How a Lone Norwegian Trader Shook the World’s Financial System

May 3, 2019

First Read

Hits & Takes
JLN Staff

MarketsWiki exceeded 150 million pageviews yesterday.~JJL

I am so old, I can remember when the exchange leader panel at the Options Industry Conference had the CEOs of exchanges on them. It was nice, though, to see some of the other executives from the exchanges mix it up.~JJL

Spencer Doar at the Options Conference among all the traders, vendors, exchange and clearing professionals is like a pig in you know what. The JLN editor is just in his element and enjoying every minute of it.~JJL

Taking a swim yesterday during the poolside networking event at the Options Conference during a thunderstorm was judged to be a bad idea. Even though there was a low delta chance of being hit by lightning, the fat tail consequences were thought to be too risky.~JJL

The Association of Futures Markets, or AFM, is holding a conference in Chicago next week. I will be moderating a panel. Other more important features include fireside chats with Terry Duffy and Leo Melamed, though not at the same time. Though that might be interesting.~JJL

Also in Chicago next week, the Trading Show will be in town. Which is kind of like having the circus in town, as all acts will be there.~JJL

John Lothian News will be at IDX in London in early June with our video team. If we should be talking to you about news you will be releasing, let us know.~JJL


FIA Names Bruce Savage as Head of Europe
FIA President and CEO Walt Lukken today named Bruce Savage as the new Head of Europe. Savage, who will join FIA this summer, has spent 21 years with Deutsche Bank in a variety of roles, most recently as the bank’s Global Head of Regulatory Affairs & Market Structure, Listed Derivatives & Markets Clearing. He has been an active member of FIA, recently serving on the association’s board of directors and as a member of the European Regional Advisory Board.

***** I believe if your title is “head of Europe” then you should just be called the “King.”


CryptoMarketsWiki Coin of the Week: Tether (USDT)
Stuart Hoegner, the general counsel of both Bitfinex and Tether, admitted to the office of the New York AG this week that Tether is only roughly 74 percent backed by cash and “cash equivalents” (short-term securities). Another attorney representing Tether, Zoe Phillips, wrote in a memorandum of law that Tether doesn’t “need” to be backed 1:1 by fiat currency.


Thursday’s Top Three
Our top read story of the day on Thursday was The Block’s Bobby Cho, head of DRW’s crypto business, is set to depart the firm. Second was JLN’s interview with Steve Crutchfield in The Thorny Speed Bump Question. The third most read item was The Wall Street Journal’s piece on ICE’s latest acquisition NYSE Owner Bets on Mortgage Digitization


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Lead Stories

How a Lone Norwegian Trader Shook the World’s Financial System; A futures bet gone spectacularly wrong provoked a daylong crisis at one of the clearinghouses that are supposed to be global safeguards.
Jack Ewing and Milan Schreuer – NY Times
On a breezy day in September, an ominous text message appeared on Fredrik Ekstrom’s phone: Go immediately to the war room. Mr. Ekstrom is chairman of Nasdaq Clearing, an outpost of the American stock exchange company in Stockholm, which processes futures trading and acts, in part, as a shield against contagious losses in the global financial system. He headed toward an ordinary conference room outfitted with extra phones, video hookups, data terminals and policy manuals, designed to be a command center in case of a financial crisis. Until then, the war room had been used only for drills.

Nasdaq chief doubles down on data as NYSE fight intensifies; Adena Friedman tries to position New York exchange group as hub for technology
Nicole Bullock and Philip Stafford – FT
As a business school grad more than two decades ago, Adena Friedman was drawn to Nasdaq as the “cool and up-and-coming” exchange that listed Microsoft and other racy tech groups.

Facebook Building Cryptocurrency-Based Payments System; Social-media giant is recruiting financial firms, merchants to help launch payments platform
AnnaMaria Andriotis, Liz Hoffman, Peter Rudegeair and Jeff Horwitz – WSJ
Facebook Inc. FB -0.26% is recruiting dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system on the back of its gigantic social network.

Accounting body proposes relief on Libor transition; Help for banks using Libor-linked derivatives aimed at avoiding penalties when rate is phased out
Philip Stafford – FT
The main global accounting body is planning to modify standards for how banks and companies treat Libor-related deals on their balance sheets, in a rare shot of leniency for an industry grappling with the reform of global benchmarks.

CFTC goes after binary options fraudsters who orchestrated $4.8m scheme
Finance Feeds
From at least January 2016, William Thomas Caniff, Arie Bos, Berkley Capital Management, BBOT 1, and Berkley II, have engaged in a scheme whereby they fraudulently solicited $4.8 million from 62 commodity pool participants.

Deutsche Bank veteran appointed head of Europe at FIA; Bruce Savage was most recently global head of regulatory affairs and market structure, listed derivatives, and markets clearing at Deutsche Bank.
Hayley McDowell – The Trade
The Futures Industry Association (FIA) has appointed a Deutsche Bank veteran as its new head of Europe, following the departure of Simon Puleston Jones earlier this year.

TradeTech 2019: The key takeaways; The rise of artificial intelligence and new data sets dominated discussions at this year’s conference, while Brexit casts a long shadow over future plans.
John Brazier – The Trade
This year’s TradeTech conference has closed its doors and the stands have been packed away, but there was plenty to take away from all the discussion panels, keynote speeches and working groups across the two days in Paris.

How ‘Cybersovereignty’ Splits the Once World Wide Web
Karen Leigh, Stephan Kravchenko, Saritha Rai – Bloomberg
Early on, the narrative around the internet was it should be unfettered and borderless, a global commons. That didn’t last. China’s President Xi Jinping has led the way in asserting what’s become known as cybersovereignty — a nation’s right to control the digital realm. Other authoritarian regimes such as Russia’s and Vietnam’s, but also governments in places such as India and France, are following suit. With America’s more hands-off approach under fire for enabling election meddling, fake news and hate speech, China is trumpeting its method of controlling the internet to serve state interests.

New tech and younger faces: DRW’s Cumberland looks different, its counter-parties say
Frank Chaparro – The Block
DRW’s Cumberland might be unrecognizable to some of its counter-parties as it takes a more modern approach to trading, and as its old-guard execs depart the company.

BNP’s Traders Take the Fight to Wall Street; The French bank is one of the few European lenders with global markets ambitions. Its investment bank remains a work in progress, though.
Elisa Martinuzzi – Bloomberg
For the first time in nearly two years, BNP Paribas SA has posted a quarterly rebound in its trading income. That’s undoubtedly good news for one of the few remaining European banks with ambitions to take on Wall Street in the global markets business.

Fidelity Survey Finds Institutional Investors Are Eyeing Crypto
Matthew Leising – Bloomberg
Nearly half of investors said digital assets worth owning; Concerns include volatility, lack of rules and no fundamentals
About half of institutional investors consider digital assets to be worthy of holding in portfolios, according to a survey commissioned by Fidelity Investments.

New OCC Study: Listed Index and ETF Option Overlays May Improve Endowment Performance
OCC, the world’s largest equity derivatives clearing organization, today shared the results of a new study, Endowment Risk Management and Return Enhancement with Listed Index and ETF Options, that found that both buy-write and put spread collar overlays improved risk-adjusted performance within the study sample for small, mid-sized and very large endowments, with the small endowment portfolio seeing the largest benefits.

Exchanges, OTC and Clearing

New Trading Participants At EEX in April 2019
In April 2019, EEX admitted AFS Equity & Derivatives B.V. (Amsterdam) to trading on the emissions spot and derivatives market. Alperia Trading SRL (Bolzano) was additionally admitted to trading on the emissions spot market. Marex Spectron Europe Limited (Dublin) was admitted to trading on the derivatives markets for power, freight and industrial wood pellets, emission allowances and agricultural products. Shell Energy Europe B.V. (The Hague) and Strategic Energy Trading S.A. (Alimos Athens) were admitted to trading on the power derivatives market.

CME Group Averaged 15.7 Million Contracts Per Day in April 2019
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, reached average daily volume (ADV) of 15.7 million contracts during April 2019, compared to 17 million contracts in April 2018. Open interest (OI) at the end of April was 132 million contracts, up 14% from year-end 2018 and up 5% from April 2018.

Intercontinental Exchange Used ‘Crypto Winter’ to Scoop Up Digital Assets for Bakkt
Ana Alexandre – Cointelegraph
Intercontinental Exchange Inc (ICE) purportedly took advantage of the “crypto winter” to purchase crypto assets at a discount for its institutional cryptocurrency trading platform Bakkt, Reuters reported on May 2.

Default and non-default risks squarely on the radar for CCPs
Tan Boon Gin, CEO, Singapore Exchange Regulation
It is often said that regulators spend too much time looking in the rear-view mirror instead of the road in front of them to address new and emerging risks. I would agree only to the extent that we do glance behind once in a while, to remind ourselves that during the Global Financial Crisis of 2008, Lehman Brothers’ cleared derivative portfolio was in the trillions, yet it took mere weeks for the Central Counter Parties (CCPs) to close out the position. A CCP eliminates counterparty risk for participants in the financial market by assuming the role of seller to the buying Clearing Member and the role of buyer to the selling Clearing Member. By doing so, the CCP assumes most of the credit risks of the seller and the buyer.

Intercontinental Exchange Reports First Quarter 2019
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the first quarter of 2019. For the quarter ended March 31, 2019, consolidated net income attributable to ICE was $484 million on $1.3 billion of consolidated revenues, less transaction-based expenses. First quarter GAAP diluted earnings per share (EPS) were $0.85. Adjusted net income attributable to ICE was $527 million in the first quarter and adjusted diluted EPS were $0.92. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and free cash flow.

***SR: Here is the transcript of Intercontinental Exchange CEO Jeff Sprecher’s earnings call on ICE’s Q1 Results.

Single Stock Futures: Introduction of seven SSFs; Single Stock Dividend Futures: Introduction of one SSDF
The Management Board of Eurex Deutschland took the following decisions with effect from 13 May 2019, due to previous corporate actions:

ASX launches developer sandbox for blockchain system; Exchange operator lets developers experiment with blockchain-based replacement for CHESS
Rohan Pearce – ComputerWorld
ASX Limited — the operator of the Australian Securities Exchange — has begun offering its customers access to a development environment for its new blockchain-based replacement for CHESS.

NASDAQ embraces cryptocurrency as XRP index tracked; Bitcoin Futures & Bitcoin trading next?
Christopher Williams –
NASDAQ Embraces Cryptocurrency as XRP Index Tracked Bitcoin Futures & Bitcoin Trading Next
XRP yesterday joined Bitcoin and Ethereum in having its price tracked on Nasdaq’s Global Index Data Service (GIDS). This is the latest of many steps that the world’s second-largest stock exchange has made toward embracing cryptocurrency.


Sungard Speeds Through Bankruptcy in Under 24 Hours; Disaster-recovery company races through chapter 11 in bankruptcy’s rocket docket
Tom Corrigan – WSJ
Bankruptcy’s version of the “rocket docket” returned to a Westchester courthouse Thursday as Sungard Availability Services LP, an IT services provider that specializes in disaster recovery, secured final court approval of its chapter 11 plan less than a day after filing for bankruptcy.
/ raises record $230m in Series A funding; London-based payments start-up that competes with Adyen secures valuation close to $2bn
Jemima Kelly and Aliya Ram – FT
A little-known payments start-up has raised Europe’s biggest ever early-stage funding round for a fintech company, after the blockbuster initial public offering of Dutch payments group Adyen whet investor appetite for the sector.


Blockchain firm SETL completes corporate restructuring to focus on technology solutions; Management of newly-formed SETL business have acquired the operating assets, staff and intellectual property rights of previous incarnation.
John Brazier – The Trade
Blockchain and settlement payments technology specialist SETL has announced the completion of its corporate restructuring and has exited administration.

Start-ups’ U-turn on crypto funding as scrutiny rises; Lawyers scramble to help young companies comply with regulators’ rules
Don Weinland – FT
Not long ago, lawyers across Asia were devising clever schemes to keep new cryptocurrencies as far from regulators as possible. This year they are trying to come up with ways that make sure crypto offerings fall squarely within securities laws across the region.

Former CFTC Chair Gary Gensler Says Crypto Market Needs Regulation in Order to Grow
Ana Alexandre – Cointelegraph
Former chairman of the Commodity Futures Trading Commission (CFTC) Gary Gensler said that the cryptocurrency market needs regulation in order to grow, because consumers must be protected. Gensler shared his views with Cointelegraph at the Business of Blockchain event at the Massachusetts Institute of Technology on May 2.

UK blockchain group Setl set to emerge from administration; Management has bought main assets and intellectual property rights
Philip Stafford – FT
Setl, the UK blockchain technology group backed by a host of financial services heavyweights, is set to re-emerge after its management bought the group’s main assets from administrators.

Ex-NFL Owner Is Said to Have Ties to $850 Million Crypto Mystery
Matt Robinson , Olga Kharif , and Matthew Leising – Bloomberg
Former Vikings investor Fowler indicted in token trading case; He is said to have links to company in N.Y. AG’s Bitfinex suit
When New York’s attorney general last week accused Bitfinex — one of the world’s largest crytocurrency exchanges — of hiding the loss of about $850 million in client and corporate cash, a crucial question was left unanswered: What happened to the money?

Blockchain ETFs are on a steep climb up – but it may take a while for disillusioned investors to return
Isabel Woodford – The Block Crypto
January 2018 saw the first four blockchain ETFs break onto the scene in quick succession in the US. They were somewhat of a novelty, tracking the share price of 20 to 50 companies developing or using blockchain in some capacity, for an average 0.75% management fee. Investors flocked to them, pumping in hundreds of millions, hoping to nab a piece of a pie predicted to save banks between $15 billion and $35 billion a year according to consulting firm Bain.

‘Other stable coins are not serious contenders at this stage:’ High speed traders don’t see an alternative to Tether
Celia Wan – The Block Crypto
The Tether shake-up is bad, but investors really don’t have many other stablecoin options.

Project Libra: Facebook to launch stablecoin-based payments network
The Block Crypto
Facebook’s long-rumored stablecoin will be at the center of a brand new payments network, according to a report in The Wall Street Journal. Project Libra, as the blockchain initiative is called internally, will reportedly involve a stablecoin backed by government currency. A source close to the situation confirmed to The Block aspects of The Journal’s report, including that Facebook is recruiting financial firms to help with the project’s launch and that its name is Libra.

JPMorgan: Blockchain Can Fix ‘Societal Problems’ In Partnership With Microsoft
Michael del Castillo – Forbes
The largest bank in the United States has partnered with the largest software provider to bring enterprise blockchain to the masses.

U.S. DOJ Moves to Detain Defendant in Crypto ‘Shadow Banking’ Case
Nikhilesh De – Coindesk
U.S. prosecutors are seeking to detain Reginald Fowler until his trial for operating an unlicensed money transmission business which may have processed funds for the Bitfinex crypto exchange.

Crypto trading firms are under pressure, but a group is banding together to breathe new life into the OTC world
Frank Chaparro – The Block Crypto
“Well, the market is small and not really growing.” Darius Sit doesn’t like to beat around the bush. And that’s the typical frank response he gives when I check in on trading activity in Asia’s crypto over-the-counter markets.

London Stock Exchange Watching for ‘Interesting’ Blockchain Use Cases: CEO
Yogita Khatri – Coindesk
The London Stock Exchange (LSE) is taking a wait-and-see approach when it comes to blockchain, according to its CEO. Nikhil Rathi told CNBC in an interview published Thursday that the LSE has noticed several “interesting” ideas from rival stock exchanges and will see which ones “gain market traction” before making any moves in the space itself.


Washington’s Biggest Lobbyist, the U.S. Chamber of Commerce, Gets Shut Out; Chilly relations with both the White House and congressional Democrats leaves the chief advocacy group for American corporations struggling to adapt
Brody Mullins and Alex Leary – WSJ
A month before his inauguration, and shortly after he had finished a round of golf with Tiger Woods, Donald Trump was introduced to an adviser of the U.S. Chamber of Commerce, the chief advocacy group for American corporations.

Trump Says Stephen Moore Decided to Withdraw From Fed Process; Withdrawal comes after Republican senators raised concerns about Moore’s comments on women, personal financial issues and views of the Fed
Paul Kiernan – WSJ
President Trump said a second of his picks for a Federal Reserve position was out of consideration following resistance from Republican senators, a further setback to his efforts to place political allies at the central bank.

Trump’s Fed Pick Appears on Bloomberg TV, Then Is Gone; Could it have to do with Stephen Moore’s statement that he disagrees with the White House?
Peter Coy

Trump Gives Oil Drillers More Leeway by Easing Post-Spill Rule
Jennifer A Dlouhy – Bloomberg
Interior rewrites strict mandates governing offshore wells; Companies would have more flexibility on managing the sites
The Trump administration is giving oil companies more flexibility when drilling offshore, by easing Obama-era mandates imposed in response to the 2010 Deepwater Horizon disaster that killed 11 workers and unleashed the worst oil spill in U.S. history.

White House complained to Barr about contents of special counsel report after its release
Rosalind S. Helderman and Josh Dawsey – The Washington Post
The White House last month lodged a formal complaint with the Justice Department over the findings of special counsel Robert S. Mueller III — and made clear that President Trump believes he retains the right to assert executive privilege over material contained in the report, despite its public release. The five-page letter was authored by Emmet Flood, who has handled the Mueller investigation for the White House counsel’s office, and submitted to Attorney General William P. Barr on April 19, the day after Barr released a redacted version of the report.

Trump: Biden’s not as smart as Bernie
Katie Galioto – Politico
President Donald Trump on Wednesday waded once again into the 2020 Democratic primary, telling a Boston radio show that former Vice President Joe Biden is “not as smart as” Sen. Bernie Sanders and slamming the campaign of Sen. Elizabeth Warren. In a phone call to Boston Herald Radio that lasted almost 20 minutes, Trump launched his now-familiar attack on “Sleepy Joe’s” intelligence and complained Warren (D-Mass.) should resign after she called for Attorney General William Barr to step down earlier Wednesday.


FCA to tour UK for adviser input
Rachel Addison – FT Adviser
The Financial Conduct Authority will tour the country in a series of roundtables this summer to talk to advisers about its advice market review.

FCA launch the Financial Services Regulatory Partners Phoenixing Group
The Financial Conduct Authority (FCA) held a round table event with its regulatory partners to build on existing collaboration and launch a working group to tackle the ongoing issue of phoenixing in financial services.

Giancarlo Releases Letter to Quarles on Phase Five Implementation
Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo sent a letter to Federal Reserve Board Vice Chairman Randal K. Quarles concerning “Phase Five” implementation requirements for initial margin on uncleared swaps, scheduled for September 2020.

FINRA Sanctions AXA Advisors, LLC Approximately $772,000 for Misrepresentations to 401(k) Plan Sponsors and Participants; Restitution Ordered; Firm Ordered to Send Corrective Disclosures to Affected Plan Participants
FINRA announced today that it has fined AXA Advisors, LLC (AXA) $600,000 and ordered the firm to pay approximately $172,000 in restitution to affected 401(k) retirement plan participants for distributing materials that negligently misrepresented that certain bond funds offered for 401(k) plans were “investment-grade” when, in fact, a substantial portion of the funds’ portfolios consisted of high-yield or junk bonds. As part of the settlement, FINRA also required AXA to send corrective disclosures to all affected plan participants.

FINRA Requests Comment on Proposed New Rule 4111 (Restricted Firm Obligations) Imposing Additional Obligations on Firms with a Significant History of Misconduct
As part of FINRA’s ongoing initiatives to protect investors from misconduct, FINRA is requesting comment on proposed new Rule 4111 (Restricted Firm Obligations) that would impose tailored obligations, including possible financial requirements, on designated member firms that cross specified numeric disclosure-event thresholds.

ESMA submits technical advice on Sustainable Finance to the European Commission
The European Securities and Markets Authority (ESMA) has published its technical advice to the European Commission (EC) on Sustainable Finance initiatives to support the EC’s Sustainability Action Plan in the areas of investment services and investment funds.

PG&E Says S.E.C. Is Investigating Its Wildfire Disclosures
Ivan Penn – NY Times
The Securities and Exchange Commission has opened an investigation into Pacific Gas and Electric’s accounting for its losses related to three years of wildfires in Northern California, the utility reported to shareholders Thursday.

Is Overregulation Killing the CFD Markets?; Trading volumes are down and regulation is impacting markets worldwide
Jacob Maslow – Guru Focus
Contract for difference trading is in trouble. Volumes are down and regulation is hitting markets around the world. Since its inception in the 1990s, CFD trading has evolved into a trillion-dollar industry. The advancement of the internet opened CFD trading to retail traders and, as such, an ever-increasing number of online brokerages sprang up very quickly.

Investing and Trading

Ginnie Mae Moves to Crack Down on Repeated Refinancings; Government-backed firm says proposal is being driven by concerns of investors who buy its securities
Ben Eisen – WSJ
Ginnie Mae is taking steps to curb repeated mortgage refinancings that it says are hurting both borrowers and investors. The government-backed firm, which promotes homeownership by guaranteeing government mortgage bonds, is considering barring some loans backed by the Department of Veterans Affairs from inclusion in its flagship bonds.

Mobisol: a cautionary tale for impact investors; European company seen as the rock star of the solar energy industry files for insolvency
John Dizard – FT
It is simply impossible to be cooler than Mobisol, the Berlin-based provider of battery-backed solar systems to homes and microenterprises in Africa. Everyone loves the picture of a village girl reading her books with a lamp powered by bright, clean electricity rather than smoky paraffin. That electricity is earning you profits, which is why you got into impact investing in the first place.

Investors flock back to credit product blamed in financial crisis; Greater safety seen in ‘synthetic’ CDOs backed by corporate debt rather than subprime mortgages
Joe Rennison – FT
Investors are flocking back to a complex debt-derivatives product blamed for amplifying losses in the financial crisis, reckoning that the securities are safer now that they are no longer backed by subprime mortgages.

5 Surprising Things About the European ETF Market
Joel Weber and Eric Balchunas – Bloomberg
While ETFs play an increasingly large role in U.S. financial markets, they’re still in their infancy in Europe. The continent has regional markets, which has led to substantial fragmentation — think a lot of products but not yet a lot of assets. Tom Psarofagis, an analyst with Bloomberg Intelligence who’s now based in London, joins Eric and Joel to discuss how ETFs in Europe are “the same but different.” a lot of products but not yet a lot of assets.


Banks, Managers Cut Fees in Dysfunctional European CLO Market
Sarah Husband – Bloomberg
European arrangers share fees in order to boost equity return; Issuance hampered if practice stops, but may help arbitrage
All is not well in Europe’s CLO market. Strong supply of nearly 10 billion euros ($11.2 billion) masks a market that is requiring arrangers and managers to work for less in order to price deals.

Charlie Munger Doesn’t Want Wall Street ‘Making the Damn Decisions’ at Wells Fargo; In an interview with The Wall Street Journal, the Berkshire Hathaway vice chairman blamed Timothy Sloan’s predecessors for scandals that have badly damaged the bank
Rachel Louise Ensign and Jason Zweig – WSJ
Berkshire Hathaway BRK.B -0.36% Inc. Vice Chairman Charlie Munger thinks Timothy Sloan should still be running Wells Fargo & Co.

HSBC Beats Expectations but Brexit Clouds Outlook; HSBC’s CFO says the bank is watching closely for any deterioration in the British economy and customers’ ability to repay debt
Margot Patrick and Saurabh Chaturvedi – WSJ
HSBC Holdings PLC said it’s keeping a watchful eye on the U.K. economy ahead of Brexit as it posted better than expected first-quarter results Friday.

Barclays vote against Bramson is no victory for long-termism; Chief executive Jes Staley must now do everything to prove the activist investor wrong
Matthew Vincent – FT
Activist investors seek to put their mouth where their money is. But Barclays shareholders have told Edward Bramson he may not do the former, having failed to do the latter.

Edward Bramson faces Barclays defeat head on; Activist investor makes mark at AGM despite losing vote for a board seat
Patrick Jenkins – FT
One of the big unknowns heading into Thursday’s showdown between Barclays and Edward Bramson was whether the activist would turn up to the AGM or not. He’d registered for the meeting, but that was true last year too when he didn’t show. City Insider hears the bank got an inkling when a Barclays insider bumped into the investor in a Claridge’s lift the night before. “Mr Bramson, I’ve been following you,” said the mystery woman. “Good luck.” The activist did indeed come to the meeting and gave an impromptu press conference, (accurately) predicting a heavy defeat in his attempt to win a board seat. He then beat a hasty retreat before the AGM actually began. As usual, though, he’d made his mark.

HSBC pledges cost discipline to counter revenue risk; First-quarter results beat expectations but bank wants to cut costs to hit 2020 targets
David Crow – FT
HSBC pledged to keep a tight rein on costs so it can hit its 2020 financial targets despite a “more uncertain economic outlook” as the Asia-focused bank delivered first-quarter results that beat market expectations.

SocGen Reports Downturn at Its Investment Bank
Fabio Benedetti Valentini – Bloomberg
Profit falls more than expected as fixed-income sales drop; Equities business shows resilience, capital levels increased
Societe Generale SA failed to halt the slide in its investment bank in a quarter where the key equities business and stronger capital levels were bright spots for Chief Executive Officer Frederic Oudea.

HSBC’s Flint Zeros in on Cost Cuts After Quarterly Profit Beat
Harry Wilson and Alfred Liu – Bloomberg
CEO Flint says ‘proactively’ managing costs and investment; CFO says cost increases were driven by investment in digital
HSBC Holdings Plc Chief Executive Officer John Flint is pressing ahead with a plan to rein in costs after the Asia-focused lender reported its best quarter in more than three years.

UBS Investors Revolt Over Record French Tax Evasion Penalty
Patrick Winters – Bloomberg
Shareholders refuse to back management, directors at meeting; UBS fined $5 billion for helping French clients evade taxes
UBS Group AG shareholders refused to back management and directors in a revolt against the bank’s handling of events that led to a $5 billion penalty for helping French clients evade taxes.


Australia’s Huge Stock Rally Faces a Rude Awakening
Jackie Edwards – Bloomberg
RBA meets Tuesday, with market pricing in 50% chance of cut; Earnings in 1H weakest since financial crisis: Goldman Sachs
Promises of easy monetary policy have sent Australia’s stocks soaring to the highest in more than a decade. But there’s a speed bump: Soft profit growth.

Pig ‘Ebola’ Virus Sends Shock Waves Through Global Food Chain
Dan Murtaugh and Enda Curran – Bloomberg
African swine fever in China will impact global food supply; Virus will move markets, may influence geopolitics: Rabobank
What started with a few dozen dead pigs in northeastern China is sending shock waves through the global food chain. Last August, a farm with fewer than 400 hogs on the outskirts of Shenyang was found to harbor African swine fever, the first ever occurrence of the contagious viral disease in the country with half the world’s pigs. Forty-seven head had died, triggering emergency measures including mass culling and a blockade to stop the transportation of livestock. Within days, a government notice proclaimed the outbreak “effectively controlled.”

Merkel Weighs German Carbon Prices to Speed Pollution Cuts
Brian Parkin , William Wilkes , and Vanessa Dezem – Bloomberg
Government looks at both a levy and widening carbon market; Industry says plan may increase costs for big energy users
Germany is considering whether to impose a tax on carbon pollution or push to expand the existing European market in an effort to speed up the pace of reducing greenhouse gases.

Norway’s Wealth Fund Surges $84 Billion in First Quarter
Sveinung Sleire – Bloomberg
Fund posts third highest quarterly return ever in percent; World’s biggest wealth fund rallied on technology stocks
Norway’s $1 trillion sovereign wealth fund gained $84 billion in the first quarter, or $16,000 per citizen, after it took advantage of a market sell-off late last year to build its massive portfolio.

Japan’s Liquidity Woes Risk Limiting BOJ to Tinker on Sidelines
Chris Anstey – Bloomberg
Tools for easing are ‘limited,’ JPMorgan strategists conclude; Kuroda dismissed incremental moves earlier in his term
Haruhiko Kuroda took charge at the Bank of Japan declaring an “incremental” approach to stoking inflation should be abandoned. Six years on and still a long way from his price goal, the governor has been forced to tinker with little-noticed funding programs in a bid to sustain his stimulus program.


Local elections: Tories and Labour hit by Brexit backlash in polls
BBC News
The Conservatives and Labour have faced a backlash at the ballot box over the Brexit deadlock, with smaller parties and independents winning seats. In England so far, the Tories have lost more than 530 seats and 22 English councils, while the Liberal Democrats have gained more than 340 seats. National politics seems to have been a deciding factor for voters, with Labour also losing almost 80 seats to date. Council results continue to come in for England and Northern Ireland.

Election results: Labour’s worst result ‘down to Brexit’
BBC News
Barnsley’s Labour leader said the council election results were the party’s worst result for 15 years. Sir Steve Houghton blamed the national failure to carry Brexit through for his party’s performance – Labour lost seven seats, but retained control. The Liberal Democrats, who gained three seats to become the main opposition party on the council, put their success down to Labour “arrogance”. Independent candidates also faired well, gaining five seats.

Brexit Backlash in U.K. Local Elections as Main Parties Lose Seats
Stephen Castle – The New York Times
LONDON — Britain’s two main political parties suffered a severe rebuke from voters in local elections, according to results announced on Friday, in an indication of frustration and disenchantment over the country’s stalled withdrawal from the European Union.

EU to prepare for post-Brexit era with pledge to speak with ‘one voice’
Alex Barker – The Financial Times
EU leaders will pledge to stay united “through thick and thin” at a summit next week that aims to move the bloc beyond a decade of crisis management and into a more assertive global role. The gathering in Sibiu in Romania was planned as a show of unity and a chance to take big decisions in the wake of Brexit. But with Britain still an EU member, the summit is expected to be more low-key, with the bloc’s 27 remaining leaders starting a preliminary discussion on a “strategic agenda” for the next five years.

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