First Read

Fintech Exchange 2016
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It’s a Fintech Life
Sarah Rudolph, JLN

Yesterday’s FinTech Exchange event in Chicago, sponsored by Barchart, explored a wide array of uses of technology in financial services, from blockchain and AI to big data and cloud platforms.

John Lothian News was on hand, in the audience and behind the camera. In the coming days, we will feature a few of the presentations, but for today, here is a snapshot from the gallery.

In the big data realm, news from the CME Group includes changing their data business model and partnering with Amazon Web Services and Ticksmith to make their data more accessible and available to customers much faster. They plan to launch these services around May or June of this year. Julie Menacho, head of market technology sales for the CME Group, also provided the packed audience with some background on the recent news that the CME Group sold its data center in Aurora to CyrusOne. The CME is not a real estate company per se and wants to focus on the markets, Menacho said. The arrangement is a partnership and the exchange will still co-locate there, and will enrich the data center with a broad range of services, including cloud and connectivity offerings. They will also launch retail services and forge new vendor partnerships, she said.

They have also partnered with FinTech Sandbox, a not-for-profit focused on startup fintech businesses. CME Group will offer their data to them for free so they can build on that to help these new companies; CME will launch CME Partner Services in June, with an online search tool that will allow any vendor of any style of technology service to have a home on the CME’s website. The vendor database will be searchable so customers looking for a particular tech service can find what they are looking for in one place.

Other presenters at the event included Quandl, a platform for analysts and software developers that gives them “broad and deep” access to financial data, including “alternative data” you wouldn’t normally think of as financial, according to the company’s CEO, Tammer Kamel.
For example, data gathered by farm equipment suppliers that measure fields and give farmers advice about fertilizers can be aggregated on a central server and provide information on corn yields and other information of value to commodity futures traders.

“It is almost religious now that if you are in business you have to be collecting data about everything you are doing,” Kamel said.

Brian Mehta, chief marketing officer at Trading Technologies, talked about how TT got their successful 20-year-old legacy platform to act more like a startup with the “three Cs: craft, communication and culture.” Craft is what differentiates a company – its unique product. In this case, TT completely revamped its product from the ground up, changing their installed software platform to a hybrid cloud infrastructure that allowed them to be more flexible with customer needs, Mehta said. Communication is about being transparent, both with customers and internally, he said. For TT, that included codifying the company’s principles and going on “listening tours” to their 13 offices in five continents. Culture meant TT reinvested in the growth and training of their people and looked at where there were gaps, hiring some external hires where needed, and flattening the organization so that many employees wear multiple hats, Mehta said.

Also, at TT’s Tech Tap, in their Chicago office, you can enjoy communication and culture while drinking craft beer.

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Bodson and Masters Discuss Roadmap for Blockchain
Jim Binder, DTCC
Discussion of disruption was replaced by talk of transition as the 2016 DTCC Blockchain Symposium came to a close. In one of the main events of the day, Michael Bodson, DTCC President and CEO, shared the stage with Blythe Masters, CEO, Digital Asset, for a conversation on the long-term potential of blockchain technology.
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***DA: Also see Joseph King’s article, The Challenges and Opportunities of Distributed Ledger Technology

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Protect source code to protect innovation in markets
FIA Blog
Source code is the result of careful planning, risk-analysis, decision making and technological investment. It can be thought of, in some sense, as a codified business plan: it contains a firm’s strategy and instructions for how to trade given any number of variables. It is the lifeblood of many firms’ commercial success. Importantly, it does not just contain information on how a firm may have traded in the past — it details how the firm will trade in the future.
goo.gl/UT1syl

***DA: For a summary of CFTC Proposed Reg AT, click HERE

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The power of positive impact; A focus on supporting the communities where we live + work
DRW
DRW is proud to support many philanthropic organizations in the metropolitan areas where we live and work, targeting our efforts at providing people with opportunities to learn and increase self-reliance. Being involved matters to us, and we encourage all of our team members to volunteer their time and expertise.
/goo.gl/HKEhs8

***** DRW is more than just a trading group. Don Wilson and his company are community leaders.

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Mike Forrester reflects on 50 years of trading at the CBOT
JohnLothianNews.com

For the better part of the Chicago Board of Trade’s history, the exchange was built on the backs of grains traders. Mike Forrester, who started at the CBOT in 1963, has seen the best and worst of corn, wheat and soybean markets during his time on the floor. John Lothian News sat down with Forrester and spoke with him about a career that lasted more than 50 years.

Watch the video »
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Thursday’s Top Three
The top read story yesterday U.S. SEC panel proposes stock exchange fee-cutting experiment immediately had me wondering how the SEC hopes to convince the exchanges this is a good idea. We had a tie for second and third place. There was The US Giant limbering up to scupper Germans’ bid for the London Stock Exchange neck-and-neck with Blythe Masters Sees Tech Answer to Banks’ Existential Woes. Have a great weekend!

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Lead Stories

Singapore Raids Brokers; Exchange Reports Irregularities
Wes Goodman, Chanyaporn Chanjaroen, Andrea Tan – Bloomberg
MAS and CAD probe possible breaches of securities law; At least four brokerages raided earlier in week: newspaper
Singapore authorities raided a number of brokerages in a probe of possible breaches of the securities law, while the stock exchange reported several cases related to alleged insider trading and market manipulation as the city sought to protect its reputation as a financial center.
goo.gl/IQzTuC

New Rules Curbing Wall Street Pay Proposed; Senior executives at largest firms would have to defer more than half their bonus pay for four years under proposed regulations
By DONNA BORAK, ANDREW ACKERMAN in Washington and CHRISTINA REXRODE in New York – WSJ
Tens of thousands of Wall Street bankers face tighter restrictions on how they are paid under new rules proposed by U.S. regulators in response to the financial crisis of nearly a decade ago.
goo.gl/Qb9MAE

Spoofing Cases From Oystacher’s Past Prove Intent, CFTC Says
Matthew Leising – Bloomberg
Government plans to call German regulator as witness; Exchange fines total $660,000 for Oystacher in past years
Fines levied against 3Red Trading LLC’s Igor Oystacher by the world’s largest futures exchanges prove he intended to rig markets, according to U.S. regulators seeking to use those penalties as evidence in their own lawsuit against the trader.
goo.gl/OfIexp

Wall Street Bonus Pay Restricted Under Regulators’ Proposal
Jesse Hamilton, Elizabeth Dexheimer – Bloomberg
Rules would allow bonus clawbacks over inappropriate actions; U.S. plan adopted by credit-union watchdog; others to follow
Wall Street executives would have to wait at least four years to collect most of their bonus pay and could be forced to return money if their companies lose big under rules being proposed to install one of the last major planks of the Dodd-Frank Act.
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SEC extends test of investor safeguards
Nicole Bullock in New York – FT
The Securities and Exchange Commission on Thursday extended a pilot scheme for rules intended to protect investors during times of market stress, to fine-tune them after they were put to the test during volatility last August.
goo.gl/JkuLuK

Regulators Don’t Want Bankers to Be Paid for Taking Risk
By Matt Levine -Bloomberg View
There are basically two ways for a big bank to do bad things:

    • It can do bad things to itself.

 

    • It can do bad things to someone else.

There is some blurring of the boundaries. The U.S. legal system being what it is, No. 2 quickly turns into No. 1 as well: If you, say, manipulate Libor, or sell someone a mortgage-backed security that is designed to fail, or whatever, then eventually you will get in trouble and have to pay big fines and generally end up regretting whatever bad thing you did. And, the banking system being what it is, No. 1 can become No. 2 as well: If you do enough harm to a bank, or more particularly to the banking system, it can blow up the economy for everyone else.
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The Thrill Is Gone From Owning Stocks
By Barry Ritholtz – Bloomberg View
Before the Great Recession, almost two-thirds of Americans owned stocks. That number has since fallen to a little more than half, as you can see from the chart below:
goo.gl/rADN9N

SEC extends test of investor safeguards
Nicole Bullock in New York – FT
The Securities and Exchange Commission on Thursday extended a pilot scheme for rules intended to protect investors during times of market stress, to fine-tune them after they were put to the test during volatility last August.
goo.gl/Whd17g

Washington wants to screw bankers out of their summer homes
By Kevin Dugan – NY Post
Government regulators on Thursday proposed a long-anticipated rule that clamps down on banker pay, forcing top executives to defer as much as 60 percent of their compensation for as long as four years. Current rules call for deferring one-third of the compensation for Wall Street’s big earners for three years.
goo.gl/eDLrxd

CME Group eyes 15% stake in MCX; Move follows govt decision to increase foreign investor holding in a commodity exchange to 15% from 5% earlier
Shrimi Choudhary – Business Standard
CME Group, one of the world’s largest derivatives exchanges, is planning to take 15 per cent stake in India’s only listed commodity bourse — Multi Commodity Exchange (MCX). The move follows the government’s decision to increase foreign holding in Indian commodity exchanges to 15 per cent, from five per cent earlier. Currently, a single investor cannot own more than 15 per cent in a commodity exchange. “CME had placed a non-binding bid in 2014 when Financial Technologies (India) Ltd or FTIL had to sell 26 per cent stake in MCX,” said a source.
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How Goldman Sachs’ vampire squid became a flattened slug
Gillian Tett – FT
A decade ago, Goldman Sachs reported that its return on common shareholder equity had hit a dazzling 39.8 per cent. It symbolised a gilded age: back in 2006, as markets boomed, the power — and profits — of big banks seemed unstoppable.
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Fed to Confront Skeptical Market View of Gradual Rate Hike Pace
Craig Torres – Bloomberg
Investors see zero chance of a hike at the April 26-27 FOMC; Fed has two rate hikes penciled in for 2016, market sees one
The Federal Reserve’s dilemma next week is how to skip an interest-rate hike for a third straight meeting without cementing expectations that policy is on hold for months to come.
goo.gl/DxtrBh

Zero Rates, Zero Success in Japan
Lisa Abramowicz, Rani Molla – Bloomberg Gadfly
Japan took a big risk in January. To stimulate its economy, it adopted an unconventional negative interest-rate policy that penalized banks for hoarding too much money.
goo.gl/S0GTCE

Regulatory

SEC Issues Order Modifying and Extending the Pilot Period for the National Market System Plan to Address Extraordinary Market Volatility
SEC.gov
The Commission also approved a modification to the manner in which the LULD plan establishes the reference price in cases where a security does not trade in the opening auction on the primary listing exchange. In these circumstances, a security’s reference price will now be the previous trading day’s closing price or, if no closing price exists, the last reported sale on the primary listing exchange. The Commission believes that this modification is appropriate to potentially prevent unnecessary trading pauses that are unrelated to extraordinary volatility.
1.usa.gov/1TlJ3v0

SEC Announces Agenda for April 26 Meeting of the Equity Market Structure Advisory Committee
SEC.gov
The Securities and Exchange Commission today announced the agenda for its Equity Market Structure Advisory Committee meeting on April 26. The Commission established the advisory committee to provide a formal mechanism through which the Commission can receive advice and recommendations on equity market structure issues.
1.usa.gov/1TlIWQ8

Canadian Securities Regulators provide guidance for making prospectus-exempt market offering and disclosure filings on SEDAR
AMF
Members of the Canadian Securities Administrators (CSA), except for the British Columbia Securities Commission and the Ontario Securities Commission, have published guidance related to amendments to National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) and Multilateral Instrument 13-102 System Fees for SEDAR and NRD.
goo.gl/1ZOuG4

Canadian securities regulators outline next steps in the implementation of enhancements for regulation of the fixed income market
AMF
Today the Canadian Securities Administrators (CSA) published CSA Staff Notice 21-317 Next Steps in Implementation of a Plan to Enhance Regulation of the Fixed Income Market, which provides an update on various elements of the CSA’s fixed income regulation plan.
goo.gl/DcrUiK

Maker-Taker Pilot Program Eyed
By John D’Antona, Senior Editor – MarketsMedia
So what should be included in a pilot program designed to evaluate the effects of the current maker-taker or rebate pricing system used in the equities markets?
goo.gl/FLAoSH

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
SEC

    • NASDAQ: Notice of Designation of Longer Period for Commission Action on Proposed Rule Change to Establish a Secondary Contingency Procedure to Enable the Exchange to Report an Official Closing Price on Behalf of an Impaired Primary Listing Exchange (Release No. 34-77678; File No. SR-NASDAQ-2016-035)

 

    • NASDAQ: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Nasdaq Rule 7014 (Release No. 34-77662; File No. SR-NASDAQ-2016-051; April 20, 2016); see also Exhibit 5

 

    • NMS: Order Approving the Tenth Amendment to the National Market System Plan to Address Extraordinary Market Volatility by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc (Release No. 34-77679; File No. 4-631)

 

    • NYSE: Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, to Establish Procedures for the Allocation of Cages to Co-located Users, Including the Waiver of Certain Fees, and to Amend the Visitor Security Escort Fee (Release No. 34-77681; File No. SR-NYSE-2016-13)

 

    • NYSE: Notice of Designation of Longer Period for Commission Action on Proposed Rule Change Amending Rule 123C to Provide for How the Exchange Would Determine an Official Closing Price if the Exchange is Unable to Conduct a Closing Transaction (Release No. 34-77677; File No. SR-NYSE-2016-18)

 

    • NYSE: Notice of Filing of Proposed Rule Change Adopting Initial and Continued Listing Standards for the Listing of Equity Investment Tracking Stocks and Adopting Listing Fees Specific to Equity Investment Tracking Stocks (Release No. 34-77674; File No. SR-NYSE-2016-22); see also Exhibit 5

 

    • NYSE Arca: Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, to Establish Procedures for the Allocation of Cages to Co-located Users, Including the Waiver of Certain Fees, and to Amend the Visitor Security Escort Fee (Release No. 34-77682; File No. SR-NYSEArca-2016-21)

 

    • NYSEMKT: Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, to Establish Procedures for the Allocation of Cages to Co-located Users, Including the Waiver of Certain Fees, and to Amend the Visitor Security Escort Fee (Release No. 34-77680; File No. SR-NYSEMKT-2016-17)

 

    • NYSEMKT: Notice of Designation of Longer Period for Commission Action on Proposed Rule Change Amending Rule 123C-Equities to Provide for How the Exchange Would Determine an Official Closing Price if the Exchange is Unable to Conduct a Closing Transaction (Release No. 34-77676; File No. SR-NYSEMKT-2016-31)

 

    • Phlx: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Qualified Contingent Cross Pricing (Release No. 34-77673; File No. SR-Phlx-2016-51); see also Exhibit 5

/goo.gl/h0yuDn

Exchanges & Trading Facilities

Stellar Trading Systems Establishes Connectivity with CBOE Futures Exchange; Link Broadens CFE’s Reach with European, Asian Traders
CBOE
CBOE Futures Exchange, LLC (CFE®) today announced that Stellar Trading Systems, a multi-asset trading software and services specialist, has established connectivity with CFE as an approved independent software vendor (ISV).
goo.gl/vUdCWs

MGEX Records Top 25 Daily Electronic Volume
MGEX
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports an electronic volume of 15,341 from Wednesday, making it the 24th-best day on the electronic daily volume charts.
goo.gl/UVPEFU

Eurex Exchange’s Equity Index Derivatives newsletter – Q1/2016
Eurex
In Q1/2016, liquidity and open interest in our broad- and narrow-based products remained at high levels, confirming continued investor demand for listed and centrally cleared products.
goo.gl/ayc30c

EnterNext welcomes the SPAC Mediawan to the Paris market in France’s first listing of its kind; EUR250 million raised
Euronext
EnterNext, the Euronext subsidiary dedicated to promoting and growing the market for small and medium-sized companies (SMEs), today celebrated Mediawan’s listing in the professional compartment of its regulated market in Paris. Mediawan is a SPAC or Special Purpose Acquisition Company, set up to acquire one or more companies specializing in traditional and digital media or entertainment in Europe. The operation constitutes the first listing of a SPAC in France. To mark the company’s first day of trading, Mediawan’s co-founder and chairman of the management board Pierre-Antoine Capton rang the Euronext markets opening bell.
/goo.gl/8No22C

Senior maritime executives discuss opportunities at the inaugural SGX-MPA Capital Markets Roundtable
SGX
Close to 20 companies from the maritime industry today participated in a Capital Markets Roundtable event jointly organised by the Maritime and Port Authority of Singapore (MPA) and Singapore Exchange (SGX), held in conjunction with Singapore Maritime Week 2016. The companies represented various sectors of the maritime industry including liner, bulk, tanker and offshore services.
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Technology

Blockchain: It’s coming but let’s prepare the ground
Patrick Thornton-Smith – Finextra
Last week I attended a European fintech conference in Amsterdam. I’m no stranger to these events but this one was different, in a number of good and diverse ways.
/goo.gl/wCc8oQ

How technology is driving investor interest in British entrepreneurs
William Turvill – City AM
Some £360m in growth capital was raised in the first quarter (Source: Getty)
Investors are increasingly interested in British entrepreneurs, according to a new report.
goo.gl/R427Cw

Uber drivers remain independent contractors as lawsuit settled
BY DAN LEVINE – Reuters
Uber has agreed to pay up to $100 million to settle a class-action lawsuit which resolves a major challenge to its business model by allowing the ride-hailing service to keep its California and Massachusetts drivers as independent contractors.
goo.gl/y6fK8B

Politics

Elizabeth Warren calls SEC’s settlement with Steve Cohen a joke
By Kevin Dugan – NY Post
Sen. Elizabeth Warren reignited her feud with Securities and Exchange Commission Chair Mary Jo White — and this time she’s dragging billionaire hedgie Steven Cohen into the middle of it.
goo.gl/WPPftY

What both Bernie Sanders and Donald Trump get wrong about Wall Street
By Gautam Mukunda – Washington Post
Each week, In Theory takes on a big idea in the news and explores it from a range of perspectives. This week, we’re talking about financialization. Need a primer? Catch up here.
/goo.gl/Ynh3sP

I.R.S. Fights Back Against House Republicans’ Attacks
By JACKIE CALMES – NY Times
WASHINGTON — For five years, congressional Republicans have taken out their anti-tax wrath on the Internal Revenue Service, cutting its budget by nearly $1 billion, reducing its staff by about 17,000, and even threatening to impeach its chief.
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Obama Praises EU in U.K. Op-Ed Aimed at Swaying Brexit Vote
Toluse Olorunnipa, Thomas Penny – Bloomberg
U.S. president accused of hypocrisy by `Leave’ campaigners; Obama will meet with Prime Minister David Cameron on Friday
President Barack Obama intervened in Britain’s increasingly bitter Brexit debate Friday, drawing allegations of hypocrisy from lawmakers campaigning for the U.K. to leave the European Union.
goo.gl/CT7KIz

Barack Obama: As your friend, let me say that the EU makes Britain even greater
BARACK OBAMA – Telegraph
In 1939, President Franklin D Roosevelt offered a toast to King George VI in the White House. “I am persuaded that the greatest single contribution our two countries have been enabled to make to civilisation, and to the welfare of peoples throughout the world,” he said, “is the example we have jointly set by our manner of conducting relations between our two nations.”
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Hedge Funds & Managed Futures

Fund manager raises about $100 mln to bet against a single company
BY LAWRENCE DELEVINGNE – Reuters
Sahm Adrangi’s Kerrisdale Capital Management has raised approximately $100 million from investors to bet against a single stock, a person familiar with the situation told Reuters.
goo.gl/c6nyRh

The Rise of the Most Powerful Idea in Investing
By Noah Smith
The biggest story in the finance industry during the past decade might not be the 2008 crisis, or new regulation, or even record-low interest rates. Maybe it’s the shift from active to passive-investment management. In the realm of mutual funds, the change is stunning. Here is a picture of fund flows in billions of dollars since 2007:
goo.gl/B9Id5n

Fidelity Should Make Smart Beta Smarter
By Nir Kaissar – Bloomberg Gadfly
This, I think, was inevitable: Fidelity Investments — the money management behemoth that turned fund managers into rock stars — is entering the smart beta exchange traded fund business with a large-cap, value ETF.
goo.gl/zRWPvR

Golf, lapdancing — there’s far too much fun in fund management
Merryn Somerset – FT
When I was a junior stockbroker in Tokyo my boss told me he had a problem with me. It wasn’t the fact that I was late to work almost every day. It wasn’t the way I took cigarette breaks every 25 minutes with a handsome young man from the trading desk. And, rather more oddly, it wasn’t about the fact that I appeared to know absolutely nothing at all about the Japanese stock market (this was quite a long time ago).
goo.gl/ODHtDL

Odey fund loses 31 per cent in four months
Miles Johnson and Lindsay Fortado – FT
A brutal start to 2016 for Crispin Odey, the outspoken British investor, has wiped out almost half a decade of trading profits in his flagship hedge fund in less than four months.
goo.gl/Yqzw09

Banks & Brokers

Why the S.E.C. Didn’t Hit Goldman Sachs Harder
BY JESSE EISINGER – New Yorker
In the late summer of 2009, lawyers at the Securities and Exchange Commission were preparing to bring charges in what they expected would be their first big crackdown coming out of the financial crisis. The investigators had been looking into Goldman Sachs’s mortgage-securities business, and were preparing to take on the bank over a complex deal, known as Abacus, that it had arranged with a hedge fund. They believed that Goldman had committed securities violations in developing Abacus, and were ready to charge the firm.
goo.gl/AaLtV7

Goldman Sachs and Morgan Stanley are split on the future of trading
Matt Turner – Business Insider
Morgan Stanley’s top stock strategist blows up everyone who thinks they’re just so smart
goo.gl/K43WkZ

Why I (Belatedly) Blew the Whistle on the SEC’s Failure to Properly Investigate Goldman Sachs
By James A. Kidney – Watchthecircus.com
The New Yorker and Pro Publica websites today posted an article by Pro Publica’s Jesse Eisinger about the de minimis investigation by the Securities and Exchange Commission into the conduct of Goldman Sachs in the sale of derivatives based on mortgage-backed securities during the run-up to the Great Recession of 2008. The details of the SEC’s failure to aggressively pursue Goldman in the particular investigation, Abacus, and its refusal to investigate fully misconduct by Goldman and other “Too Big to Fail” banks, stands not only as a historic misstep by the SEC and its Division of Enforcement, but undermines the claim that the Obama Administration has been “tough on Wall Street.” The Pro Publica version contains links to a few of the documents I provided.
goo.gl/4YrZGC

Why Haven’t Bankers Been Punished? Just Read These Insider SEC Emails; Right after the financial crisis, an SEC lawyer fought a lonely struggle to get his agency to crackdown harder on Goldman bankers. He lost.
by Jesse Eisinger – ProPublica
n the late summer of 2009, lawyers at the Securities and Exchange Commission were preparing to bring charges in what they expected would be their first big crackdown coming out of the financial crisis. The investigators had been looking into Goldman Sachs’ mortgage-securities business, and were preparing to take on the bank over a complex deal, known as Abacus, that it had arranged with a hedge fund. They believed that Goldman had committed securities violations in developing Abacus, and were ready to charge the firm.
/goo.gl/Ty9Oys

Banks push e-trading of OTC energy derivatives; Goldman, JP Morgan and SG lead race to add oil and gas to single-dealer platforms
Alexander Osipovich – Risk.net
Commodity desks have long been bastions of old-fashioned ways of doing business at investment banks, with salespeople quoting prices to clients by phone or instant message, even as other parts of the fixed income, currencies and commodities (Ficc) business have gone increasingly electronic. That could be about to change, though, as a growing number of US and European banks have begun to offer electronic execution of over-the-counter energy derivatives. Goldman Sachs, JP Morgan and Societe Generale…
goo.gl/FpxaHt

Clearing & Settlement

CDS clearing RTS published in the OJEU
Lexology
The Delegated Regulation containing regulatory technical standards (RTS) on the clearing obligation EMIR for classes of credit default swaps (CDS) over-the-counter derivative contracts has been published in the OJEU. The RTS confirm which CDS are subject to the clearing obligation and set out four different categories of counterparties for which different phase-in periods apply over three years after the RTS enter into force. Some counterparties need to determine their categorisation by reference to the three months following the publication of the delegated act on the clearing obligation for interest rate swaps. The RTS also lay down the minimum remaining maturities for the purposes of the frontloading requirement as well as the dates on which the frontloading should start. The regulation comes into force on 9 May. (Source: RTS on EMIR clearing published in the OJEU)
/goo.gl/y1my57

ESMA announces EU-wide stress tests for CCPs
Lexology
ESMA will publish the results of its first EU-wide stress test exercise on Central Counterparties (CCPs), mandated under the European Markets Infrastructure Regulation (EMIR), on 29 April. The stress test assesses the resilience and safety of the European CCP sector and aims to identify possible vulnerabilities by exposing them to adverse market scenarios. ESMA’s stress test focuses on the counterparty credit risk that CCPs would face as a result of multiple clearing member defaults and simultaneous market price shocks.
goo.gl/0kzBdT

Indexes & Products

Fundamental Vs. Factor Investing
ETF.com
To many investors and advisors, this may seem like a silly question: Is factor investing the same as fundamental investing? Fundamentals are, after all, “factors,” or better yet, metrics that help determine the intrinsic value of a company. Equity risk factors—those we commonly refer to in factor investing—are the drivers of equity returns, and something most people know well.
goo.gl/k7tgds

Fidelity Should Make Smart Beta Smarter
Bloomberg Gadfly
This, I think, was inevitable: Fidelity Investments — the money management behemoth that turned fund managers into rock stars — is entering the smart beta exchange traded fund business with a large-cap, value ETF.
bloom.bg/1T1QhBI

Schwab Among Firms Caught Up in Executive Pay Rule
By MICHAEL WURSTHORN – WSJ
New rules proposed by regulators curbing financial firms’ pay to senior executives is expected to affect discount brokerage Charles Schwab
goo.gl/Mb1z8N

Enforcement

Florida man indicted for bribery in case tied to JPMorgan hacking
BY NATE RAYMOND – Reuters
A Florida man was arrested on Thursday for participating in a bribery scheme aimed at supporting an illegal bitcoin exchange operated by his son and owned by an Israeli behind a series of hacking attacks on organizations such as JPMorgan Chase & Co.
goo.gl/HpdlVg

SEC Files Case Against Erik Bardman, former CFO, and Jennifer Wolf, former Acting Controller, for their Roles in Materially Misstated Financial Statements of Logitech International, S.A.
SEC
The Securities and Exchange Commission today announced fraud and other charges against the former chief financial officer and the former acting controller of Logitech International, S.A., a publicly-traded manufacturer of technology products.
/goo.gl/qWrnBP

Environmental & Energy

First big test for Paris climate deal
BBC
When COP President Laurent Fabius smacked down his gavel on December 12, it signalled that agreement had been reached at the UN climate conference in Paris on one of the world’s most intractable environmental and economic problems.
After years of onerous, cantankerous and often tedious talks, somehow all 196 participants, like a large collection of cats, had agreed to be herded in the same direction.
goo.gl/uy5uY1

Mark Carney wants more green bonds, Bitcoin technology and mobile banking to help deliver on United Nations’ climate change goals
Jake Cordell – City AM
Mark Carney has said the expansion of environmentally-friendly finance products will help the world economy fight climate change and enhance economic stability around the planet.
goo.gl/WF9eLV

Volkswagen Reaches Deal in U.S. Over Emissions Scandal
NY Times
Volkswagen agreed on Thursday to fix or buy back nearly 500,000 diesel cars in the United States that are equipped with illegal emissions software.
But a settlement announced in federal court in San Francisco left open numerous legal and financial issues stemming from the carmaker’s admission that it rigged diesel vehicles to cheat on pollution tests.
goo.gl/k6XXDC

Asia-Pacific

In Asia, financial firms wake up to Brexit risks, begin contingency planning
Reuters
The Hong Kong exchange has begun a Brexit impact assessment, and some Asian asset managers are looking to set up new bases in mainland Europe amid growing concerns their operations could be disrupted if Britain votes to leave the European Union in a June referendum.
goo.gl/iGtzHJ

China’s Great Ball of Money Is Rushing Into Commodities Futures
Bloomberg
Chinese speculators have a new obsession: the commodities market.
Trading in futures on everything from steel reinforcement bars and hot-rolled coils to cotton and polyvinyl chloride has soared this week, prompting exchanges in Shanghai, Dalian and Zhengzhou to boost fees or issue warnings to investors. While the underlying products may be anything but glamorous, the numbers are eye-popping: contracts on more than 223 million metric tons of rebar changed hands on Thursday, more than China’s full-year production of the material used to strengthen concrete.
goo.gl/s8N4PV

Hong Kong Rejoins Developed Market Bourses With Closing Auction
Bloomberg
Hong Kong is going to rejoin its developed market peers when it reintroduces a stock-market closing auction after a seven-year gap.
goo.gl/4kO1iX

China’s stock regulator reins in risqué cyber-celebrity analysts
SAMUEL SHEN AND ENGEN THAM – Reuters
China’s securities regulator has ordered brokerages to restrain their staff’s online activity, two sources with direct knowledge told Reuters on Thursday, after some were judged to have used attractive women analysts to drum up business.
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As Global Stocks Rally, China’s Markets Send More Ominous Signal
Enda Curran, Justina Lee – Bloomberg
Shanghai Composite is world’s worst performer this week; Yuan is at lowest versus basket of peers since November 2014
As equities climb around the world, Chinese traders aren’t celebrating.
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How Hong Kong can play a key role in China’s financial reform
EJI Insight
China’s financial system is still relatively closed. Banks account for a big part of the country’s financial assets and most financial institutions serve mostly domestic companies.
As the economy slows, adjustments are necessary to support its financial infrastructure.
In the long run, financial reform will benefit the economy and the domestic financial industry.
However, in the short term, reform will bring uncertainty, especially for cross-border businesses.
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Frontier Markets

Palm oil industry fumes as Indonesia gets tough on forest fires
Reuters
Palm oil firms have slammed Indonesia’s move to prohibit the use of new land to boost production, saying President Joko Widodo’s latest effort to tackle forest fires could slash jobs and cripple output in the world’s top producer of the commodity. Palm oil is a major growth driver for Indonesia, but the industry is facing criticism for deforestation and its slash-and-burn forest-clearing techniques that send vast plumes of smoke across Southeast Asia every year, described by climate officials as a “crime against humanity”.
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Sebi flags concern on brokers shutting shop; The regulator discussed the data that showed how a high compliance cost had forced 85% of brokers having capital between Rs 1-10 crore to shut shop
Shrimi Choudhary – Business Standard
In a meeting with representatives of stock brokers on Thursday, the Securities and Exchange Board of India (Sebi) has raised concern over loss-making brokers operating in the cash segment.
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Not against high-frequency trading use, Sebi tells brokers; Algorithmic trading or HFT refers to use of electronic systems which can execute thousands of orders on the stock exchange in less than a second
Ankit Doshi – LiveMine
Mumbai: The capital markets regulator Securities and Exchange Board of India (Sebi) on Thursday assured brokers that it is not against the use of high-frequency trading (HFT) but said it would intervene from time to time if it observes any unfair access to stock exchanges by market intermediaries.
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