In swaps we trust? Disappearing dollars drive currency trading dependence; France Tried Soaking the Rich. It Didn’t Go Well.

Nov 14, 2019

First Read

A Cost-Benefit Analysis of the CFTC Case Against Jitesh Thakkar, Part 1
John Lothian, Publisher – JLN

Cost-benefit analysis is an important part of the regulatory process and even more so after Dodd-Frank became the law of the land. The CFTC does not have an unlimited budget, though it is attempting to throw the legal version of the kitchen sink at Jitesh Thakkar in order to get him to accept a plea agreement. The CFTC must decide which cases to litigate in court and which ones not to based on legal analysis of the law and the facts as well as a cost-benefit analysis of each case. The Jitesh Thakkar case is a good case to drop in the name of cost-benefit analysis, not to mention for the “thin” facts of the case.

Seeing as the Department of Justice has already dropped its case against Thakkar after the judge threw out the conspiracy charge and the aiding and abetting charges lost in a 10 to 2 jury decision against them, bringing this case is throwing good money after bad.

For the rest of the commentary, click HERE


Hits & Takes
By JLN Staff

Yesterday I met Bill Fitzgerald, a longtime industry senior executive. He has agreed to participate in the Open Outcry Traders History Project.~JJL

Next up in the Open Outcry Traders History Project is Bill Dudley, the former head of Kidder Peabody’s Chicago financial floor operation. Gary Sagui‘s interview was our top viewed item of the day yesterday.~JJL

The petition on for Justice for Jitesh continues to grind away and is up to 1620 signatures. One recent signer is an exchange executive in Chicago.~JJL

EEX reported that its daily market share in dry freight contracts was 13% on November 13, 2019. EEX also just acquired freight futures in the Nasdaq Futures Exchange deal.~JK

The Yale Program On Climate Change does a lot of polling on the topic. A tweet yesterday said 69% of Americans believe corporations should do more to address global warming.~JK

FIA’s next conference is coming up. It is holding FIA ASIA 2019 in Singapore this 3-6 December. Sponsors include SGX, HKEX, CME Group, Eurex, Goldman Sachs, JP Morgan and more. ~SR

Rival Systems has turned algorithms into art. They took data from historical events in the markets (“Volmageddon” and the creation of bitcoin, as two examples), then used their platform to generate unique graphical patterns with pretty colors. They call it, “The Art of Smart.” You can find more information |here.~MR

My Twitter activity is down 9% in the last 30 days. I must be losing it.~JJL


CME Plans to Start Brazilian Soybean Futures With B3 Exchange
Isis Almeida and Megan Durisin – Bloomberg
Contracts will be cash-settled and based on PRA assessments
Trade war has exacerbated gap between Brazil and U.S. prices
CME Group Inc. plans to start Brazilian soybean futures with the country’s B3 exchange, giving traders a new hedging tool as the U.S.-China trade war disrupts the global flow of beans, people familiar with the matter said.

*****One more time, this time with feeling.~JJL


Wikipedia co-founder Jimmy Wales launches Twitter and Facebook rival; Wikipedia co-founder says WT:Social is effort to combat ‘clickbait’
Tim Bradshaw – FT
Wikipedia co-founder Jimmy Wales has quietly launched a rival to Facebook and Twitter that he hopes will combat “clickbait” and misleading headlines.

*****Brilliant idea from Wales. What Twitter and Facebook need is some competition with facts as a background.~JJL


If Women Don’t Apply to Your Company, This Is Probably Why (Opinion)
Lori Mackenzie, Alison Wynn, Shelley J. Correll
Harvard Business Review
“I’d love to hire more women, but when I post a job, they don’t apply. They’re not interested.”
“There just aren’t enough qualified women to do the job.”
At the Stanford VMware Women’s Leadership Lab, where we work with leading companies to help them attract, retain, and advance a diverse pool of talent, we hear comments like these quite a bit. And every time we are reminded of the art of fishing: If you don’t catch a fish, you don’t blame the fish. You change your technique.

***SR: Thanks to Elise Fleischaker for tweeting this.


Wednesday’s Top Three
Our top item of the day was the JLN Open Outcry Traders History Project interview with Gary Sagui. Second was Bloomberg’s Billion-Dollar-a-Day Crypto Trader Finds Accolades Top Anonymity. If ever there was a picture of a crypto trader, this is it. Third was the National Futures Association’s NFA announces nominations made by the 2019 Nominating Committee


Sponsored Content
Trading Futures in a Retirement Account

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Lead Stories

In swaps we trust? Disappearing dollars drive currency trading dependence
Olga Cotaga – Reuters
As dollars dry up, global finance is growing increasingly dependent on opaque currency trading to keep cash flowing. Banks and other short-term dollar borrowers are becoming ever more reliant on the $3.2 trillion-a-day foreign exchange swap market, data shows, leaving them dangerously exposed should U.S. lenders stop feeding the system, even if only temporarily.

France Tried Soaking the Rich. It Didn’t Go Well.; A wealth tax and sky-high rates on top incomes didn’t yield much revenue.
Noah Smith – Bloomberg
In recent years, several prominent economists have brought attention to the problem of growing inequality. These scholars include Thomas Piketty, author of the best-selling book “Capital in the Twenty-First Century,” and Emmanuel Saez and Gabriel Zucman, who in a new book chronicle the rise in American wealth inequality. All three embrace the same solution: much higher taxes. Piketty has declared that billionaires should be taxed out of existence, and he called for a global wealth tax, while Saez and Zucman helped Democratic presidential candidate Elizabeth Warren design her proposal for a U.S. wealth tax. Piketty and Saez have also suggested taxing top incomes at a rate of more than 80%.

SEC’s Settlements With Some Cryptocurrency Firms Showing Cracks; Three startups have missed deadlines to pay back investors or provide more transparency
Dave Michaels – WSJ
Regulators’ efforts to push cryptocurrency startups to comply with laws governing fundraising may be faltering, as several firms that agreed to fix past misdeeds missed deadlines to repay investors or provide more transparency.

Citadel appoints co-investment chief, president; James Yeh has worked for the hedge fund—the largest in the city—for nearly three decades. He’ll work hand in hand with Ken Griffin.
Lynne Marek – Crain’s Chicago Business
Citadel tapped James Yeh today to become the Chicago hedge fund firm’s first president and co-chief investment officer, saying he will be promoted to the role on Jan. 1.

The robbery of the century: the cum-ex trading scandal and why it matters
Alex Simpson –
It has been called “the robbery of the century”. Martin Shields and Nicholas Diable, two British investment bankers, are on trial in Germany for helping structure a massive tax evasion scheme, known as cum-ex trading, that has siphoned up to EUR55 billion (about US$60 billion or A$90 billion) from European public funds.

Little-Known Data Wizards Take On the Pros at New AI Hedge Fund
Justina Lee – Bloomberg
Kvasir Technologies founders turn engineering skills to stocks; Computer scientists and data experts take on the finance pros
The first question Mike Merritt-Holmes gets asked when pitching his AI strategy is about his resume: which hedge fund did he work for? But Kvasir Technologies Ltd. doesn’t come from an established corner of finance. And neither does the man touting it.

World’s energy watchdog is undermining climate change battle, critics say
Matthew Green – Reuters
A short walk from the Eiffel Tower, Fatih Birol oversees the world’s energy watchdog, whose analyses of fuel demand have long been viewed as the gold standard by government officials, energy executives and investors.

Lone Hedge-Fund Bear at 2018 Sohn London Comes Out on Top
Nishant Kumar and Suzy Waite – Bloomberg
Kier Group short wager by Kuvari turns out as most profitable; Eight of 10 share tips from last year’s event are in the money
When Vikram Kumar took the stage to talk about his investment tips at the Sohn London conference last year, he was alone in recommending a bearish bet. A year later, his call has proved prescient.

Fidelity to Baby Boomers: Lay Off the Stocks
Michael McDonald – Bloomberg
The generation has been steadily increasing its stock wagers; The average 401(k) account dipped in volatile third quarter. Hey, baby boomers: lay off the stocks. That’s the message from Fidelity Investments in its third-quarter retirement report. Boomers, or the generation born between 1944 and 1964, have been riding a 10-year bull market into retirement, steadily upping bets on stocks to boost 401(k) returns and exposing them to unnecessary risk.

EU prepares tweak to Mifid market rules after industry backlash; Rethink on aspects of landmark legislation after concerns from banks, investors and regulators
Philip Stafford – FT
Brussels is preparing to retune some of its Mifid II markets rules from next year, less than three years after implementation, following a wave of criticism from investors and regulators over the effectiveness of the far-reaching legislation.

Five market axioms that can no longer be relied upon; Many economic, financial and political ‘unthinkables’ have become facts
Mohamed El-Erian – FT
Investors will have to grapple with once-unthinkable economic and market trends as they set about fine-tuning their portfolios next year. Where they end up will depend on five factors that are growing less stable by the day.

Marie-Louise Huth Named Chief Counsel in Division of Economic and Risk Analysis
The Securities and Exchange Commission today named Marie-Louise (Malou) Huth as Chief Counsel for the Division of Economic and Risk Analysis (DERA). Ms. Huth will lead DERA’s Office of the Chief Counsel, which provides guidance to the Chief Economist and other staff regarding legal issues implicated by the Division’s broad mandate. As Chief Counsel, Ms. Huth will be responsible for collaborating with staff from across the Commission on matters related to the integration of the DERA’s economic analyses into Commission rulemakings and other Commission actions. Ms. Huth will also provide guidance on a variety of mission-related legal and policy matters involving risk assessment, data analytics, and structured disclosure.

Effective Date for Amendments to NFA’s Promotional Material Rules and Interpretive Notices
NFA Compliance Rules 2-29 and 2-36 and related Interpretive Notices establish requirements for a Member’s communications with the public and use of promotional material. NFA recently amended these requirements to clarify their applicability, better reflect current technology and business practices and address the use of hypothetical performance in promotional material by commodity pool operator (CPO) Members operating pursuant to a CFTC Regulation 4.7 exemption. These amendments will become effective on January 1, 2020.

UBS boss Ermotti fears Europe’s banks ‘too small to survive’
UBS Group (UBSG.S) Chief Executive Sergio Ermotti on Wednesday said banking consolidation, especially in Europe, is unavoidable in coming years as institutions must achieve critical mass to remain competitive.

London forex trader accuses Citigroup of unfair dismissal
Kirstin Ridley – Reuters
A former top Citigroup (C.N) trader, who was fired in 2014 but acquitted of foreign exchange-rigging charges after a trial in New York, told a London employment tribunal he was unfairly dismissed despite being in the “eye of the storm” at the time.

Factbox: FX swaps step from market obscurity to global stage
Olga Cotaga – Reuters
Foreign exchange swap volumes have risen in the past three years to account for nearly half of the entire FX market, Bank for International Settlements (BIS) data shows.

Hong Kong Crippled Again as Anxiety Builds Over China’s Next Move
Shelly Banjo and Iain Marlow – Bloomberg
Deleted Global Times tweet on curfew leads to market selloff; City’s workers stay home, universities cancel classes
Hong Kong was left crippled for a fourth straight day, as protests paralyzed parts of the city and residents questioned how much longer they could endure the disruptions.

A New SEC Rule Will Make CEOs Less Accountable to Shareholders: A Call to Action
ProMarket writers – University of Chicago Booth School of Business
A new SEC proposal regarding proxy advisors will make it harder for shareholders to vote against CEOs’ preferences. However, there is a 60-day period to comment and propose amendments to the new regulation. Please send your comments to the SEC and to ProMarket as well. We will publish the best of them on our website.

Exchanges, OTC and Clearing

CLS launches FX forward volume dataset; The CLS FX Forward Volume data product aims to provide users with an aggregated view of the FX forward market.
Hayley McDowell – The Trade
Foreign exchange settlement provider CLS has confirmed plans to launch a new product to its executed trade data suite, known as FX Forward Volume.

Nasdaq Launches OptionsPlay to Educate Investors on Options Trading; Education program aims to strengthen options market knowledge among Nordic private investors
Nasdaq today announced its launch of an option education program based on actionable trading ideas and content to the Nordic investment community, in partnership with OptionsPlay.

CME Group to Launch Block Cheese Futures and Options
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it will launch Block Cheese futures and options in January 2020, pending regulatory review. “Our clients continue to look for tools to manage their price exposure in physical cheese markets, including food manufacturers and processors of cheese,” said Tim Andriesen, Managing Director of Agricultural Products at CME Group. “The addition of Block Cheese futures and options to our existing suite of cash-settled dairy products provides clients with another solution for managing and hedging their risk.”

Ice adds insurance to default waterfall; Protection promises partial recovery of guarantee funds at three CCPs
Robert Mackenzie Smith –
Ice, the multinational exchange operator, has added insurance protection to its default waterfall schedule at three separate central counterparties (CCPs) under its corporate umbrella – Ice Clear Europe, Ice Clear US and Ice Clear Credit.

Thailand Futures Exchange Announces TFEX Best Awards 2019
Thailand Futures Exchange PCL (TFEX) today announced winners of four categories of TFEX Best Awards 2019. KGI Securities (Thailand) pcl swept both Most Active House and Most Active Prop-Trading awards. Most Active Agent was awarded to Country Group Securities pcl. Market Maker Best Performance was awarded to MTS Gold Futures Co., Ltd.

RPT-China markets feel the pain of stalled derivatives rollout
Samuel Shen and Alun John – Reuters
A long list of stock and currency derivatives has been lying in wait for regulatory approval at the China Financial Futures Exchange (CFFEX), some for nearly a decade.

Intercontinental Exchange sets up India operations;The Hyderabad centre to serve its global clientele
V Rishi Kumar –
Intercontinental Exchange, Inc., has announced the launch of its India operations in Hyderabad formally opening its facility which will initially focus on ICE Data Services’ reference data.


Ping An fintech arm chooses US over Hong Kong for IPO; SoftBank-backed OneConnect sells tech platforms to smaller banks and plans to use proceeds for expansion
Mercedes Ruehl – FT
OneConnect, the financial technology arm of China’s largest insurance company, has picked the US over Hong Kong to launch its long-awaited initial public offering.

What The Emergence Of Blockchain 5.0 Means For Business Managers And Entrepreneurs
Dr. Evan Singh Luthra – Forbes
Over the last few years, blockchain technology has progressed and penetrated the arena of technology, evolving at a pace faster than most other parallel domains. While the world is occupied with bigger players like Facebook getting involved in cryptocurrency, companies are making some revolutionary advancements for efficient use cases of the blockchain phenomenon. A lot of advancements are happening under the radar at a very quick pace. In fact, the pace of progress is so fast that within about a decade of the Satoshi white paper coming to light, the world is witnessing the emergence of blockchain 5.0.


A US recession could fuel a new crypto boom and bust
Adam Reese – Financial Times
If the global economic slowdown and uncertainty about the future of US-China trade send the US into recession, it could spur a bull run in cryptocurrencies. But while this shift may provide investors with a temporary safe haven, it is likely to lead many to financial ruin.

Crypto debit card issuer rolls out exchange to retain its 1 million customers
Celia Wan – The Block Crypto
Another crypto firm is edging into the crowded exchange market. Cryptocurrency debit card issuer announced on Thursday the launch of a cryptocurrency exchange in an attempt to retain the platform’s existing customers, CEO Kris Marszalek told The Block. According to Marszalek, has already solved the problem of user acquisition before launching the exchange. The firm’s task now is to build an ecosystem in which its acquired users are willing to stay.

Coinbase’s crypto Visa debit card adds support for XRP and 4 more coins
Yogita Khatri – The Block Crypto
Cryptocurrency exchange Coinbase’s Visa debit card has today added support for XRP and four more coins. The four coins are Brave browser’s basic attention token (BAT), Augur (REP), Stellar (XLM) and 0x (ZRX), Coinbase Card announced Thursday. Coinbase Card, which allows customers in the U.K. and EU to spend their cryptocurrencies directly from their Coinbase accounts, was launched in April and has already been supporting bitcoin (BTC), ether (ETH), bitcoin cash (BCH) and litecoin (LTC).

Winklevoss Capital, Coinbase Back $1.8 Million Round for Bitski Crypto Wallet
Zack Seward – Coindesk
A startup making it easier for developers to put crypto wallets in their applications is announcing a seed round from the likes of Galaxy Digital, Winklevoss Capital and Coinbase Ventures. Bitski thinks its developer platform can help the crypto sector overcome a key hurdle: For most folks, setting up a wallet is a pain. By having one pre-loaded into, say, your favorite video game, Bitski thinks its single-sign-on wallet can move the needle on mainstream adoption.

Data Provider Messari Closes $4 Million Funding Round
William Foxley – Coindesk
Data provider Messari has closed a $4 million funding round led by Uncork Capital with new participation from Coinbase Ventures and former Coinbase CTO Balaji Srinivasan, according to a statement from the New York-based firm. As part of the deal, Uncork’s founder Jeff Clavier was named to Messari’s board of directors. Uncork joins existing Messari investors including Blockchain Capital, CoinFund, Danhua Capital, Fabric Ventures, Semantic Ventures and Underscore VC, among others.

Swiss SIX Exchange Lists Tezos ETP With Staking Rewards
William Foxley – Coindesk
New financial products are coming to tezos (XTZ), one of a handful major proof-of-stake (PoS) blockchains up and running today. On Thursday, crypto startup Amun AG launched the Amun Tezos exchange-traded product (ETP), tracking the tezos cryptocurrency under the XTYZ ticker on the SIX Swiss Stock Exchange, according to a statement. Zurich-based Amun’s Tezos ETP is the firm’s ninth crypto-based ETP issued to date on SIX and the firm claims to have some $70 million in assets under management. The product’s underlying asset will be held by Coinbase Custody, Amun said.

Binance’s CZ Speaks Publicly About China’s Digital Currency
Hisashi Oki – Cointelegraph
Binance CEO Changpeng Zhao, better known as CZ, predicted that the digital Renminbi token (RMB) would be based on blockchain. Speaking today at BlockShow Asia 2019, CZ shared his thoughts on the digital currency in development by the People’s Bank of China. The details of this currency are not officially known. It will certainly not be as decentralized as Bitcoin (as it will be issued by the central bank), but CZ thinks it is going to be a blockchain-based version of RMB.

Crypto Exchange OKEx Launches Bitcoin Futures Margined With Tether
Adrian Zmudzinski – Cointelegraph
Cryptocurrency exchange OKEx has launched Bitcoin (BTC) futures contracts that are margined with the Tether (USDT) stablecoin. OKEx announced the new offering in a press release on Nov. 14. OKEx first announced its intention to launch USDT-settled futures trading with up to 100x leverage at the end of October. Now, after conducting a simulation that began on Nov. 5, the exchange listed the BTC/USDT offering on its trading platform.

The fintech and blockchain arm of one of China’s largest insurance companies has filed for US IPO
Celia Wan – The Block Crypto
OneConnect Financial Technology, the blockchain and fintech unit of China’s insurance giant Ping An, has filed for an initial public offering (IPO) in the U.S. The Shenzhen-based company has been developing AI, big data, and blockchain technologies as part of the insurance giant’s fintech strategy. OneConnect operates a proprietary blockchain, FiMAX, which has been deployed by the Hong Kong Monetary Authority to build a blockchain trade finance platform named eTradeConnect.

Bitcoin Miner Maker Canaan Sets $100 Million Target for US IPO
Wolfie Zhao – Coindesk
Canaan, the world’s second-largest bitcoin miner maker, intends to raise about $100 million in its initial public offering (IPO) in the U.S. The Hangzhou, China-based manufacturer of the Avalon bitcoin miner updated its IPO application with the U.S. Securities and Exchange Commission (SEC) on Wednesday. It’s aiming to offer 10 million American depositary shares (ADS) with each at a price of between $9 and $11. If Canaan receives enough investment interest, the offering would rake in $100 million, making it the first major bitcoin miner maker to go public in the traditional stock market.

Samsung SDS Beefs Up Privacy on Its Business-Grade Blockchain
Ian Allison – Coindesk
Samsung SDS, the enterprise technology arm of the South Korean behemoth, is enhancing privacy on its Nexledger blockchain with zero-knowledge proofs (ZKPs). The company said Thursday it had formed a partnership with Israel-based QEDIT to record and authenticate the transfer of assets on a shared ledger without revealing underlying confidential information. The step underscores one of the challenges facing companies adopting distributed ledger technology: broadcasting transactions to a network puts them at risk of exposing sensitive client data and tipping their hands to competitors.


How Trump’s Trade War Went From Method to Madness; Inside the president’s shift from a grand bargain with China to a small deal.
Shawn Donnan, Jenny Leonard – Bloomberg
It started with a carefully calibrated trade weapon, an algorithm that spat out a list of targets for an assault on China ordered up by a U.S. president determined to rebalance the relationship between the world’s two biggest economies. The goal: building leverage for negotiations aimed at forcing wholesale changes in China’s economic architecture while limiting the pain to businesses and consumers at home. “We’ve given this an enormous amount of thought,” Robert Lighthizer, the U.S. trade representative, told senators in March 2018, highlighting the work of the computer model his team had constructed. “It’s a sensible, moderate, appropriate amount,” he went on, “and it is calculated and created in a very businesslike, sensible way.”

Warren Says Big Business Shouldn’t Worry About Her Presidency
Misyrlena Egkolfopoulou – Bloomberg
Only those who break the law have reason for concern, she says; Candidate has traded jabs with business leaders over proposals. Democratic presidential candidate Elizabeth Warren sought to reassure business leaders and investors they have nothing to worry about if she is elected president — as long as they obey the law.

Warren Wealth Tax Could Slow Economy, Early Analysis Finds; A preliminary projection of Senator Elizabeth Warren’s proposed wealth tax said a drop in investment by the richest Americans would crimp growth.
Jim Tankersley – NY Times
Senator Elizabeth Warren’s proposed wealth tax would slow the United States economy, reducing growth by nearly 0.2 percentage points a year over the course of a decade, an outside analysis of the plan estimates.

Elizabeth Warren Slams Goldman Over Apple Card Bias Furor
Sridhar Natarajan, Misyrlena Egkolfopoulou, and Shahien Nasiripour – Bloomberg
She chides bank’s response, says firm should explain algorithm; ‘And if they can’t do it, then they need to pull it down’
Presidential candidate Elizabeth Warren blasted Goldman Sachs’s response to claims of bias against women applying for the Apple Card, as complaints reignited a sweeping debate over the role of algorithms in consumer finance.

Trump’s Best Defense on Impeachment Undermines His Case for Re-Election; Insubordinate bureaucrats may save him from being removed from office, but they also show him to be a weak president.
Eli Lake – Bloomberg
The best defense of President Donald Trump on the first day of the House’s public impeachment hearings came from Representative Elise Stefanik, a New York Republican. She cited “the two most important facts” for Americans trying to understand the inquiry into the president withholding military assistance to Ukraine unless it investigated former Vice President Joe Biden: “No. 1, Ukraine received the aid,” she said. “No. 2, there was in fact no investigation into Biden.”

Opinion: What today’s investors could learn from 1980s France
Pierre Briançon – MarketWatch
The possibility of Jeremy Corbyn becoming U.K. prime minister with a strong Labour majority in Parliament looks remote at best, if current polls are to be believed. But fickle voters and the general Brexit upending of British politics mean that the scenario cannot be discarded altogether. For the moment, at least, it looks more like what economists sometimes call a “black swan” – an event with little likelihood but major potential consequences.

The Evidence of Wrongdoing by Trump Is Overwhelming; The witnesses’ testimony on Wednesday was clear and alarming.
Noah Bookbinder – NY Times
Impeachment is a constitutional procedure that should be reserved only for extraordinary times with the most extreme examples of abuse of power by a president. That is why, in our country’s history, only two presidents have been impeached.


UBS Fined $8.2 Million by Singapore for Misconduct by Advisers
Chanyaporn Chanjaroen – Bloomberg
Singapore’s regulator fined UBS Group AG S$11.2 million ($8.2 million) for misconduct by its advisers that included overcharging clients for trades.

Activists Worry Britain’s Financial Watchdog Is Losing Its Zeal; The biggest cases are noticeably absent from new Serious Fraud Office probes.
Franz Wild – Bloomberg
About seven years ago, the U.K. agency set up to prosecute errant executives and publicly traded companies started taking on some meaty cases. The Serious Fraud Office investigated everything from derivative traders to top brass at blue-chip darlings Barclays Plc and engine maker Rolls-Royce Holdings Plc.

New Proxy Voting Rules Take Aim at Powerful Advisory Firms; Lobbyists are pushing the SEC to rein in companies like ISS and Glass Lewis that help big investors decide whether to oppose or support management.
Andrea Vittorio – Bloomberg
The shareholder vote is fundamental to how publicly traded companies are run. But the question of who gets a real voice in a proxy fight is more complicated than one vote for every share.

SocGen Banker Fired Amid Insider-Trading Probe Loses Bonus Case
Gaspard Sebag – Bloomberg
Paris appeals court rejects claim; Fima also lost 2017 lawsuit; Lawyer Jaïs lost separate case to annul insider-trading raids
A former Societe Generale SA banker fired over allegations he took secret information on a $10 billion chemical deal and shared it with a friend lost a second bid to get about 430,000 euros ($473,000) in compensation related to his dismissal.

ASIC’s Vision for a Fair, Strong and Efficient Financial System for all Australians
Keynote address by ASIC Commissioner Sean Hughes at the ARCA National Conference, Gold Coast, 14 November 2019

ASIC relief from financial adviser compliance scheme obligations takes effect
ASIC has taken action to provide certainty to Australian financial services (AFS) licensees that they will not be in breach of the law because their financial advisers were not able to register with an ASIC-approved compliance scheme by 1 January 2020, as originally required.

CFTC Charges Unregistered Commodity Pool Operator, Two California Men with $2.3 Million Fraud
The U.S. Commodity Futures Trading Commission announced today that it filed a civil enforcement action in the U.S. District Court for the Central District of California charging Main & Prospect Capital, LLC and two California men—the firm’s president, Daniel Adam Hewko (Adam Hewko), and his father, Daniel Hewko—with fraud. The complaint also alleges that the defendants violated CFTC registration requirements and various commodity pool operator requirements.

ProPetro confirms U.S. SEC probe, accounting weaknesses
Liz Hampton, Shariq Khan – Reuters
Oilfield services firm ProPetro Holding Corp (PUMP.N) on Wednesday said a board investigation had uncovered material weaknesses in its financial controls and an undisclosed related-party transaction with its former chief accountant.

One of China’s richest men named in Hikvision securities probe
David Stanway, Cate Cadell – Reuters
China’s securities regulator is investigating one of the country’s richest men for alleged violation of disclosure rules as a director of U.S.-blacklisted surveillance camera giant Hikvision (002415.SZ), the company said.

Danish prosecutor charges Danske Bank for overcharging customers
Danske Bank (DANSKE.CO) said on Thursday it has been preliminary charged by the Danish prosecutor for overcharging customers for an investment product.

Chairman Tarbert to Participate in a Fireside Chat at the 2019 Global Financial Leadership Conference

Commissioner Stump to Participate in a Fireside Chat at SIFMA’s Annual Meeting

Investing and Trading

U.S. October Budget Gap Widens to $134.5 Billion From Year Ago
Katia Dmitrieva – Bloomberg
The U.S. budget deficit widened in October, the first month of the fiscal year, as government spending increased and receipts declined.
The shortfall grew about $34 billion, or almost 34%, from the same month last year, to $134.5 billion, the Treasury Department’s monthly budget statement showed Wednesday. The median projection in a Bloomberg survey of economists called for a $130 billion deficit. Income fell 2.8% in October from a year earlier, while spending increased 7.6%.

A $100 Billion Hole May Be European Market Rally’s Best Ally
Ksenia Galouchko – Bloomberg
Europe equity funds started seeing inflows just 3 weeks ago; Pictet, BofA are overweight European stocks on valuations
European stocks are near a four-year high and technical indicators suggest that the rally may have gone too far. But some signals still favor a market ignored by investors for much of this year.

For Ethical Investors, Oil Isn’t Aramco’s Only Problem; Social and governance concerns at the state-owned Saudi oil and gas giant will also scare away some buyers focused on sustainability
Rochelle Toplensky – WSJ
Can an oil-and-gas company count as a sustainable or ethical investment? In Saudi Aramco’s case, the obvious question of its carbon emissions may not even be the main problem for the increasing numbers of investors who focus on environmental, social and governance (ESG) criteria.

Alibaba to pioneer paperless listing in break with Hong Kong norm
Scott Murdoch – Reuters
Alibaba’s planned $13.4 billion share sale will be Hong Kong’s first paperless stock market listing, a source with knowledge of the matter said, breaking with a long-held tradition of investors placing stock orders in bank branches.

Stock Investors Could Use a Refresher on the Basics; Profits, governance and price should always be in vogue.
Nir Kaissar – Bloomberg
I’ve always thought someone should write a book titled “All I Really Need to Know About Stock Investing I Learned in the First Year of B-School” or something like it. The gist would be that investors should look for companies that:

Why doing good can be good for your portfolio
Washington Post
Are individuals and institutions feeling bullish about bettering the world? Here’s how sustainable investments aim to benefit their portfolios—and society.


BlueMountain: the hedge fund that lost its way; Wall Street firm made its mark with the London whale trade but ran into trouble
Ortenca Aliaj and Joe Rennison and Miles Kruppa – FT
When Californian utility Pacific Gas & Electric filed for bankruptcy protection in January, a once-prominent Wall Street hedge fund was feeling the pain.

H2O auditor flags rule breach during summer liquidity squeeze; Fund manager suffered redemptions after FT reports of ties to racy German financier
Robert Smith and Cynthia O’Murchu – FT
H2O Asset Management broke rules governing open-ended funds during a liquidity crisis in June, according to newly published accounts that reveal that the fund manager blew through limits on counterparty risk.

Woodford fund investors predicted to lose at least £1bn; Analysis by PJT estimates scale of losses from Equity Income vehicle’s liquidation
Owen Walker and Peter Smith – FT
More than 300,000 investors caught in Neil Woodford’s £3bn Equity Income fund risk losing at least a third of their savings, according to an analysis by the investment bank brought in to offload its illiquid assets.

US small-cap managers notch rare victory for active over passive; Data shows more than half of active small-cap funds beat benchmarks in year to June
Richard Henderson – FT
Stockpickers who specialise in small and mid-cap US companies enjoyed a rare victory over index-trackers in the year to June, sharpening the debate over whether active managers can ever represent better value than passive.

BNP Paribas gains approval for Deutsche Bank prime brokerage and equities deal; Deutsche Bank’s transition of prime and electronic equities clients to BNP Paribas moves forward after both banks receive approval for the deal.
Hayley McDowell – The Trade
BNP Paribas has gained the necessary approvals to take on Deutsche Bank’s global prime brokerage and electronic equities clients.


Hong Kong Money Markets Show Investor Calm Is Cracking
Tian Chen and Claire Che – Bloomberg
Liquidity tightest since aftermath of Asian financial crisis; Signs of stress have emerged as protest intensity increases
Cracks are starting to emerge in Hong Kong’s currency and money markets, as traders speculate the local dollar’s resilience to increasingly violent protests won’t last.

China’s Investment Growth Slows to a Record Low
Bloomberg News
Industrial output and retail sales both below estimates; Investment is growing at slowest pace in data dating to 1998
The engines of China’s economy are sputtering, with exports falling, factory output slowing, investment growth at a record low and consumption coming off the boil.

Digital sovereignty does not need EU champions; Europe can help incentivise more security-focused systems and apps
The editorial board – FT
The EU’s General Data Protection Regulation, which came into effect last year, was supposed to be a gold standard for privacy — one other states might emulate. The revelation by the Financial Times that health data are being shared without consent shows GDPR is full of holes. Yet the response to data scandals is not to create a European “champion” to rival US or Chinese tech giants, as German Chancellor Angela Merkel mooted this week. Instead, the solution is market design.

Soaring Indian onion prices raise risk of political fallout; Bad weather has hit production of a key vegetable in the country
Benjamin Parkin and Emiko Terazono – FT
Onion prices in India have soared to eye-watering heights, leading to worries about food inflation and consumer unrest amid declining availability of one of the country’s most important vegetables.

Russia to cut dollar share of its $125bn sovereign wealth fund; Reduction is part of Kremlin plan to shift towards euro and renminbi
Max Seddon – FT
Russia wants to reduce the dollar’s share of its $125bn sovereign wealth fund as part of a Kremlin plan to “de-dollarise” the economy and shift towards the euro and the renminbi.

No More Easy Profits as China’s Venture-Capital Boom Fizzles; Investors that bet on the rising fortunes of startups are finding it difficult to cash out at a profit
Jing Yang – WSJ
China’s venture-capital boom, which spawned some of the world’s most valuable technology companies and dozens of rags-to-riches entrepreneur tales in recent years, has come to an end.

Oil is our gold and we aim to use all of it, ADNOC official says
Ron Bousso, Rania El Gamal – Reuters
Abu Dhabi National Oil Co aims to exhaust its vast oil and gas reserves even as many consumers switch to cleaner sources of energy, a senior executive in the Gulf oil company said.


Brexit Is the Reason the U.K. Missed Out on Elon Musk’s Tesla Gigafactory
Oliver Sachgau – Bloomberg
The U.K. was once a candidate for Tesla Inc. to locate its European research and manufacturing facilities, but Brexit thwarted those plans, according to Elon Musk.

Brexit Party Rejects Tactical Voting Pact With Conservatives
Associated Press via The New York Times
Britain’s Brexit Party has rejected an electoral pact with the ruling Conservatives, saying it will field 300 candidates in next month’s election to force Prime Minister Boris Johnson to deliver on promises of a clean break with the European Union. Brexit Party leader Nigel Farage said Thursday the party had to contest the seats to keep pressure on Johnson, rebuffing Conservative arguments that doing so risks splitting the pro-Brexit vote and helping parties that want to remain in the EU.

No more surrender for Brexit Party’s Farage in election
Guy Faulconbridge, Kylie MacLellan – Reuters
Brexit Party leader Nigel Farage on Thursday rejected demands to further help British Prime Minister Boris Johnson by pulling out of contests with the opposition Labour Party, saying his aim was to win enough parliamentary seats to hold Johnson to account.


How to Beat the Market
Joe Nocera – NY Times
By Gregory Zuckerman
There are few books in the investing world as well known as Burton Malkiel’s “A Random Walk Down Wall Street.” First published in 1973, it has never been out of print, and is now in its 12th edition. Its thesis is that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”

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Past JLN Newsletters

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Gensler says SEC to review payment for order flow

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