Index Fund Giants Draw Antitrust Scrutiny in U.S. Merger Reviews; Free Trade Is Dead. Long Live Managed Trade

Jan 23, 2020

First Read

Hits & Takes
By JLN Staff

Gemini has launched a new educational campaign titled “20 Things to Know About Crypto in 2020.” Gemini has generously listed John Lothian News as a news source to learn more about crypto.~JJL

Yesterday, Sarah Rudolph interviewed author Eileen Flaherty about her new book, “The Perilous Step.” The book, a novel by the former industry regulator, is available from Amazon for pre-order. I put my order in yesterday for the Kindle version. I wonder if she will sign my Kindle?~JJL

Lorna Kiewert has been promoted to vice president, director of fintech at 3Points Communications. Also, Sam Svoboda will now be serving as COO and content director for the ten-year-old public relations firm founded by Drew Mauck.~JJL

The NFA has a feature on the stories of some of their people on their website, including Associate Director of Information Technology Lisa Guess.~JJL

We are looking for more former traders who want to be interviewed for the Open Outcry Traders History Project, especially women as we have been too male dominated in this series for far. Also, we have set a couple of interviews for Boca Raton, FL as we are coming down early for the FIA International Conference to shoot some interviews with Boca-based traders. You NYMEX traders in Boca, please reach out to me.~JJL

Now that the Cboe has created the CMC, or Cboe Market Close, I want to make sure you don’t confuse the CMC with the CMC, or the Commodity Markets Council or CMC Markets for that matter.~JJL

According to The Block’s Larry Cermak on Twitter, Ripple sold only $13 million worth of XRP (the third-biggest digital asset by market cap) in Q4 of 2019, none of which it sold to exchanges, according to Cermak. Ripple sold $251 million of XRP in Q2 of 2019, its best-selling quarter to date. “Despite that, the price of XRP has declined by 22% in the same time period,” Cermak says. He also points out that Ripple raised $200 million in VC funds during Q4 of 2019.~MR

The OCC’s CEO John Davidson was quoted in a recent article about diversity and inclusion in the financial services industry. He said the need for diversity reflects the need for a variety of approaches to everyday problems that those in the financial services industry need to solve in order to do their jobs. “Those different approaches are most available if you have a diverse number of perspectives in your organisation,” said Davidson.~MR

The 23rd Association of Futures Markets Annual Conference in 2020 will be May 7 to 8 in Minsk, Belarus.~JJL


Lee Tenzer – Open Outcry Traders History Project

Lee Tenzer is one of the giants of the Chicago markets. He was an inaugural member of the Crowd of Fame from the Options Industry Council. Lee E. Tenzer is the founder of trading firm LETCO and brought two leading names from the industry into the markets. His first clerk was Jon Najarian and later he hired Don Wilson. He formed LETCO so he and Najarian could both trade, as an entity was required to do that. At its peak, LETCO had 75 traders and 150 employees. His trading style was to be neutral and take the other side of the customer orders, which he did profitably. He exited the trading business in 2002 as electronic trading negatively impacted the trading floor. Today he has a family office with various investments, including Lake Geneva Canopy Tours.

Watch the video »


A Goldman Insider Previews CEO Solomon’s New Plan for World Domination
William D. Cohan – Vanity Fair
There’s been a lot of hand-wringing about Goldman Sachs on Wall Street lately. With an equity market value of $88 billion, it finds itself the smallest of its peer group. And that’s not where it wants to be, nor where it has been historically. In fact, it’s been quite the opposite. But facts—remember them?—are stubborn things, and the fact is that Goldman lags behind its chief competitors. JPMorgan Chase, the new king of Wall Street, has a market value of around $430 billion; Bank of America is valued around $300 billion; Wells Fargo is valued around $200 billion and Citigroup is valued around $170 billion. Morgan Stanley, Goldman’s longtime rival, is now worth around $90 billion, a fact that surely gets the competitive juices flowing at 200 West Street.


FIA Seeks Clarity from the CFTC on Permissible Market Practices for Margining Separate Accounts
Press Release January 22, 2020
Today, FIA formally petitioned the Commodity Futures Trading Commission (CFTC) to amend its rules to clarify the margin treatment of separate customer accounts. In two related petitions, FIA seeks codification of no-action relief issued by the CFTC, which governs the disbursement of customer margin to separate accounts of a common beneficial owner, and requests the CFTC to clarify its position on allocated asset recourse for separate accounts.



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Wednesday’s Top Three
Our most read story Wednesday was the exchange competition story SEC Decision on 4 p.m. Closing Trades Deals Blow to NYSE, Nasdaq from the Wall Street Journal, regarding the Cboe Market Close proposal. Next up was CFTC close to resolving case against software developer charged with aiding spoofing scheme from Finance Feeds, about a possible resolution in the Jitesh Thakkar case. And in third was The Financial Times’ The new kings of the bond market, about the surge in exchange traded funds and portfolio trading.


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Lead Stories

Index Fund Giants Draw Antitrust Scrutiny in U.S. Merger Reviews
David McLaughlin – Bloomberg
FTC is asking companies about influence of large shareholders; Holdings by passive managers have raised antitrust concerns
U.S. antitrust officials have begun asking companies about communications with their biggest shareholders as part of merger investigations, according to people familiar with the matter, adding to the growing scrutiny of the power of giant index funds.

Free Trade Is Dead. Long Live Managed Trade; President Trump’s upending of global commerce may endure even after he’s gone.
Peter Coy – Bloomberg
At age 85, Jagdish Bhagwati has defended free trade for decades. The professor of economics and law at Columbia University even wrote a 2004 book called In Defense of Globalization. He doesn’t like the way things have gone lately. “My worry is basically that around the world, there are very different reasons why people are beginning to despair about free trade,” he says.

US brings competition to the close with Cboe mechanism approval; Cboe has gained approval from the SEC to operate an alternative closing auction mechanism, which threatens the monopoly primary exchanges retain on end-of-day trading.
Hayley McDowell – The Trade
Cboe Global Markets has received approval in the US to operate an end-of-day matching mechanism, which would bring competition to closing auctions dominated by the likes of Nasdaq and NYSE.

Shadow Banks Come Into the Light in Global Lending; Nonbank financial institutions have a growing presence in cross-border credit, but we won’t know the real effect until a downturn arrives
Mike Bird – WSJ
In cross-border credit, regular banks are out, and shadow banks are in. Our limited knowledge about how the latter will behave in a downturn is a reason for concern.

City watchdog pledges tougher line with asset managers; FCA sets out list of complaints against industry in wake of Woodford furore
Siobhan Riding – FT
The City of London regulator has pledged to crack down on conflicts of interest and risk controls at asset management companies in the wake of the Neil Woodford scandal.

China’s Finance World Opens Up to Foreigners, Sort Of
Bloomberg News
While the trade war was crimping the flow of goods between the U.S. and China, the Chinese government was opening doors in another arena: Inviting more foreign banks, insurance providers and other financial services companies in to set up shop. China has also been making it easier for foreigners to buy its stocks and bonds — something many fund managers are required to do now that major index compilers are including Chinese assets in their gauges, to the dismay of some U.S. politicians. Financial regulators in Beijing say the liberalization drive will continue. The take-up is gathering pace but the going is tough.

ECB Kicks Off Broad-Based Review in Search of Elusive Inflation
Carolynn Look – Bloomberg
Policy makers leave interest rates, bond purchases unchanged; President Lagarde to face press at 2:30 p.m. in Frankfurt
The European Central Bank agreed to review its strategy for the first time since 2003 after years of radical monetary stimulus struggled to revive inflation.

SNB Isn’t Weighing a New Cap to Fight Franc’s Latest Surge
Catherine Bosley – Bloomberg
SNB’s Jordan says central bank can cut rates if needed; Swiss currency has strengthened to highest since 2017
The Swiss National Bank left the door open to a further easing of policy to rein in the “highly valued” franc, though a new currency cap isn’t in the cards for now.

EU Consolidated Tape: Support Wanes With Lack of Answers; With regulators slow to answer industry questions relating to how a CT should be built and what it’s for, development has slowed.
Rebecca Natale, Josephine Gallagher – Waters Technology
The devil is in the details—unfortunately, a lack of details is exactly what has plagued the establishment of a European consolidated tape (CT) over the last decade.

Amateur Investors Are Making Risky Bets That Could Wipe Them Out
Ken McCallum – Bloomberg
From Korea to India to U.S., individuals making risky bets; New technologies are allowing amateurs to increase speculation
After years of falling debt yields and new technologies enabling one-click purchases of complex financial products, mom and pop investors around the world are making bets that put them at danger of getting burned.

The Exchange Of The Future: A One-Stop Shop (Opinion)
Kurt Dew – Seeking Alpha
The SEC’s decision to merge the two securities information processors (SIPs) is not a change in the agencies’ tack. It is a reversal of regulatory direction.
The SEC’s proposal to assign responsibility for a new single SIP to a nonprofit commission suggests a return to the old self-regulatory organizations that exchanges once were.

To Make Money in Stocks, Take Off Your Headphones; Betting against the noise is a consistently successful strategy.
John Authers – Bloomberg
The Victory of Noise Reduction
Working in a large open-plan office, surrounded by people who are under at least as much stress as you are, isn’t easy. The Bloomberg policy under which nobody shuts themselves off in their own private office has its advantages. You never miss out on the news stories and ideas flowing around a room with several hundred journalists in it. But the noise is a problem. And that is true in both a literal and figurative sense. How exactly can you separate signal from noise?

Top EU Bank Regulator Candidate Rejected Over Lobby Concerns
Alexander Weber – Bloomberg
Nomination of Gerry Cross dismissed by EU assembly in Brussels; MEPs worried about ‘revolving door’ between banks, regulators
The European Parliament rejected the nomination of an Irish central bank official to become one of the bloc’s top banking regulators, amid concerns about his past employment for an industry group.

Exchanges, OTC and Clearing

SGX scales up its index business with EUR186 million acquisition of smart beta index firm, Scientific Beta
Singapore Exchange (SGX) is scaling up and accelerating the growth of its Data, Connectivity and Indices (DCI) business with the acquisition of a 93% stake in Scientific Beta Pte. Ltd. (Scientific Beta) for EUR186 million in cash (S$280 million), subject to closing adjustments.

SGX reports 2Q FY2020 net profit of S$99 million
Singapore Exchange (SGX) today reported 2Q FY2020 net profit of S$99.0 million (S$96.5 million), with revenues of S$230.9 million (S$224.2 million). EBITDA came in at S$141.5 million (S$128.8 million), and earnings per share was 9.2 cents (9.0 cents). The Board of Directors has declared a dividend of 7.5 cents (7.5 cents) per share, payable on 10 February 2020.

Airbus’ Skytra Selects Nasdaq to Provide the Technology for Its New Venue for Air Travel Price Derivatives
Newly established Skytra Ltd. is developing a new trading venue in the UK to enable the $1 trillion global air travel industry to hedge revenue risk; Nasdaq’s marketplace platform will deliver full trading venue functionality including: matching, surveillance, risk management and MiFID II regulatory reporting to power the derivatives trading venue
Airbus’ wholly owned subsidiary Skytra has selected Nasdaq (Nasdaq: NDAQ), architect and provider of the world’s most widely adopted financial market infrastructure technology, to provide the core technology for its derivatives trading venue.

Deutsche Bundesbank and Deutsche Börse publish concept study on DLT-based collateral management
Deutsche Börse
DLT solutions can offer significant advantages; Tokenized securities and security baskets significantly improve the mobility of collateral
The Deutsche Bundesbank and Deutsche Börse have published the results of a concept study that deals with the use of distributed ledger technology (DLT) in the area of ??collateral management. According to the study, this technology basically offers advantages in terms of speed and availability of collateral. Both institutions continue their successful cooperation in researching the possibilities of DLT-based securities processing.

ETF statistics 2019: significant increase in sustainable investments
Deutsche Börse
The market for Exchange Traded Funds (ETFs), which map sustainable investment strategies, reached a new record level last year: Invested assets in ESG (Environmental, Social and Governance) ETFs on the Xetra trading venue rose to 23.2 billion. Euros (+217%; 2018: 7.3 billion euros), this corresponds to around three percent of total assets in ETFs. Last year, ESG products were by far the fastest growing category in the ETF segment of Deutsche Börse.

Challenge taken – developing an interface for Eurex EnLight
While developing new products and services for our customers we are always seeking to partner with other industry experts to find the best possible solution for a particular task. In this special case, we worked together with Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading. We spoke to Patrick Gardner, Vela’s Director of Sales & Product Manager, Automated Trading about our joined challenge.

MaterialsXchange joins NLBMDA Manufacturers and Services Council; The online marketplace for buying and selling commodities went live in October.
The National Lumber and Building Material Dealers Association (NLBMDA) announced today that MaterialsXchange (MX) is the newest member of the association’s Manufacturers and Services Council (MSC).


AxeTrading integrates Overbond predictive analytics with EMS; AxeTrader EMS users will gain access to Overbond’s AI pricing analytics platform for insights into various securities.
Hayley McDowell – The Trade
Fixed income trading software provider AxeTrading has teamed up with FinTech Overbond to integrate its predictive analytics with the AxeTrader execution management system (EMS).

Broadway Technology adds repo to FICC trading platform; Known as RepoTrader, the new trading functionality at Broadway Technology has already been deployed by major European banks.
Hayley McDowell – The Trade
Fixed income and forex trading software provider Broadway Technology has rolled out new repo trading capabilities across its fixed income, currencies and commodities (FICC) global trading platform.

Freetrade stakes claim in Europe’s fee-free stock trading markets
Madison Darbyshire – Financial Times
Freetrade, the UK commission-free stock trading service, is expanding into other European countries in the latest shake-up of the investment market by app-based brokerages. The Netherlands and Ireland are the first countries selected by Freetrade for a wider European rollout of its low-cost trading platform, following its 2018 launch in the UK. App-based services such as Freetrade, Revolut and the US-based Robinhood have disrupted the traditional investment market, which charges fees for customers to buy and sell shares. Investment platforms such as Hargreaves Lansdown, AJ Bell and Interactive Investor can charge more than £10 per trade.

Iota Communications Reports Fiscal 2020 Second Quarter Financial Results and Provides Corporate Update; Iota provides overview of financial results and business update following second quarter report
Iota Communications, Inc. (IOTC), a wireless network carrier and software service company that provides Internet of Things solutions that optimize energy efficiency, sustainability and operations for commercial facilities, today announced its financial results for the fiscal 2020 six months ended November 30, 2019.


The World Economic Forum issues framework for central bank digital currencies
Yogita Khatri – The Block
The World Economic Forum (WEF), an international organization committed to improving the state of the world, has for the first time developed a framework for central bank digital currencies (CBDCs). The framework, dubbed the “CBDC Policy-Maker Toolkit,” provides a guide for central banks around the world to help them decide if CBDC is right for them. For those who are already researching, it helps them “make progress quickly,” said the WEF.

Crypto Stablecoins Find a Toehold in Shadows of Global Trade
Olga Kharif – Bloomberg
Tether, USD Coin seen being used by some small merchants; Demand is increasing in Asia, Europe, payment firms say
A controversial type of cryptocurrency is gaining in popularity among some small merchants operating in the shadows of mainstream commerce.

Bitcoin is ‘not effective’ to serve purposes of money, says billionaire investor Ray Dalio
Yogita Khatri – The Block
Billionaire investor Ray Dalio, who is the founder of the world’s largest hedge fund Bridgewater Associates, is not a fan of bitcoin.

SEC Charges Founder of Purported Blockchain Marketplace for Fraudulent ICO
The Securities and Exchange Commission charged a purported blockchain-marketplace company and its founder with conducting a fraudulent initial coin offering (ICO) of unregistered digital asset securities. As alleged in the SEC’s complaint, Sergii “Sergey” Grybniak and his company Opporty International, Inc. raised approximately $600,000 from nearly 200 investors in an ICO of Opporty’s unregistered digital asset securities called “OPP Tokens.” Grybniak and Opporty allegedly made multiple false and misleading statements to investors, including exaggerating the number of actual and potential users of its business platform and falsely claiming that the ICO was “SEC regulated,” “SEC compliant,” and “SEC registered.” The SEC’s complaint further alleges that Grybniak and Opporty engaged in other deceptive acts, including misappropriating third-party content without approval or attribution, to create the false impression that actual users of Opporty’s platform had created such content.

Former CFTC Chair releases first formal remarks about his Digital Dollar Project at Davos
Yogita Khatri – The Block
Christopher Giancarlo, the former chairman of the U.S. Commodity Futures Exchange Commission (CFTC), has revealed more details about his recently launched Digital Dollar Project. In prepared remarks for The Block’s event hosted by E8 Partners in Davos on Wednesday, Giancarlo said he launched the project because the circulation of U.S. central bank money has remained “strictly local” and its functionalities are “limited.” “We seek to encourage the next major innovation in the U.S. currency: a tokenized fiat currency issued by the Federal Reserve System,” said Giancarlo. “A new digital form of the Dollar that, alongside traditional fiat coins, bank notes and reserves, would enjoy the full faith and credit of the U.S. government as central bank money.”

Jack Dorsey’s Square Wins Patent for Fiat-to-Crypto Payments Network
Paddy Baker – Coindesk
Payments provider Square has won a U.S. patent for a new network that enables seamless crypto-to-fiat transactions. Granted Tuesday by the U.S. Patent and Trademark Office, the patent details a payments system allowing users holding different asset types to transact with one another in real-time. “The present technology permits a first party to pay in any currency, while permitting the second party to be paid in any currency,” reads Square’s application. The network itself can automatically exchange the sender’s payment into the asset specified by the receiver.

Bakkt’s consumer app is coming in 2020, and it’ll look more like PayPal than Coinbase
Frank Chaparro – The Block
Bakkt president Adam White shared some details about one of the major developments underway at the Intercontinental Exchange-backed venture while speaking at Davos. During a panel at The Block’s event hosted by E8 Partners in Davos on Wednesday during the World Economic Forum, White said Bakkt’s consumer app will view digital assets as any form of value that is digital, including cryptocurrencies like bitcoin. This means the app could also support virtual goods such as loyalty reward points and equities. The possible inclusion of equity trading, a portal for merchants, and a wide array of other assets would make the app more similar to a traditional fintech product like PayPal than a crypto-native offering that allows retailers to accept bitcoin, like Flexa.

Ripple’s XRP sales declined by 80% in Q4
Yogita Khatri – The Block
Ripple has reported an 80% drop in sales of XRP during the fourth quarter of 2019. The blockchain payments firm sold a total of $13.08 million in XRP in Q4, compared with $66.24 million in the previous quarter, it announced Wednesday. The sharp decline is the result of a drop in direct institutional sales, as well as a pause in Ripple’s programmatic sales, i.e. XRP sales to cryptocurrency exchanges.

2019 Saw Most Exchange Attacks Ever, With Hackers Becoming More Savvy
Colin Harper – Bitcoin Magazine
As cryptocurrency exchanges beef up their security to defend themselves against cyberattacks, hackers are responding in kind by amping up their techniques — and the data shows that they’re finding success. Cryptocurrency exchanges faced more successful attacks in 2019 than in any other year since bitcoin began trading on public exchanges in 2011, according to data compiled for a recent report from blockchain analytics firm Chainalysis. While the 11 attacks recorded in 2019 nearly doubled those conducted in 2018, the total damage ($282.6 million stolen in cryptocurrency in 2019 versus $875.5 million in 2018) was drastically less.

Has Quebec Missed the Ship for Attracting Cryptocurrency Miners?
Jack Martin – Cointelegraph
The results of a 300 megawatt (MW) energy allocation for cryptocurrency miners, run by Canadian provincial utility provider Hydro-Québec, has failed to attract expected demand from the local industry. A Request for Proposals (RFP) for power allocation was opened in June last year, supposedly based on huge demand of around 16,000MW from miners around the world that wanted to take advantage of Quebec’s hydroelectric power. Bid submissions closed on Oct. 31, 2019. According to a Jan. 22 report from Radio Canada, the results of the RFP or only released recently with Hydro-Québec granting one-fifth of total block set aside for crypto mining.

Bitcoin Cash Miners Propose Controversial Soft Fork for Zcash-Style Development Fund
Paddy Baker – Coindesk
A group of bitcoin cash miners is preparing a soft fork to redirect some of the block rewards into a new zcash-style development fund. In a medium post Wednesday, Jiang Zhuoer, CEO of mining pool BTC.TOP, said that a group of some of the largest bitcoin cash mining pools were preparing to soft fork the network to implement a “short-term donation plan” that would cut block rewards by 12.5 percent in order to fund network development. “Investment in software and commons is crucial to secure a bright future for Bitcoin Cash,” the post reads, arguing that neglect can have a “damaging” effect on the network. “We can avoid these problems by providing an adequate level of stable funding, allowing Bitcoin Cash to thrive and succeed.”

Bitcoin Cash miners propose 12.5% share of block rewards to support ecosystem
John Dantoni – The Block
Jiang Zhuoer, CEO of BTC.TOP, the largest mining pool on Bitcoin Cash, announced a proposal through a blog post that would redirect 12.5% of Bitcoin Cash Coinbase block rewards to a development fund. The fund is a Hong Kong corporation that has been set up to legally accept and disperse funds and would be provided funding for six months to support Bitcoin Cash infrastructure. The plan is to implement this proposal into Bitcoin Cash’s May 2020 protocol upgrade. The fund would receive approximately 112.5 BCH per day and about 20,588 BCH over the six months. Based on the current prices of BCH, the fund would receive roughly $7.1 million in total.

Crypto Asset Firm Amun Launches Inverse Bitcoin ETP
William Foxley – Coindesk
Digital asset issuer Amun is launching a new financial product, this one for traders who predict bitcoin’s price will drop. Announced Thursday, Switzerland-based Amun has launched the 21Shares Short Bitcoin ETP (SBTC) on the Swiss Stock Exchange (SIX), an exchange traded product tracking bitcoin’s price movements inversely. If bitcoin’s price climbs, traders lose. If it falls, they win. “If you’ve ever tried trading options or futures, you’ll see that it’s pretty difficult,” Amun CEO Hany Rashwan said in a phone interview. “It’s not the easiest thing which is why it’s just easier to say ‘I think bitcoin price will go down, I’m going to buy this stock.'”


Rudy Giuliani Sidekick Lev Parnas Traces Part of Money Trail to Ukraine
Greg Farrell, Stephanie Baker, Ben Bartenstein, and David Kocieniewski – Bloomberg
Personal loans, private jets, the Ritz, a $100,000 bris; Trump’s lawyer talked about a Ukraine contract that fell apart
From fine whiskey to European flights to cigar bars, the tab for the Ukraine mission was starting to add up. Even one of President Donald Trump’s wealthiest contributors sounded peeved. “Just becoming expensive flying u guys everywhere LEV,” wrote Harry Sargeant III, a Florida energy tycoon, in a pointed text to Lev Parnas, Rudy Giuliani’s advance man on the Ukraine operation.

Facebook Says Bezos Hack Highlights Smartphone Vulnerabilities
Amy Thomson – Bloomberg
EMEA Vice President Mendelsohn spoke to Bloomberg TV at Davos; Mendelsohn said Facebook was going to look into WhatsApp hack
The hack of Inc. billionaire Jeff Bezos’s phone, allegedly via a WhatsApp message, brings to light potential security weaknesses in smartphone operating systems, Facebook Inc. vice president Nicola Mendelsohn said.

Mnuchin Tells Thunberg to Go Study Economics: Davos Update
Iain Rogers and Chris Reiter – Bloomberg
The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems they helped create, above all climate change.


NY Court nixes TFS-ICAP’s attempt to dismiss CFTC action; Judge Victor Marrero of the New York Southern District Court has found that the issues raised by TFS-ICAP do not warrant a dismissal.
Maria Nikolova – Finance Feeds
TFS-ICAP LLC and TFS-ICAP Ltd have failed to dismiss the CFTC complaint against them. Judge Victor Marrero of the New York Southern District Court has signed an order nixing the attempt by the companies to escape the CFTC’s action.

Court urges individual behind FX scam Simple Wealth to respond in action brought by CFTC; Cody M. Wilson is given until February 12, 2020, to explain why the Court should not compel him to comply with the Commission’s administrative subpoena.
Maria Nikolova – Finance Feeds
The United States Commodity Futures Trading Commission (CFTC) may be getting closer to obtaining the information it seeks regarding suspected Forex and binary options scam Simple Wealth, as the Columbia District Court has issued an order that supports the efforts of the regulator.

FCA expects to finish post-Woodford fund review within months; Regulator also says a review of hedge funds and other alternative investments is on its way
Mark Cobley – Financial News
The UK’s markets regulator is pushing forward with a fast-track review of the way mutual funds are governed following the collapse of Neil Woodford’s firm last year, and expects to complete its work “in early 2020”.

Financial Services AI Public Private Forum
The pursuit of artificial intelligence (AI) and use of machine learning (ML) are increasingly important fields of innovation in the financial services sector.

Andrew Bailey calls on tech giants to collaborate with the FCA to help protect consumers
In his final podcast interview as Chief Executive, Andrew Bailey looks back at the last year and his time at the FCA, and underlines the important work ahead as the UK leaves the European Union.

Firms now need to update or confirm their Firm Details annually
From 31 January 2020, firms that come under Sup 16.10 reporting requirements have to check, amend or confirm the accuracy of their Firm Details annually, using the FCA’s Connect portal. They will need to do this within 60 business days of their Accounting Reference Date (ARD).

ICYMI: Making Derivatives Markets Work for American Agriculture; Op-ed by Chairman Tarbert Featured for the American Farm Bureau Federation
“America’s farmers and ranchers are at the heart of our real economy. Yet for the past six years, U.S. agricultural production has faced turbulence. From natural disasters to low commodity prices, farmers and ranchers are forced to spend considerable time thinking about how to mitigate risk and insulate themselves from potential losses. Farm bill programs and crop insurance are an important part of that equation, but so are the derivatives markets.

SEC Awards Whistleblowers Whose Information Helped Stop Fraud
The Securities and Exchange Commission today announced two whistleblower awards in connection with two separate enforcement actions. Both whistleblowers provided significant information that helped the SEC shut down two separate fraudulent schemes preying on retail investors. In the first action, the whistleblower alerted the agency to a fraudulent scheme. The SEC awarded the whistleblower more than $277,000. In the second action, the whistleblower, a harmed investor, provided critical information that enabled the SEC staff to recover assets that were later returned to victims. The SEC awarded the whistleblower $45,000.

Investing and Trading

Investors are asking the wrong questions on sustainability; Companies and funds need to step up their due diligence and engagement
Carol Adams – FT
When it comes to hitting the 2030 targets underpinning the UN’s 17 Sustainable Development Goals, considering risk alone will not cut it. Larry Fink’s recent emphasis on climate change risks and divesting in coal is significant, albeit a few decades late, but what about opportunities? And what about other sustainable development issues that threaten to bring businesses down?

‘Peak Greed’ Fuels Record Junk Bond Sales in Europe
Laura Benitez – Bloomberg
High-yield bond sales set to top $11bn in record this month; Market goes risk on with LBOs, payment-in-kind notes\
One of the riskiest corners of the European bond market is enjoying its busiest January ever as companies rush to grab ultra-cheap yields and some of the more dubious instruments popular ahead of the financial crisis resurface.


BNP Paribas and open banking platform Tink extend their partnership in Europe; As part of the partnership, BNL will start implementing Tink’s solutions for account aggregation, payment initiation and personal finance management.
Maria Nikolova – Finance Feeds
BNP Paribas and open banking platform Tink and BNP Paribas today announce an extension of their partnership in Europe. On top of Tink’s existing partnership with BNP Paribas Fortis – the retail network of BNP Paribas in Belgium, Tink is now also entering a partnership with the Italian retail network of BNP Paribas, Banca Nazionale del Lavoro (BNL).

Morgan Stanley prime brokerage business founder Portogallo to retire; The stalwart of the industry-leading prime brokerage business at Morgan Stanley will retire after serving over 30 years with the US firm.
Joe Parsons – The Trade
One of the founders of the prime brokerage unit at Morgan Stanley, Rich Portogallo, is set to retire after building the division into one of the industry’s leading businesses.

Deutsche Bank Chief Says ECB Missed Exit From Negative Rates
Steven Arons and Harry Wilson – Bloomberg
CEO Sewing tells panel the policy is creating social rifts; Said he expects “one or the other” change under Lagarde
Deutsche Bank AG Chief Executive Officer Christian Sewing said the European Central Bank missed an opportunity to reverse its negative interest rates when the economy was strong, joining bank executives in stepping up criticism of policy makers ahead of their rate decision.


Hong Kong FX broker CLSA Premium set to report substantial loss for 2019; The broker, formerly known as KVB Kunlun, says the loss reflects a reduction in leveraged Forex and other trading income earned from external customers.
Maria Nikolova – Finance Feeds
Hong Kong-focused retail Forex broker CLSA Premium Ltd (HKG:6877), formerly known as KVB Kunlun

Russia’s rally puts it back on the radar for global fund managers; ‘Special cocktail’ of factors attracts fund managers’ interest after bruising run
Anna Gross in London and Max Seddon – FT
Russia’s equity market was stuck six years ago. The Ukraine crisis, and resulting western sanctions, sent stock prices lower, with investors balking at the country’s economic prospects. Making matters worse, the oil price slumped.

Embattled Hong Kong has no choice but to reset its US dollar peg; Liquidity is drying up and rates could catch fire with the slightest provocation
Tom Roderick – FT
Policymakers in Hong Kong have been riding their luck. They can be thankful for a dovish US Federal Reserve, which cut rates three times last year. That reduced the pressure on the Hong Kong dollar at a time of deepening political crisis in the Chinese territory. As the Hong Kong Monetary Authority runs out of options, the question is how long its currency can hold the line.

Davos Special Edition: Royal assent for carbon tax; Your guide to the investment and business revolution you can’t afford to ignore
Gillian Tett, Billy Nauman and Andrew Edgecliffe-Johnson – FT
Carbon taxes get Royal seal of approval
It is not often that His Royal Highness Prince Charles is mentioned in the same breath as Ursula von der Leyen, European Commission president, or Axel Weber, UBS chairman, and Janet Yellen, the former Federal Reserve chair. However, this happened on Wednesday when the prince sternly told the business and political elites at Davos that it was high time that global leaders got serious about imposing a proper tax on carbon usage.

Putin’s Spending Spree Could Boost These Russian Stocks
Aine Quinn – Bloomberg
Retailers, steelmakers, banks poised to drive rally further; New cabinet could deploy $34 billion this year alone, ING says
A clutch of Russian stocks is particularly well placed to reap the benefits of the possible $34 billion spending windfall under the nation’s new government.


Brexit, blue passports and the declining value of Britishness; ‘Young Britons risk being excluded from Erasmus — and won’t have the luxury of taking migration for granted’
Simon Kuper – FT
I moved to Paris in 2002 with a very British sense of entitlement. Like most British migrants through the ages, I didn’t think of myself as a migrant. I took it for granted that I could move wherever I wanted.

Brexit Deal Clears Parliament, Paving U.K.’s Way to Leave the EU
Thomas Penny – Bloomberg
House of Lords backs down on Johnson’s EU divorce bill; European Parliament must now ratify terms of Jan. 31 split
Prime Minister Boris Johnson’s Brexit deal cleared its final hurdles in Parliament, bringing the crisis that paralyzed U.K. politics since the country voted to leave the European Union almost four years ago to a close.

Brexit: UK has ‘crossed Brexit finish line’, says Boris Johnson
BBC News
Boris Johnson has said the UK has “crossed the Brexit finish line” after Parliament passed legislation implementing the withdrawal deal. The EU Bill, which paves the way for the country to leave the bloc on 31 January, is now awaiting royal assent. The PM said the UK could now “move forwards as one” and put “years of rancour and division behind it”. The EU’s top officials are expected to sign the agreement in the coming days, while MEPs will vote on it next week.

Aerospace industry fires Brexit warning shot at Johnson
Peggy Hollinger – Financial Times
Britain’s aerospace and defence companies fired a warning shot at Boris Johnson’s government on Wednesday after chancellor Sajid Javid’s defiant comments that there would be no regulatory alignment with the EU after Brexit. In a speech to the sector’s biggest annual gathering in London, Tony Wood, incoming president of the industry trade body, ADS, said staying aligned with European aviation regulations was “in our national interest”.


Stress Makes Your Hair Turn Gray, New Research Shows
Press Association
Scientists believe they have uncovered “new evidence” that shows how acute stress can cause hair to turn white prematurely.

Soho House Backer Bets on Millennials With $131 Million Fund
Benjamin Robertson – Bloomberg
Active Partners closes fund targeting high-growth businesses; Firm also backs London restaurant chains, craft beer brewer
Active Partners Investments, backer of private members’ club Soho House, has raised 100 million pounds ($131 million) for a new fund.

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A Hack Like This Could Start the Next World War

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First Read $31,126/$300,000 (10.4%) Ajay Jain ++++ Hits & Takes John Lothian & JLN Staff Welcome to International Women's Day 2021. The theme for this year's International Women's Day is "Choose To Challenge." The WFE says there are over 100 women today...

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