Japan’s Worst Bond Auction in Years Spurs Global Sell-Off

Oct 1, 2019

First Read

Hits & Takes
By JLN Staff

Here is the list of all the winners of the GlobalCapital Global Derivatives Awards of 2019, including Curve Global as the “European Derivatives Exchange of the Year.”~JJL

G. H. Financials won the Non-Bank Broker of the Year Award 2019 in the FOW and Global Investor Asia Capital Markets Awards.~JJL

Molly McGregor at Axioma is looking for a corporate communications director to join the team.~JJL

At a blockchain and cryptocurrency summit hosted by Fidelity Digital Assets, Galaxy Digital, Token Daily, and FinTank last night, Diogo Monica, co-founder and president of Libra foundation member Anchorage, said that “Libra is ahead of schedule from a technical standpoint…It works. Anchorage is one of the test nodes currently running transactions.”~MR


David Silverman: Is Greed Good?

At MarketsWiki Education’s World of Opportunity event in Chicago, David Silverman, the CEO of Alpha Trading, talks about the natural tendency toward greed in the markets and the struggle against it. Is greed good, as Gordon Gekko opined in the movie “Wall Street,” or is it more likely to lead to the fate of the gluttonous Mr. Creosote in Monty Python’s “The Meaning of Life”?

Watch the video »


Global Commodity Technology Association (GCTA) Launched to Support Physical Commodity Sector’s Modernization Efforts
Global Commodity Technology Association
Motivated by a desire to evaluate and accelerate digitization opportunities in the global agricultural commodity industry, the Global Commodity Technology Association (GCTA) has launched and named financial services industry veteran David Lehman as its Managing Director.

*****David Lehrman was a managing director, research and product development at CME Group and chief economist at the Chicago Board of Trade (CBOT) before its acquisition by CME Group.~JJL


Intercontinental Exchange and MSCI Expand Relationship
Intercontinental Exchange, Inc. and MSCI
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, and MSCI Inc. (NYSE:MSCI), a leading provider of mission-critical decision support tools and services for the global investment community, today announced they have expanded their existing relationship. This expansion includes a long-term extension of ICE’s existing license agreement for listed futures based on MSCI Indexes. In addition, MSCI will license ESG data to ICE Data Services for index construction, while ICE Data Services’ leading fixed income pricing and reference data will be integrated into MSCI’s platform

*****Some organizations play footsie, some expand relationships.~JJL


Sponsored Content

BCause LLC has received a proposal to sell its equity interests in BCause Secure, LLC and its cryptocurrency spot exchange platform (the “Spot Exchange”) as part of the chapter 11 bankruptcy cases of BCause LLC and BCause Mining LLC, which are jointly administered as Case No. 19-10562 and pending before the U.S. Bankruptcy Court for the Northern District of Illinois.

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  • A list of requested information necessary to make a proposal relating to the Spot Exchange.

All potential purchasers of the Spot Exchange shall submit an offer, letter of intent, and term sheet, via email to BCauseAuction@freeborn.com on or before October 11, 2019 at 5:00 p.m. Central.


Monday’s Top Three
Our top read stories of the day on Monday were led by the curious race to be the first to launch physically delivered bitcoin futures, in The Block’s LedgerX cries foul; CFTC says there’s no favoritism. Just a hint: it wasn’t LedgerX. Second was The New York Post’s IEX Exchange may be up for sale after leaving listings business as our top speculative story of the day. Third was Bloomberg’s The Road to Replacing Libor Led This Finance Legend to the Best Barbecue about Richard Sandor and Ameribor


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Lead Stories

Japan’s Worst Bond Auction in Years Spurs Global Sell-Off
Masaki Kondo and Kazumi Miura – Bloomberg
Futures slump the most since 2016 following 10-year note sale; BOJ’s operation change has huge psychological impact, says SBI
Japanese bond traders just had a taste of what it’s like when the nation’s central bank and pension fund aren’t there to support them.

Egg Glut Deepens Problems in Farm Economy; Shares in top egg producer Cal-Maine Foods take a hit, as per-dozen prices decline
Micah Maidenberg and Kirk Maltais – WSJ
Too many hens laying too many eggs are pushing down prices for the consumer staple, hurting sales at producers such as Cal-Maine Foods Inc. CALM -12.03% and adding more stress to the U.S. farm economy.

Credit Suisse Contractor’s Suicide Probed by Zurich Prosecutor
Hugo Miller – Bloomberg
Investigation into banker’s original complaint continues; Credit Suisse COO to step down after hiring detectives
The suicide of a Credit Suisse Group AG contractor amid a spying scandal that has rocked Switzerland’s banking scene is being investigated by Zurich prosecutors and police.

Credit Suisse CEO’s Top Lieutenant Quits in Spy Scandal; Chief operating officer resigns as probe finds no evidence CEO Tidjane Thiam was involved in hiring investigators to follow former wealth-management head
Jenny Strasburg and Margot Patrick – WSJ
A probe ordered by Credit Suisse Group AG CS 0.41% cleared Chief Executive Tidjane Thiam of involvement in a spy scandal that has enveloped the bank, and laid primary blame for the affair on a close deputy, who resigned.

Fed wrestles with role of regulation in repo squeeze; Breakdown in overnight lending exacerbated by banks’ preference for reserves
Brendan Greele and Laura Noonan, Joe Rennison, Robert Armstrong and Colby Smith – FT
The Federal Reserve is looking at whether regulation played a role in the sudden rise in short-term interest rates that rocked markets last month, when the largest US banks, despite being flush with cash reserves, did not lend them out overnight as expected.

Goldman Sachs’s Year of Frantic Upheaval and Same Old Problems
Sridhar Natarajan – Bloomberg
CEO Solomon overhauled team, now investors await new strategy; ‘There’s a bigger transformation occurring’ than at any rival
David Solomon was zipping through the Outer Banks in an Infiniti SUV when he was pulled over on a scenic byway connecting one island to the next. The Goldman Sachs chief was dinged for going too fast.

Credit Suisse clears CEO Thiam of spying on star banker
Brenna Hughes Neghaiwi, Michael Shields – Reuters
Credit Suisse on Tuesday cleared Chief Executive Tidjane Thiam of ordering the botched surveillance of the bank’s former wealth management head Iqbal Khan, but said its chief operating officer had resigned to take responsibility.

Cryptocurrency Startup to Pay $24 Million in SEC Settlement; Initial coin offering that raised billions of dollars allegedly violated investor-protection laws
Dave Michaels – WSJ
A startup behind one of the largest initial coin offerings of the past several years will pay $24 million to resolve a U.S. regulator’s allegations that its deal violated federal investor-protection laws.

Popular in Wisconsin: Cheese, the Packers and…Risky Bonds; State agency facilitated some municipal-market deals now going sour
Heather Gillers – WSJ
Wisconsin has long been famous for its lakes and cheese. Now it is becoming known for risky debt. Wisconsin is home to the Public Finance Authority, an agency that has issued billions of dollars in tax-exempt debt across the U.S. for projects ranging from senior-living communities to student housing. Many projects claim no direct economic ties to Wisconsin.

FCA eyes liquidity reforms to avert replay of Woodford crisis; Rule changes would have big consequences for daily traded investment funds
Siobhan Riding – FT
The UK regulator has fired the starting gun on a shake-up of investment fund liquidity rules following a number of high-profile fund suspensions — a move that could have far-reaching consequences for the future of daily traded investment funds.

Swedbank Estonia Executives Are Fired Amid Laundering Probe
Ott Ummelas – Bloomberg
Danske’s branch enters liquidation as bank exits Estonia; U.S. authorities are investigating Nordic banks for laundering
Three top executives at the Estonian branch of Swedbank AB, including a one-time candidate for central bank governor, have been fired amid an ongoing investigation into a vast money-laundering scandal.

Former Billionaire Eike Batista Convicted for Insider Trading
Peter Millard and Luiza Ferraz – Bloomberg
Brazilian businessman had already been sentenced to 30 years; Prosecutors pursuing more accusations against entrepreneur
Eike Batista, formerly Brazil’s richest man, was sentenced to an additional eight years and seven months of prison time on Monday for insider trading. Batista, 62, had already been convicted for paying $16.6 million to get government contracts as part of a sprawling corruption probe known as Carwash and sentenced to 30 years, which he is serving under house arrest.

ETFs That Hide Their Holdings Are Coming for Your Mutual Fund; After more than 10 years of effort, Dan McCabe’s ActiveShares ETFs are almost ready to launch.
Rachel Evans – Bloomberg
Dan McCabe is on a quest to transform your finances. The chief executive officer of Bedminster, N.J.-based Precidian Investments has a new way to invest that could make thousands of mutual funds obsolete, and he’s persuaded the likes of BlackRock Inc. to license the idea.

Appellate court puts freeze on hearing requiring live testimony from CFTC commissioners
Brad Rosen, J.D.
In yet another stunning development in a CFTC enforcement action against Kraft Foods, the CFTC has scored a victory of sorts, as a three-judge panel from the Seventh Circuit Court of Appeals granted its motion for a stay of proceedings. As a result, the district court struck an evidentiary hearing scheduled for October 2, where Commission Chairman Heath Tarbert, Commissioners Dan Berkovitz and Rostin Behnam, and Division of Enforcement Director James McDonald were expected to provide live testimony to justify and explain having made public statements despite a gag provision regarding a Kraft Foods/Mondelez International motion for contempt and sanctions. A status hearing in the lower court for September 27 was also cancelled. However, the CFTC’s victory may have come at a cost, as the appellate court has indicated that all papers in this case may become of public record, a development the agency is likely to strenuously oppose (CFTC v. Kraft Foods Group, Inc., September 26, 2019, per curiam).

Fiscal crises biggest risk to global business, WEF says
The possibility of a fiscal crisis is the biggest risk to doing business globally, according to a survey of World Economic Forum business leaders published on Tuesday, though there were strong regional differences in views of the biggest risk.

Me and My Whistle-Blower; Deutsche Bank. North Korea. The Intelligence Committee’s investigation of the president. Again and again, one man has taken his trove of secret documents — and uncanny nose for scandal — to the center of the news.
David Enrich – NY Times
One sunny Wednesday in February, a gangly man in a sports jacket and a partly unbuttoned paisley shirt walked into the Los Angeles field office of the F.B.I. At the reception desk, he gave his name — Val Broeksmit — and began to pace anxiously in the lobby.

Exchanges, OTC and Clearing

Trading Overview in September 2019 & First Half of FY2019 (April to September); Japan Exchange Group released Trading Overview in September 2019 & First Half of FY2019 (April to September)
Cash Equity Market – In the first half of FY2019, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 2.4139 trillion.
Derivatives Market – In the first half of FY2019, total derivatives trading volume was 175,106,350 contracts, the third-highest trading volume over the same period.

Announcement of Decision on Demand for Cash-Out pertaining to Shares of Tokyo Commodity
Exchange, Inc. and Approval of the Demand for Share Cash-Out by the Company
Japan Exchange Group, Inc. (“JPX”), with the intention of acquiring all of the shares of common stock (the
“Common Stock Subject to the Cash-Out”) and non-voting stock (the “Non-Voting Stock Subject to the CashOut”; hereinafter, the “Common Stock Subject to the Cash-Out” and the “Non-Voting Stock Subject to the Cash-Out” shall be collectively referred to as the “Stock Subject to the Cash-Out”) of Tokyo Commodity Exchange, Inc.

Appointment of Director and Executive Officers, etc.
We hereby announce that Japan Exchange Group, Inc. (JPX) has appointed a director and executive officers,
effective on October 1, 2019, as follows.

Deletion of Component Issues for the TSE Mothers Index
Due to a section reassignment, the following deletion of components for the TSE Mothers Index was announced.

Meet us at the ALFI Leading Edge Conference
The Association of the Luxembourg Fund Industry (ALFI) is delighted to organise this Leading Edge conference on collateral management for the practitioners of the buy-side.

Equity Total Return Futures and Basket Trades of Equity Total Return Futures – Update on introduction and additional information
The Management Board of Eurex Deutschland took the following decisions with effect from
7 October 2019:

DekaBank on the use of Inter-Product Spreads; Interview with Arndt Fassbender, Salestrader ETD, DekaBank
Can you provide some color on the strategies investors deploy to take advantage of market opportunities from spread trading in futures?

DGCX Registers Highest Ever Quarterly Volumes – Exchange Breaks All-Time Quarterly Volumes Record
The Dubai Gold and Commodities Exchange (DGCX) has continued its record-breaking performance this year, registering its best quarter since inception with over 7.98 million contracts traded in the third quarter of 2019, with over 2.37 million contracts traded in September, valued at USD 133 billion.


Royal London Asset Management deploys OEMS from TradingScreen; Royal London will use TradingScreen’s OEMS for trading across its £130 billion portfolio.
Hayley McDowell – The Trade
UK investment firm Royal London Asset Management has implemented a multi-asset order and execution management system (OEMS) from TradingScreen.

NatWest Markets shares trade axes with buy-side clients via ipushpull
Hayley McDowell – The Trade
UK data sharing platform provider ipushpull has said NatWest Markets is using its system to share trade axes with buy-side clients.

Revolut’s losses double as fintech unicorn pushes for global expansion
Ryan Browne – CNBC
British financial technology start-up Revolut’s losses doubled in 2018, the firm said Tuesday, as the company embarks on an aggressive global expansion.
The London-headquartered firm recorded a £32.8 million ($40.3 million) net loss on revenues of £58.2 million for 2018. That was more than double the £14.8 million loss it posted a year earlier, while revenue climbed 354%.

Council Post: Three Trends Supporting The Rise Of Financial Technology Companies
Swish Goswami – Forbes
The increase in the power of technology, greater and more equal access to information and other factors have fostered unprecedented growth in the financial technology (fintech) industry. One report (via Globenewswire) estimated that the market would be worth $305.7 billion by 2023. Much of the innovation I’ve seen in the fintech space is coming from non-bank entities, such as venture-backed startups. In fact, research from CB Insights (via CNBC) found that VC-backed fintech companies raised $39.6 billion in 2018, which is a 120% increase from the previous year.

FinTech Abu Dhabi Announces New Strategic Partnership With The UAE Banks Federation
FinTech Abu Dhabi (“FinTech AD”), MENA’s leading FinTech festival, is pleased to welcome the UAE Banks Federation (“UBF”) as the Strategic Industry Partner of the Festival. FinTech AD is organised by Abu Dhabi Global Market (“ADGM”) – the award-winning international financial centre in Abu Dhabi and powered by Unbound – a global innovation platform.

PayPal is first foreign company to win Chinese payments licence; US group acquires 70% of Gopay, beating Visa and Mastercard to market
Yuan Yang – FT
PayPal has become the first foreign company to acquire a payments licence in China, after buying a majority stake in a Chinese payments group.


The World’s Most-Used Cryptocurrency Isn’t Bitcoin
Olga Kharif – Bloomberg
What’s the world’s most widely used cryptocurrency? If you think it’s Bitcoin, which accounts for about 70% of all the digital-asset world’s market value, you’re probably wrong. While concrete figures on trading volumes are hard to come by in this often murky corner of finance, data from CoinMarketCap.com show that the token with the highest daily and monthly trading volume is Tether, whose market capitalization is more than 30 times smaller.

Japanese Messaging App LINE Positioning Itself As Leader In Blockchain and Crypto Space
Darryn Pollock – Forbes
Enterprise blockchain and cryptocurrency adoption has been peeking in 2019 with news constantly filtering through of major Western powers such as IBM, Microsoft, Amazon, and other tech companies exploring space.

TalkTalk hacker Elliott Gunton: Cryptocurrency auctioned by police
BBC News
A police force has auctioned off more than £240,000 of cryptocurrency confiscated from a teenage hacker. The Eastern Region Special Operations Unit sold the stash, which included Bitcoin, Ripple and Ethereum, in what it said was a first for UK police. It is understood the currency came from Elliott Gunton, of Old Catton, near Norwich, who received a jail sentence for hacking internet provider TalkTalk.

California BitLicense Exposes Fault Lines Among Cryptocurrency Advocates
Andrea Tinianow – Forbes
There is a rift emerging in the crypto sector. California’s AB 1489 (the “CA Act”) which is modeled on the Uniform Law Commission’s (ULC’s) Uniform Regulation of Virtual Currency Businesses Act (the “Model Act”) seeks to regulate companies engaged in virtual currency business activity. Not everyone is on board.

Cryptocurrency Startup to Pay $24 Million in SEC Settlement
Dave Michaels – WSJ
A startup behind one of the largest initial coin offerings of the past several years will pay $24 million to resolve a U.S. regulator’s allegations that its deal violated federal investor-protection laws. The civil settlement announced Monday represents one of the biggest fines since the Securities and Exchange Commission began a crackdown on ICOs in 2017. SEC officials say many such deals evaded federal securities laws because the coin issuers didn’t provide investors with required disclosures meant to inform them about a business’s finances and operations.

Don’t ask for permission, hire good lawyers and then ask for forgiveness
Larry Cermak – The Block Crypto
The SEC announced yesterday that it has settled charges against Block.one, the issuer of EOS, for conducting an unregistered ICO in 2017 – 2018. After allegedly raising $4.1 billion, the firm has agreed to pay a $24 million penalty for selling unregistered securities. That’s a slap on the wrist?—?only 0.6% of the total raise.

EOS Maker Block.One Settles With SEC Over Unregistered Securities Sale
Nikhilesh De – Coindesk
EOS maker Block.One must pay $24 million in penalties for conducting an unregistered securities sale, the U.S. Securities and Exchange Commission (SEC) announced Monday evening.

This Crypto-Savvy Bank Is Building Bandwidth for Bitcoin Retail Payments
Leigh Cuen – Coindesk
The German bank partially owned by blockchain firms Nimiq, TokenPay and the Litecoin Foundation is planning to process cryptocurrency payments for retailers starting in 2020.

CFTC files charges against alleged $7M bitcoin fraudster
The Block Crypto
The U.S. Commodity Futures Trading Commission (CFTC) has charged Jon Barry Thompson with fraud, alleging that in 2018 he fraudulently convinced two clients to send approximately $7 million to fund bitcoin purchases he never actually made. The CFTC is alleging that Thompson never delivered the bitcoins to his clients, and instead, “sent virtually all of the money to third parties without first receiving any bitcoin in return.”

Crypto firm Longfin ordered to pay SEC $6.8M in penalties
The Block Crypto
Cryptocurrency firm Longfin Corp. has been ordered by a federal court in New York to pay the U.S. Securities and Exchange Commission (SEC) about $6.8 million in penalties and disgorgement for conducting a fraudulent public offering and falsifying revenues.

Rakuten, SBI, Monex Launch Japan STO Association: Official
Helen Partz – Cointelegraph
Six major Japanese brokerage firms such as SBI Securities and Rakuten Securities officially established Japan Security Token Offering (STO) Association. The four other members of the new association include Nomura Securities, Daiwa Securities, Kabu.com Securities and Japan’s financial giant Monex, who officially announced the news on Oct. 1.

UK Police Auction Off $294,000 in Stolen Crypto From EtherDelta Hack
Daniel Kuhn – Coindesk
UK police auctioned off more than $294,000 of cryptocurrency confiscated from the teenage hacker of EtherDelta and TalkTalk. The Eastern Region Special Operations Unit (ERSOU) worked with Wilsons Auctions to sell the digital assets, including bitcoin, ripple and ethereum, in what is said to be the unit’s first such auction.

Ethereum’s Istanbul Upgrade Will Break 680 Smart Contracts on Aragon
Christine Kim – Coindesk
A system-wide upgrade arrived on ethereum’s Ropsten test network on Monday. And while “Istanbul” should ultimately introduce network efficiencies, the testnet launch won’t be smooth sailing for everyone.

Switzerland’s FINMA boss says Facebook’s Libra handled transparently
Switzerland is more worried about cryptocurrency projects developing outside official scrutiny than he is about Facebook-conceived Libra, which is being handled transparently, the head of Swiss financial supervisor FINMA said on Tuesday.


Midwest’s Faltering Economies Will Spread Pain Nationwide; Financial strain is increasing for farmers and manufacturers in the heartland
Lauren Silva Laughlin – WSJ
With the fortunes of flashy young companies such as We Co. and Peloton stealing headlines, it may be easy to forget about the worsening economic condition of flyover country, USA. That would be a mistake.

Rep. Chris Collins, Charged in Insider-Trading Case, Resigns; Republican congressman from New York faces federal charges involving his son and a pharmaceutical company
Corinne Ramey – WSJ
U.S. Rep. Christopher Collins of New York resigned Monday ahead of his expected guilty plea to charges related to an insider-trading case involving his son and an Australian biotechnology company.

Fannie and Freddie to be allowed to keep more capital; US Treasury will no longer grab all profits from nationalised mortgage giants
Kiran Stacey – FT
The Trump administration has taken the first step towards what it hopes will be the eventual privatisation of the two biggest mortgage guarantors in the US, allowing Fannie Mae and Freddie Mac to keep millions of dollars’ more of their own profits.

China Buys 1 Million Tons of U.S. Soy After Tariff Waivers
Bloomberg News
Chinese companies purchased U.S. soybeans after the government issued more waivers for retaliatory-tariff free imports, according to people familiar with the situation.

As Draghi leaves ECB, his opponents get chance to turn the tables
Francesco Canepa – Reuters
Mario Draghi leaves the European Central Bank at the end of the month, and that may give opponents of his ultra-easy monetary policy a chance to shift the tone of the debate at the top of the institution.

Britain to introduce a Magnitsky law after Brexit: foreign minister
Britain will introduce laws after it leaves the European Union to freeze assets of those deemed responsible for human rights abuses, foreign minister Dominic Raab said on Sunday.

Saudi Crown Prince Says Iran War Would Bring Down Global Economy
Hailey Waller – Bloomberg
Oil to hit ‘unimaginably high numbers’ if countries go to war; Denies ordering Khashoggi’s murder, but takes responsibility
Saudi Crown Prince Mohammed Bin Salman warned that war between his country and Iran would lead to a “total collapse of the global economy” and should be avoided.

Trump Hints at Civil War But He Launched a War on Facts; It’s not just the president’s phone calls to Ukraine that are a problem. Now there’s more.
Timothy L. O’Brien – Bloomberg
The president of the United States suggested on Twitter on Sunday night that the country may have to endure a civil war should he be impeached and removed from office. So a timeline detailing how Donald Trump and the rest of us got to this point is probably in order.


Supercapital Ltd has entered administration
Supercapital Ltd (Supercapital) is authorised by the FCA to provide payment services under the Payment Services Regulations 2017 (the PSRs).

CFTC Orders Chicago Trading Firm and Its Co-Founder to Pay $2.5 Million in Penalties for Spoofing and Manipulative Trading Scheme
The U.S. Commodity Futures Trading Commission announced today the filing and settling of enforcement actions against Hard Eight Futures, LLC and Igor Chernomzav for spoofing – bidding or offering with the intent to cancel the bid or offer before execution – and for engaging in a manipulative and deceptive trading scheme. Hard Eight is a proprietary trading firm located in Chicago, Illinois. Chernomzav is a founder, partner of, and trader for, Hard Eight, and resides in Monsey, New York.

CFTC Charges Three Individuals with Fraudulently Soliciting U.S. Customers in Binary Options Scheme
The U.S. Commodity Futures Trading Commission today issued three orders filing and simultaneously settling charges against three individuals who each fraudulently solicited customers in the United States to enter into illegal, off-exchange binary options transactions through internet websites using fictitious trade names such as “BinaryBook” and “BigOption.” The individuals are Liora Welles of California, Yair Hadar of Florida, and Shira Uzan of California.

CFTC Charges Former Registrant with Making False and Misleading Statements During a CFTC Investigation
The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Rafael Novales for making false and misleading statements of material fact to CFTC staff during an investigation by the agency’s Division of Enforcement.

CFTC Charges Former Floor Broker with Misappropriating Client Funds, Registration Violations, and Making False Statements
The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Coby Tresner of Andover, Kansas, for failing to register with the CFTC as an associated person and as a commodity trading advisor as required, misappropriating client funds, and making false or misleading statements to the CFTC during its investigation into his misconduct.

CFTC Orders Global Agribusiness to Pay $175,000 for Failure to File Timely Reports
The U.S. Commodity Futures Trading Commission today issued an order filing and simultaneously settling charges against Intergrain S.A., for failing to file timely CFTC Form 204 Reports. The CFTC order requires Intergrain to pay a $175,000 civil monetary penalty and to cease and desist from committing further violations of CFTC Regulation 19.01.

SEC Orders an Additional 16 Self-Reporting Advisory Firms to Pay Nearly $10 Million to Investors; Orders Firm That Did Not Self-Report to Pay $300,000 Penalty for Disclosure Failures
The Securities and Exchange Commission today announced settled charges against 17 investment advisers for disclosure failures regarding their mutual fund share class selection practices. The firms include 16 advisers that self-reported as part of the Division of Enforcement’s Share Class Selection Disclosure Initiative and one adviser that did not self-report and was ordered to pay a $300,000 civil penalty.

SEC Charges Hedge Fund Adviser and Top Executives With Fraud
The Securities and Exchange Commission today charged SBB Research Group, LLC, a Chicago-area hedge fund adviser and its two top executives with a multi-year fraud that inflated fund values.

ESMA publishes translations for Prospectus Guidelines on risk factors
The European Securities and Markets Authority (ESMA) has issued today the official translations of its Guidelines on risk factors under the Prospectus Regulation.

ESMA prepares for new responsibilities in 2020 ESMA 2020 Work Programme
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published its 2020 Work Programme (WP), setting out its priorities and areas of focus for the next 12 months in support of its mission to enhance investor protection and promote stable and orderly financial markets.

Prudential fined £24m over lack of transparency in annuities sales; UK insurer rebuked over using large bonuses and spa breaks as staff incentives
Josephine Cumbo – FT
Prudential, the UK insurer, has been fined nearly £24m by the City watchdog for failing to treat tens of thousands of retiring customers fairly after incentivising sales staff with large bonuses and spa breaks.

UK regulator calls for clearer warnings in wake of Woodford case; Equity Income fund investors were unaware of their ‘liquidity risk’ exposure, FCA says
Siobhan Riding – FT
The UK regulator has called for investors to be given clearer warnings about the liquidity risks posed by funds investing in hard-to-sell assets following the suspension of Neil Woodford’s flagship fund.

FCA says Woodford investors didn’t know the risks they were taking
Daniel Grote – Citywire
City regulator the Financial Conduct Authority (FCA) is considering changes to the rules governing how funds invest in unquoted and hard-to-trade stocks following the suspension of Neil Woodford’s flagship Woodford Equity Income fund.

UK Regulator Introduces New Liquidity Rules For Open-Ended Funds(Alliance News) – The UK financial regulator confirmed Monday it will apply new rules to some …
The UK financial regulator confirmed Monday it will apply new rules to some open-ended funds investing in “inherently illiquid” assets following a number of high-profile liquidity crunches at funds.

FCA reveals new protections for investors as Woodford saga rumbles on; Sky’s Ian King outlines the background to the new approach to illiquid assets being taken by the Financial Conduct Authority.
Ian King – Sky News
Do you know what investments are held by the funds to which you have committed your hard-earned savings?

Investing and Trading

Market makers not liable for US equity market volatility, says Citadel Securities; While many market participants are quick to point to market makers in times of market volatility, Citadel Securities says electronic liquidity providers are not to blame.
Hayley McDowell – The Trade
Recent bouts of volatility in the US equity market were not caused by technology-driven market makers, according to a thorough examination of depth-of-book data carried out by Citadel Securities.

Tech IPOs Aren’t Working for the Masses; Even before WeWork’s debacle and Peloton’s misfire, most new tech debuts were struggling
Dan Gallagher – WSJ
The market for initial public offerings has taken a hit, and it would be easy to lay the blame on an overhyped office-sharing outfit and a maker of $2,000 exercise bikes.

Palladium prices hit record as car industry faces tougher rules; Demand for precious metal, used in catalysts, pushes gains for year to 33 per cent
Henry Sanderson – FT
Palladium prices rose to a record as expectations mounted of a supply squeeze driven by stricter emissions standards in the car industry.

WeWork to formally withdraw IPO filing; New co-CEOs aim to refocus business after public listing process runs aground
Mamta Badkar, Andrew Edgecliffe-Johnson and Joe Rennison – FT
WeWork has formally withdrawn its plan for an initial public offering, signalling the need to reduce its losses and revamp the business before making a new attempt at a public market listing.

Investors Flock to Options Bets
Gunjan Banerji – The Wall Street Journal
Options trading is flourishing as investors struggle to make sense of a tumultuous period in the markets and the economy. Assets under management for mutual and exchange-traded funds that use options strategies have jumped 24% this year—on track for one of the biggest advances of the past decade, according to Morningstar data. They hit a record $22 billion at the end of August.

Negative interest rates, by country
Thomas Hale – FT
Today, Jean Pierre Mustier, chief executive of Italian lender UniCredit, called for banks to stop complaining about negative rates.


Liontrust completes acquisition of Neptune Investment Management; Neptune founder Robin Geffen to lead new Liontrust global equity team following closure of acquisition.
John Brazier – The Trade
Liontrust Asset Management has announced the completion of its acquisition of Neptune Investment Management in a deal valued at approximately £40 million.

Neil Woodford is now a Patient fund manager in name only; Investment trust is leaving him little to do but sell holdings and repay debt
Matthew Vincent – FT
Neil Woodford used to be the biggest name in fund management. Now he seems to be a fund manager in name only. On Monday the board of Woodford Patient Capital Trust talked about the “decisive and proactive measures” it had taken with the aim of “protecting shareholders” from Mr Woodford’s investment choices — and said it “remains in dialogue with other potential managers”. It was tantamount to having a security guard stand over him while his successor measured up for new curtains.

Top Credit Suisse executive resigns after spying affair; Chief operating officer steps down over surveillance of bank’s outgoing head of wealth management
Sam Jones, David Crow, and Daniel Shane – FT
The chief operating officer of Credit Suisse resigned on Tuesday following a corporate espionage scandal, as it emerged that a security consultant involved in the surveillance effort had committed suicide.

Franklin Templeton launches range of five liquid hedge fund strategies; In partnership with alternatives boutique K2 Advisors
Ellie Duncan – Investmentweek
Franklin Templeton Investments has launched a new fund range that will offer European investors access to liquid hedge fund strategies in a UCITS format.

UBS top economist reinstated after ‘pig’ row suspension; Paul Donovan had been put on leave in June for his comments over swine fever
David Crow – FT
A senior economist at UBS who was suspended after he made controversial remarks relating to a bout of swine fever in China is returning to work, according to two people familiar with the matter.


Argentina sifts through ‘fantasy land’ bond proposals; Lenders hoping to avoid enforced losses may be heading for disappointment
Benedict Mander and Colby Smith – FT
Argentina’s creditors holding out hope that they can avoid losses on the country’s bonds are “living in fantasy land”, one big investor said, reflecting tensions over the government’s reorganisation of its massive debt pile.

Hong Kong remains China’s gateway to global finance; Shanghai has been curtailed by strict curbs on capital flows
Hudson Lockett – FT
Addressing a conference last week in London, David Schwimmer, chief executive of the London Stock Exchange, told attendees that in the long term, “we view Shanghai as the financial centre for China”. It was a pointed, public rebuke to the only other man onstage: Charles Li, chief executive of Hong Kong Exchanges and Clearing, and architect of an unsolicited bid to buy the British exchange and data group.

South Africa’s No. 1 Platinum Union Seeks Wage Dispute Mediation
Paul Burkhardt – Bloomberg
AMCU refers deadlocked talks with Sibanye and Amplats to CCMA; Union says still possible to reach agreement without a strike
South Africa’s biggest platinum mining labor union has referred a wage dispute with both Anglo American Platinum Ltd. and Sibanye Gold Ltd. to outside mediators.

Norway Unexpectedly Withdraws Cash From Massive Wealth Fund
Mikael Holter and Sveinung Sleire – Bloomberg
Surprise withdrawal follows drop in oil price to 7-month low; Highlights sensitive budgets amid record oil-income spending
Norway unexpectedly took almost $400 million from its sovereign wealth fund in August, marking the first such withdrawal in over a year as western Europe’s biggest petroleum producer takes advantage of its enormous piggy bank amid a decline in oil prices.

Hong Kong police fire water cannon, tear gas as protests spread
Jessie Pang, Donny Kwok – Reuters
HONG KONG (Reuters) – Hong Kong protesters threw petrol bombs and police fired tear gas in street battles across the city on Tuesday, posing a direct challenge to Chinese President Xi Jinping on the 70th anniversary of the founding of the People’s Republic.

Saudi Aramco plans $75bn dividend in IPO push; Company will also cut global expansion plans to make float more appealing to investors
Anjli Raval – FT
Saudi Arabia has boosted efforts to woo investors to the long-awaited stock market listing of Saudi Aramco by announcing an annual dividend of $75bn while scaling back global expansion plans at the oil company to increase cash flow.


Crispin Odey dismisses talk of hedge fund influencing Brexit; Donor to PM’s leadership campaign stands to gain if pound falls in the event of no-deal
Laurence Fletcher – FT
Hedge fund manager Crispin Odey has dismissed as “crap” suggestions that he donated to Boris Johnson’s leadership campaign in order to profit from a possible no-deal Brexit triggered by the prime minister.

What Decarbonization Means for Cows, Steel and Cement
Reed Landberg and Jeremy Hodges – Bloomberg
What is “decarbonization”? It’s an approach to climate change both sweeping and incremental: working industry by industry, process by process, to bring greenhouse gas emissions down as close to zero as possible. Some challenges are familiar: switching power plants to renewable sources and filling roads with electric vehicles. A look at agriculture, which accounts for 25% of emissions, along with cement and steel, which combined account for 14%, gives a sense of less well-known tasks.

Boris Johnson denies Brexit customs plan for Irish border; UK is due to submit formal proposals for alternative to backstop on Wednesday
Laura Hughes – FT
Boris Johnson has rejected reports that Britain will propose customs clearance posts on either side of the Irish border as an alternative to the so-called backstop.

Boris Johnson: Irish customs checks will be ‘reality’ after Brexit
BBC News
Boris Johnson says the “reality” of Brexit is there will need to be customs checks on the island of Ireland after the UK leaves the EU. But the PM rejected claims that would effectively mean a hard border, in the form of a series of customs posts set five or 10 miles back. He told BBC Radio 4’s Today programme: “A sovereign united country must have a single customs territory.”

Johnson to ‘know by weekend’ whether he has chance of Brexit deal
George Parker, Sam Fleming, Mehreen Khan, and Arthur Beesley – FT
Boris Johnson will on Wednesday launch his bid to secure a Brexit deal, with allies admitting they could know “by the weekend” whether the EU will engage with a detailed plan to resolve the vexed Irish border issue. Mr Johnson’s allies say they expect Britain to submit to Brussels its formal proposals for a Brexit deal — in legal text — after the prime minister closes the Conservative party conference in Manchester.

Brexit uncertainty hangs over new ESMA powers
Uncertainty over the outcome of Brexit negotiations may impact new powers granted to the pan-European regulator ESMA, which has laid out its plans to ensure an EU-27-wide approach to handling the fallout of the UK’s departure from the European Union.


Barclays bank exec beat wife to death with crowbar after she called him ‘useless’
Tamar Lapin – NY Post
A British Barclays bank executive “snapped” and beat his cancer-ridden wife to death with a crowbar after she called him “useless,” his lawyer said on Monday.

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Past Newsletters

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