India’s NSE overtakes CME Group as largest derivatives exchange globally

Jan 17, 2020

First Read

Hits & Takes
By JLN Staff

Nasdaq yesterday published their 4th annual Tech Trends report, this one titled “Nasdaq Decodes: Tech Trends 2020.” This is their report that covers big broad topics they see impacting how markets operate over the next year. It is developed by their Market Technology and Global Technology Divisions.~JJL

Cboe’s Adam Inzirillo is out with a note this week which outlines some of Cboe’s strategies to better serve their customers. The note to customers provides an overview of Cboe’s latest initiatives (from a proposed asymmetric speed bump, Retail Priority, to solutions for thinly traded securities) to enhance the US equity markets.

Katten’s Gary DeWaal and Cathy Yoon are hosting “Fintech Leadership as a New York State of Mind – a Fireside Chat with the New York Department of Financial Services,” on January 23. They will discuss the Bitlicense regime, cryptocurrencies, and more.~JJL

Derek Sammann of the CME Group said on LinkedIn that “CME Group will be donating $100,000 to the Australian Red Cross to support the relief effort.” Very good people!~JJL

Simply Wall St. did an analysis of whether Terry Duffy is being paid too much as CEO of the CME Group. I will let them speak for themselves, but Terry is a bargain.~JJL

Correction: Yesterday we said Mark DeSalvo of Revolution Cannabis was on the Cannabis panel at STAC, it was actually Mark DeSouza of Revolution Cannabis. So much for cutting and pasting names from the STAC agenda on their website.~JJL

Cboe tweeted yesterday that average daily volume for FLEX options in 2019 hit record highs, surpassing the record set in 2018 by 49,408 contracts.~MR


Global Futures and Options Trading Reaches Record Level in 2019
Summary statistics released today by FIA show that trading activity in the global exchange-traded derivatives markets rose by 13.7% in 2019 to reach a record of 34.47 billion contracts. Futures volume rose 12% to 19.24 billion contracts, while options volume rose 16% to 15.23 billion contracts.

*****There is a lot of risk in the world to be managed, and it is being managed.~JJL


Calculating TERM Rates for AMERIBOR from AMERIBOR Futures
John Coleman – RJO
Ameribor is one of the few IOSCO-compliant benchmark alternatives for LIBOR transition. While the money-center/GSIB/TBTF banks have self-elected SOFR, there are the other 4,000+ U.S. banks that do not own many/any Treasury securities, do not participate in Treasury repo, and do not have interest in implementing a benchmark that does not reflect those non-SIFI banks’ cost of funds. They prefer an overnight benchmark that reflects their inter-bank, unsecured, overnight funding rate—and that is AMERIBOR. And, AMERIBOR participation is growing.

****You are told in advance, there will be math. ~JJL


Jack Dorsey Asks Elon Musk How to Fix Twitter
Kurt Wagner – Bloomberg
Identify the bot accounts, SpaceX and Tesla CEO said; The two executives talked at Twitter’s offsite meeting
Elon Musk’s suggestion for how to fix Twitter? Identify the bots. Musk, the SpaceX and Tesla Inc. chief executive officer, was asked Thursday by Twitter Inc. CEO Jack Dorsey how he would fix the social network, where Musk has almost 31 million followers.

****Fix is a strong word. Improve would be better.~JJL


CryptoMarketsWiki Coin of the Week: Bitcoin SV (BSV)
Bitcoin SV increased in value by over twofold this week when its creator, Craig Wright, recovered a list of bitcoin holdings thought to be lost. Some speculate that this may have been due to a coordinated effort to pump its price. Wright, who claims to be the real identity of bitcoin’s creator Satoshi Nakamoto, was ordered by a District Court of a Southern District of Florida judge to provide a list of his digital asset holdings as part of a lawsuit against him by Ira Kleiman, the brother of Wright’s former business partner.


Thursday’s Top Three
Our top story Thursday was our top story (in Leads), Bloomberg’s London’s Future Is in the Hands of the EU, about yet another aspect of the continuing and constant fallout from Brexit. Second was the clickbaity title Flash Crash Culprit Seen as Childlike Gamer Not Fit for Prison from Bloomberg again, about Navinder Sarao, “a guileless mathematical savant who plays markets like a computer game in his bedroom, [and] collects stuffed animals.” Third was The Trade’s story, LSEG’s futures exchange CurveGlobal appoints new sales head for US expansion, about the appointment of Robert Grillo as CurveGlobal’s new head of business development for the Americas.


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Lead Stories

India’s NSE overtakes CME Group as largest derivatives exchange globally; The NSE of India traded 6 billion contracts in 2019, up 58% from the year prior, compared to 4.83 billion contracts traded at CME Group.
Hayley McDowell – The Trade
The National Stock Exchange of India (NSE) has surpassed US exchange group CME to become the largest derivatives exchange globally by trading volume, statistics from the Futures Industry Association (FIA) have revealed.

Trump Tax Cut Hands $32 Billion Windfall to America’s Top Banks
Yalman Onaran – Bloomberg
Top banks saved $18 billion in 2019, even more than prior year; Meanwhile lending slowed, job cuts mounted and dividends rose
Savings for the top six U.S. banks from President Donald Trump’s signature tax overhaul accelerated last year, now topping $32 billion as the lenders curbed new borrowing, pared jobs and ramped up payouts to shareholders.

Jamie Dimon is causing headaches for rivals — and himself; JPMorgan’s stellar profits show banks can make money despite tougher rules
Tom Braithwaite – FT
Eager to cover JPMorgan results for the first time in 2011, I bounced out of bed in an unfamiliar Manhattan apartment, gashed my head on a protruding book shelf and took a taxi to hospital. I listened to Jamie Dimon’s conference call from the emergency room.

‘Quant winter’ raises tricky questions for a hot industry; Automated investing is on the rise, but many funds are struggling to meet expectations
Robin Wigglesworth – FT
Quantitative, automated strategies have long appeared to be the new, exciting frontier for investing, but many are suffering a rough patch — raising questions about an industry that has enjoyed huge inflows over the past decade.

Wall Street M&A fees drop by more than $500m in 2019; Decline in overall dealmaking and cross-border transactions eats into revenues of top banks
Eric Platt – FT
Top Wall Street banks suffered a $558m drop in fees from advising on mergers and acquisitions in 2019, as a fall in overall dealmaking and lucrative cross-border transactions ate into their revenues.

US agency to bar computers from economic data ‘lock-ups’; Change could have implications for firms reliant on fast access to market-moving data
Brendan Greeley, Katie Martin and Colby Smith – FT
The US Department of Labor has announced a crucial change to how it releases government data, banning computers from the “lock-up” rooms where journalists prepare reports on economic figures in strictly controlled conditions to prevent leaks.

What’s a ‘Lockup’ and Why It Matters for Markets
Katia Dmitrieva and Vince Golle – Bloomberg
The news media faces new limits on its special access to a trove of market-moving data in the U.S. The U.S. Labor Department said it will ban computers from so-called lockup rooms, where journalists receive advance access to major economic reports. The Agriculture Department made changes to its lockup system in 2018. The shift is designed to remove any edge that subscribers of news services have over the general public, even if it’s just a matter of seconds or milliseconds. Critics say the move threatens to create logjams on official websites and hand the advantage to tech-savvy traders or news outlets.

Jamie Dimon protégé takes on US banking’s biggest clean-up; Low-key Charlie Scharf works to revive Wells Fargo after fake accounts scandal
Robert Armstrong and Laura Noonan – FT
Wells Fargo chief executive Charlie Scharf made a name for himself as Jamie Dimon’s protégé at several Citigroup predecessor companies — Mr Dimon’s “go-to guy” for advice, problem solving and getting things done.

Morgan Stanley’s 126% Bond-Trading Surge Is Electric
Electronification of fixed income most likely helped Wall Street deliver a blowout quarter.
Brian Chappatta – Bloomberg Opinion
Wall Street’s bond traders deserve a lot of credit for an impressive earnings season for the biggest U.S. banks. After all, fixed-income trading revenue easily blew past analysts’ estimates across the board.
But shareholders might want to show some respect to the machines, too.

Over 100 Billionaires Are Descending on Davos Next Week
Tom Metcalf – Bloomberg
World Economic Forum’s annual meeting takes place next week; Richest 119 attendees have $500 billion of combined net worth
As the gulf between the rich and everyone else continues to grow, at least 119 billionaires are converging on Switzerland next week to join bankers, politicians and other grandees for their annual pilgrimage to the Alps.

China posts weakest growth in 29 years as trade war bites, but ends 2019 on better note
Stella Qiu, Kevin Yao – Reuters
China’s economic growth cooled to its weakest in nearly 30 years in 2019 amid a bruising trade war with the United States, and more stimulus is expected this year as Beijing tries to boost sluggish investment and demand.

Now, Try Slicing the Stock Market Into Equal Pieces; Index fund investing is already immensely popular. But is it time to consider funds that construct indexes differently?
Conrad de Aenlle – NY Times
Not all funds that track the same index are created equal. For some, inequality is part of the design. Take the S&P 500 and the S&P 500 SPDR E.T.F. Apple is the S&P 500’s largest constituent, 4.7 percent in early January. News Corporation, the smallest member, accounted for less than 0.01 percent of the index.

E*TRADE Announces the Appointment of Corporate Controller Brent Simonich to Chief Risk Officer
Business Wire
E*TRADE Financial Corporation (NASDAQ: ETFC) today announced that Corporate Controller Brent Simonich will assume the Chief Risk Officer role after Paul Brandow advised the Company of his decision to retire, following over a decade of service to the firm. The appointment of Mr. Simonich is effective immediately, while Mr. Brandow has agreed to serve in an advisory capacity throughout the transition.

Exchanges, OTC and Clearing

WFE Chairman Dr Urs Rüegsegger looks ahead to pivotal year for industry
The World Federation of Exchanges
Dr Urs Rüegsegger, Chairman of the World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, yesterday delivered a speech at the WFE’s Annual Reception, which took place in London, following the WFE’s first Board meeting of the year.

Everything you wanted to know about data pricing, in 90 seconds: The World Federation of Exchanges releases market data animation
The World Federation of Exchanges
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and central counterparties (“CCPs”), has today released an animation designed to educate stakeholders on the importance of valuing stock market data correctly for users who profit from it. The animation forms part of the WFE’s work to ensure that role of exchanges in creating market data is well understood.

Equity Index Highlights – January 2020 edition
2019 can be described as an impressive assault on the wall of fear. Sure, there was some stuttering along the way but nearly all broad equity market benchmarks finished 2019 with strong double-digit growth and were the strong outperformer across the major asset classes after dividends reinvested. Even against the backdrop of a low to negative yield environment, it looks difficult to see a repeat for 2020. Traders and investors already had to digest the latest U.S.-Iran tensions and evaluate if it may develop into a more serious conflict. Meanwhile, last year’s on-going story, escalating and de-escalating trade tensions between the U.S. and China. seems likely to continue through 2020 and we’re also entering the final chapter of the Brexit saga. And, there is of course no small matter of the U.S. elections in November with the Democratic primaries beginning next month. A whole new wall needs to be assaulted again.

2019 success of Eurex Partnership Program – perfect base for 2020 growthCarsten Hiller – LinkedIn
With its extension to the repo segment at the beginning of 2019, the Eurex Partnership Program was aiming to increase repo transactions in the interbank market for European government bonds by offering more choice and efficiency for market participants in Special Repo and General Collateral instruments and to foster adoption and growth in the dealer-to-client repo business.


LiquidityBook adds two to EMEA Client Service Team
LiquidityBook, a Software-as-a-Service (SaaS)-based provider of buy- and sell-side trading solutions, has made two London-based hires for its EMEA Client Service Team: James Pearson and Abdullah Al Nasiri.

Charles River IMS integrates with ChartIQ for data visualisation; ChartIQ software will provide traders using the Charles River IMS with greater insights into trading decisions.
Hayley McDowell – The Trade
State Street’s Charles River has teamed up with ChartIQ to integrate its investment management solution (IMS) with advanced charting and data visualisation tools.

NICE Actimize Adds Cryptocurrency Innovator CipherTrace To X-Sight Marketplace To Enhance Due Diligence And Reduce Risk – Complementing NICE Actimize’s AML solutions portfolio, Ciphertrace Cryptocurrency Solutions Detect Money Laundering And Enable Regulatory Supervision
With cryptocurrency-related compliance issues on the rise, and an increase in enforcement actions anticipated, the need for financial institutions to adopt solid AML programs addressing this market segment is expected to escalate this year. With this activity at the forefront, NICE Actimize, a NICE business (Nasdaq: NICE) and leader in Autonomous Financial Crime Management, today announced that CipherTrace, a leading provider of cryptocurrency intelligence and blockchain security, has joined the X-Sight Marketplace, the industry’s first financial crime and compliance ecosystem. The X-Sight Marketplace gateway connects financial services organizations with data, applications, tools and service providers, all in one place, to allow users to experience the value of choice while reducing integration timelines.


Most Canadian crypto exchanges likely fall under securities laws, according to new guidance
Mike McSweeney, Celia Wan, and Yilun Cheng – The Block
New guidance from the umbrella group for Canadian securities regulators indicates that many of the country’s crypto exchanges will fall under national securities laws. The Canadian Securities Administrators (CSA) published the notice on Thursday, which in part follows a published framework from March 2019 in which the group “stated that if crypto assets that are securities or derivatives are traded on a Platform, such Platform would be subject to securities legislation.”

Biggest Bitcoin Investment Trust Says Hedge-Fund Demand Booming
Olga Kharif – Bloomberg
Inflows from institutions rose in 2019 to 71% from 66%; Grayscale Investments took in $608 million last year
Traditional hedge funds, pensions and endowments are boosting cryptocurrency holdings, according to the biggest Bitcoin trust provider.

Libra Association Forms Steering Committee to Guide Technical Development
Aaron Wood – Cointelegraph
The Libra Association — the government body of the eponymous stablecoin introduced by Facebook in late 2019 — has formed a new committee to guide the network’s technical development.

Another crypto firm moving out of the EU in response to 5AMLD, this time non-custodial exchange KyberSwap
Yogita Khatri – The Block
KyberSwap, currently the second-largest non-custodial cryptocurrency exchange by market share, is moving out of Malta to the British Virgin Islands (BVI), according to an email obtained by The Block.

Binance ties up with Yahoo! Japan to operate a separate exchange in the country
Yogita Khatri – The Block
Cryptocurrency exchange Binance has partnered with Z Corporation, a wholly-owned subsidiary of Yahoo! Japan, to set up a separate platform in the country.

Crypto Trading Giant Bithumb Set to Fight $69 Million Tax Fine; South Korean crypto trading giant Bithumb wants tax tribunal to nullify the $69 million fine imposed by the NTS in November 2019.
Osato Avan-Nomayo –
Following a $69.1 million tax bill imposed by South Korea’s National Tax Service (NTS) in late 2019, cryptocurrency exchange giant Bithumb has filed a complaint with the Tax Tribunal to negate the tax bill. The NTS and Bithumb must wait 90 days for a decision from the tribunal.

Venezuela’s Demand for Payments in Crypto Pauses on Some Oil Purchases
Lucia Kassai – Bloomberg
Some buyers of Venezuelan crude oil have halted purchases after the country started demanding payment of port fees in its failed cryptocurrency. Exports of at least 1 million barrels of oil were put on hold after the government announced this week that certain maritime fees, currently paid in euros, must be paid in Petros starting Monday, according to people with knowledge of the situation. Buyers worry the payment may be in violation of sanctions after the U.S. targeted the cryptocurrency, calling it a “scam.”

US Lawmakers Try Again on Tax Relief for Small Crypto Payments
Danny Nelson – Coindesk
U.S. lawmakers have resurrected a bipartisan push to exempt gains from small cryptocurrency transactions from being taxed. On Thursday, Reps. Suzan DelBene (D-Wash.), David Schweikert (R-Ariz.), Darren Soto (D-Fla.) and Tom Emmer (R-Minn.) introduced “The Virtual Currency Tax Fairness Act of 2020,” an amendment to IRS tax code that would exempt realized gains under $200, otherwise known as a de minimis threshold.

2019’s DeFi Boom Creates New Questions for Tax Filing Season
Leigh Cuen – Coindesk
The decentralized finance (DeFi) boom of 2019, leading to over $785 million in locked crypto assets, is already making accountants dizzy. If you lock up bitcoin or ether in exchange for a synthetic asset or a stablecoin, as nearly a dozen projects and platforms today allow, is that a trade or merely a temporary reorganizing of the original asset? Cryptio CEO Antoine Scalia, of the accounting startup that received a small investment from ethereum co-founder Joe Lubin’s ConsenSys, said there’s no clear answer yet.

Elliptic’s Liat Shetret: Congress risks losing the tech war to China if it imposes stringent regulations on crypto
Yilun Cheng – The Block
Liat Shetret told legislators at a Wednesday congressional hearing that the solution to crypto-enabled crimes is not to ban the use of cryptocurrencies but to disseminate available tools to the right hands. According to Liat, regulatory discrepancies across jurisdictions, the transition from bitcoin to privacy coins, and the cross-over between crypto and the traditional financial sectors constitute the biggest challenges for regulators today.

CabbageTech CEO Sentenced to 33 Months in Prison After Pleading Guilty in Fraud Case
Danny Nelson – Coindesk
Patrick McDonnell was sentenced to 33 months in federal prison Thursday after pleading guilty to charges of defrauding investors in his crypto trading firm CabbageTech, otherwise known as Coin Drop Markets. McDonnell was also ordered to pay back his victims $224,352, according to the U.S. Attorney’s Office for the Eastern District of New York. Thursday’s sentencing caps McDonnell’s back-to-back legal fights with the federal government, which saw the 47-year-old New York resident in civil and then criminal court on fraud charges. He pleaded guilty in June 2019, a press release stated.


Parnas Tells of Rick Perry’s Role in Ukraine: Impeachment Update
Steven T. Dennis – Bloomberg
Check here for live updates on impeachment fight developments; Pence Says He’s Looking for a ‘Profile in Courage’ Democrat
Chief Justice John Roberts made his first appearance in the Senate chamber Thursday to swear in the senators for President Donald Trump’s impeachment trial, which is set to begin Tuesday.

Putin the Puppet Master Shows He Retains the Power to Shock
Evgenia Pismennaya, Ilya Arkhipov, and Henry Meyer – Bloomberg
As Russian lawmakers huddled in the State Duma to discuss Vladimir Putin’s bombshell plan to change the constitution, the president still had one more surprise for them.

Brussels Edition: Path Dependency to Disaster
Nikos Chrysoloras – Bloomberg
The EU is terrified of another migrant wave, and while that’s been driving its policy on Turkey and Libya, the bloc may need to expand its list of concerns. President Recep Tayyip Erdogan just announced he will issue hydrocarbon licenses in the Eastern Mediterranean and start exploration work, potentially in waters that Greece claims as its own under UN law. For Athens, that would cross the line, and another EU Summit statement or a diplomatic protest may not cut it. Greek Prime Minister Kyriakos Mitsotakis could be left with little choice than to intercept Turkish drillships, or risk political suicide. And then what? Those who recall January 1996 know that bad things don’t always happen by design. It only takes a miscalculation or an overplayed hand for path dependency to lead to disaster.

Donald Trump nominates Federal Reserve critic to central bank’s board; Adviser to US president’s 2016 election campaign has questioned the role of the institution
Brendan Greeley – FT
Donald Trump has announced Christopher Waller and Judy Shelton as nominees for the Federal Reserve’s board of governors. If confirmed, they would bring it to its full complement of seven governors, five of whom will have been selected by the US president.

Trump Plans to Nominate Shelton, Waller to Federal Reserve
Alister Bull – Bloomberg
Fed nominees could face a lengthy confirmation process; Waller is a Fed insider, Shelton’s views may court push back
President Donald Trump plans to nominate Judy Shelton and Christopher Waller to join the Federal Reserve, the White House said.

Even Under Trump, U.S. Renewable Investment Hit a Record in 2019
Akshat Rathi and Jeremy Hodges – Bloomberg
Global spending in green energy up 1% to $282 billion; Surge in offshore wind projects added $30 billion for the year
The U.S. renewable energy industry doesn’t seem to take much notice of President Donald Trump’s views on green energy and climate change as investments surged to a record last year.

China’s Birthrate Sank to Lowest Level on Record Last Year
Bloomberg News
Number of newborns declines further in 2019, data shows; Demographic trend poses threat to long-term growth prospects
China’s birthrate dropped to the lowest level since at least 1949 last year and the labor force continued to shrink, in the latest sign of slowing growth prospects for the world’s second-largest economy.

White House broke law by withholding Ukraine aid, watchdog finds; Report delivers fresh blow for Trump ahead of impeachment trial
Kadhim Shubber and Lauren Fedor – FT
An independent congressional watchdog said Thursday the White House violated the law by withholding US military aid to Ukraine last year, a fresh blow to Donald Trump ahead of a Senate trial centred on whether he froze the funds to pressure Kyiv.


Chairman Tarbert to Keynote at the Annual Meeting of the American Bar Association’s Banking Law Committee

Commissioner Stump to Speak on a Panel at the ABA Derivatives & Futures Law Committee Winter Meeting

Former CFTC Chair Launches The Digital Dollar Project
In partnership with Accenture, the Digital Dollar Project is a multi-stakeholder initiative to explore options for a U.S. digital dollar
Press Release via Business wire
J. Christopher (“Chris”) Giancarlo, former Chair of the Commodity Futures Trading Commission (CFTC), along with Charles Giancarlo and Daniel Gorfine, have partnered with Accenture (NYSE: ACN) to create the Digital Dollar Project (the “Project”) to advance exploration of a United States Central Bank Digital Currency (CBDC).

Austin Gerig Named as SEC’s Chief Data Officer
Press Release
The Securities and Exchange Commission today announced that it has named Austin Gerig as its Chief Data Officer. Dr. Gerig, currently Assistant Director of the Office of Data Science in the Division of Economic and Risk Analysis (DERA), will assume his new position on Feb. 3.

Esma trains beam on investment fund risks; Officials look to regulatory reporting for better grasp of fund leverage and liquidity Esma headquarters in Paris Esma
Philip Alexander –
Over the past year, Europe’s markets regulator has stepped up its use of data with a focus on the asset management industry. The reasons are clear enough. Although assets under management in Europe have doubled in the decade since the financial crisis, these firms have not been subjected to the level of scrutiny directed at banks over the same period – until now.

ESMA Consults on the Sse of No Data in Securitisation Reporting
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published a Consultation Paper on Guidelines on securitisation repository data completeness and consistency thresholds. The consultation’s objective is to help market participants and securitisation repositories to understand ESMA’s expected maximum use of No Data options contained within a securitisation data submission.

Austin Gerig Named as SEC’s Chief Data Officer
The Securities and Exchange Commission today announced that it has named Austin Gerig as its Chief Data Officer. Dr. Gerig, currently Assistant Director of the Office of Data Science in the Division of Economic and Risk Analysis (DERA), will assume his new position on Feb. 3.

SEC’s top Democrat issues warning ahead of departure next month
Patrick Temple-West and Kadhim Shubber – FT
Patrick Temple-West in New York and Kadhim Shubber in Washington YESTERDAYPrint this page4 The senior Democratic member of the US Securities and Exchange Commission has warned that shareholders’ ability to influence corporate boardroom decisions is under threat in comments ahead of his departure next month. Robert Jackson, whose exit has been expected after his term officially ended in June last year, told the Financial Times that updates to shareholder advisory and voting regulations “could make it harder for investors to speak their mind going forward”.

Investing and Trading

Banking’s Problem Child May Be Due Another Tantrum; The speed of the rise in European bond yields suggests trouble ahead for the region’s financial stocks.
John Authers – Bloomberg
Global finance has a problem child. The European banking system was every bit as complicit in triggering the global financial crisis as its American counterpart (leading some to call the whole disaster the “North Atlantic Financial Crisis”). Its weakness subsequently drove the European Union into the sovereign debt crisis, and the world of negative rates and sluggish growth that has followed.

Capital markets dismiss doomsday prediction of ‘full-fledged’ banking crisis in Hong Kong by short-seller Kyle Bass
Kyle Bass, the hedge fund manager who’s been shorting Hong Kong’s currency, said the former British colony faces a banking crisis in 2020, mirroring the struggles of Iceland and Ireland a decade ago.

The Debate Over Whether to Call It QE Is Over, and the Fed Lost
Elena Popina – Bloomberg
Powell says repo ops aren’t stimulus but stocks keep rallying; Concern becomes what happens when the spigot is turned off
In the court of investor opinion, the verdict is in. The Federal Reserve is guilty of quantitative easing. Never mind that Chairman Jerome Powell tells everyone his efforts to shore up funding markets are “in no sense” QE. Try as policy makers may, they’ve lost the ability to convince people that Treasury purchases aren’t at least partially why the Dow Jones Industrial Average is up almost 4,000 points since late August.

Methane Rules Are Good for the Energy Industry; So why don’t more companies support them?
Fred Krupp – Bloomberg
Everywhere you look, it seems there’s another ad trying to persuade people that natural gas is the key to a clean energy future. The American Petroleum Institute (API) is running a seven-figure campaign touting its climate benefits, despite the fact that natural gas is a fossil fuel with a significant carbon footprint.

U.S. to Start Issuing 20-Year Bonds to Fund Rising Deficit
Saleha Mohsin – Bloomberg
Treasury will give more information in Feb. 5 announcement; Mnuchin said Treasury will continue to evaluate other options
The U.S. Treasury will start issuing 20-year bonds in the first half of 2020, expanding its roster of securities as the government seeks ways to fund a ballooning deficit.

Buy High or Low But Not Both; Also Leon Black, startup investing, 1MDB and binary arithmetic.
Matt Levine – Bloomberg
A traditional complaint about index funds is that they are mechanically forced to buy high, so they tend to put more money into overvalued stocks and less into undervalued ones. For one thing, if you put money into a typical market-capitalization-weighted index fund, that fund will go out and buy stocks in proportion to how valuable they are, putting more money into high-priced stocks than low-priced ones. Also, a lot of money is indexed to large-cap indexes, and companies get added to the large-cap index when their price goes up. This means that index funds are particularly susceptible to bubbles and manipulation: If a stock goes up a lot for no reason, index funds will have no choice but to buy it.

Ex-FBI Head Hired by NMC Health to Probe Short-Seller Allegations
Phil Serafino – Bloomberg
Stock climbs after company hires firm for investigations; Freeh’s risk management firm has worked for Wynn, Tether
NMC Health Plc hired former FBI Director Louis Freeh to investigate allegations by short seller Muddy Waters Capital LLC of financial wrongdoing by the hospital operator.


UBS Wealth Bankers Get Dose of Credit Suisse Tonic in Khan Plan
Patrick Winters and Marion Halftermeyer – Bloomberg
Star hire is dismantling units and cutting hundreds of jobs; Lender seeks to maintain wealth-management edge amid shifts
As Christmas approached in Zurich, UBS Group AG’s private bankers were bracing for their own winter storm. The deadline had passed for a 60-day review of the bank’s wealth-management business — the world’s biggest — by its new co-head, Iqbal Khan. Many were anxious about the future of a unit that had lost its edge. Some stayed in their offices until the last moments before the holiday, fearing they might not have jobs in January, according to people familiar with the matter.

Exclusive: HSBC cutting around 100 staff in equities business – sources
Sumeet Chatterjee, Lawrence White – Reuters
HSBC (HSBA.L) is cutting around 100 roles in its equities business with the bulk of the layoffs falling on its continental European trading floors, sources familiar with the matter told Reuters.

Jamie Dimon’s Good Works Shouldn’t Be Hidden; Businesses talk a lot about corporate purpose, so why don’t they provide evidence of how they’re doing in their yearly financial results?
Chris Hughes – Bloomberg
The first annual results season is underway since the Business Roundtable, a U.S. group of top bosses chaired by JPMorgan Chase & Co.’s chief executive officer, Jamie Dimon, clarified the “purpose of a corporation” back in August. It should be a moment for CEOs, including Dimon, to show they’re serious about the commitments they made, and for investors to hold them to account. But no.

Hedge Funds That Bet on Big Trends Are Trying to Bounce Back; Low interest rates and growing competition make it harder to find an edge.
Katherine Burton, Katia Porzecanski – Bloomberg
Greg Coffey’s hedge fund firm, Kirkoswald Asset Management, gained 28% for clients in 2019. That’s a decent profit by any standard, but what makes it more impressive is that Coffey is what’s known as a macro investor. That’s a tough trade to ply.

Morgan Stanley’s Blowout Quarter Fueled by Chinese Baby Formula
Sridhar Natarajan and Max Abelson – Bloomberg
Morgan Stanley’s secret sauce last quarter was baby formula. A Morgan Stanley private equity fund in Asia was a major shareholder in China Feihe Ltd., the nation’s biggest producer of milk for babies. Its public offering in October and subsequent rally brought the fund’s stake to a value of almost $2 billion, leading the bank to recognize performance fees and gains in the quarter.

MUFG Taps Math Expert as CEO to Lead Digital Transformation
Taiga Uranaka and Yuki Hagiwara – Bloomberg
Will replace Mike, who remains head of main banking unit; Japanese bank may accelerate digital efforts, analyst says
Mitsubishi UFJ Financial Group Inc. named Hironori Kamezawa as chief executive officer, turning to a math expert to help Japan’s biggest bank forge a path in the digital era.

Morgan Stanley’s Stock Hasn’t Kept Pace With Record Profits; Some banks are still feeling the effects of the credit crisis more than others
Michael Wursthorn – WSJ
Morgan Stanley MS 6.61% reported record revenue and profit for 2019 and the stock jumped 6.6% on Thursday, its biggest gain in three years. But for some long-term shareholders, that isn’t enough—the stock still trades at a discount to pre-financial crisis levels.

Hedge Funds Return to Net Redemptions in November with $4.7 Billion in Industry Outflows According to Backstop BarclayHedge
After a one-month reprieve, the hedge fund industry returned to net outflows in November with $4.7 billion in redemptions, a reversal from October’s $1.9 billion in industry inflows.


Venezuela’s Demand for Payments in Crypto Pauses on Some Oil Purchases
Lucia Kassai – Bloomberg
Port fees must be paid in sanction-hit Petro starting Monday; Oil buyers are wary about potentially violating sanctions
Some buyers of Venezuelan crude oil have halted purchases after the country started demanding payment of port fees in its failed cryptocurrency.

Australians Stick With Their Banks Through Years of Scandal; Regulators hope new competition will encourage better behavior from giant lenders.
Emily Cadman – Bloomberg
Over the past several years, Australia’s financial industry has been gripped by a series of scandals involving everything from mortgages to investment advice. A sweeping government-ordered inquiry into misconduct lambasted the industry for letting down consumers.

Australia’s bushfire-stricken east welcomes drenching rain
Lidia Kelly – Reuters
Intense thunderstorms with heavy rains dampened bushfires on Australia’s east coast on Friday, to the relief of exhausted firefighters and farmers battling years of drought, and granting a reprieve to the organisers of next week’s Australian Open.

Cracks Are Showing in This Egg-Saturated Chinese Market; Prices of one-month egg futures on the Dalian Commodity Exchange have fallen 45% since November
Lucy Craymer – WSJ
New cracks have appeared in China’s egg market, the result of an uptick in production and a drop in meat prices at the end of 2019.

Cocoa Cartel Is Less Bitter for Luxury Chocolate; A pay rise for West African cocoa farmers will increase costs for global confectioners Lindt, Nestlé and Hershey. Some are better placed to pass them on than others.
Carol Ryan – WSJ
A new method for pricing cocoa will give a better wage to West African farmers. The downside may be more inequality between global chocolate brands.


Brexit day: what happens after January 31?
The Telegraph
Brexit day is fast approaching, with the UK on track to officially leave the European Union (EU) in just a few weeks time. But how did we get to this stage and what is in the Brexit deal?
Here is everything you need to know about the UK’s departure, including what the deal means for UK citizens and the changes to travel, investments and savings we can expect to see post-Brexit.

Bell tolls for Johnson’s Big Ben bong Brexit plan
Laura Hughes – Financial Times
Boris Johnson has admitted defeat in his efforts to crowdfund up to £500,000 to allow Big Ben to chime to mark Brexit on the night of January 31.
The prime minister claimed earlier this week that the government was “working up a plan so people can bung a bob for a Big Ben bong” after he stopped short of authorising public funds to cover the cost of a temporary fix to allow the bell, which has hung silent since 2017 owing to refurbishment work, to ring.

How Brexit Will Affect Travel to the U.K. and Europe
Tariro Mzezewa – The New York Times
The Conservative Party’s victory in December’s general election opened the way for Britain to finally make good on its plans to leave the European Union. Brexit day is slated for Jan. 31. That doesn’t mean everything will change overnight: There will be a standstill period, as Britain and the European Union work out the final details before the end of 2020.

Full Brexit trade deal by end of year ‘just not possible’, EU trade chief says
Jon Stone – The Independent
The EU’s trade boss has warned the UK that a full Brexit trade deal by the end of the year is “just not possible”.
Phil Hogan, Ireland’s EU commissioner, said he was “certainly” not going to be able to meet Boris Johnson’s ambition of having a comprehensive agreement in place by 31 December.

Brexit: UK rules out automatic deportation of EU citizens – Verhofstadt
Frances Perraudin and Jennifer Rankin – The Guardian
The UK government has sought to reassure the EU that its citizens living in the UK will not be deported if they fail to apply for settled status, the European parliament’s Brexit co-ordinator has said. Speaking after a meeting with the Brexit secretary, Steve Barclay, on Thursday night, Guy Verhofstadt said he had raised a number of concerns regarding the status of EU citizens in the UK after it leaves the bloc.

EU’s funding for UK’s poorest areas ‘must be matched after Brexit’
Larry Elliott – The Guardian
The Treasury will need to find almost £2bn a year to fill the hole left when EU funding for some of Britain’s poorest communities ends after Brexit, ministers have been told. A body that represents local authorities in the industrial areas of England, Scotland and Wales said the government needed to match the money currently coming from Brussels and allow for extra EU cash that would have arrived over the next few years.


Jaime Botin Is Sentenced to Prison in Picasso Smuggling Fiasco
Charlie Devereux and Benjamin Stupples – Bloomberg
Santander chairman’s uncle fined $60 million, loses painting; Authorities accuse him of planning to sell painting at auction
Jaime Botin, the uncle of Banco Santander SA Chairman Ana Botin, was sentenced to 18 months in prison and fined 52.4 million euros ($58 million) for smuggling a Pablo Picasso painting out of Spain.

Apple to Release ‘Banker’ Movie After Accusations Led to Delay
Mark Gurman – Bloomberg
Apple Inc.’s “The Banker” movie, whose debut was scrapped over allegations surrounding one of its producers, will get its premiere after all.

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