First Read

BlockChain, BlockChain Wherefore Art Thou? (Progress, that’s wherefore!)
Carl Gilmore, President, Integritas Financial Consulting
Carl Gilmore There has been a lot of ink spilled lately about bitcoin and the underlying technology, blockchain, that makes digital currencies (if that is what they are) possible. At the risk of spilling a bit more, I would like to end my week as guest editor talking about the possibilities and challenges of this new and potentially disruptive technology. Since I do not profess to understand a lot of the math underlying the concepts, and since I believe there are people out there in the world that do understand it, I’ll limit my comments to those of a practitioner.

What is blockchain exactly? A blockchain is a public or private ledger within a network that records all of the transactions that have ever been executed with respect to an exchange of value. Bitcoin is a type of blockchain technology and blockchain could also be something else. The blockchain constantly grows as more transactions, or blocks, are added. The blocks get added to the chain in a linear, chronological order. Each computer, known as a node, in a network gets a copy of the blockchain, which allows for distributed validation of the transaction (block). Everyone gets a copy of the transaction so the complete record is known by all. When a new computer/node joins the network it gets a complete historical copy of the entire chain and thus is instantly up to speed. Since blocks are extremely difficult to generate mathematically, and since a blockchain is linear, in order to change one, you would have to change each and every previous block, which makes the system very resistant to tampering.

One interesting aspect of this technology is the ability to form “smart” assets or “smart” contracts. A smart contract comprises an IF THEN statement and an accessible data source. For example, IF June e-mini S&P futures trade over 1980.50 for eight minutes THEN sell three June Treasury Bonds. Other applications are also possible. The power of this technology is that it is completely programmable and limited only by our imagination.

The idea of a publicly (or privately) distributed ledger isn’t new. Apparently one of the first true public ledgers was carved out of giant stones in a village on an island in the south Pacific. Every time an economic exchange took place, the villagers would record the transaction by carving it into the stones in the center of town. Those stones served as an immutable (and immovable!) public record. Blockchain serves the same function.

So if blockchain functions as an immutable (and philosophically immovable) public memory, the potential uses could be endless. It’s useful for insurance, titles, patents, copyrights, artists, lawyers, accountants, and of course financial services.

But, what are the challenges? The single biggest challenge (of which, admittedly, there are many) is inside our collective heads. By that I mean the ability for businesses, industries, governments and everyone else to conceptualize and grasp the potential of this disruptive technology. I’ve also heard some say that there are insurmountable challenges with this technology, but that is not even close to being true. No problem is insurmountable. For if it were, we would still be recording our transactions on giant stones in the town square.

Frank Zappa summed it up when he said “without deviation from the norm, there is no progress.”
The future is coming fast and there isn’t a darn thing anyone can do about it.

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John and company, I want to thank you for letting me guest host the newsletter this week. It was great fun. Readers – thank you as well for indulging me this week. I look forward to seeing many of you in Boca Raton next week at the Futures Industry Association Boca conference. Travel safely and have a great weekend.

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Sponsored Content
SpiderRock

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Today’s Derivatives Industry: Q&A with Walt Lukken
FTI Strategic Communications
One of the derivatives industry’s most significant gatherings takes place next week when the Futures Industry Association convenes its annual spring convention in Boca Raton, Florida. It comes amid debates over the timing of what will be only the second Federal Reserve interest hike since the markets began convulsing in 2008. That is a stark indication of the depth of dislocation in the economy that the financial crisis caused.

Market stability and regulation are still topics of heated discussion today, and will be at Boca. Another prominent topic will be the future structure of the industry as new technologies and innovations create opportunities for investing and hedging but also pose regulatory challenges.

FTI Consulting spoke with Walt Lukken, FIA’s President and CEO, to hear his views on the topics that will be discussed at Boca. Walt, a former Acting Chair of the U.S. Commodity Futures Trading Commission, also shared his thoughts on how industry participants can take advantage of the opportunities at Boca to network with peers, make news about their own firm and have a voice in shaping the industry.
goo.gl/dQlIXl

***CG – See everyone there!

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Why Are Equities Moving In Tandem With Oil?
Erik Norland, CME Group
The S&P 500 has been 70% correlated with day-to-day movements in West Texas Intermediate Crude Oil (WTI) so far this year. This is the highest correlation over any rolling 30-day period since 2012 (Figure 1). The one-year rolling correlation has risen sharply to its highest level since 2013.
goo.gl/g5QO06

***CG – Who knows why? Take advantage of it though.

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UK and Ireland’s fintech funding scene lags
finextra.com
Is London’s much-lauded fintech scene overhyped? New figures suggest that the value of UK and Ireland financial technology investments grew last year at a far slower rate that the general tech scene.
bit.ly/1Lglbcj

***CG – I’d blame it on the pubs.

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When do you want your risk, now or later?
The Reformed Broker
Volatility is not the true risk for investors preparing for retirement. It is an unavoidable permanent feature of the investing process. The true risks are the permanent loss of capital and the possibility of running out of money.
goo.gl/UxYCuc

***CG – There is risk getting out of bed in the morning.

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Girl scout power
Gillian Tett, FT.com
In some respects, the prevalence of so many girl scout alums in the halls of power may simply be due to correlation. The movement boomed in postwar 20th-century America, since it was one of the few after-school activities available to girls. Today, there are 59 million girl scout alumnae, with one in every two adult women having been a girl scout at some point. But I suspect there is causation in this pattern too. As it happens, I was a keen brownie and girl guide myself (the British equivalent of girl scouts) and, while I never gave much thought to this before, the experience was crucial in terms of building self-confidence.
on.ft.com/1RbQ11P

***CG – I’ve great respect for the girl scouts and what they teach future women leaders.

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OIC: 5 Options Greeks for Next-Level Traders
March 15, 2016, 3:30 pm CST
What you’re seeing with your options quotes is only half the story. When you understand the value of options Greeks – and the benefit they can bring investors and traders – you’ll be taking the next steps towards a better understanding of how options can work for you.
goo.gl/yCc2Jb

***CG – Vega, theta, gamma – oh my…

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Thursday’s Top Three
The top clicks went to the home team yesterday. Atop the leaderboard was the link to storystylecreative, where readers clicked over to vote for the wedding photo of John Lothian News head of video production Patrick Lothian. Good luck Patrick and Amanda. Number two on the click list was the link to our special report on the Nasdaq-ISE deal, ISE Getting a New Parent. Coming in third was Francine McKenna’s piece on why Citadel opposes IEX’s stock exchange application. Stay tuned to John Lothian News as later today we will publish another look at equity market structure and IEX in an exclusive interview with Keith Ross, CEO of rival ATS PDQ.

Lead Stories

Professor to Wall Street: You’re Doing Swaps Accounting Wrong
Matt Leising – Bloomberg
The world’s largest banks are incorrectly accounting for their swaps trades, locking up money that could otherwise be paid out as dividends to their shareholders, according to a bold new academic paper.
bloom.bg/1pBh6p1

***CG – As esoteric as this subject is, it is worth reading the article. Take note of the point about treasurys if you are an FCM CFO.

SEC urged to beef up trading safeguards
By Nicole Bullock and Joe Rennison in New York, FT.com
Vanguard the asset manager and high-speed trader Virtu Financial are among a group of financial industry heavyweights urging the US Securities and Exchange Commission to help avoid a repeat of the chaotic trading that rocked markets last August. The group of 18 financial firms said in a letter on Thursday that there was broad agreement on ways to improve measures meant to safeguard investors in times of stress.
on.ft.com/1YE0iJP

***CG – The wolf guarding the henhouse comes to mind.

Nasdaq Just Took a Step Toward Challenging the Flash Boys Bourse
Bloomberg
Nasdaq Inc.’s deal to acquire Deutsche Boerse AG’s International Securities Exchange gives it another chance to bring a trading speed bump to the U.S. stock market, a move that would put it in direct competition with IEX Group Inc.’s proposed public venue.
bloom.bg/1pBi5p8

ICE Would Keep London Stock Exchange If It Bought LSE Group
Bloomberg Business
Intercontinental Exchange Inc. has decided it would keep London Stock Exchange Group Plc’s namesake equity market if it successfully buys the parent company, according to people familiar with the matter, a reversal of strategy from the last time ICE purchased a European stock exchange.
bloom.bg/1LgnID5

***CG – Don’t underestimate Sprecher.

The World’s Biggest Hedge Fund Hires Former Apple Exec As Co-CEO
Forbes
In a move that will reverberate on Wall Street, Bridgewater Associates, the world’s biggest hedge fund, told its clients on Thursday that it had hired technologist Jon Rubinstein as its co-chief executive officer.
onforb.es/1YE1xsv

**CG – And fintech moves to a new level.

Mizuho Securities CEO John Koudounis resigns
Reuters
Mizuho Securities USA, the investment banking unit of Japan’s Mizuho Financial Group, said Chief Executive John Koudounis resigned to pursue other opportunities. Koudounis joined Mizuho’s U.S. unit in 2008 as head of its fixed-income division and was appointed CEO in 2010.
reut.rs/1YE4kBY

Deutsche Bank says first quarter challenging for entire sector
Reuters
Deutsche Bank (DBKGn.DE) has warned that volatile financial markets in the first quarter, normally a strong season for banks, posed a challenge for the entire sector. “Deutsche Bank is no exception to this. Nonetheless, in this period of market turbulence, Deutsche Bank remains very solid,” Chief Executive John Cryan said in the lender’s annual report published on Friday.
reut.rs/1RbOKrx

***CG – Keine sorge, Deutsche Bank.

FIS seeks sale of SunGard’s public sector and education unit: sources
Reuters
Fidelity National Information Services Inc (FIS) (FIS.N) is seeking to sell SunGard Data Systems Inc’s business that serves the public sector and education markets, hoping to fetch more than $1 billion, according to people familiar with the matter. The sale process follows FIS’ acquisition of payment processing peer SunGard from buyout firms in November for $9.1 billion, including debt. It illustrates its desire to focus on areas of core competence, such as retail and enterprise banking, payments, capital markets, wealth management and insurance.
reut.rs/1YE0qsW

MarketAxess to Launch Electronic Trading for $3.6 Trillion Municipal Bond Market
MarketAxess
MarketAxess Holdings Inc. announced today it will expand its trading system in April to the $3.6 trillion municipal bond market. The company expects to have approximately 60 dealers and 250 institutional investor firms connected to the municipal bond platform when it launches, including many of the largest asset managers in the municipal bond market. MarketAxess currently has more than 1,000 institutional investors and broker dealers worldwide on its corporate bond platform. More than 6,000 users log in to its electronic platform daily to trade investment grade, high yield and emerging market securities, as well as Eurobonds.
goo.gl/vzzsNk

Hedge Fund Owner’s Suit Over F.B.I. Raid May Proceed, Judge Rules
The New York Times
A lawsuit brought by a hedge fund owner who claimed that an F.B.I. raid had violated his civil rights and forced him to close his business may proceed to determine whether evidence will support his “grave allegations,” a judge said on Thursday.
nyti.ms/1YE01GO

Buying America: Canada Becomes a U.S. Creditor for First Time
Bloomberg Business
Canada is now a creditor to the U.S. for the first time on record, government data show, reflecting the northern nation’s love affair with assets south of the border. The stock of U.S. assets held by Canadians in the fourth quarter of 2015 — everything from corporate acquisitions to portfolio investments — exceeded assets held by Americans in Canada for the first time since at least 1990, according to quarterly data published Thursday by Statistics Canada.
bloom.bg/1YE1cWX

***CG – An interesting development, eh?

Boom! Draghi Pulls Out the Bazooka
MoneyBeat – WSJ
Central bankers would surely say that Mario Draghi pulled out the monetary version of a man-portable recoil-free anti-tank rocket launcher. To the ordinary investor and trader, it was enough to know that the president of the European Central Bank has fired his bazooka.
on.wsj.com/1YE3fdr

***CG – I had something for this, then lost it.

BlackRock Hires Former Bank Regulator as It Bulks Up Financial Markets Advisory Unit – MoneyBeat
WSJ
The world’s largest asset manager has hired a former banking regulator as it bulks up an advisory unit that works with large banks, insurers and other financial institutions. Coryann Stefansson, who worked on bank supervision at the Federal Reserve Board and was a senior member of PricewaterhouseCoopers LLP’s financial services regulatory group, has joined BlackRock in Washington, D.C. as a managing director.
on.wsj.com/1YE3zZR

Ex-Rabobank trader gets two yrs in prison for Libor manipulation
Reuters
A former Rabobank trader was sentenced to two years in a U.S. prison on Thursday after being convicted in the first U.S. trial arising from a global investigation into manipulation of Libor, the leading benchmark for pricing financial transactions.
reut.rs/1YDZPaH

Use the Power of Negative Rates
Narayana Kocherlakota, in Bloomberg View
The power of negative interest rates was on global display today, as the European Central Bank sought to surprise markets with its plan to stimulate growth by taking rates ever further below zero. In my view, the U.S. Federal Reserve could do better by harnessing that power in a different way: If it can convince people that it is willing and able to take rates into negative territory, it might actually be able to raise rates faster and higher.
bv.ms/1RDIlpr

Regulatory

Finra’s Help Sought in Fight Between Credit Suisse and Brokers
The New York Times
Lawyers for dozens of former Credit Suisse brokers have appealed to the brokerage industry’s main regulator to step into a fight over millions of dollars of accumulated bonus payments the brokers say the bank owes them. The lawyers have an issue with where their arguments will be heard.
nyti.ms/1YE0GYZ

NFA to review and approve risk-based initial margin models for uncleared swaps for certain SDs and MSPs
NFA
On January 6, 2016, the CFTC published its final rules on the margin requirements for uncleared swaps of swap dealers (SD) and major swap participants (MSP)1 (CFTC’s Margin Rules). These requirements allow SDs subject to the CFTC’s Margin Rules to choose between using a standardized grid-based calculation for initial margin or an internal risk-based initial margin model approved by the CFTC or NFA.
goo.gl/QhQKcT

***CG – NFA continues to do good work, and this subject is a lot of work. Keep it up!

Bank Regulator Wades Into Fintech
WSJ
The national bank regulator is taking steps into the emerging world of financial technology, weighing its first-ever charter request from a virtual-currency firm and preparing to release a report that will shed light on its views of the fintech sector. The Office of the Comptroller of the Currency has been quietly gathering information from banks and fintech firms for the past year to prepare a so-called white paper on new companies as well as their developing relationships with banks.
on.wsj.com/1YDZULp

***CG – Yesterday at breakfast we were talking about whether regulation of financial technology was warranted. Now I know what some people think.

Proposed regulatory change could hit U.S. options trading volume
Reuters
U.S. options exchanges, already hard pressed to revive declining volumes, face a new threat from regulatory changes that could restrict the use of options in retirement accounts, which until now have been a growing part of the industry. The U.S. Department of Labor’s (DOL) Conflict of Interest rule aims to stop brokers and advisors from recommending products that put their profits ahead of clients’ best interests. The rule, proposed in April 2015, is expected to be published during the first half of this year.
reut.rs/1YE3JjH

Trade Spoofing: Crossing International Jurisdictions
Tayloe Draughon, Neurensic, in Finextra
Great interest has been generated over the past year in market manipulation, especially spoofing. Regulators around the world have been engaged. What happens when the traders involved cross jurisdictions?
/goo.gl/7A75cI

***CG – What happens? The same thing that always happens in multi-jurisdictional problems.

Massad lauds CFTC cross-border margin plan, bucking industry
Neil Roland, MLex
Washington’s top derivatives regulator endorsed a proposal for international application of US margin rules just days after meeting with leading bank representatives that had criticized the plan.
goo.gl/HQpPuA

***CG – My previous comments about the regulatory environment notwithstanding, Chairman Massad has been a breath of fresh air.

Anthony Kelly Named Co-Chief of Asset Management Unit
SEC.gov
The Securities and Exchange Commission today announced that Anthony S. Kelly has been named Co-Chief of the Enforcement Division’s Asset Management Unit, which focuses on misconduct by investment advisers, investment companies, and private funds. He joins Marshall Sprung as Co-Chief of the unit and succeeds Julie Riewe, who left the agency last month.
1.usa.gov/226epcX

Sebi mulls norms to help funds navigate default
Business Standard News
The market regulator is looking at creating “gating” norms to determine how and when mutual funds can restrict investors from withdrawing money from debt schemes. The authority also wants to specify circumstances under which mutual funds can separate bad assets from good assets and hold the former in a segregated scheme, known as a “side pocket”.
goo.gl/RPHvVy

BSE asks brokers to furnish details of associates by Mar 15
Business Standard News
Leading stock exchange BSE today asked stockbrokers to furnish details of their associates in its electronic filing system by March 15.
goo.gl/T8SvIJ

Exchanges & Trading Facilities

Foreign bidders prepare to board Baltic Exchange
FT.com
Overseas bidders are laying siege to the Baltic Exchange, the venerated bourse to the east of the Square Mile, as US and European interests battle for the London Stock Exchange. The Baltic, once as much the heartbeat of the British trading empire as the LSE and which remains central to maritime commerce, says it is in discussions with a number of bidders. The Singapore Exchange has said it has made an approach. The mooted price tag is about $100m.
on.ft.com/1YE3m8S

***CG- That is a lot of freight.

Nasdaq Wants a Magic Shoebox
Bloomberg Gadfly
There are three main reasons behind Nasdaq’s $1.1 billion purchase of the International Securities Exchange, but only one of them is likely to cause widespread gossip and speculation among the market-structure debate club that’s been meeting nonstop since “Flash Boys” was published. It also points to a broader problem in the stock-trading world.
bloom.bg/1YE11uK

***CG – I want a magic shoebox also. I just don’t want to trade the family cow to get it.

Nasdaq shares fall after deal to buy options business ISE
FT.com
Investors greeted Nasdaq’s deal to buy International Securities Exchange, the US options business of Deutsche Börse, with some scepticism on Thursday, sending Nasdaq’s shares down as much as 3.5 per cent. The acquisition for $1.1bn in cash and debt is the largest for the US exchanges operator in nearly a decade and will extend its leading share in the highly competitive US options market.
on.ft.com/1YE1UU2

Euronext Announces Quarterly Review Results Of The CAC Family March 2016
Mondovisione
Euronext yesterday announced the results of the reweighting of the CAC family, which took place after close of the markets on Thursday 10 March 2016.The changes following the review will be effective from 21 March 2016.
goo.gl/uNCs5p

Politics

Free Trade Loses Political Favor
WSJ
After decades in which successive Republican and Democratic presidents have pushed to open U.S. and global markets, resentment toward free trade now appears to have the upper hand in both parties, making passage this year of a sweeping Pacific trade deal far less likely and clouding the longer-term outlook for international economic exchange.
on.wsj.com/1YE4cT5

Presidential candidates in Chicago: Bernie, Hillary and protesting Trump
Crain’s Chicago Business
The campaign for president hits Chicago today ahead of the March 15 Illinois primary. U.S. Rep. Luis Gutierrez, Chicago activists and students are planning separate protests outside a University of Illinois at Chicago venue where Republican presidential candidate Donald Trump is expected to speak.
bit.ly/1RDEiJV

Stop Bashing Wall Street. Times Have Changed.
Bloomberg View
There’s a perverse competition among some U.S. presidential candidates: Who can most loudly blame Wall Street for the problems of Main Street. They’ve got it wrong. Financial firms are doing more to help consumers, business and industry in America than they have in decades. And for the first time since the early years of the 21st century, global investors consider U.S. banks among the world’s best.
bv.ms/1RDHN2X

Hedge Funds & Managed Futures

A High-Speed Trading Pioneer Spots a New Way to Make Big Returns
Bloomberg Business
Way up in a Manhattan tower, next door to the fabled Carnegie Hall, a pioneer of high-frequency trading explained his new idea for reaping big returns from modern markets.
bloom.bg/1RDI9qg

For Hedge Funds, Start of 2016 Offers Little Relief From 2015
The New York Times
The hedge fund titan Larry Robbins did something out of character last year. He apologized to investors for losing their money and pledged to “right the ship as quickly as possible.” Then he solicited more money from them, raising $1 billion for a new fund and promised to waive the fees. But he keeps on losing money.
nyti.ms/1YE05GE

The Assets of the Ultrarich Come Closer to Earth
The New York Times
Last year, a Manhattan penthouse sold for $100 million and another went into contract for $200 million. Christie’s auctioned Picasso’s “Women of Algiers” for $179 million, and Sotheby’s sold the 12-carat Blue Moon of Josephine diamond for $48.4 million. A vintage Jaguar sold for $13.2 million. For the ultrawealthy, 2015 was an embarrassment of riches. But after years of dizzying appreciation, the values of luxury assets are plateauing and in some cases plunging. Volumes have shrunk, prices are being cut and some auction lots are going unsold.
nyti.ms/1YE08lL

Investors cast wary eye on U.S. industrial stock rebound
Reuters
Many U.S. industrial companies’ shares that slid last year over concerns of an economic slowdown have regained their footing in recent weeks, but some investors and analysts suspect the stocks still may be standing on uncertain ground.
reut.rs/1YE0YiA

Inside the New PUT-Write ETF: Can it Counter Volatility?
NASDAQ.com
The U.S. bourses were on a tumultuous ride at the start of the year and were languishing in the red. Concerns over the Chinese market slowdown and the oil price rout had a brutal impact on the broader market. Though the markets are on the mend now, we share the skepticism of several other investors on the duration of this uptrend. A certain level of uncertainty is still present in the market.
goo.gl/IExSEI

The Fed Shouldn’t Watch the Calendar
Bloomberg View
The U.S. Federal Reserve faces a daunting task as it moves away from near-zero interest rates: communicating its plans without unduly shaking up financial markets. The job would be easier if everyone involved recognized that the central bank’s actions must depend on the state of the economy, not on the calendar.
bv.ms/1YE2ilz

Ray Dalio’s Bridgewater to Hire Jon Rubinstein as Co-CEO
Bloomberg Business
Ray Dalio’s Bridgewater Associates hired Jon Rubinstein, one of the creators of the iPod, as co-chief executive officer, as the $154 billion firm transitions management away from its founder. Greg Jensen, currently co-CEO and co-chief investment officer, will drop his administrative duties and focus on his investing role, according to a letter the firm sent to clients. Rubinstein, who worked closely with Steve Jobs for almost 16 years, is often referred to as the Podfather for his role in creating Apple Inc.’s music player. Rubinstein, 59, joins Bridgewater in May.
bloom.bg/1YE2UYa

Banks & Brokers

Goldman Hired Daughter of PM Ally Amid 1MDB Pitch, WSJ Says
Bloomberg Business
Goldman Sachs Group Inc. hired the daughter of an ally to Malaysian Prime Minister Najib Razak around the time the firm’s bankers were pitching business to the country’s government investment fund, the Wall Street Journal reported, citing unidentified people.
bloom.bg/1YE16hW

MOVES-Goldman’s private equity pioneer Sanjeev Mehra to retire
Reuters
Sanjeev Mehra, one of the pioneers of the private equity business at Goldman Sachs Group Inc, will retire after nearly 30 years of service, according to an internal memo viewed by Reuters
reut.rs/1YE1Nb1

Analysts losing sleep over US bank loans
Business Insider
The economy is all about cycles. And to Matthew Mish, a credit strategist at UBS, there may be none more important than the credit cycle.
read.bi/1YE2Jfy

*** CG – I suspect they are losing sleep over lack of profits.

Macquarie to appeal new conditions over handling of client money
The Australian
Macquarie Group is to appeal against new regulatory conditions imposed on its financial services licence over the handling of client money. The Australian Securities and Investments Commission said an investigation had revealed Macquarie (MQG) failed to deposit moneys into a designated client trust account and made withdrawals that were not permitted from such an account between 2004 and 2014.
goo.gl/g5YV1t

Deutsche Bank staff costs rise despite bonus cuts
FT.com
Deutsche Bank increased staff pay and numbers last year, despite Germany’s biggest bank slumping to a multibillion euro loss and its new chief executive pledging to rein in costs. John Cryan, who took over as co-chief executive last June, said in Deutsche’s annual report on Friday that the bank had endured a “challenging” start to the year but emphasised that it “remains very solid”.
on.ft.com/1RbOgBK

Clearing & Settlement

Bank of China joins as the first Chinese Settlement Bank for DGCX
www.zawya.com
Dubai Gold & Commodities Exchange ( DGCX ) announces the appointment of Bank of China (BOC), as a Settlement Bank for Dubai Commodities Clearing Corporation (DCCC) which is a wholly owned subsidiary of DGCX .
bit.ly/1LgnZG6

Commerzbank signs up for OpenGamma margining service
Finextra
Commerzbank has become the first sell-side institution to sign up for OpenGamma’s new margining service. This comes at a time when Category 2 market participants are just two months away from joining Category 1 institutions in the obligation to clear OTC derivatives under EMIR.
/goo.gl/3jZeDo

Indexes & Products

ETF industry asks SEC to prevent repeat of Aug 2015 turmoil
Reuters
A group of 18 top issuers, traders and other exchange-traded fund companies asked the Securities and Exchange Commission in a letter on Thursday for action to prevent a repeat of the trading issues seen on Aug. 24 last year
reut.rs/1YE3OE6

FTSE Russell building ‘momentum’ index range
Global Investor Magazine
FTSE Russell, the index provider owned by the London Stock Exchange, is planning to develop a new set of ‘momentum’ indices. The company is working with analytics firm Trendrating, which has spent five years developing momentum factor strategies for fund managers.
goo.gl/zbYJ87

?Can investors pick winning funds? Chances are, no
CBS News
In the perpetual debate over “active” versus “passive” investment, Vanguard’s Jack Bogle and other proponents of indexing are likely feeling fairly validated at the moment.
cbsn.ws/1RDFo8l

Volatility, Short- and Long-term
S&P Dow Jones Indices
This morning’s Financial Times highlighted a study of market volatility suggesting that return and volatility are inversely related — that “the correct response to an increase in volatility…is to exit the market.” This is certainly true in the short run, as the table below confirms.
goo.gl/MHf6zP

New ETFs Focus on Dividends, Smart-Beta and More
ETFdb
ETF issuers continue to add new twists to old themes with respect to their fresh product launches. ETF leader Vanguard, “vampire squid” investment bank Goldman Sachs and ETF creator State Street all released new funds in the past few weeks. These new funds all use smart-beta ideals to re-dice and re-index previously common themes. In this case, it’s developed-market stocks from around the world.
goo.gl/VbsQIG

Technology

Fintech growth accelerates in Asia with record $4.5 billion investments
Reuters
Investors poured a record $4.5 billion into financial start-ups in Asia last year, four times as much as the previous year, data shows, putting the region at the center of the global tech revolution poised to shake up the financial services industry.
reut.rs/1RbP2ia

Mill Hill Capital Implements Fund-Studio as its Portfolio Management Solution
Fund Studio
Mill Hill Capital LLC, a NY based investment manager, announced today that it has
recently chosen and implemented Fund-Studio as its front to back office portfolio management, investor reporting and shadow accounting platform. Objecutive, Inc., the provider of Fund-Studio, has implemented the platform with Mill Hill as a hosted solution leveraging the strong back up and support capabilities of Objecutive’s infrastructure.
goo.gl/3KA92F

Algomi Announces Tom Glocer As New Strategic Advisor And Appoints Howard Edelstein To Board
Mondovisione
Algomi, the network company providing information-matching solutions for the optimisation of fixed income liquidity, today names Tom Glocer, former CEO of Thomson Reuters, as a Strategic Advisor. The company also announces the appointment of Howard Edelstein to the board, after serving two years as a Strategic Advisor. Edelstein is the former Chairman and CEO of BondDesk Group and is an investor in Algomi. Glocer has also made an investment in the business.
goo.gl/yngu3T

Former Microsoft CEO Ballmer does about-face on Linux technology
Reuters
Fifteen years after calling the open-source operating system Linux a “cancer,” former Microsoft Corp (MSFT.O) Chief Executive Steve Ballmer has softened his position. Speaking on Wednesday night at a dinner hosted by Fortune magazine, Ballmer said the position was right for the time, but the threat from Linux was now “in the rearview mirror.”
reut.rs/1YE0yIT

Thomson Reuters Enhances Eikon’s Workflow, Analytics Capabilities
Waters Technology
As part of the upgrade, Thomson Reuters has also improved Eikon’s search functionality to help in the research process.
bit.ly/1YE1Fbs

Enforcement

SEC Charges Company and Executives for Faulty Evaluations of Internal Controls
SEC.gov
The Securities and Exchange Commission has settled charges against Texas-based oil company Magnum Hunter Resources Corporation and several individuals, including a company consultant, for deficient evaluation of the company’s internal controls over financial reporting, and failures to maintain internal control over financial reporting between Dec. 31, 2011 and Sept. 30, 2013.
1.usa.gov/1YDgTxD

***CG – Yikes. They are after the consultant!

SEC Charges Oregon-Based Investment Group and Executives With Defrauding Investors
SEC.gov
The SEC’s complaint, filed today in federal district court in Oregon, alleges that CEO Robert J. Jesenik and executive vice president Brian A. Oliver were well aware of Aequitas’s calamitous financial condition yet continued to solicit millions of dollars from investors to pay the firm’s ever-increasing expenses and attempt to stave off the impending collapse. Former CFO and chief operating officer N. Scott Gillis allegedly concealed the firm’s insolvency from investors and was aware that Jesenik and Oliver continued soliciting investors so that Aequitas could pay operating expenses and repay earlier investors with money from new investors.
1.usa.gov/1YDYzEm

Pennsylvania families win $4.2 million damages in fracking lawsuit
Reuters
A federal jury ruled on Thursday that Cabot Oil & Gas Co must pay more than $4.2 million in damages to two families in northeastern Pennsylvania who said the company’s fracking operations contaminated their ground water. Six jurors in federal court in Scranton awarded $1.3 million each to Scott Ely and Monica Marta-Ely, a married couple in Dimock. Each of their three children received an award of $50,000.
reut.rs/1YE1ihd

Ex-Hanlong executive guilty of insider trading
FT.com
The former head of Hanlong Mining Investment, Hui Xiao, has been sentenced to eight years and three months in jail for his role in Australia’s biggest insider trading case. New South Wales Supreme Court Justice Peter Hall ruled on Friday that Xiao was guilty of “a gross breach of trust and confidentiality”, which necessitated a long custodial sentence.
on.ft.com/1RbPf4L

Environmental & Energy

California Water District Fined by S.E.C. Over ‘Enron Accounting’
The New York Times
When the overseers of the nation’s largest and most powerful agricultural water district approved a bookkeeping change at their July 2010 board meeting, the district’s general manager called it “a little Enron accounting.” It turns out that the Securities and Exchange Commission agrees with him.
nyti.ms/1YE0OYp

Here’s What Climate Change Has Done to the Season Formerly Known as Winter
VICE News
It’s not just you — it really is hot in here. Winter is coming to a warm, wet close in the Northern Hemisphere, knocking down records on the way. Though fading, the Pacific warming phenomenon El Niño helped drive the average temperatures in the continental United States to a new winter record. December-through-February readings were 4.6 degrees Fahrenheit (2.5 degrees Celsius) over the 20th century average, the National Oceanic and Atmospheric Administration reported this week.
bit.ly/1YE2Doj

Oil meeting on output freeze unlikely without Iran progress: sources
Reuters
A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as OPEC member Iran is yet to say whether it would participate in such a deal.
reut.rs/1YE37KV

Oil under threat from stealthily building gasoline stocks
Reuters
Gasoline stocks building on both sides of the Atlantic could undercut a sustained recovery in oil prices, as crude’s 30 percent rise in the last month is partly based on hopes that drivers will gobble up most global inventories of the fuel.
reut.rs/1YE3THX

IEA says oil may have bottomed as non-OPEC producers cut output
Reuters
Oil prices might have bottomed as production declines in the United States and other non-OPEC producers accelerate and an increase in Iranian supply has been less than dramatic, the International Energy Agency said on Friday.
reut.rs/1RbOTeB

Asia-Pacific

Bank of America Said to Fire at Least 15 Senior Asia Bankers
Bloomberg Business
Bank of America Corp. fired at least 15 senior bankers at its investment-banking unit in Asia this week as it pares jobs globally, according to people with knowledge of the matter.
bloom.bg/1RDIclS

For China Banks, Swapping Stock for Debt Is a Stopgap With Pitfalls
The New York Times
A new approach to managing China’s corporate debt burden may offer temporary relief for banks but spell further difficulties for the country’s economy: having deeply troubled companies use stock to pay overdue loans. Early evidence of the strategy emerged late Thursday, when a heavily indebted Chinese shipbuilder disclosed that it would issue equity to its creditors, instead of repaying $2.17 billion in bank loans.
nyti.ms/1YE0IA9

Negative Rates Stir Japanese Bonds From Slumber
WSJ
Japan’s negative-rate experiment has found a new market to roil: Japanese government bonds. The tempestuous times are probably just starting. Yields on JGBs swung wildly this week, after unexpectedly high demand at an auction for 30-year bonds. Volatility on these bonds rose to the highest since at least 2000.
on.wsj.com/1YE20er

What If Chinese Government Bonds Enter Major Benchmarks?
Bloomberg Business
A question, posed innocently enough, by Citigroup Inc. analysts earlier this month. It is difficult to overstate the importance of benchmark indexes within markets. They are the “bogeys” against which large pension funds, asset managers and insurers measure their returns. In an age of passive investing they also exert an outsized influence on the fortunes of billions of dollars worth of assets, able to send vast amounts of money into or out of a particular bond or stock by dint of its inclusion or expulsion.
bloom.bg/1YE2vFl

China Banks: Careful What You Swap Into
MoneyBeat – WSJ
To swap or not to swap, that is the question. China’s central bank is preparing new regulations that would make it easier for banks to convert their bad loans into borrowers’ equity, according to Reuters. Such swaps are common for creditors to maximize the value of their soured loans, but China currently restricts banks from investing in non-financial companies.
on.wsj.com/1RbQfG7

Frontier Markets

Mystery ‘Dude’ Rattles Turkish Stock Traders With Massive Bets
Bloomberg Business
There’s a specter haunting stock traders in Istanbul that some are calling “the dude.” A mystery investor who first appeared a year and a half ago with $450 million of bets on a single day, almost double the market average, is now executing major transactions with increasing frequency, scaring away competitors who can’t figure out when he or she will strike next, traders and bankers said.
bloom.bg/1RDHS6N

JPMorgan Cuts Credit Traders Amid Emerging-Market Swings
Bloomberg Business
JPMorgan Chase & Co. cut several emerging-market credit traders, including global head Robert Milam, as volatility in the asset class bled into this year, according to people with knowledge of the moves.
bloom.bg/1RDIgSC

Investors vie for toeholds in Iran’s exploding market
CNBC
Foreign investors are rushing to cash in on a bonanza in Iran since UN economic sanctions from the West were lifted in January. That’s because the country’s $400 billion economy — the second largest in the Middle East after Saudi Arabia — may surge in the months ahead as President Hassan Rouhani works to diversify the oil-based economy.
cnb.cx/1RDE3yv

Mozambique proposes ‘tuna’ bond restructuring
FT.com
Mozambique has proposed a restructuring of the contentious state-backed “tuna” bond that has become a byword for the risks associated with lending foreign currency to developing economies.
on.ft.com/1RDE5WY

Where’s My Mercedes? Egypt’s Financial Crisis Hits the Rich
The New York Times
Gucci Corner is the nickname for a bustling plaza at the private American University in Cairo, here well-heeled students hang out between classes and strut their imported fashions. These days, though, even the privileged are feeling the squeeze of Egypt’s economic crisis.
nyti.ms/1YE2bX2

***CG – There has to be an opportunity here, right CB?

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