education World of Opportunity series in Chicago.~JJL

Sign your interns and newer employees up for MarketsWiki Education World of Opportunity at www.MarketsWikiEducation.com.~JJL

Thank you to the sponsors of this year’s series, CME Group, Cboe, FTSE Russell, Trading Technologies, Stuart School of Business at Illinois Tech, Barchart.com, OCC and The IFM.~JJL

The Advantage Futures Team will again be teaching the chess merit badge as part of the Trading Tech from the Pathway to Adventure Council of Boy Scouts of America. This year both boy and girl members of Scouts BSA will be participating. Thank you to Joe Guinan, Terry Duffy and the team for their continued leadership and service.~JJL

Here is the real picture we should have shown when Pat Kenny spilled the raffle tickets at the IDX Gala dinner drawing. The expressions on his and Emma Davey’s faces are priceless.~JJL

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Breaking Down The Merger of JPX and TOCOM

JohnLothianNews.com

In March 2019, JPX and TOCOM signed an agreement to merge. In this video from FIA IDX, Osaka Exchange President and CEO Hiromi Yamaji talks about the benefits of an all-in-one Japanese exchange for market participants.

Watch the video »

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At Least One Active ETF Outperforms Comparable Hedge Funds
Russell Rhoads – TABB Forum
TABB Group has been looking at various alternative ETFs relative to their hedge fund counterparts. Our goal is to see if hedge fund-like returns can be realized using an ETF. With the increase in the number of smart beta, alternative, and actively managed ETFs, we assumed there must be some ETFs that have found a niche and put up good performance.
Our most recent dive into the space involved an analysis of alternative ETFs that have a track record of less than five years. The earlier analyses eliminated ETFs with a performance record under five years, but we had noticed that there were some newer funds putting up impressive numbers during their short lives. One fund that we found particularly interesting was the Hull Tactical ETF (HTUS), run by Blair Hull, who has been an icon in the investment and derivatives space for decades.
bit.ly/2Rq0ZtK

****SD: Congrats to Blair, Petra Bakosova and Alex Kment on their work! (Hull Tactical is one of our neighbors on the 16th floor of the CBOT.) If you’re not familiar with Hull’s operation, take a look at this Crain’s piece about Ketchum closing. It covers the background. If you want to go into the weeds a bit more, check out this piece about Bakosova’s 2018 research paper “Return Predictability and Market-Timing: A One-Month Model.”

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FIA President and CEO Walt Lukken on the Basel Committee’s Recognition of Client Cleared Margin As Reducing Exposure
FIA
FIA President and CEO Walt Lukken today made the following statement on the Basel Committee’s agreement “on a targeted and limited revision of the leverage ratio to allow margin received from a client to offset the exposure amounts of client-cleared derivatives.”
bit.ly/2Y2PvyT

***** Yes, lobbying does work, especially when you are in the right.~JJL

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Giancarlo Statement on Basel Committee Agreement
CFTC
Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo issued the following statement regarding the recommendation by the Basel Committee on Banking Supervision to exclude initial margin from the leverage ratio.
bit.ly/2Y2VtzJ

***** Two words. About time.~JJL

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Google Maps Littered With Fake Business Listings, Tormenting Competitors and Customers
Millions of pushpins on Google Maps point to false business addresses created by firms pretending to be nearby
Rob Copeland and Katherine Bindley – The Wall Street Journal
Out of habit, Nancy Carter, a retired federal employee, turned to Google for help one August evening. She ended the night wishing she hadn’t.Ms. Carter had pulled into her Falls Church, Va., driveway and saw the garage door was stuck. The 67-year-old searched Google and found the listing of a local repair service she had used before. She phoned in a house call.
/on.wsj.com/2KxbFpM

***** Fake is fake is fake.~[JJL]]

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Craig Wright says he invented bitcoin. Now he’s suing those who doubt him
Olga Kharif – LA Times
At a convention on digital currency, rarely does an audience Q&A session include a question as incendiary as, “Why is this fraud allowed to speak at this conference?” But that’s how a discussion about bitcoin ended up last year in Seoul.
The supposed fraud is Craig Wright, an Australian-born technologist who gained notoriety three years ago when he declared himself the inventor of bitcoin. The provocateur is Vitalik Buterin, a baby-faced Russian Canadian programmer who helped create another popular digital currency called ether. No one disputes Buterin’s role in ether; many reject Wright’s claim to be Satoshi Nakamoto, the mysterious genius behind bitcoin.
/lat.ms/2x5T77r

**** If Craig Wright is not Satoshi, then Satoshi must be dead. Otherwise, why would Wright risk being exposed?~JJL

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CryptoMarketsWiki Coin of the Week: Libra
Facebook’s new stablecoin Libra, which is currently planned to launch in 2020, really stole the headlines this week in the crypto world and beyond. Mostly, the subject of those headlines involved considerable scrutiny; not only have regulators and governments around the world voiced concern for the implications of the new, blockchain-based digital asset, but even the crypto community has expressed skepticism over the centralized, “corporate” nature of its blockchain.
/bit.ly/2WSa842

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Thursday’s Top Three
Our top read story of the day Thursday was the FT’s CFTC chair complains to European Commission over regulation jibe. Second was the op/ed piece in The Wall Street Journal Accusing the New York Times of ‘Treason,’ Trump Crosses a Line. Third was our top story from Wednesday, Cboe’s Disciplinary Info on actions taken against various firms and individuals.

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MarketsWiki Stats
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CryptoMarketsWiki Website»
CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.

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Lead Stories

Global regulators give banks capital relief on derivatives
Huw Jones – Reuters
Global banking regulators have agreed to introduce more flexibility into how banks compile a broad measure of capital, the Basel Committee said on Thursday.
/reut.rs/31LM6Xp

The Case for a Financial Transaction Tax; Governments charge user fees for parks, roads and other infrastructure. Why not do the same for the financial system?
Michael Edesess – Bloomberg
It’s a good conservative principle that where possible, the government should recover the cost of its services from the people who use them, rather than from taxpayers at large. It’s also pretty uncontroversial that the government must oversee financial markets, to ensure that they are free and fair.
/bloom.bg/31HMhmt

Regulatory Certainty is Crucial
Tags: Initial Margin, Margin
ISDA Chief Executive Officer Scott O’Malia
It is said that nothing in this world is certain except for death and taxes. That’s true enough for financial markets, where gains can turn to losses in the blink of an eye. But it should be possible to achieve a level of certainty and consistency in how financial markets regulation is interpreted and applied.
bit.ly/31VQQtI

Hating the Fed Is as American as Apple Pie; The tone of Trump’s attacks is new even if the sentiment isn’t. But try living without a central bank.
Justin Lahart – WSJ
When President Trump complains about the Federal Reserve, he’s taking part in a tradition of central-bank bashing that stretches back to America’s founding. But for all the missteps the Fed has made over the years, the country is better off with it than it would be without it.
/on.wsj.com/2Y6sL0Q

Americans Aren’t Sure U.S. System Can Fix Long-Term Problems, Poll Finds; A majority believes the nation’s best years are in the past
John McCormick – WSJ
Americans have little faith the U.S. political system can address long-term challenges and are skeptical the nation remains committed to foundational tenets such as the free market, majority rule and tolerance, a Wall Street Journal/NBC News poll shows.
/on.wsj.com/2Y2T203

Facebook co-founder: Libra coin would shift power into the wrong hands; Regulators should not underestimate the digital currency’s disruptive potential
Chris Hughes – FT
Move fast and break things — our mantra in Facebook’s early days — was an appropriate slogan for a college social network. It’s not appropriate for the global monetary system.
/on.ft.com/2YblyNf

UBS Seeks to Defuse ‘Chinese Pig’ Outcry in Regulator Meetings
Bloomberg News
Executives sought to clarify nature of economist’s comments; Rival Chinese firms have called for Donovan’s ouster
UBS Group AG is taking steps to ensure its head start over competitors in China isn’t jeopardized by controversial comments by a senior economist that already cost the firm at least one bond deal.
/bloom.bg/2YbkZ65

Ex-Barclays CEO Varley Cleared in Case Over Qatar Fundraising
Franz Wild and Jonathan Browning – Bloomberg
Court of Appeal dismisses attempt to reinstate fraud charges; Case against three other former executives will continue
Criminal charges against former Barclays Plc Chief Executive Officer John Varley were dismissed following a ruling by a London appeals court.
/bloom.bg/2Fpm9mQ

China Looks for a Savior in the Shadows; Brokerages and other non-bank financial institutions play a key role in funneling credit to the real economy. Beijing needs them.
Shuli Ren and Anjani Trivedi – Bloomberbg
China’s central bank is stretching its arms far and wide to stem convulsions in the real economy. In the process, it’s lending legitimacy to financial firms that have long operated in the shadows.
/bloom.bg/2Y2RkvJ

At Wells Fargo, a Chance Dims to Break U.S. Banks’ Glass Ceiling
Hannah Levitt – Bloomberg
Mary Mack drew most praise from the board in leadership review; Yet some see her getting sidelined as bank seeks outsider CEO
Inside Wells Fargo & Co., Mary Mack looked like a rising candidate to become its next chief executive officer, shattering the industry’s last glass ceiling.
/bloom.bg/2Y2LKtl

Bundesbank’s Weidmann says ‘virtual’ coins could undermine banks if used widely
Reuters
Virtual tokens pegged to official currencies, known as stablecoins, could undermine banks if they became widely used, the head of Germany’s central bank said on Friday.
/reut.rs/2Y6xsru

UBS scrambles to calm rich Chinese clients after ‘pig’ comment -sources
Anshuman Daga, Sumeet Chatterjee – Reuters
UBS has instructed its senior managers to prioritise concerns raised by its rich clients from China, after a bank economist’s “Chinese pig” comment in connection with food price inflation in the country kicked up a row, sources said.
/reut.rs/2XY6KRP

U.S., Japan may need more tools to shore up banking system: Fed’s Rosengren
Reuters
The United States and Japan may need to shore up bank oversight to prepare for economic downturns, the head of the Federal Reserve Bank of Boston warned on Friday.
/reut.rs/31OTbqg

U.S. regulator accuses head of defunct British bitcoin company of $147 million fraud
Jonathan Stempel – Reuters
A U.S. commodities regulator has filed a lawsuit accusing a defunct British cryptocurrency company and its former principal of fraudulently misappropriating at least 22,858,322 bitcoin worth $147 million (£117.1 million) from more than 1,000 customers.
bit.ly/2Rr1AeG

SEBI allows futures trading in commodity indices; Small step towards giant leap for commodity market reform: ICEX chief
Suresh P Iyengar – TheHinduBusinessLine.com
SEBI has allowed exchanges to launch futures trading in commodity indices. The move will further facilitate mutual fund and institutional participation in commodity exchanges.
bit.ly/2RuHEHY

On Ethanol, Big Corn Beats Big Oil; Corn crops are under pressure, yet farmers are pushing for a bigger share of the gasoline blend that would push up prices further
Lauren Silva Laughlin – WSJ
American farmers are a force to be reckoned with. Fresh from a trip to Iowa, President Trump has sent Environmental Protection Agency Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue to the drawing board, according to The Wall Street Journal. They are meant to come up with a plan that could make further changes to ethanol policies that would benefit farmers. This comes at a time of rising corn prices following damaging floods.
/on.wsj.com/31K38Fk

Exchanges, OTC and Clearing

CME Group and BarclayHedge Honor Managed Futures Leaders at Eighth Annual Managed Futures Pinnacle Awards
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, and BarclayHedge, a division of Backstop Solutions Group, recognized top managed futures industry leaders at the eighth annual Managed Futures Pinnacle Awards last night.
bit.ly/2Y0z71z

SGX welcomes Astrea V private equity bond retail offering
SGX
Singapore Exchange (SGX) today welcomed the listing of Astrea V Private Equity (PE) Class A-1 bonds issued by Astrea V Pte Ltd, a wholly owned subsidiary of Azalea Asset Management Pte. Ltd., which is itself wholly owned by Temasek Holdings (Private) Limited.
bit.ly/2Y2JhPn

EU: green finance to play a bigger role for investors
Eurex
The European Commission has published new guidelines on corporate climate-related information reporting, as part of its Sustainable Finance Action Plan. These guidelines provide companies with practical recommendations on how to better report the impact that their activities are having on the climate as well as the impact of climate change on their business.
bit.ly/2Ycpz3C

MarketAxess lifts the lid on Portfolio Trading solution; Portfolio Trading solution under development in response to growing client demand expected to launch in Q3 2019.
John Brazier – The Trade
MarketAxess has announced the development of a new Portfolio Trading solution for the fixed income markets in response to an increase in basket trading.
bit.ly/2XY1VId

Bank of America Merrill Lynch veteran tapped to lead US equities at Cboe; Adam Inzirillo will oversee product development and the strategic growth of the US equities franchise at Cboe Global Markets.
Hayley McDowell – The Trade
The head of order routing and execution products at Bank of America Merrill Lynch has departed the bank after almost a decade to take up a senior position within the equities business at Cboe Global Markets.
bit.ly/2Ycpugk

London Stock Exchange Looks to Provide Tools to Nascent Crypto Exchanges; LSEG is seeing interest from the crypto market for help with technology and connectivity.
Hamad Ali – Waters Technology
As cryptocurrencies slowly try to emerge as viable asset classes in the capital markets, startup crypto markets are struggling to build out the necessary infrastructure and trading tools to attract institutional investors on their own. While speaking at the Synchronize Europe conference on June 18, Ann Neidenbach, global head of LSEG Technology and CIO of shared services, said that her company is looking to capitalize on this new pool of potential customers.
bit.ly/2XY4z0B

REPO risk parameters change for the security CBOM
MOEX
As per the Equity Market Risk Parameters Methodology, on 21.06.2019, 13-30 (MSK) the lower bound of the REPO rate and IR Risk Rate (downward scenario) for the security CBOM was changed. New values are available at http://nationalclearingcentre.ru/fondMarketRates.do
bit.ly/2Y9o1ru

Fintech

Supurna VedBrat also highlighted the important of talent management as the fixed income ecosystem evolves.
John Brazier – The Trade
Supurna VedBrat, global head of trading at BlackRock, identified the emergence of data science and artificial intelligence (AI) as key elements to the next phase of buy-side trading operations for fixed income.
bit.ly/2Y3vTKW

Bank of England intends to open its vaults to tech companies; Mark Carney wants to allow all payment providers to store funds overnight
Chris Giles, Caroline Binham and Delphine Strauss – FT
The Bank of England intends to throw open its vaults to tech companies for the first time, allowing them to bank at Threadneedle Street and thereby offer payments systems on a level playing field with commercial banks.
/on.ft.com/2Y2NzGD

Dollars in the detail: banks pan for gold in ‘data lakes’
Iain Withers, Lawrence White – Reuters
From sending special offers on restaurants to burger-loving current account holders to selling anonymized credit card records, banks are racing to monetize the huge troves of data they hold.
/reut.rs/2XZpHni

Fintech algorithms discriminate 40% less than traditional lenders
John Detrixhe – Quartz
Algorithmic fintech lending is less discriminatory against minorities than traditional loan officers, according to a recent study of US mortgages. The findings signal hope that technology could provide financing that’s more fair, but the research also underscores how widespread discrimination remains.
bit.ly/31Jrijp

Cryptocurrencies

Quadriga Founder Spent Client Money, Bankruptcy Monitor Says
Ernst & Young says Gerald Cotten, late founder of defunct Canadian cryptocurrency exchange, funneled client money into fraudulent accounts
Paul Vigna – WSJ
The court-appointed monitor for bankrupt QuadrigaCX said the Canadian cryptocurrency exchange’s late founder took most of the money entrusted to him by clients and spent much of it on himself and his wife.
/on.wsj.com/2Y71H1E

Facebook’s Crypto Association Holds Talks With Major Banks
Kurt Wagner and Jennifer Surane – Bloomberg
Citigroup CEO says his bank would consider joining Libra; U.S. banks were noticeably absent from Libra’s initial debut
The biggest U.S. banks have a chance to get in on the new cryptocurrency spearheaded by Facebook Inc.
/bloom.bg/2XZjyHK

Bitmain Revives IPO Plan as Bitcoin Hits One-Year High
Crystal Tse and Manuel Baigorri – Bloomberg
Bitmain shifts to U.S. after Hong Kong IPO application lapses; Bitcoin hits highest since March 2018 on wider usage optimism
Bitmain Technologies Ltd., the world’s biggest producer of cryptocurrency mining chips, is reviving plans for an initial public offering as Bitcoin climbs to a one-year high, people with knowledge of the matter said.
/bloom.bg/2ZAyw7h

At-Home Crypto Miner Coinmine Now Pays Out Bitcoin
John Biggs – Coindesk
Coinmine, a tool some call the Xbox of crypto, will now be able to mine bitcoin. The device was able to mine monero, zcash, grin, and ethereum at launch, a set of cryptocurrencies that had a low enough difficulty threshold to allow for the average miner to see a minimal return. The addition of bitcoin – an established player in the space with a difficulty rating that most miners can barely touch – gives miners more incentive to try the $799 ($699 with a special BTC discount) product.
bit.ly/2Y2K03h

Examining Facebook’s Claim Its Crypto Is for the Unbanked
Daniel Evans – Coindesk
The excitement about Libra is premature. Maybe Zuck’s got more to share, but right now there’s very little information, and Libra has a lot to prove. Libra’s main stated mission is to service the world’s poor and unbanked. This seems unlikely to be the whole story…
bit.ly/2Y5KPs2

France to create G7 stablecoin taskforce following Libra’s announcement
The Block Crypto
France, which holds the Group of Seven (G7) presidency, will create the group taskforce on “stablecoin” projects, according to a report from Reuters on Friday. The news was announced by France’s central bank governor Francois Villeroy de Galhau. The taskforce will reportedly be headed by European Central Bank board member Benoit Coeure, and will also include Facebook’s planned cryptocurrency project, Libra.
bit.ly/2XZn3xS

Facebook co-founder: Libra coin would shift power into the wrong hands
Chris Hughes – Financial Times
Move fast and break things — our mantra in Facebook’s early days — was an appropriate slogan for a college social network. It’s not appropriate for the global monetary system. This week, Facebook and 28 other partners announced a plan for a new digital currency called Libra that could be used to send money around the world. If things go according to plan, some of the world’s largest corporations will oversee this new currency, through an independent association based in Switzerland that has a membership fee of $10m.
/on.ft.com/2XpYi0G

The Real Reason for Facebook’s New Cryptocurrency
Kevin Werbach – The New York Times
Facebook says its new cryptocurrency, Libra, is a tool for financial inclusion and disrupting the world’s cumbersome payment systems. In reality, there is a deeper motivation behind it, although not the one its critics imagine: Libra is the last, best hope to re-establish trust between Facebook and the world.
/nyti.ms/2IuAaBI

Facebook Is a Threat to Governments Not Crypto
Avi Mizrahi – Bitcoin.com News
The moment Facebook released the whitepaper for its planned Libra coin, social media was flooded with claims about Zuckerberg’s new drive to take over the cryptocurrency market, with some even calling it a Bitcoin killer. However, looking at the actual details of the plan, it has little to do with cryptocurrency and is in fact more of a threat to government fiat.
/bit.ly/2WYK7QC

***Straight from the hacker’s mouth.~MR

Alternateth: A ‘Friendly Fork’ of the Ethereum Blockchain
Christine Kim – Coindesk
One ethereum community member is about to begin what one might call a “friendly fork” of the ethereum blockchain. Called “Alternateth,” James Hancock, project team lead at ethereum startup ETHSignals, told CoinDesk in interview that he hopes the network will act as “a sister chain” to ethereum validating ideas and proof-of-concepts before adoption on the main chain. The goal is to initiate the split in two months’ time. “For ethereum to be sound money, it needs to be very conservative in making changes,” said Hancock. “For ethereum to keep pace with competition it needs to keep making changes. These two ideas are in tension as it is difficult to do well.”
/bit.ly/2IvNFBb

European central bankers claim oversight over Facebook’s cryptocurrency
Francesco Canepa – Reuters
FRANKFURT (Reuters) – Three European central bankers are claiming oversight over Facebook’s planned virtual currency to ensure it will not jeopardize the financial system or be used to launder money. Facebook drew worldwide interest this week when it announced plans to introduce a cryptocurrency called Libra, part of an effort to expand into digital payments.
/reut.rs/2N24Oa3

Meet Alternateth: A ‘Friendly Fork’ of the Ethereum Blockchain
Christine Kim – Coindesk
One ethereum community member is about to begin what one might call a “friendly fork” of the ethereum blockchain.
bit.ly/2Y2RBPh

Japan Watchdog Orders Improvements After Fisco Crypto Exchange ‘Violations’
Daniel Palmer – Coindesk
Cryptocurrency exchange owner Fisco is being forced to improve its business management systems after an investigation by the country’s financial watchdog.
bit.ly/31Q8w9M

Explainer: Initial exchange offerings flourish in crypto market
Gertrude Chavez-Dreyfuss – Reuters
Initial exchange offerings (IEOs) are currently the most popular fundraising trend in the cryptocurrency industry, which has seen poster child bitcoin surge more than 150% in 2019. As the name suggests, initial exchange offerings are conducted over crypto trading platforms and exchanges.
/reut.rs/31K1h3v

Politics

Trump Ordered Military Strike on Iran, Then Called It Off
Tony Capaccio and John Harney – Bloomberg
Operation was in its final stages and could be revived; Iran shot down U.S. drone after earlier attacks on tankers
The U.S. called off military strikes against Iran on Thursday night that were approved by President Donald Trump, according to an administration official, abandoning a move that would have dramatically escalated tensions that are already running high.
/bloom.bg/2FqnsBY

EU Plots Response to Boris Johnson Becoming U.K. Prime Minister
Ian Wishart – Bloomberg
The bloc will only offer minor concessions on the Brexit deal; Conservative Party conference in October seen as a milestone
As the European Union plots how to respond to a prime minister Boris Johnson, officials are aiming to keep him away from Brussels for as long as possible.
/bloom.bg/2FplAte

This Year’s G-20 Will Be a Faceoff Between Trump and Xi; Failure to reach a trade deal could turn simmering tensions into a new cold war.
Shawn Donnan and Peter Martin – Bloomberg
There was a time in the not-too-distant past when “G” summits were earnest, even turgid affairs, at which worthy matters were discussed in polite sitdowns between the leaders of major economies. That was before Donald Trump, of course. If the American president has done anything during his time in office, he’s added drama, spice, and the dual tensions of consequence and uncertainty to the once-carefully scripted art of international summitry.
/bloom.bg/2Y7aCjE

Trump should stop bragging about the stock market
Rick Newman – Yahoo Finance
What have you done for me lately? That’s what voters want to know when politicians run for reelection. And President Trump’s boasts about stock market gains under his watch are growing very dated.
/yhoo.it/31XFm94

Why Trump Might Actually Drop Out of the 2020 Election, According to Bond King Jeffrey Gundlach
Mike Murphy, MarketWatch
If the U.S. economy tanks in the next year, President Donald Trump might not even bother running for re-election, “Bond King” Jeffrey Gundlach said Wednesday.
bit.ly/31P6Opa

Regulation

Effective date of dues surcharge for certain Member firms engaged in swaps activities
NFA
In May 2019, NFA issued Notice to Members I-19-13 announcing that NFA’s Board of Directors approved an annual dues surcharge of $1,750 on certain NFA Members including FCMs for which NFA is the DSRO, IBs, CPOs and CTAs that are approved as swap firms pursuant to NFA Bylaw 301(l)1. The Board determined to impose this surcharge on these firms since NFA does not currently assess any fees related to NFA’s oversight of their swaps activities.
bit.ly/2Y75Y5c

Proposed Rule Change to Amend FINRA Rules 2210 (Communications with the Public) and 2241 (Research Analysts and Research Reports)
FINRA
Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) proposed amendments to FINRA Rule 2210 (Communications with the Public) and FINRA Rule 2241 (Research Analysts and Research Reports) required by the Fair Access to Investment Research Act of 2017 (“FAIR Act”). The proposed rule change would eliminate the “quiet period” restrictions in Rule 2241 on publishing a research report or making a public appearance concerning a covered investment fund and would create a filing exclusion under FINRA Rule 2210 for covered investment fund research reports.
bit.ly/2XZCtSC

Financial Prosperity Eludes Many Americans Despite Growing Economy and Declining Unemployment; National Comprehensive Survey of Financial Capability Finds Younger Americans, Those With Lower Incomes, African-Americans and Those Without a College Degree Facing Toughest Financial Struggles
FINRA
As the gap between the Haves and the Have-nots continues to widen, cash-strapped Americans are failing to save money, struggling with student loan debt and facing decreasing financial literacy, despite economic growth and declining unemployment over the past 10 years, according to new research from the FINRA Investor Education Foundation (FINRA Foundation). The study, “The State of U.S. Financial Capability,” finds that key indicators of financial capability are no longer improving in step with the economy.
bit.ly/2Y25FID

SEC Wins Jury Trial Against Broker Charged With Defrauding Customers; Broker’s Partner Settled on the Eve of Trial to a Final Judgment With Admissions
SEC
Jurors in Manhattan federal court today returned a verdict in the Securities and Exchange Commission’s favor against a broker who was charged in January 2017 with fraud for excessively trading customer accounts using a trading scheme that generated hefty commissions for the broker but significant losses for his customers. A second broker, also charged in the same complaint for engaging in the same fraudulent practices, admitted to his misconduct and settled with the SEC on the eve of trial.
bit.ly/2Y2Tjjr

Statement on Senate Confirmation of Allison H. Lee
SEC
We congratulate Allison on her successful Senate confirmation, and, on behalf of the entire agency, we welcome her back to the SEC. We look forward to her further contributions to our work in advancing the agency’s mission on behalf of our investors and markets.
bit.ly/2Y2716b

SEC Charges Intelligence Communications Company and Top Executives With Defrauding Merger Investors
SEC
The SEC has charged Ability Inc., an Israel-based intelligence communications company, its wholly-owned subsidiary, and two of its top executives with defrauding shareholders of a Florida-based special purpose acquisition company (SPAC), a company formed to raise capital for a merger or acquisition within a set timeframe.
bit.ly/2Y3xaBI

Walmart Charged With FCPA Violations
SEC
The Securities and Exchange Commission today charged Walmart with violating the Foreign Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance program for more than a decade as the retailer experienced rapid international growth.
bit.ly/2Y2PlHN

SEC Freezes Assets in International Manipulative Trading Scheme
SEC
The Securities and Exchange Commission today announced charges against five foreign traders for executing illegal matched trades in the stock of Medico International, Inc. (MDDT). The SEC also obtained an emergency court order freezing assets held in brokerage accounts of the defendants, including approximately $144,000 that otherwise could have been wired offshore, and hundreds of thousands of shares of MDDT stock.
bit.ly/2XZDeLs

Bank of Scotland fined £45m over failure to report fraud suspicions; Financial watchdog hits lender with penalty over scandal at its Reading branch dating back to 2007
Myles McCormick – FT
Bank of Scotland has been fined £45.5m by the UK’s financial watchdog over its failure to report suspicions of fraud at its Reading branch dating back to 2007.
/on.ft.com/2Y0vYyN

Lloyds Fined $58 Million by FCA Over Decade-Old HBOS Scandal
Hugo Miller – Bloomberg
Two of four banned from finance industry already in prison; 2007-2009 a “dark period” in HBOS’s history: Lloyds CEO
Lloyds Banking Group Plc’s Bank of Scotland unit was fined 45.5 million pounds ($58 million) by the U.K.’s finance regulator over a scandal at the bank’s Reading division that siphoned millions from failing businesses a decade ago.
/bloom.bg/2Fqo0I2

FCA fines Bank of Scotland for failing to report suspicions of fraud at HBOS Reading
UK FCA
The Financial Conduct Authority (FCA) has today fined Bank of Scotland (BOS) £45,500,000 for failures to disclose information about its suspicions that fraud may have occurred at the Reading-based Impaired Assets (IAR) team of Halifax Bank of Scotland.
bit.ly/2Y5MwFU

FCA confirms next event for British Steel Pension Scheme Members
UK FCA
We have confirmed the second of our series of events for British Steel Pension Scheme Members (BSPS). These events are designed to provide information for members concerned about the advice they may have received when they transferred their pension out of the scheme.
bit.ly/2Y0BpOd

City minister warns against more regulation
David Thorpe – FT Adviser
More stringent regulation of the financial services sector will hamper innovation, according to City minister John Glen
bit.ly/2Y9nC8s

Former UBS Banker in China Convicted in Cross-Border Insider Trading Case; Ex-banker sentenced to nine years in prison in case involving $6.3 billion takeover by Cosco Shipping Holdings
WSJ
A former banker from UBS ‘s Shanghai office was sentenced to nine years in prison in a case involving leaks about a $6.3 billion takeover by Cosco Shipping Holdings Co.
/on.wsj.com/2XZFW3A

IOSCO Examines Liquidity In Corporate Bond Markets Under Stressed Conditions
Mondovisione
The Board of the International Organization of Securities Commissions today published a report that examines the factors affecting liquidity in secondary corporate bond markets under stressed conditions.
bit.ly/2Y9nPsg

SEC says closed-end funds should disclose more, managers differ on requirements
Kristen Haunss, Loan Pricing Corporation – Reuters
Firms that manage closed-end funds agree that regulatory proposals that would force managers to disclose more information to investors including factors affecting performance as well as investment strategies could be beneficial, but disagree on whether regulators should dictate what specific data is shared.
/reut.rs/31HRtXH

Investing and Trading

Communication the key ingredient to improving buy- and sell-side relationships; Panelists at Fixed Income Leaders Summit US say that consistent, open communication between the buy- and sell-side is vital to evolving.
John Brazier – The Trade
Increased levels of communication and information efficiencies are the key elements to improving relationships between the buy- and sell-side, according to panellists at this year’s Fixed Income Leaders Summit.
bit.ly/2XZBpy6

Nouriel Roubini outlines the 2020 recession risk
Izabella Kaminska – FT
Alphachat sat down with economist and New York University Stern School of Business professor Nouriel Roubini last week to discuss his current diagnosis of the economy and the chances of a global recession in 2020. A number of geopolitical and financial risks are stalking global growth, he says, key among them being the US-China trade war and general protectionism in the global market.
/on.ft.com/2Y1rTKQ

‘Green bond’ market leaves wildlife behind; Energy, housing and transport projects dominate over natural habitats
Siddarth Shrikanth – FT
Late last year Seychelles issued the world’s first government bond dedicated to marine conservation — a so-called “blue bond,” aimed at supporting sustainable fisheries.
/on.ft.com/2Y2SdnZ

Opinion: Believing all this talk about a stock market bubble can land you in real trouble
Mark Hulbert – MarketWatch
Repeat after me: The stock market is not in a bubble. I suppose it was inevitable that the stock market’s new all-time high this week would cause bubble talk to bubble up, so to speak. Yet, it shouldn’t need repeating, calling something a bubble doesn’t make it a bubble.
/on.mktw.net/31Rhnsb

This Is a Market Only Gordon Gekko Could Love; Whether or not greed is good, it’s certainly contagious. Plus, credit contradictions, gold fever and more
Robert Burgess – Bloomberg
Judging by the performance of markets this week, it’s hard to come to any other conclusion than investors have gotten a bit too greedy. The S&P 500 Index closed at a new high Thursday, contributing to what is already one of the five best months for stocks globally since 2010. It’s a similar story for junk-rated debt and emerging-market currencies. But where greed seems to be out of control is in the market for sovereign bonds, which is usually viewed as the adult in the room.
/bloom.bg/31NDC20

Announcing the launch of Wealthbase, a simulated trading game for investors; Paper-trading app for stocks, ETFs, and cryptocurrencies is educational, social, and risk-free
Wealthbase
Wealthbase, a simulated trading game for individual investors, has been released at Wealthbase.com and via an iOS mobile app in the App Store. The announcement was made at the Benzinga Trading & Investing Summit in New York City.
/prn.to/31P6FC8

Institutions

Why Neil Woodford has lifted the lid on open-ended funds; Liquidity crisis has left billions trapped in investor funds
Kate Beioley – FT
Popular investment vehicles known as open-ended funds have been thrust into the spotlight this month as a result of the shock suspension of investor Neil Woodford’s flagship fund this month.
/on.ft.com/2Y4LFoI

Hargreaves Lansdown stands firm on Neil Woodford fees; Online broker refuses to waive charges on multi-manager platforms exposed to star manager’s frozen fund
Kate Beioley – FT
Fund supermarket Hargreaves Lansdown has refused to waive even part of the management and platform fees it charges on its in-house funds exposed to Neil Woodford’s stricken Equity Income fund.
/on.ft.com/2XY0IAF

H2O hit with more than EUR600m of outflows on illiquid bond worries; Fund management firm’s chief to step down from controversial German financier’s board
Robert Smith and Cynthia O’Murchu and David Keohane – FT
France’s Natixis said that its subsidiary H2O Asset Management had been hit with at least EUR600m of outflows, after the Financial Times revealed the scale of its holdings of illiquid bonds linked to a controversial German financier.
/on.ft.com/2Y6rqHm

Goldman Sachs Executive Says Legacy Retail Banks Are ‘Screwed’
Lananh Nguyen – Bloomberg
Traditional consumer banks face an existential threat from new digital challengers, according to a Goldman Sachs Group Inc. executive in the company’s retail unit, Marcus.
/bloom.bg/2FkY5S8

AIG Duo Win $10 Million Ahead of $100 Million U.K. Bonus Case
Gaspard Sebag and Jonathan Browning – Bloomberg
Alperovitch, Benaroch awarded $10 million at Paris court; Judges say bonuses had been allocated before AIG’s losses
Two former American International Group Inc. employees won awards totaling about $10 million after French judges chastised the insurance giant for trying to block the payment of bonuses they’d already earned to cover for its huge losses.
/bloom.bg/2Fn2dkE

Regions

Foxconn’s Billionaire Founder Urges Apple to Move Plants From China
Debby Wu – Bloomberg
The billionaire founder of Apple Inc.’s largest supplier asked the U.S. company to move part of its sprawling production chain from China to neighboring Taiwan.
/bloom.bg/2Y2QXkL

Hong Kong Has Suddenly Turned Into World’s Best Stock Market
David Watkins – Bloomberg
Hang Seng Index outperformed world’s major indexes this week; City’s currency nears midpoint of trading band with greenback
Central banks have helped supercharge a rebound in Hong Kong stocks. The Hang Seng Index jumped 5% this week, beating all other 93 major benchmarks tracked by Bloomberg. That’s its best weekly rally since early November. The Hang Seng Enterprises Index was a close second, adding 4.8%. The Hong Kong dollar strengthened towards the midpoint of its trading band with the greenback, a level it hasn’t breached since September.
/bloom.bg/2FihfrV

The World Doesn’t Need Trouble in Chinese Steel
Nathaniel Taplin – WSJ
The world’s largest steel industry is coming under pressure again. That’s bad news for Western steelmakers and China alike.
/on.wsj.com/2Y2OO8J

After years of war and drought, Iraq’s bumper crop is burning
Ahmed Aboulenein, Maha El Dahan – Reuterts
Iraqi farmer Riyadh woke on May 13 to find his wheat crop ablaze. In his fields in Diyala province, he found the remains of a mobile phone and plastic bottle which he believes was an explosive device detonated in the night to start the fire.
/reut.rs/2Y2OXJj

Zimbabwe Leader Wants New Currency, IMF Loan in Revival Bid
Matthew Hill and Prinesha Naidoo – Bloomberg
Government will also consider selling a Eurobond next year; Country struggling to emerge from years of economic collapse
Zimbabwean President Emmerson Mnangagwa and his finance chief want a new currency by March, would seek financing from the International Monetary Fund and may even consider a Eurobond offering as the struggling economy emerges from almost two decades of isolation.
/bloom.bg/2XZqFQs

Baoshang failure takes a toll in China’s interbank markets as contagion fears grow
Samuel Shen, John Ruwitch – Reuters
Nearly three weeks after Chinese regulators took over troubled Baoshang Bank, a mid-sized mutual fund house in Beijing suddenly became unable to borrow cash in the interbank market and was forced to default on some products.
/reut.rs/31PQOUe

Brexit

How the Brexit debate was flushed down the drain; We want plumbers to know how a lavatory works, but our standards for politicians seem far lower
Tim Harford – FT
On a scale of one to seven, how well do you understand how a flush lavatory works? This was a question asked by two Yale psychologists, Leonid Rozenblit and Frank Keil, almost two decades ago. Before I explain why, here’s a follow-up exercise: write down your lavatory explanation in as much detail as you can. You may wish to draw a diagram, or explain it to a friend. Or not.
/on.ft.com/2Y3YwYe

How Oxford university shaped Brexit — and Britain’s next prime minister; Simon Kuper returns to the place where Boris Johnson and Jeremy Hunt began their climb to power
Simon Kuper – FT
You turn the pages of yellowing student newspapers from 30 years ago, and there they are, recognisably the same faces that dominate today’s British news. Boris Johnson running for Union president, Michael Gove winning debating contests, Jeremy Hunt holding together the faction-ridden Oxford University Conservative Association (OUCA).
/on.ft.com/2Y0wEEl

Mark Carney dismisses Boris Johnson’s no-deal Brexit claims; Tariffs would apply automatically without an EU agreement, says Bank of England chief
Chris Giles – FT
Mark Carney, the Bank of England governor, has dismissed Boris Johnson’s claim that Britain’s exporters would avoid facing EU tariffs after a no-deal Brexit.
/on.ft.com/2XZzVnw

Donald Tusk warns EU still opposed to renegotiating Brexit treaty; Stance effectively rejects most of Boris Johnson’s strategy
Jim Brunsden – FT
Donald Tusk has said that the Brexit process could become “even more exciting” under a new British prime minister while warning that the EU remains staunchly opposed to reopening the UK’s exit treaty.
/on.ft.com/2XZnmZy

Brexit’s Fearmongers May Be Right—Three Years Late
Andre Tartar and Christopher Cannon – Bloomberg
Three years after Britain voted to leave the European Union, warning signals for the U.K. economy are finally beginning to flash red.
/bloom.bg/2YcsucA

Miscellaneous

Being Transgender at Goldman Sachs; How Maeve DuVally, an employee in the bank’s buttoned-up communications department, became herself at work.
Emily Flitter – NY Times
Goldman Sachs’s trading floors are vast rooms crammed with rows of tightly packed workstations, four monitors for every trader. The two-by-two grids tower over and swallow up their users, so that the only way someone can be identified from across the room is by the decorations affixed to the tops of the screens.
/nyti.ms/2Y2QsXL

Latest Suicide Data Show the Depth of U.S. Mental Health Crisis; While material well-being has improved, America’s emotional distress has climbed to crisis levels.
Cynthia Koons – Bloomberg
So many statistics say that life in the U.S. is getting better. Unemployment is at the lowest level since 1969. Violent crime has fallen sharply since the 1990s—cities such as New York are safer than they’ve ever been. And Americans lived nine years longer, on average, in 2017 than they did in 1960. It would make sense that the psychic well-being of the nation would improve along with measures like that.
/bloom.bg/2x5ygkt

An Ex-UBS Banker Is Battling to Keep Japan in Super Rugby
Takako Taniguchi and Russell Ward – Bloomberg
Eyes alliances to keep ‘one foot’ in competition after 2020; Japan to host Rugby World Cup in September, first in Asia
Even when working as a private banker at Citigroup Inc. or heading the wealth management unit for UBS Group AG in Japan, rugby has dominated Yuji Watase’s life. Now, as chief executive officer of the Sunwolves Super Rugby franchise, he’s using everything he’s learned to keep the club alive after its exit from the competition next year.
/bloom.bg/31XF9Tk

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