Half the World’s Banks Are Too Weak to Survive a Downturn, McKinsey Says

Oct 22, 2019

First Read

Hits & Takes
By JLN Staff

I just created a petition on Change.org: “Justice for Jitesh Thakkar; CFTC Should Drop Civil Charges and Apologize.” I believe a grave injustice is being waged against Thakkar that has costly and far reaching implications for trading innovation and software development. This is everyone’s problem, not just Jitesh’s. So I ask you to read my petition and sign for Justice for Jitesh.~JJL

You can read more and Sign the Petition Here. As of publishing time, 90 people have signed the petition.~JJL

Ray Cahnman, chairman of TransMarketGroup llc, sent me a note yesterday in support of the CME Market Regulation relative to a Bloomberg story where 14 Democratic Senators were calling for an investigation of CME Group markets. Cahnman knows CME Market Regulation from first hand experience, having won a CME regulatory jury trial case for Transmarket after not agreeing to settle a contentious matter. He even represented the firm himself against up to 10 different CME attorneys. Cahnman says CME is “relentless in their efforts to sift out the bad guys. They have the tools and the staff to delve into activities of this type.” He said, “If there was ANY trading behavior that even remotely violated CME rules, action would be taken against the wrong doers. Investigating CME market regulation is a waste of time. They do their job exceptionally well.” Cahnman is also one of the largest individual shareholders of CME Group stock, so he has a lot of personal incentive for CME Market Regulation to do their job well.~JJL

The OCC created a new regulatory oversight committee, replacing its old regulatory oversight working group, to help improve regulatory compliance on all of its clearance and settlement operations. The committee was, in part, created by the OCC as a good faith gesture towards the SEC.~MR

LME reported on Twitter that “following the success of a three-month trial for zinc, the LME has extended the period available for kerb trading from five minutes to ten minutes in the afternoon kerb session. This applies to zinc, copper, lead, nickel, aluminium and tin.”~JJL

The cryptocurrency exchange Bittrex is moving its headquarters from Malta to Lichtenstein, and will be operating the exchange under Lichtenstein’s Transaction Systems Based on Trustworthy Technologies Act, also called the “Blockchain Act.” They’re turning over a new leaf, re-branding their company from Bittrex International to Bittrex…Global. The news of the move came about a month after Malta’s financial regulator vowed to monitor cryptocurrency exchanges in the country to prevent money laundering.~MR

I have tendered my resignation as the Scoutmaster of Troop 117G and Crew Advisor of Venture Crew 711 in Three Fires Council of the Boy Scouts of America. There is a time and place for everything, and it was time for me to move along.~JJL

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U.S. Senators Seek Investigation Into Possible Market Manipulation Regarding Market Bets Timed to Trump’s Comments on Trade War & Other Geopolitical Events
Jack Reed – United States Senator for Rhode Island
After a number of suspicious trades raised red flags about possible market manipulation or insider trading, a group of U.S. Senators is calling for federal authorities to investigate, protect our financial markets, and ensure no one is cashing in on material nonpublic information from the Trump Administration, foreign nations, or other entities.
bit.ly/2qz9462

***** They could get better results spitting into the wind.~JJL

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Nasdaq’s Sandy Frucher to Retire as Vice Chairman; Frucher to transition to strategic advisor role at end of 2019
Nasdaq, Inc.
Nasdaq, Inc. today announced Vice Chairman Meyer “Sandy” Frucher will conclude his 11-year tenure as Vice Chairman and assume the role of Strategic Advisor, effective January 1, 2020.
bit.ly/35Y5dzq

*****This is the biggest news story of the day. Congratulations to Sandy Frucher on a great career at Philly, Nasdaq and more.~JJL

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Fidelity Pulls $500 Million From Fisher as Big Clients Flee
Sabrina Willmer – Bloomberg
Fisher Investments clients divest more than $1.8 billion; Iowa, Boston, Philadelphia are among pensions to yank money
Fidelity Investments is pulling the $500 million it has invested with Ken Fisher’s investment firm, according to people familiar with the matter.
/bloom.bg/35TpQgg

**** Investors had to wonder what Fisher’s mind was like when he made these comments. Now, they have to wonder how he is dealing with losing billions of dollars in funds under management. Sometimes these things just keep going not for the original reason for withdrawals, but some funds have limits on what percentage of funds under management of a particular fund or manager they can be.~JJL

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Monday’s Top Three
Some stories take on a life of their own. Friday’s top three Vanity Fair piece “There Is Definite Hanky-Panky Going On”: The Fantastically Profitable Mystery of the Trump Chaos Trades triggered the top read item of the day on Monday, the CME Group Statement on Vanity Fair Article. It also spurred a Congressional call for an inquiry. Second was the Chicago Tribune’s architectural review of the new home for Cboe Global Markets, in An exclusive look inside Chicago’s Old Post Office. It is impressive, indeed. Third was Bloomberg’s IMF Growth Forecasts: World Economy Is Stumbling Toward Disaster

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Lead Stories

Half the World’s Banks Are Too Weak to Survive a Downturn, McKinsey Says
Hannah Levitt – Bloomberg
Half of firms are ill-prepared for a downturn, report finds; Upstarts spend more on innovation and target lucrative markets
More than half of the world’s banks are too weak to survive a downturn, according to a survey from consultancy McKinsey & Co.
/bloom.bg/33WhSkz

Turkey Picks Ex-Banker Convicted in the U.S. as New Bourse CEO
Tugce Ozsoy – Bloomberg
Former Halkbank executive Atilla served 28 months in jail; Atilla was tried in New York court over Iran sanctions breach
Turkey chose former Halkbank executive Hakan Atilla, who served time in a U.S. jail over Iran sanctions breaches, to be the new chief executive officer of the Istanbul stock exchange.
/bloom.bg/33QNMPr

Wall St’s top cops defend new focus on Main St; SEC’s enforcement team have shifted from big corporates to cases that hit small investors
Kadhim Shubber – FT
The US Securities and Exchange Commission has long been called the top cop on Wall Street, but in Donald Trump’s administration the regulator has struck a softer tone.
/on.ft.com/35Ow7d4

Wall Street’s watchdog wants to weaken its own whistleblower program, critics say
Max de Haldevang – Quartz
Wall Street’s top watchdog loves to tout the success and importance of its whistleblower program. “These awards show how critically important whistleblowers can be to the agency’s investigation and ability to bring a case to successful and efficient resolution,” said Jane Norberg, who heads the Securities and Exchange Commission’s (SEC) program, when announcing a $50 million reward for two whistleblowers in March.
bit.ly/2Jet0Bx

European banks run out of options to protect profits; Negative interest rates, new regulations and sluggish economy mean tougher challenges
David Crow – FT
When Commerzbank’s chief executive unveiled the lender’s new strategic plan last month, he kicked off the press conference by declaring “it’s a wonderful day”. Unfortunately for his investors, Martin Zielke was not referring to the prospects for Commerzbank, or the wider European banking industry: he was wishing his colleague a happy birthday.
/on.ft.com/2N5ZuiD

US regulators take a closer look at exchanges’ data fees; SEC pressure threatens to hamper ambitions to charge more
Richard Henderson – FT
The dominant US exchange groups are fighting to expand their market data businesses but face a stand-off with the securities regulator over fees. The New York Stock Exchange, Nasdaq, CBOE Global Markets and others increasingly earn money by offering data rather than simply facilitating securities trading. They do, however, face pressure from the Securities and Exchange Commission, which threatens to curtail their ambition to sell data.
/on.ft.com/33SKYkU

The TRADE’s Rising Stars of Trading and Execution 2019 revealed; The Rising Stars of Trading and Execution awards are back for a fifth year, recognising the best up-and-coming talent in trading.
John Brazier – The Trade
Following an industry nomination process and extensive market research, The TRADE’s Rising Stars of Trading and Execution is back for its fifth year, recognising 20 of the most promising up-and-coming talents in buy-side trading.
bit.ly/2W430xT

Socially conscious products rise up exchanges’ agendas; Environmental, social and governance issues weigh more heavily in investors’ minds
Philip Stafford – FT
Setting out its three-year strategy this month, Euronext made a firm commitment that sustainable finance would be at its heart.
/on.ft.com/2p5lDFB

Clearing reforms set to ‘disrupt’ asset management; Costs are set to rise — but the question of how much and who pays is yet to be decided
Eva Szalay – FT
Global regulators might have delayed completion of a major reform of derivatives trading rules by a year, but currency markets are already changing in anticipation. One aspect of the reform that investors and dealers can agree on is that trading costs will rise — the question is only how much, and who will pay.
/on.ft.com/2P9EOJh

Libor reformer welcomes jolt from repo market; Banker overseeing switch to Sofr says change is coming despite rate volatility
Joe Rennison – FT
A wild swing in the interest rate chosen to replace the discredited benchmark London interbank offered rate is unlikely to have helped convert sceptics of the monumental switch.
/on.ft.com/35SI6GC

Protesters Target Money Managers at MoMA’s Reopening Party
Katya Kazakina and Michelle Kaske – Bloomberg
Fund’s Puerto Rico ties at issue in latest art world clash; Separate campaign targets various holdings at Fink’s BlackRock
The line was long and impeccably dressed as befits the Museum of Modern Art’s opening night.
/bloom.bg/2P97mm8

London Investment Bankers Charged in Insider-Trading Ring
Bob Van Voris, Edvard Pettersson, and Franz Wild – Bloomberg
Benjamin Taylor, Darina Windsor, accused of selling info; Pair got cash, watches worth more than $1 million, U.S. says
Two London investment bankers were charged in the U.S. with selling information about pending deals as part of a “large-scale, international insider-trading ring” that, prosecutors claim, generated tens of millions of dollars in illicit profits.
/bloom.bg/2qAntyS

UBS Gets Boost From Wealthy Asians as Investment Bank Trails
Marion Halftermeyer and Patrick Winters – Bloomberg
Wealth, asset management units attract new money in quarter; Firm warns lower interest rates will hit lending income
UBS Group AG got a boost from rich Asian clients in a quarter hit by a poor result at the investment bank and lower income from lending as interest rates have languished.
/bloom.bg/2P95FFi

Ex-Deutsche Bank Traders Must Face Spoofing Case, Judge Says
Janan Hanna – Bloomberg
Trade Groups had joined defendants in seeking case’s dismissal; Judge said ex-traders can be charged under wire-fraud statute
The criminal case against two former Deutsche Bank AG employees accused of fraudulent and manipulative precious-metals trading can proceed, after a federal judge on Monday rejected their request for dismissal.
/bloom.bg/2p2SSJO

ISDA Publishes Final Results of IBOR Pre-Cessation Consultation
Manesh Samtani, Regulation Asia
The consultation did not yield a consensus among market participants regarding how to address pre-cessation issues related to a benchmark’s nonrepresentativeness.
bit.ly/2Bw32VW

Exchanges, OTC and Clearing

Nasdaq Vice Chairman Bruce E. Aust to Retire
Nasdaq, Inc.
Nasdaq, Inc. today announced Bruce E. Aust will retire as Vice Chairman at the end of 2019. Aust has served Nasdaq for 21 years, most notably as Executive Vice President of Global Listings from 2003 to 2014 where he oversaw Nasdaq’s new listings and capital markets business.
bit.ly/31EWjnc

All about data: LSE bids show exchanges’ new priorities; Big deals in vogue again as focus shifts to trading from capital-raising
Philip Stafford – FT
“A very simple vision, but a very big dream” was how Charles Li, chief executive of Hong Kong Exchanges and Clearing, described his vision to connect China’s vast capital markets with the rest of the international system.
/on.ft.com/2N285CL

Top 10 CCPs add $5.4 billion to liquidity pools in Q2
Alessandro Aimone – Risk.net
Ten of the world’s largest clearing houses added $5.4 billion (0.8%) to their liquidity buffers over the second quarter of the year, mostly in the form of cash secured with commercial banks and highly marketable collateral.
bit.ly/2oU3FpN

Fintech

Goldman Sachs and Clearwater partner on liquidity management platform; The liquidity solutions portal from Goldman Sachs aims to provide a consolidated view of funds, with reporting and analytics.
Hayley McDowell – The Trade
Goldman Sachs has teamed up with Clearwater to integrate analytics and portfolio reporting tools with the bank’s liquidity management platform.
bit.ly/2W96E9R

IBM researchers dismiss Google ‘quantum supremacy’ claim; Paper says internet group had overstated advantage over supercomputers
Richard Waters – FT
Google is wrong to claim it has reached a turning point in the history of computing by being the first to achieve “quantum supremacy”, according to researchers at IBM.
/on.ft.com/35VAV0w

Fintech Revolut to launch in the U.S. by year-end with Mastercard deal
Lawrence White – Reuters
Digital banking app Revolut is set to begin issuing its cards in the United States by the end of this year via a partnership with payments company Mastercard Inc MA.N, the two companies said on Tuesday.
/reut.rs/35UAL9x

Interest rates may be the next battleground for fintech disruption
Kate Rooney – CNBC
After shaking up trading commissions, fintech companies are looking at a new Wall Street area to disrupt: interest rates.
A wave of fintech companies are now offering a 2% or higher rate, which is more than 20 times the national average. In order to compete, analysts say some banks may have to raise their own rates to attract new customers.
/cnb.cx/2p5IOzD

RBC fights the fintechs by Uber-izing mobile payments
John Adams – PaymentsSource.com
Technology companies like Square and Stripe have nimbly captured small-business share from banks that often overlooked the segment. Royal Bank of Canada is trying to respond through a mix of merchant services, tied to the national debit system and incentive marketing.
bit.ly/35UVlXo

Nine big shifts that will determine your future Business of Technology; Why you need to transform your IT department into a company-wide Business of Technology capability
Andries van Dijk, Hans van Grieken – Deloitte
Digital’s impact is pushing organisations beyond the traditional IT model. The ‘Business of Technology’ will be shaped by nine shifts that change how businesses identify, test, evaluate, and scale new technologies.
bit.ly/2BK7YXz

Cryptocurrencies

CFTC Chairman: a commodity can become a security and vice versa
Celia Wan – The Block Crypto
The Commodity Futures Trading Commission (CFTC) chairman Heath Tarbert confirmed that a security can turn into a commodity and vice versa. Tarbert made this remark on Monday at DC Fintech Week, when asked about a comment he made earlier this month that ether is not a commodity. At the conference, Tarbert emphasized that the Securities and Exchange Commission (SEC) is the entity that determines when something is a security, while the definition of commodities, which fall under the CFTC’s jurisdiction, is broader.
bit.ly/2o3A7W2

Bitcoin IRA Is Letting Customers Lend Out Their Crypto Retirement Funds
Nathan DiCamillo – Coindesk
Bitcoin IRA will soon allow customers to lend their retirement assets for interest. The firm, which provides digital asset individual retirement accounts (IRAs) is partnering with digital currency trader and lender Genesis Trading to offer interest on cryptocurrency and cash holdings that customers want to lend out, including bitcoin, ether, XRP, litecoin, and zcash.
bit.ly/2P6Jr6C

Trump’s former Fed nominee plans to launch stablecoin
Celia Wan – The Block Crypto
President Donald J. Trump’s former pick for the Federal Reserve will issue a stablecoin backed by a fractional reserve. Stephen Moore, who was nominated by Trump to join the Fed earlier this year, is partnering with former Reagan deputy general counsel Ralph Benko and Everipedia co-founder Sam Kazemian to launch a new stablecoin called Frax. Moore will serve as the co-founder and chief economic officer of Frax, the company behind the stablecoin, with Kazemian being the other co-founder.
bit.ly/2JarWPi

The end of Libra? Mark Zuckerberg is going before the US House of Representatives to make his case for the cryptocurrency project
Robert Armstrong – FT
“It was a neat idea that’ll never happen, and I have nothing else to say about it.” So said JPMorgan Chase chief executive Jamie Dimon on Friday, giving Facebook’s Libra cryptocurrency project one last kick at the end of what had already been a brutal week.
/on.ft.com/2JbXGU5

Does Britain need a stablecoin after sterling’s wild ride? Brexit-related volatility is making the pound act like a mini bitcoin
Izabella Kaminska – FT
If the past week has taught us anything, it’s that stability cannot be called sterling’s defining characteristic. Wild rides on the back of Brexit tos and fros mean the pound is giving cryptocurrencies a bit of a run for their money on volatility.
/on.ft.com/2oTWwpu

A G7 stablecoin report that tells it how it is
Izabella Kaminska – FT
Overnight the G7 investigation into the impact of global stablecoins was published, and by and large it’s a very sensible account of the challenges and opportunities in the sector. (Rightly dwelling a lot on the challenges.)
/on.ft.com/33T2KES

Banks may cut ties with Facebook on Libra concerns, ING warns; Money laundering high on regulators’ list of worries about proposed cryptocurrency
Laura Noonan and Patrick Temple-West – FT
Banks might have to cut ties with Facebook if the social media giant launches its Libra digital currency without fully addressing financial regulators’ money laundering fears, the chief executive of ING has warned.
/on.ft.com/2PanVy6

INSIGHT: Cryptocurrency Taxation—Recent Guidance Is a Good Start, But More Is Needed
Sahel Ahyaie Assar – Bloomberg Tax
On Oct. 11, 2019, the Internal Revenue Service issued Revenue Ruling 2019-24 to address the tax consequences of cryptocurrency hard forks and airdrops. The crypto community has been anxious to receive definitive guidance since the IRS issued Notice 2014-21. Although taxpayers and tax professionals have been waiting for guidance dealing with a plethora of issues relating to taxation of cryptocurrencies, the Ruling is strictly narrowed to an analysis of the U.S. federal income tax consequences of hard forks and airdrops.
bit.ly/2W3CR2g

Telegram Backer Sought Circle Listing Before SEC Halted Token Launch
Anna Baydakova – Coindesk
A least one crypto exchange, Circle, was asked to list Telegram’s tokens before the Securities and Exchange Commission (SEC) halted the launch of the TON blockchain, court filings show. According to documents submitted to the court by the SEC, the agency obtained a registration form titled “Circle Asset Listing Form.” According to the form, it was filed to request a listing on Circle’s Poloniex crypto exchange and submitted by Sergey Vasin, chief operating officer of Blackmoon, a small crypto exchange that earlier had announced plans to list grams.
bit.ly/32xKFMd

Fiat-to-Crypto ‘Carry Trade’ May Tempt Traders Tired of Negative Interest Rates
Omkar Godbole – Coindesk
With the era of negative interest rates well and truly here, return-hungry investors may increasingly borrow in low-interest fiat currencies and invest in higher-yielding cryptocurrency accounts. “The fiat-BTC carry trade is the next step in bitcoin growth,” tweeted popular bitcoin quant investor @100trillionUSD on Oct. 10. A carry trade is a strategy where a trader uses a low-yielding currency to fund a high-yielding investment. For instance, the yen carry trade was popular in 2004-2008 when the Federal Reserve hiked rates from 1 percent to 5.25 percent and interest rates in Japan were stuck near 0.5 percent.
bit.ly/2W23apA

Opera’s Android browser now supports bitcoin payments
Yogita Khatri – The Block Crypto
Internet browser Opera has added support for bitcoin payments to its latest version of Android app. Announcing the news on Tuesday, Opera said the added functionality means Android users can send and receive bitcoins via the browser’s built-in cryptocurrency wallet. Opera has also added support for the TRON blockchain and TRON decentralized apps (dApps) to its Android app. The Norwegian browser maker initially announced its plans to add support for the TRON blockchain in May.
bit.ly/33WqhED

Jump Taps Cahill for Digital Asset Sales
Galen Stops – Profit & Loss
Michael Cahill has joined Jump Trading in a digital asset sales role. Based in London, Cahill joins after more than two years at Cboe FX in a sales role. Before that, he was the global head of FX sales at KCG in New York for three years and also had a stint at Nomura as head of e-FX sales.
bit.ly/35UVUjY

UBS managing director Choo Oi Yee to join digital securities startup iSTOX
Fiona Lam – Business Times
CAPITAL markets platform iSTOX will bring on board UBS’s Choo Oi Yee as its first chief commercial officer (CCO) in January 2020.
bit.ly/31Cbv4H

Politics

Billionaire Michael Novogratz Says Rich Worried About Warren Should ‘Lighten Up’
Amanda L Gordon – Bloomberg
‘You’re not victims, you’re the richest people,’ he says; She ‘just wants to redistribute more,’ ex-Goldman partner says
Billionaire Michael Novogratz has a message for his rich friends: Stop worrying so much about Elizabeth Warren. “You’re not victims, you’re the richest people in the world,” said Novogratz, the former Goldman Sachs partner who’s now investing in cryptocurrency as founder of Galaxy Investment Partners. “How in God’s name do you feel like a victim?”
/bloom.bg/2PbTHuu

EU FTT back on the agenda
Securities Lending Times
Proposals for “enhanced cooperation” between EU member states on a new financial transaction tax (FTT) have been tabled by 11 market regulators, according to one panellist at the Risk Management Association’s (RMA) conference in Miami last week.
bit.ly/2N0jFyl

Facebook Finds New Disinformation Campaigns and Braces for 2020 Torrent
Mike Isaac – NY Times
Facebook said on Monday that it had recently found and taken down four state-backed disinformation campaigns, the latest of dozens that it has identified and removed this year and a sign of how foreign interference online is increasing ahead of the 2020 presidential election.
/nyti.ms/2NfIsif

Protesters Are United by Something Other Than Politics
Tyler Cowen – Bloomberg
The world increasingly finds itself under protest. As 2019 enters its final quarter, there have been large and often violent demonstrations in Lebanon, Chile, Spain, Haiti, Iraq, Sudan, Russia, Egypt, Uganda, Indonesia, Ukraine, Peru, Hong Kong, Zimbabwe, Colombia, France, Turkey, Venezuela, the Netherlands, Ethiopia, Brazil, Malawi, Algeria and Ecuador, among other places. What gives? One possibility is that all of this is a random coincidence. Another is that news of such protests is now much more widely dispersed, and so they seem more widespread. But it is also worth considering what cause or causes these protests might share — and, more important, the means they have to spread their concern.
/bloom.bg/2JebL3r

Facebook takedowns show new Russian activity targeted Biden, praised Trump
Tony Romm and Isaac Stanley-Becker – Washington Post
Facebook on Monday said it removed a network of Russian-backed accounts that posed as locals weighing in on political issues in swing states, praising President Trump and attacking former vice president Joe Biden — illustrating that the familiar threat of Russian interference looms over the next U.S. presidential race.
/wapo.st/2BwTYQD

Regulation

A 3rd Goldman banker in 18 months has been accused of insider trading
Daniel Strauss – Business Insider
Another Goldman Sachs banker was charged with insider trading on Friday, according to court records. That marks the third employee to be accused in the past 18 months. Bryan Cohen, a vice president in Goldman’s investment banking division for consumer and retail, has been accused of leaking tips to another trader regarding deals involving Swiss agrochemical company Syngenta and Buffalo Wild Wings, the court records show. The charges come just three months after a former Goldman banker was sentenced to three months in prison for insider trading.
bit.ly/2MAPJcY

Commissioner Stump to Participate in a Fireside Chat at the Association of Financial Professionals Conference
CFTC
bit.ly/31BoDqv

Chairman Heath P. Tarbert to Participate in a Fireside Chat with Women In Derivatives
CFTC
bit.ly/32ELYJs

Notice of FINRA Regional Committee Elections and Mailing of Ballots
FINRA
The purpose of this Election Notice is to notify firms of the upcoming elections to fill vacancies on the FINRA Regional Committees, and the mailing of ballots to eligible firms.
bit.ly/32CpJUn

FINRA Bars Ami Forte and Charles Lawrence for Their Roles in Churning Accounts of Elderly Client with Dementia; Forte and Lawrence Exploited Elderly Client to Generate More Than $9 Million in Commissions in Less Than One Year
FINRA
FINRA today announced it has barred Ami Forte and Charles Lawrence of Florida for their respective roles in churning accounts belonging to a 79-year-old customer who suffered from severe cognitive impairment.
bit.ly/32AxPNg

Notice of SFAC Election and Mailing of Ballots
FINRA
The purpose of this Election Notice is notify FINRA small firm members that ballots to elect one New York Region representative to the Small Firm Advisory Committee (SFAC) have been mailed to all eligible firms. FINRA small firm members1 in the New York Region as of the close of business on Friday, October 18, 2019, are eligible to vote in these elections. All eligible firms are urged to vote in this election.
bit.ly/2JdlsPq

EU enforcers must monitor closely new reporting standards ESMA
ESMA
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, today publishes the priorities that European enforcers will consider when examining the 2019 annual financial reports of listed companies. The 2019 enforcement priorities reflect the changes introduced in recent financial reporting standards and consider issues identified by national competent authorities (NCAs) through their enforcement activities in 2019.
bit.ly/2N1wbh8

Investing and Trading

This Year’s Hottest Trade: Buying Everything; Stocks, bonds, gold and oil have staged a rare concurrent rally
Gunjan Banerji – WSJ
Stocks and bonds have staged a rare simultaneous ascent, logging the best performance in a quarter-century.
/on.wsj.com/2P9OYcB

The Short-Volatility Trade Is Now So Big It’s Starting to Break
Luke Kawa and Yakob Peterseil – Bloomberg
One of the hottest strategies of the bull market for stocks may be getting too popular for its own good, placing billions of dollars and a slew of money managers at risk of being burned.
The short-volatility trade, where investors sell options to bet against equity price swings, is becoming less profitable. The strategy has in theory made no money for investors 42% of the time since 2018, according to new research, compared with a recent average of about 30%.
/bloom.bg/2N67Nej

Hoping to Find Gold, Rio Tinto Strikes Lithium Instead; Company bets piles of waste rock contain vast stores of the mineral that helps power electric vehicles
Rhiannon Hoyle – WSJ
Rio Tinto RIO 1.83% PLC thinks it can become the biggest domestic producer of lithium in the U.S. without digging a new hole in the ground.
/on.wsj.com/2J9nkZp

Popularity of passive investing changes rules of the game; Advent of ETFs lifts volatility and has major implications for execution of trades
Chris Flood – FT
The proliferation of exchange traded funds since the financial crisis is one of the more important — and most contentious — developments in global capital markets over the past decade.
/on.ft.com/2qvUbBf

Investors start to ponder ‘QE infinity’ from the ECB; Amid weak growth and inflation, fund managers contemplate the limits of bond-buying
Tommy Stubbington – FT
As the European Central Bank limbers up to restart its debt-buying programme, one question looms large for investors: how long can the purchases continue before the bank runs out of bonds to buy?
/on.ft.com/33SK9sk

A Landmark Climate Trial Turns on Whether Exxon Cooked the Books; New York’s $1.6 billion lawsuit arose from a national effort to hold Big Oil responsible for global warming. It ended up being an accounting case.
Erik Larson – Bloomberg
Last month, millions of people around the globe gathered to protest what they consider a dangerous lack of vision among nations and industries when it comes to combating global warming, and the burning of fossil fuels that causes it.
/bloom.bg/2P95Xfm

Institutions

UBS investment bank restructure to cost $100 million; UBS has said costs associated with a restructure of its investment banking division will total around $100 million in the fourth quarter.
Hayley McDowell – The Trade
UBS has confirmed that it will incur expenses of $100 million in the fourth quarter of this year due to costs associated with restructuring its investment bank.
bit.ly/31CtrMq

UBS: Facing Headwinds but Ready for the Storm; Swiss banking giant has the ammunition to deploy as market outlook dims
Rochelle Toplensky – WSJ
UBS is facing gale-force winds, but it has plans to weather the storm.
Third-quarter profit before tax fell by 21% from a year earlier to $1.3 billion, the lender said Tuesday, but that was still enough to beat the market’s expectations, which reflected the gloom of continued ultralow interest rates and investors’ lack of confidence due to trade disputes and geopolitical tensions.
/on.wsj.com/2qyqsHX

Star broker banned for stealing millions from aging lover
Kevin Dugan – NY Post
A former star financial broker who got accused of stealing millions of dollars from the aging, demented co-founder of the Home Shopping Network has been banned from the industry. Ami Forte — who was ranked as Barron’s top female financial adviser from 2010 to 2012, reportedly with $2 billion in assets — was barred from ever managing money again after it was found she had made $9 million in bogus fees during a years-long affair with her now-dead lover, HSN co-founder Roy Speer, according to a financial watchdog.
bit.ly/31Dgv93

Wells Fargo Finally Has a CEO. Here’s What He Has To Do; Lingering effects of accounts scandal, revenue declines and more await banking veteran Charles Scharf
Rachel Louise Ensign – WSJ
Charles Scharf starts Monday as CEO of Wells Fargo WFC 0.98% & Co. Big changes could follow. Mr. Scharf, who previously ran Bank of New York Mellon Corp. BK 0.73% and Visa Inc., is the first outsider to run Wells Fargo in decades and the fourth person to lead the bank since a 2016 fake-account scandal left its folksy image in tatters. The firm is still in hot water with overseers, who have curbed its growth and slapped it with fines. Top regulators believe Mr. Scharf is likely to reshuffle the bank’s executive ranks, people familiar with the matter said.
/on.wsj.com/35UFmIF

Fidelity pulls $500m from Ken Fisher’s investment group; Clients have withdrawn more than $1.8bn after investment adviser’s controversial comments
Richard Henderson – FT
Fidelity Investments has pulled $500m from Fisher Investments, bringing the total withdrawals from the investment group to more than $1.8bn after Ken Fisher made what were considered disparaging remarks about women earlier this month.
/on.ft.com/2P6nkgN

Former Pimco chief pleads guilty in university admissions scandal; Douglas Hodge among rich parents who paid bribes to get children into top schools
Joshua Chaffin – FT
Douglas Hodge, the former chief executive of Pimco, pleaded guilty on Monday to criminal charges stemming from his involvement in a scheme to use bribery and fraud to win places for his children at selective US universities.
/on.ft.com/2N1W943

Deutsche Bank Weighs Job Cuts of at Least 10% in Rates Unit
Steven Arons and Nicholas Comfort – Bloomberg
Lender is putting final touches on review of rates trading; ‘We need to refashion the business model,’ CFO has said
Deutsche Bank AG is considering substantial cuts to the unit that trades interest-rate securities, a division that survived a large-scale pullback as part of the lender’s sweeping revamp in July.
/bloom.bg/33SNTdy

Fidelity drops Fisher’s money management firm as withdrawals accelerate
Ross Kerber – Reuters
Fidelity Investments has dropped Fisher Investments as a money manager, a Fidelity spokesman said on Monday, the latest in an accelerating series of withdrawals from the firm over allegedly sexist comments by its leader, Kenneth Fisher.
/reut.rs/2PbIhqr

Goldman Sachs chases thousands of new trading clients; Initiatives aimed at lessening the bank’s reliance on its core sales and trading business have been called into question
Paul Clarke – Financial News
Goldman Sachs is planning an aggressive push into sales and trading, as new initiatives aimed at lessening the bank’s reliance on its core business have been called into question.
bit.ly/33U8YEp

TD Ameritrade fourth-quarter profit up 21% before cutting commissions
The Associated Press
Online brokerage TD Ameritrade said Monday that its fiscal fourth-quarter profit jumped 21% in the last quarter before it slashed its trading commissions to zero.
/cnb.cx/2o6FyDF

Regions

First Petrobras Indictment Filed in Long-Running Swiss Probe
Hugo Miller – Bloomberg
Person charged for suspected bribery and money laundering; Swiss investigating 70 cases linked to Petrobras and Odebrecht
Switzerland’s top prosecutor filed its first indictment against an individual in the long-running Petrobras-Odebrecht corruption scandal, charging the unidentified person with bribing foreign public officials and money laundering.
/bloom.bg/2oRELqN

Angola Drops Currency Trading Band, Weakening Kwanza
Henrique Almeida and Candido Mendes – Bloomberg
Kwanza slumps to record versus dollar, down 17% this month; IMF has urged Angola to allow its currency to trade freely
Angola’s central bank stopped using a trading band that kept the kwanza’s value within a fixed range, accelerating the currency’s slump, according to two people familiar with the matter.
/bloom.bg/2P8EhHm

Russia Is Importing Thousands of European Cows; Russia bought 45,000 dairy cows from Europe this year, but cheese imports are still forbidden.
Anatoly Medetsky – Bloomberg
President Vladimir Putin is on a mission to wean Russia off foreign food and modernize the dairy industry, where milking is still often done by hand. To do that, he’s getting help from Europe.
/bloom.bg/35PAtRn

Spain set for further political stalemate, far-right rise – El Pais poll
Isla Binnie, Tomas Cobos, Simon Cameron-Moore – Reuters
A general election in Spain next month is unlikely to break a political stalemate, as neither left-wing or right-wing parties are set to win a parliamentary majority, a poll of polls in El Pais newspaper predicted on Tuesday. Voters in the euro zone’s fourth-largest economy will cast their ballots for the second time this year on Nov. 10. The Socialist party of Pedro Sanchez, acting prime minister, failed to secure a majority at a vote in April.
/reut.rs/2oU423F

Chile Faces Mine Stoppages as Workers Join Protests
Laura Millan Lombrana – Bloomberg
BHP’s Escondida copper workers to halt mine for 10 hours; Umbrella group of unions CTMIN calls for Oct. 23 strike
Anti-government protests that have shaken the world’s largest copper producing nation Chile for the past three days have spread to the mining sector as unions call for stoppages.
/bloom.bg/2oU4miU

There are more wealthy Chinese than Americans for the first time
Julia Horowitz, CNN Business
For the first time, there are more rich Chinese than Americans in the top 10%. A new report from Credit Suisse (CS) shows that wealth in China is ticking up, and the country now accounts for 100 million of the richest 10% of people in the world. There are 99 million Americans in the same category.
/cnn.it/2Pg000h

Brexit

Business leaders warn Gove over EU regulatory breakaway; Senior figures fear their concerns are being ignored in pursuit of ‘hard Brexit’
George Parker and Jim Pickard and Jim Brunsden – FT
Cabinet Office minister Michael Gove was given a stark warning by business leaders on Monday over the government’s Brexit vision of the UK breaking away from EU rules and setting its own regulatory framework: don’t do it.
/on.ft.com/2JavWzi

Boris Johnson faces two crucial votes Tuesday as he tries to seal Brexit before the deadline
Silvia Amaro – CNBC
Sterling dipped on Tuesday morning to 1.2955 against the dollar after breaking above $1.30 in the previous session. Boris Johnson has seen his plans scuppered on two different occasions over the last few days. In the meantime, the European Union is closely monitoring events in the U.K. Parliament.
/cnb.cx/2Pa2zRa

Brexit: SNP says NI plan must also benefit Scotland
BBC News
The Scottish National Party has said it “fully supports” special arrangements for Northern Ireland in any Brexit deal – but only if Scotland can benefit too. Gavin Newlands, the party’s Northern Ireland spokesperson, said any unique plans for NI should not be at Scotland’s expense. A majority in NI and Scotland voted remain in the 2016 EU referendum. MPs are due to debate key legislation to implement Boris Johnson’s Brexit deal later on Tuesday.
/bbc.in/2BAqDVz

European stocks turn mostly positive with Brexit and earnings in focus; Just Eat soars 24%
Elliot Smith – CNBC
Members of Parliament (MPs) on Tuesday begin a three-day debate in which opponents of Johnson’s exit plan will attempt to pass amendments on customs, a confirmatory second referendum, and the prevention of a no-deal exit. U.S. President Donald Trump’s chief economic adviser Larry Kudlow told Fox Business on Monday that there is a possibility for planned tariff hikes on Chinese goods in December to be halted if trade talks advance.
/cnb.cx/2N1K7Yy

Johnson Aims to Force Brexit Law Through Commons in Three Days
Tim Ross and Robert Hutton – Bloomberg
Prime Minister Boris Johnson will seek to rush his crucial Brexit law through the U.K.’s House of Commons in just three days after he was thwarted in his latest attempt to get his divorce deal approved. On Monday, Commons Speaker John Bercow rejected the government’s bid to trigger a second parliamentary vote on the Brexit deal that the prime minister secured last week in Brussels.
/bloom.bg/2MAd1jq

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First Read Back in Court with Bcause - Year End Report Thom Thompson - John Lothian News Wednesday was the last hearing scheduled for this year for the Bcause bankruptcy. The next court date is January 7 when the bankruptcy trustee's...

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