Junk bond king’s pardon ‘is spectacular’ for Wall Street; Franklin Templeton to acquire Legg Mason for $4.5 billion

Feb 19, 2020

First Read

Hits & Takes
By JLN Staff

The FIA released its monthly volume highlights for January 2020, in which global volume of exchange-traded derivatives was 3.25 billion contracts, up 15.2% from the previous month and up 20.3% from January 2019. Total open interest at the end of January was 884.6 million contracts, down 1.7% from the previous month but up 7.3% from a year ago.~SR

The CFTC responded to my FOIA request regarding the matter of the CFTC vs. Jitesh Thakkar and Edge Financial Technologies, Inc. for expenses and person-hours expended by the CFTC during the third and fourth quarters of 2019. The answers were $6,606.02 in expenses and 365 hours and 15 minutes. I thank the CFTC for providing this information to JLN.~JJL

The London Derivatives Exchange announced that Kiri Self is their new chief operating officer.~JJL

NFA has been named one of the Nation’s Best and Brightest in Wellness and has received this award for five consecutive years.~JJL

The latest podcast from IEX is titled Boxes + Lines. It is a market structure podcast with Rronan Ryan and John Ramsay.~JJL

With a hat-tip to CBS News Chicago, for the first time since Nov 7, 2007, Illinois does NOT have a former governor in prison.~JJL

Deutsche Boerse held their annual press conference today.~JJL

In Chicago, 1871 has acquired fellow not-for-profit company Illinois Technology Association.~JJL

Greenwich Associates has a research report out titled “February Spotlight: E-Trading Up, SOFR Futures Down to Start 2020.” They also have a report titled “Measuring the Market’s Growth and Understanding ATS Data.”~JJL

David Mitchell is now a regional sales manager at Eventus Systems, Inc.~JJL

We had the wrong link on the Boy Scouts story yesterday. Here is the correct one. See in Miscellaneous for the latest story on the bankruptcy.~JJL

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Early legal cannabis sales brisk, on track with projections, Supercritical’s Jay Caauwe says
JohnLothianNews.com

With the launch of Illinois’ legal cannabis out of the way, canna companies focus on investment. What’s next for legal cannabis in Illinois? Supercritical’s Jay Caauwe looks at the next steps.

“Investment will certainly pick up as more and more banking policies loosen up,” Caauwe says.

Suzanne Cosgrove of John Lothian News interviews Jay Caauwe, the co-founder and managing partner of Supercritical, LLC, for a JLN Interview Podcast.

Watch the video »

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Deutsche Börse Photography Foundation shows “Geert Goiris – Silent Earth” at The Cube, Eschborn / Frankfurt
Deutsche Börse
Visit to the exhibition without prior registration at “Open Saturdays” on March 28 and May 16, 2020 and during the Night of the Museums on April 25; Press tour with Geert Goiris on March 5, 2020 at 11 a.m.
The Deutsche Börse Photography Foundation opens the exhibition “Geert Goiris – Silent Earth” at The Cube, Eschborn / Frankfurt. It shows photographs and publications by the Belgian artist Geert Goiris. The exhibition can be seen from March 6th to June 12th as part of a guided tour and can also be visited during the Night of the Museums on April 25th and on two Saturdays without prior notice.
bit.ly/3bTqMUP

*****Picture this?~JJL

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Why the Japanese stock market is like a toxic blowfish; Central bank support and buyback programmes mean investors are shrugging off threats
Leo Lewis – FT
When Japan’s stock market opened on Monday this week, it had much in common with a fugu puffer fish: expensive, delicious only to fanatics and absolutely riddled with danger.
/on.ft.com/38IU1aS

*****Headline of the day.~JJL

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American journalism is dying. Its survival requires public funds
Victor Pickard – The Guardian
The McClatchy newspaper chain’s recent filing for bankruptcy is one more data point showing that US journalism is dying. According to the US Bureau of Labor Statistics, the newspaper industry has lost more than 50% of its employees since 2001. While several big national papers like the New York Times are healthy, more typical are the closures, bankruptcies, and extreme downsizing that increasingly leave cities, towns, and rural communities without local news.
bit.ly/39Khdpt

*****Time to reinvent journalism again.~JJL

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Tuesday’s Top Three
Our top story Tuesday was the lead story, Bloomberg’s Black Americans Who Broke Barriers on Wall Street — and Beyond. (Pictured on our web site is
Maggie Lena Walker, the first woman of any race to start a bank.) In second place was All the reasons your boss should let you work from anywhere, from MarketWatch. Third was the New York Times op-ed Let Bernie Madoff, and Many More, Out of Prison. President Trump has clearly listened to that advice, but left Madoff behind.

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CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.Recently Updated Pages

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Lead Stories

Junk bond king’s pardon ‘is spectacular’ for Wall Street; Michael Milken maintained ties to a finance industry that he helped shape
Laura Noonan – FT
Thirty years after his conviction for securities fraud, and 20 years after he began asking US presidents to pardon him, junk bond king Michael Milken is again being cheered by some on Wall Street after winning clemency from Donald Trump. “Mike’s pardon is spectacular for our industry, the thousands of people who either worked with him or were clients at Drexel, and society at large,” said Rich Handler, chief executive at the investment bank Jefferies.
/on.ft.com/2P7ZGzF

Franklin Templeton to acquire Legg Mason for $4.5 billion; Upon closure, Franklin Templeton and Legg Mason will establish $1.5 trillion asset management entity.
Hayley McDowell – The Trade
US investment management firm Franklin Templeton has confirmed plans to acquire Legg Mason in a move that will create a combined $1.5 trillion asset management unit.
bit.ly/327WSb3

Record Wall Street rally triggers boom in options; Investors gravitate towards derivatives because they are cheaper than underlying shares
Jennifer Ablan – FT
While the S&P 500, Dow and Nasdaq have surged to record highs in recent weeks, another rally has taken hold. The US options market has been experiencing a huge jump in trading — led by large-capitalisation companies including Tesla, Amazon, Apple, Google, Microsoft and Disney, according to analysts at Goldman Sachs.
/on.ft.com/325Sr0u

RPT-‘Massive passive’ funds squeeze stock pickers
April Joyner – Reuters
A $4.5 billion buyout of Legg Mason Inc by rival Franklin Resources Inc announced on Tuesday is the latest example of how a decade-long shift into low-cost, index-tracking products is pushing stock-picking funds to join forces to remain competitive.,
/reut.rs/3bScML2

Investors hunt for alternative data to track coronavirus shock; Analytics companies mine figures on everything from traffic jams to food orders in China
Philip Georgiadis, Robin Wigglesworth and Hudson Lockett – Ft
Investors scrambling to quantify the impact of the coronavirus outbreak on China are turning to a string of unusual data points to measure disruption to the world’s second-largest economy, from food-delivery apps to the polluted air wafting over Hong Kong.
/on.ft.com/37I9wP2

Milken Pardon Backed by Billionaires From Funds, Real Estate
Erik Larson – Bloomberg
Paulson, Peltz and Rubenstein among Wall Street supporters; Murdoch, Giuliani, Barrack and Adelson from Trump World
Michael Milken’s pardon by President Donald Trump on Tuesday was accompanied by a statement praising his “innovative work” in high-yield debt as well as a long list of people the White House said had provided “longstanding support” for the pardon. It proved a veritable Who’s Who of private equity, hedge fund, real estate and media titans. Here are the biggest names:
/bloom.bg/2SYnPtG

Cost of corporate debt protection sinks to post-crisis low; Investors are assured that dovish central banks will keep money flowing freely
Joe Rennison – FT
The cost of insuring against the default of some of the world’s biggest corporate borrowers has dropped to its lowest levels since 2007, as investors bet that continued strong support from central banks will keep credit markets ticking over.
/on.ft.com/38CA9X0

China to expel three Wall Street Journal reporters in ‘smear’ article row; Decision comes a day after US designates Chinese media outlets as propaganda agents
Christian Shepherd and Katrina Manson – FT
China said on Wednesday that it will expel three Wall Street Journal reporters, marking the first time in two decades that the country has cancelled the press cards of multiple foreign reporters at the same time.
/on.ft.com/38SOkao

Chinese Companies Say They Can’t Afford to Pay Workers Now
Lulu Yilun Chen and Jinshan Hong – Bloomberg
Coronavirus precautions are keeping customers, travelers home; The private sector, China’s fastest-growing, is hardest hit
A growing number of China’s private companies have cut wages, delayed paychecks or stopped paying staff completely, saying that the economic toll of the coronavirus has left them unable to cover their labor costs.
/bloom.bg/328UhgV

Exchanges, OTC and Clearing

Intercontinental Exchange Chief Financial Officer Scott Hill to Present at the Raymond James 41st Annual Institutional Investors Conference on March 2, 2020
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that Scott Hill, ICE’s Chief Financial Officer, plans to present at the Raymond James 41st Annual Institutional Investors Conference. The presentation will take place on Monday, March 2 at 10:25 a.m. EST. The presentation will be available live and in replay via webcast and can be accessed in the Investors section of ICE’s website at www.theice.com.
bit.ly/37GC1fW

Deutsche Börse To Add To Analytics Business
Shanny Basar – Markets Media
Deutsche Börse, the German exchange group, said it wants to make acquisitions that can add capabilities to its analytics and index division which was formed last year.
bit.ly/325X9eH

DGCX Commits to UN Women Empowerment Principles
The Dubai Gold and Commodities Exchange (DGCX) today announced that it is now a signatory of the Women’s Empowerment Principles (WEPs), an initiative by United Nations (UN) Women and UN Global Compact dedicated to promoting women’s empowerment and advancing gender equality in the workplace, marketplace and community.
/bit.ly/2T0xGim

Fintech

Eventus Systems Raises $10.5 Million in Series A Funding Round
Press Release via Yahoo Finance
Austin-based Eventus Systems, Inc., a multi-award winning global trade surveillance and market risk software platform provider, announced that the firm has just raised $10.5 million of growth capital in a Series A investment round. Investors included a range of venture capital and financial services organizations, led by Chicago-based Jump Capital and Austin-based LiveOak Venture Partners.
/yhoo.it/2HDgWZC

Santander implements Bloomberg derivatives library for real-time pricing; Institutional clients at Santander will gain workflow from Bloomberg to trade and risk manage structured products.
Hayley McDowell – The Trade
The corporate and investment banking division at Santander has moved to deploy Bloomberg’s derivatives library to provide its clients with an automated model to trade and calculate prices for bespoke structured products.
bit.ly/37JmfRA

German Savers Transform the Baltics Into a Fintech Vanguard
Aaron Eglitis, Milda Seputyte, and Ott Ummelas – Bloomberg
Baltic countries are home to the biggest platforms in the bloc; Growth is rapid even amid regulation, stability concerns
Struggling to find a bank that would help fund his studies at Insead in Paris seven years ago, Martins Sulte stumbled instead upon a website matching borrowers with a vast database of creditors.
/bloom.bg/327nDwl

LendingClub buys Radius Bank in first fintech takeover of a bank
Hugh Son – CNBC
LendingClub, a fintech company that pioneered personal loans made online, is buying a U.S. bank to give it access to a stable and cheaper source of funding, CNBC has learned.
LendingClub is paying $185 million in cash and stock for Radius Bancorp, according to documents viewed by CNBC. Radius, a Boston-based online bank with about $1.4 billion in assets, is among a cohort of small lenders that have partnered with fintech firms who need the services of an FDIC-regulated institution.
/cnb.cx/327wGgI

Total fintech startup funding for 2019 show focus on late-stage rounds
Dan DeFrancesco – Business Insider
Fintech investing reached a tipping point in 2019, as nearly half the funding in the sector went towards mega-rounds.
That shift shows how the fintech space is maturing, and comes as some individual startups have nabbed eye-popping valuations.
bit.ly/2uaVOGM

Cryptocurrencies

BitGo Acquires Harbor in Surprise Expansion Beyond Crypto Custody
Nikhilesh De – Coindesk
BitGo is expanding beyond crypto custody with the takeover of a onetime poster child of the adjacent market for digital securities. The crypto custodian announced Tuesday the acquisition of Harbor, a security token platform best known for a failed bid to offer tokenized shares of a South Carolina apartment building. Harbor’s subsidiaries, which include a broker-dealer regulated by the Financial Industry Regulatory Authority and a transfer agent supervised by the Securities and Exchange Commission, are included in the acquisition, the companies said. The move allows BitGo to expand its services from custody, becoming what CEO Mike Belshe said is the first “full-stack” service provider in the digital securities space. The terms of the deal were not disclosed.
bit.ly/3bQ0hzR

Irish authorities seize $56M worth of bitcoins from a drug dealer
Yogita Khatri – The Block
The Criminal Assets Bureau, a law enforcement agency in Ireland, has seized EUR52 million (~$56 million) worth of bitcoins from a drug dealer.
bit.ly/39QjDTI

Visa Grants Coinbase Power To Issue Bitcoin Debit Cards
Michael del Castillo – Forbes
Credit card giant Visa has granted its principal membership to a cryptocurrency company for the first time. Officially awarded to cryptocurrency exchange Coinbase in December, but not revealed to the public until today, the membership cuts out a crucial, and expensive middleman from the process of issuing a debit card that lets users spend their own bitcoin, ether and XRP anywhere Visa is accepted.
bit.ly/3bQzGmg

Coinbase receives Visa principal membership to offer more features for its debit card
Yogita Khatri – The Block
Coinbase has now become a Visa principal member, a move that will allow the crypto exchange to offer more features for its debit card.
bit.ly/2T1nk1O

Binance pauses trading due to ‘unscheduled’ system maintenance
Yogita Khatri – The Block
Crypto exchange Binance has paused trading on its platform since 6:08 am ET today. Binance CEO Changpeng “CZ” Zhao tweeted a thread, saying that the exchange is going under “unscheduled” system maintenance.
bit.ly/2SVAnSE

A Korean startup that raised millions in ETH via ICO is shutting down and refunding investors
Yogita Khatri – The Block
South Korean crypto startup Contents Protocol Team, which raised a total of 29,334 ETH (~$8.15 million in today’s prices) via initial coin offering or ICO and private token sale, is shutting down and refunding investors. Announcing the news on Wednesday, Contents Protocol said it took the decision due to lack of business prospects and continued regulatory uncertainty in the crypto sector.
bit.ly/38ISzVY

Mike Bloomberg Places Spotlight On Crypto And Blockchain In 2020 Presidential Race
Jason Brett – Forbes
Former New York Mayor Mike Bloomberg offered a plan today to reform the financial system that includes a policy plank on cryptocurrency and blockchain. While President Trump has only made a few comments on Twitter indicating a negative opinion on Bitcoin and Facebook’s Libra last year, and only two prior Democratic contenders – Rep. Eric Swalwell and Andrew Yang – had made mention of cryptocurrency in terms of either accepting crypto donations or offering crypto policy positions – Bloomberg will more than likely force other candidates to offer a ‘crypto’ policy in the 2020 Presidential Race.
bit.ly/2SH4C0H

UK Crypto Exchange Coinfloor Launches ‘No BS’ Service for Bitcoin Beginners
Daniel Palmer – Coindesk
U.K-based crypto exchange Coinfloor, which made news last year by delisting ethereum to focus solely on bitcoin, is launching a simplified buying service. Going live next month, Coinfloor, the longest-running crypto exchange in the U.K., is providing an “Auto Buy” service aimed at bitcoin newbies and hodlers alike, as opposed to sophisticated trading types. It’s all part of Coinfloor’s “no BS” approach to crypto, said CEO Obi Nwosu, who wants to educate new users, as well as offer full transparency in the form of monthly proof-of-custody audits of all the coins held on the platform.
bit.ly/2SIqSqV

Crypto Nouveau Riche Go Bespoke, Shun Lambos In Latest Rally
Olga Kharif – Blooomberg
Last month, the Joe Bananas boutique on Manhattan’s Madison Avenue closed so a couple flush from recent cryptocurrency gains could shop unencumbered. Unlike during the crypto bubble of late 2017, the pair weren’t seeking to splurge on trophies such as the Lamborghinis that epitomized the exuberance of the earlier boom. They were more interested in the made-to-measure suits and limited-edition jackets that have won the praises of Elton John and other celebrities. The pair paid for everything with crypto.
/bloom.bg/2HDDjhi

Samsung Continues Support for Crypto with New Flagship Smartphone
Paddy Baker – Coindesk
Samsung Electronics’ newly launched Galaxy smartphone will come with the same crypto storage facilities found on previous models. Unveiling the Samsung Galaxy S20 range recently, the Korean tech giant said the phone’s security system includes a new “secure processor dedicated to protecting your PIN, password, pattern and Blockchain Private Key.” Although Samsung gave much more website real estate to the S20’s improved battery-life and picture-capturing capabilities, the reference to private keys suggests Samsung’s new model will continue to have the same cryptocurrency storage facilities found in previous models. Cryptocurrency private key storage will be available as standard across the entire S20 range.
bit.ly/39SRc7D

IRS Invites Crypto Firms to Discuss Tax Provisions
Arnab Shome – Finance Magnates
The United States’ Internal Revenue Services has invited multiple crypto companies and advocates to a summit to discuss the existing approach towards taxing incomes generated from digital assets. First reported by Bloomberg Tax on Tuesday, the summit has been scheduled for March 3 and will include four 90-minutes panels.
bit.ly/2vISOC6

Irish authorities seize $56M worth of bitcoins from a drug dealer
Yogita Khatri – The Block
The Criminal Assets Bureau, a law enforcement agency in Ireland, has seized EUR52 million (~$56 million) worth of bitcoins from a drug dealer. The agency received a freezing order from Ireland’s high court because the court accepted that the dealer, Clifton Collins, was involved in the sale and supply of drugs, local news outlet Irish Independent reported Wednesday. The 49-year old Collins is believed to have invested in bitcoin at an early stage. Notably, the agency received the order “to ensure it could not be removed from its wallet without the court’s approval,” per the report.
bit.ly/39QjDTI

A Safer Harbor: Improving Hester Peirce’s Proposal for Regulating Token Sales
Donna Redel and Olta Andoni – Coindesk
In February, Commissioner Hester Peirce proposed a new safe harbor which, if passed into a formal rule, would radically change the legal terrain for sellers of crypto tokens in the United States. This article addresses some critiques and point of views in response to the recent Safe Harbor Proposal from Commissioner Hester Peirce. The authors of this article met online (but not in a dating app) in a private Telegram channel where around 70 lawyers regularly engage in (sometimes fierce) debate regarding legal issues faced by the crypto industry. This article is informed by our having witnessed a wide spectrum of strongly argued opinions from different attorneys in the course of those debates.
bit.ly/2vJni6S

SEC, Telegram Locked in Legal Battle as New Evidence Surfaces
Jeff Patterson – Finance Magnates
An ongoing saga between US regulators and Telegram now has an added wrinkle, this time with the addition of new evidence which could lead to further delays in the judicial process, per SEC court filings. To date, Telegram has found itself under the regulatory crosshairs of both the US’ Commodity Futures Trading Commission (CFTC) as well as the Securities and Exchange Commission (SEC).
bit.ly/2P8vmot

Precious Metals: A Useful Precedent for Digital Assets
ErisX Insights
As an intermediary-friendly exchange that has adopted familiar building blocks from traditional commodity markets and brought conventionality to the crypto space, we believe that the gold markets are a useful precedent for digital assets. In an earlier post, we compared end-users and miners of digital assets to hedgers in traditional commodity markets. Similar to other commodities, when seeking to sell their digital assets in exchange for legal tender, digital asset owners face market risk related to price volatility, and liquidity risk related to finding ready counter-parties with offsetting interests. Miners need a way to manage the risk of holding their long positions in the market.
bit.ly/2ucrzzn

Politics

Big Tech to Face More Restrictions in Europe on Data, AI; Legislation will place more obligations on online platforms and firms developing machine-learning-enabled technologies
Valentina Pop – WSJ
American tech companies will face new restrictions in the European Union on artificial intelligence and on the use of data to drive out smaller rivals, as the bloc seeks to assert its “digital sovereignty” from the U.S. and China.
/on.wsj.com/32jemBz

EU Takes on China, U.S. With Plan to Dictate Global Tech Rules
Natalia Drozdiak – Bloomberg
European Union unveils strategy for AI, facial recognition; Liability rules this year may target Silicon Valley firms
U.S. and Chinese firms hoping to deploy artificial intelligence and other technology in Europe will have to submit to a slew of new rules and tests under the European Commission’s proposed AI and digital strategy.
/bloom.bg/37Kse8F

China Expels Three Wall Street Journal Reporters; China’s Foreign Ministry says move was punishment for a recent opinion piece published by the Journal
WSJ
China revoked the press credentials of three Wall Street Journal reporters based in Beijing, the first time in the post-Mao era that the Chinese government has expelled multiple journalists from one international news organization at the same time.
/on.wsj.com/32eM1ft

Why the US has targeted Rosneft arm over Venezuelan oil; How Washington hopes to increase pressure on Maduro by sanctioning Russian group’s subsidiary
Michael Stott, Henry Foy, Gideon Long and Katrina Manson- FT
The US has escalated its campaign against Nicolás Maduro, Venezuela’s president, by imposing sanctions on Swiss-based Rosneft Trading SA, a subsidiary of Russia’s state-controlled oil company Rosneft, which it said plays a key role in trading Venezuelan oil.
/on.ft.com/327pJwd

Michael Bloomberg to sell company if he enters the White House; Billionaire looks to assure voters business ties do not pose conflict of interest
Anna Nicolaou – FT
Michael Bloomberg will sell his financial data company if he becomes US president, according to a spokesperson, as the billionaire looks to assure American voters that his business ties do not pose a conflict of interest.
/on.ft.com/37DzfIE

Donald Trump grants clemency to Milken and Blagojevich; Pardon of one-time ‘junk bond king’ supported by Rupert Murdoch, Rudy Giuliani and others
Lauren Fedor and Kadhim Shubber – FT
Donald Trump extended clemency to several high-profile white-collar criminals on Tuesday, pardoning one-time “junk-bond king” Michael Milken and commuting the sentence of former Illinois governor Rod Blagojevich.
/on.ft.com/2HzTegE

Who is Michael Milken, the ‘junk bond king’ Trump just pardoned?
Reis Thebault – Washington Post
Michael Milken, the “junk bond king” who was charged with insider trading in the 1980s, was granted clemency by President Trump on Tuesday, making him the latest wealthy and well-connected offender bestowed such a benediction under this administration.
/wapo.st/325YQZA

Regulation

SEC Charges Real Estate Company and Executives With Defrauding Retail Investors, Obtains Emergency Relief
SEC
The Securities and Exchange Commission today announced an emergency enforcement action and a temporary restraining order and asset freeze against Florida-based private real estate firm EquiAlt LLC, its CEO Brian Davison, and its Managing Director Barry Rybicki, in connection with an allegedly fraudulent unregistered securities offering that raised more than $170 million from at least 1,100 investors, a number of whom invested their retirement funds.
bit.ly/38GwkAj

FINRA Requests Comment on a Proposal to Implement the Recommendations of the CE Council Regarding Enhancements to the Continuing Education Program for Securities Industry Professionals; Comment Period Expires: April 20, 2020
FINRA
FINRA seeks comment on a proposal to implement the recommendations of the Securities Industry/Regulatory Council on Continuing Education (CE Council) enhancing the continuing education requirements for securities industry professionals. 1 The proposal would change the: (1) Regulatory Element to provide annual training, make the content more relevant, incorporate diverse instructional formats, publicize the learning topics in advance and enhance the related management systems; (2) Firm Element to expressly recognize other training requirements, improve the guidance and resources available to firms and establish a content catalog; and (3) Continuing Education Program to enable individuals who terminate their registrations the option of maintaining their qualification by completing continuing education.
bit.ly/2HEIFsB

Advertising Regulation: Expect More Than Just Hype
FINRA
It can be a big decision for retail investors to decide how and where to invest their hard-earned cash. After all, their savings are on the line. It’s important that when making this big decision investors understand the risks—not just the hype. That’s where FINRA’s Advertising Regulation Group comes in, overseeing broker-dealer communications to ensure that they are fair, balanced and not misleading.
bit.ly/2vLeiOI

ESMA finds continued high risks as financial markets remain highly volatile
ESMA
The European Securities and Markets Authority (ESMA), the EU’s securities regulator, today publishes the first Trends, Risks and Vulnerabilities (TRV) report of 2020. ESMA identifies continued high risks and a weaker economic outlook as markets remain highly sensitive to geopolitical events. The risk outlook is stable, however risks are high, particularly in the securities markets and for retail investors.
bit.ly/38Ljbpu

FCA maps out ‘inherent risks’ in growth of algo and AI-based trading; Investment management firms have been warned by the FCA that further adoption of technologies to facilitate trading presents various risks.
Kiays Khalil – The Trade
The UK’s financial watchdog has warned that increased use of artificial Intelligence (AI) and algorithmic decision-making trading could lead to widespread market failures and flash crashes.
bit.ly/326TMEa

Investing and Trading

The Market’s Real Worry Is Lack of Worry; Despite recent wobbles on the back of the coronavirus, there are signs of complacency in the equity market
Jon Sindreu – WSJ
The stock market’s coronavirus wobbles may be overdone given the robustness of the U.S. economy, so it is tempting to say that “the only thing to fear is fear itself.” What should be concerning, though, is that there is little of it.
/on.wsj.com/2SFmHvQ

An Ousted Metals CEO Is Trying to Fire the Board That Fired Him
Joe Deaux – Bloomberg
Bouchard seeks to remove all the members of Braidy’s board; Braidy confident court will uphold decision to oust Bouchard
The battle for control of a Russian-backed aluminum project in Kentucky has landed in court, with the ousted CEO filing a lawsuit to fire the board members who fired him.
/bloom.bg/32ap11m

Taiwan Bond Binge Leaving a Mark on the U.S. Treasury Market
Stephen Spratt
Record redemptions suggest wave of Formosa bond sales ahead; Hedging flows can help driven long-dated U.S. rates markets
A flood of fund raising by American blue-chip firms in Taiwan is putting pressure on longer-dated Treasuries, a showcase of how hedging flows are moving markets worldwide.
/bloom.bg/2TaEc6D

Foreign Holdings of U.S. Treasuries Grow for a Third Year
Emily Barrett – Bloomberg
The pile of U.S. Treasuries held outside the country grew in 2019 to nearly $6.7 trillion from $6.3 trillion at the end of the previous year, as the government’s borrowing picked up to fresh record levels.
/bloom.bg/2TaElHd

Institutions

HSBC to overhaul markets division in deep restructure; Equities sales and trading in Europe and the US fixed income division set for overhaul at HSBC as part of restructure plans.
Hayley McDowell – The Trade
HSBC has confirmed that it will cut around 35,000 jobs over the next three years, with the global markets and banking division at the centre of a major restructure for the investment bank.
bit.ly/2ubIj9Q

Investors await GAM’s next step as fund house slims down; Challenges at Swiss group lay bare the pressure on midsized active managers
Sam Jones – FT
When an activist investor pressured the Swiss fund house GAM to radically cut costs and slash hundreds of jobs three years ago, they met with no success.
/on.ft.com/37JrmRQ

Franklin Templeton swells assets to $1.5tn with Legg Mason deal; Tie-up of struggling asset managers is about ‘offence not defence’, says chief Jenny Johnson
Siobhan Riding and Ortenca Aliaj – FT
US asset manager Franklin Templeton has agreed to buy rival Legg Mason for $6.5bn including debt, in the latest sign of active fund groups’ need to scale up to fend off growing threats to their business models.
/on.ft.com/2ufZ2sI

Inside story of Jupiter and Merian’s marriage of convenience; Tale of how two British fund managers came together says a lot about industry pressures
Owen Walker – FT
For weeks a rumour has buzzed around the City of London about an impending deal involving US fund manager AllianceBernstein buying FTSE 250 group Jupiter Asset Management.
/on.ft.com/38Gjwdb

The humbling of Goldman Sachs; Fears that nothing would change after the financial crisis turned out to be unfounded
Jonathan Guthrie – FT
Laughter. You could hear it above the noise of traffic in Manhattan last month. Goldman Sachs had sweated bullets to deliver its first ever investor day. Rival bankers were tickled, not terrified. “Is that all they’ve got?” chuckled one. The pitch, led by chief executive David Solomon, was as slick as any Apple product launch. But the modesty of ambition — for group earnings to exceed capital costs by a few percentage points — signalled how badly the bank’s fortunes have waned.
/on.ft.com/2SEL8tm

Questions of leadership overshadow HSBC’s shake-up; Investors worry interim chief Noel Quinn will not be in job long enough to see overhaul completed
David Crow and Attracta Mooney – FT
When Noel Quinn took to the stage on Tuesday to unveil his plan to overhaul HSBC, he promised to deliver “one of the deepest restructuring and simplification programmes in [the bank’s] history”.
/on.ft.com/2u8fbQK

Six hedge funds that went from zeros to heroes in 2019; The industry’s capacity to deliver both euphoric highs and acute lows has been evident over the past two years
Tom Teodorczuk – Financial News
Even by hedge funds’ volatile standards, the past two years have been a sharp reminder of the industry’s capacity to deliver both euphoric highs and acute lows.
bit.ly/2vOjZew

Goldman Sachs Loses $10 Billion Wealth Teams to Rival Banks
Suzanne Woolley and Sridhar Natarajan – Bloomberg
Wall Street bank has made expanding wealth business a priority; UBS team managing $6 billion will have offices in Boston, L.A.
Goldman Sachs Group Inc. planned a hiring spree to ramp up the fees it gets from advising the wealthy. It got a reminder this week that it’s not alone.
/bloom.bg/2SFGzz1

Nomura Is Finally Making Money From Asia Investment Banking
Cathy Chan – Bloomberg
Coronavirus may affect some deals, Asia division head says; Expects division to return to profit on revenue, cost cuts
Nomura Holdings Inc.’s investment banking business in Asia is set to return to profit this fiscal year after more than a decade of losses since its Lehman Brothers Holdings Inc. acquisition, according to its division chief.
/bloom.bg/2TaElHd

Citigroup Renovates Its Tribeca HQ
Rebecca Baird-Remba – Commercial Observer
When Citigroup decided to renovate its massive headquarters at 388 Greenwich Street in Tribeca, it had to combine two separate but adjacent buildings—a 39-story office tower and a nine-story printing plant—into one structure.
bit.ly/2uhEHDq

Regions

Investors Fume as China Develops New Playbook for State-Backed Bonds; A tender offer for an aluminum producer’s distressed bonds could pave the way for more such deals
Xie Yu – WSJ
Bond investors who put their faith in Chinese state-owned enterprises are swallowing another bitter pill, just two months after an earlier wake-up call. This week, the province of Qinghai persuaded a narrow majority of investors holding dollar debt with a face value of $850 million to sell their holdings for as little as 37 cents on the dollar, according to results circulated by the agent handling the tender. However some other holders of these bonds, issued by troubled aluminum-maker Qinghai Provincial Investment Group, vowed to keep fighting for a better deal.
/on.wsj.com/2SEag3E

Chinese companies sell ‘coronavirus bonds’ to boost balance sheets; Issuers from airlines to glassmakers capitalise on new rules to raise cheap cash
Sun Yu – FT
Companies across China are taking advantage of the coronavirus outbreak to shore up their balance sheets, as Beijing urges them to issue cheap bonds to support the world’s second-biggest economy.
/on.ft.com/38EQZok

As Cases Mount, Japan Is Rapidly Becoming a Coronavirus Hotbed
Gearoid Reidy – Bloomberg
Number of infections in Japan has doubled in past week; A party onboard a pleasure boat turns into infection cluster
Japan is emerging as one of the riskiest places for the spread of the coronavirus, prompting criticism that Prime Minister Shinzo Abe’s government has misfired on its policies to block the outbreak.
/bloom.bg/2uOYFpq

Brexit

UK growing more financially secretive, campaign group says; Activists’ findings come amid need to attract capital after Brexit while cracking down on dirty money
Kate Beioley- FT
The UK has jumped up the global rankings for financial secrecy, according to a tax campaign group, highlighting long-held concerns about its connection to territories vulnerable to use by terrorists, money launderers and tax evaders.
/on.ft.com/2udeuWz

Netherlands Lures Its Biggest Brexit-Linked Wave of Businesses
Ellen Proper and Ruben Munsterman – Bloomberg
Nearly half of the companies that moved ended up in Amsterdam; Large swath of companies is still awaiting Brexit negotiations
The Netherlands saw the biggest wave of Brexit-spurred moves to the country last year. More companies are likely to follow. That’s according to the Netherlands Foreign Investment Agency (NFIA). In a statement published Wednesday, the agency said 78 companies decided to move to or expand in the country last year, adding to the 62 firms that relocated there after the U.K.’s 2016 vote to leave the European Union.
/bloom.bg/2SJuJUN

EU nations prepare tougher conditions on Brexit trade talks
Jim Brunsden – Financial Times
EU nations are preparing to toughen the conditions they will attach to any tariff-free trade deal with the UK, reinforcing demands from Brussels on regulatory alignment and access to fishing waters that Britain has already rejected. But even as national ambassadors prepare to review the EU’s draft negotiating mandate in a meeting on Wednesday, Britain is advancing a clear vision of what it wants from the trade talks.
/on.ft.com/39O3DBA

They Lost the Brexit War But U.K. Remainers Are Still Fighting
Alex Morales and Olivia Konotey-Ahulu – Bloomberg
When the U.K.’s Brexit chief accused the European Union of threatening democracy with its outrageous demands, his target audience was his opponents in trade talks in Brussels. But the alarm bells from David Frost’s stinging attack this week will reverberate among businesses back in Britain, too.
/bloom.bg/32cZNPU

Miscellaneous

The Strategy Behind the Boy Scouts Bankruptcy; Organization seeks to halt hundreds of child sexual-abuse lawsuits going back decades and protect local scouting councils
Peg Brickley and Andrew Scurria – WSJ
In making its historic bankruptcy filing, the Boy Scouts of America halted hundreds of lawsuits over accusations of childhood sexual abuse going back decades and sought to protect its local scouting councils from facing those claims.
/on.wsj.com/37EQAAP

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