NYSE goes to court to halt SEC plan; Japan Exchange Group, TOCOM to merge this year – sources

Feb 15, 2019

First Read

Hits & Takes
JLN Staff

It is a big day for news. Former CBOT Chairman Pat Arbor was released from jail on Valentine’s Day, in an ironic twist to his divorce money battle. The NYSE is suing the SEC about an ”ill-advised price control,” and ICE combined its bond offerings into a single brand, ICE Bonds.

Additionally, Former FBI acting director Andrew McCabe’s new book has some explosive reveals about the Trump administration.~JJL

CFTC Chairman Giancarlo will deliver the keynote speech at FIA Boca in Boca Raton, Fla. in March.~JJL

Former FIA executive Simon Puleston Jones is the founder of Yopo. According to LinkedIn, “Yopo is the new global social network for individuals, nonprofits and companies who want to give back and make a positive difference to others, to communities, to society as a whole and/or to the environment. You have the potential to truly make a difference. That’s YOur POtential. That’s Yopo.” And, they are seeking investors if you are interested.~JJL

Hope everybody had a good Valentine’s Day. The tradition of regional Fed outposts and officials sending #Fedvalentines on Twitter continued yesterday. The best came from Minneapolis Fed President Neel Kashkari, who wrote: “Roses are red, Blah blah blah blah, Blah blah blah blah, There’s still slack in the labor market.” The Chicago Fed account went with a simpler, “To raise, or not to raise? That is the question…” ~SD

Former MF Global CEO Kevin Davis was interviewed by Yahoo Finance in a video about his latest initiatives to bring internships to the students in New York.~JJL

Cboe associates in Chicago, New York, Kansas City and London celebrated Valentine’s Day by packing personal care kits for the homeless.~JJL

Good news of sorts on the health front for me. I will be attending the FIA Boca conference in March. At least that is the plan. I am stopping taking the antibiotics I have been on since December in order to see if the infection in my hip comes back and to identify the bug or bugs causing it. Depending on the findings, I may have to have my new hip taken out and replaced. I have learned this will most likely be a one step surgery, which will get me on the road to recovery better. Not a sure thing to have the surgery. It will depend on if something shows up after Boca in my next test. See you in Boca!~JJL

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We’re Suing the SEC to Protect the Stock Market; An ill-advised price-control program would reduce transparency and increase volatility.
Stacey Cunningham – NYSE
The S&P 500 swung up and down more than 1% on nine different days in December, a gyrating month dominated by uncertainty over the Federal Reserve and a looming government shutdown. On Dec. 18, Treasury Secretary Steven Mnuchin met with reporters to assess the damage. “In my opinion,” he said, “market structure has led to a lot more volatility.” And it wasn’t yet Christmas Eve when the Dow Jones Industrial Average plunged another 653 points.
/on.wsj.com/2SPMdjc

*****Nice way to get the SEC’s attention.~JJL

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Charlie Munger: Teaching young people to actively trade stocks is like starting them on heroin; Warren Buffett’s longtime business partner Charlie Munger equated trying to teach inexperienced investors how to actively pick stocks to trying to get them to use heroin.
Thomas Franck – CNBC
Warren Buffett’s longtime business partner Charlie Munger is not a fan of active investment management and thinks it could harm inexperienced investors.
/cnb.cx/2N9092j

*****It is only like heroin if you give it to them for free. Oops!~JJL

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Vela partners with CoinRoutes to deliver Crypto-Asset Smart Order Routing
Vela
Vela today announced a new partnership with CoinRoutes, a provider of consolidated data, smart order routing & algorithmic trading for crypto investors, to extend the crypto-asset capabilities of the Vela product stack. The phased program will commence with deploying CoinRoutes’ Smart Order Routing (SOR) platform to provide clients with immediate electronic access to crypto-asset trading exchanges.
bit.ly/2DBxuyy
****CoinRoutes CEO and Co-Founder Dave Weisberger spoke at our last MarketsWiki Education event in New York. Be sure to also check out Weisberger’s December commentary for JLN – Crypto: The Good the Bad and the Ugly… ~SD
*****This would have been a better headline if it was “smart-asset order routing.”~JJL

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Thursday’s Top Three
Our top read story of the day yesterday was The Wall Street Journal’s SEC Rejects Capital Plan by Options Clearinghouse. Second went to eFinancialCareers’ post I’m a data scientist and I couldn’t stand working in banking. Hey, it ain’t for everyone. Third was the CME release, CME Is World’s Most Valuable Exchange Brand For Sixth Year Running. A few Richard Branson commercials later and voila, your brand is more valuable.

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Lead Stories

NYSE goes to court to halt SEC plan; Stock exchange says scheme ‘arbitrary and capricious’ in petition
Nicole Bullock – FT
The New York Stock Exchange has gone to court in an effort to block a controversial plan from its main regulator to study the trading incentive schemes underpinning the world’s biggest equities market.
/on.ft.com/2SSS9ry

Japan Exchange Group, TOCOM to merge this year: sources
Reuters
Japan Exchange Group Inc (JPX), owner of Tokyo Stock Exchange, and the Tokyo Commodity Exchange Inc have decided to merge, two sources with direct knowledge of the talks said, as Japan pushes to create an all-in-one bourse.
/reut.rs/2N6OwJc

It’s a Very Bad Day for U.S. Farmers
Millie Munshi and Shruti Singh – Bloomberg
Effects of Trump trade war won’t ease until 2026, USDA says; And the clincher: Kansas City Fed says farm credit tightens
Things are not looking good for the U.S. farm economy. On Thursday, the farm belt’s malaise deepened after the U.S. Department of Agriculture predicted soybean exports would stay below their pre-trade war levels until the 2026-2027 season. That followed a report that sales of the oilseed in early January had the worst week ever. And things didn’t end there: The Federal Reserve Bank of Kansas City warned that farm incomes were likely to have a weak start in 2019 and that credit was tightening at lenders.
/bloom.bg/2N8vMcv

Valentine’s Day end to divorce drama: Pat Arbor ‘delighted to be out’ of jail
Ex-CBOT chief Patrick Arbor released from jail after reaching divorce settlement with ex-wife
Mark Brown – Chicago Sun Times
Call it the Valentine’s Day Peace Treaty.
Former Chicago Board of Trade Chairman Patrick Arbor was released Thursday morning from Cook County Jail after reaching a financial settlement with his ex-wife in their epic divorce battle.
The 82-year-old Arbor had spent the past nine months in jail on a civil contempt of court charge stemming from his decision to flee to Europe in 2012 rather than comply with court orders requiring him to make payments to ex-wife Antoinette Vigilante.
bit.ly/2DF4SVi

****Also see Crain’s Chicago Business.

***** Arbor had money in a trust that he could not get out unless he was a free man. I am guessing he worked out a swap backed by some friends, which could have been done months ago. This whole thing was just stupidity and arrogance run rampant.~[[JJL]]

Intercontinental Exchange Announces the Launch of ICE Bonds; One leadership team and a new brand bring together ICE’s fixed income execution platforms
ICE
Intercontinental Exchange announced the launch of ICE Bonds, which offers access to deep liquidity pools, multiple trading protocols and a vast breadth of fixed income data and analytics.
bit.ly/2N9zWk2

Brief Price Gaps in Stocks Cost Investors $2 Billion a Year; Government-backed study finds nearly 24% of trades may not be executed at best available prices, can be exploited by fast traders
Cezary Podkul – The Wall Street Journal
Nearly a quarter of U.S. equity trades may not be executed at the best price available in the market, costing investors at least $2 billion a year, according to a new study funded by the U.S. government. The study provides new evidence of momentary pricing discrepancies that researchers say can be exploited by high-speed traders looking to make a quick profit.
/goo.gl/ZFFpFB

Brussels rejects plea for dual-listed London shares trading; EU asset managers warn they could move to UK because of commission’s stance
Jim Brunsden in Brussels and Philip Stafford – FT
Brussels has rebuffed calls from EU asset managers who want to continue trading dual-listed shares in London after a no-deal Brexit, in an indication of the European Commission’s tough stance on financial services.
/on.ft.com/2N64FhY

ICE Wants to Bring First ‘Speed Bump’ to Futures Markets; Plan to introduce brief delay on some gold and silver futures trades is on pause pending CFTC review
Alexander Osipovich – WSJ
A proposal to blunt the advantages of ultrafast traders in one corner of the futures market is threatening to shake up the high-frequency trading world.
/on.wsj.com/2N6QJUT

****Bloomberg here.

Euronext confident ‘dual-listed’ trading to continue after Brexit
Huw Jones – Reuters
The trading of dual-listed shares in Britain by European investors is expected to continue after Brexit, a senior official at pan-European exchange Euronext has said.
/reut.rs/2NckzaU

Carney’s ‘canary in the coal mine’ moment; Hundreds pack the Barbican to hear the Bank governor ratchet up his Brexit warning
Patrick Jenkins – FT
Twitter is no medium for serious central bankers (guess what: “@MarkCarney_BOE: Making waves with the GBP since 2012” is a fake). They still rely on old-fashioned speeches to draw an audience. Sure enough hundreds packed into the Barbican on Tuesday to hear the Bank of England governor ratchet up his Brexit warning a notch. Among them was Bill Michael, the KPMG boss, taking a break from being lambasted by MPs over audit shortcomings. Isle of Wight MP and keen Brexiter Bob Seely tussled with the governor in the Q&A when he suggested Carney was anti-Brexit.
/on.ft.com/2N8wpCT

EU should trust UK on clearing post-Brexit, says BoE; Brussels plans more direct oversight of derivatives trades cleared by London’s trio
Philip Stafford – FT
EU regulators should drop ambitions for greater direct supervision of London clearing houses after Brexit, to avoid imposing potentially “conflicting requirements” on institutions that play a key role in global markets, according to a top official at the Bank of England.
/on.ft.com/2N6S4Ly

The New Way to Deregulate; Offering exemptions from many consumer protection rules is meant to spur fintech innovation, but it could lead to abuse.
Paula Dwyer – Bloomberg
Sandboxes are the hot trend in financial regulation. Or rather, deregulation. China, Singapore, Australia, Canada, and more than 20 other countries have them. U.S. regulatory agencies are starting them. Arizona has one, and other states may follow suit.
/bloom.bg/2NcdnLW

Fed Officials Near Plan to Finish Portfolio Wind-Down; The strategy would conclude an effort to drain stimulus from the financial system earlier than officials once anticipated
Nick Timiraos – WSJ
Federal Reserve officials are zeroing in on a strategy to end the wind-down of their $4 trillion asset portfolio as soon as this year, which would conclude an effort to drain stimulus from the financial system earlier than they had once anticipated.
/on.wsj.com/2N6g8OA

EU and global securities regulators welcome agreement on data transfer
ESMA
The International Organization of Securities Commissions (IOSCO) and the European Securities and Markets Authority (ESMA) welcome the Opinion of the European Data Protection Board (EDPB) on their administrative arrangement for the transfer of personal data between European Economic Area (EEA) Financial Supervisory Authorities and non-EEA Financial Supervisory Authorities.
bit.ly/2N8cCU1

Exchanges, OTC and Clearing

ICE combines bond trading platforms under new unit; ICE establishes new fixed income trading business which combines its three platforms TMC Bonds, BondPoint and ICE Credit Trade.
Hayley McDowell – The Trade
US exchange group Intercontinental Exchange (ICE) has combined its fixed income trading platforms under a new business known as ICE Bonds.
bit.ly/2N68dB3

Enhancement of the volume rebate methodology
Eurex
In order to mitigate the negative impacts resulting from new structures that many market participants are currently implementing in preparation for Brexit, Eurex Clearing has decided to enhance the volume rebate methodology by considering take-up volumes for the rebate calculation in specific cases, where
bit.ly/2N6RsFB

CME Group CEO is ‘not a proponent of’ regulating stock buybacks
Brian Sozzi – Yahoo Finance
The always questionable practice of big companies spending millions to buy back their stock has suddenly become a renewed hot button political issue ahead of the 2020 election.
/yhoo.it/2SQmA1y

Euronext achieved a strong performance in 2018
Euronext
Euronext, the leading pan-European exchange in the Eurozone with 1,300 listed issuers, today announces its results for the full year 2018.
bit.ly/2N7Nuga

EurexOTC Clear: Service introduction on 17 June 2019 (OTC Release 9.2)
Eurex
With this circular, Eurex Clearing announces the introduction of service enhancements on 17 June 2019 with OTC Release 9.2.
bit.ly/2N66MlU

MSCI index derivatives: Adjustment of minimum block trade sizes and non-disclosure limits
Eurex
The Management Board of Eurex Deutschland took the following decisions with respect to MSCI futures with effect from 25 February 2019:
bit.ly/2N67gbI

Enhancement of the Excessive System Usage concept: Introduction of a new limit type
Eurex
The Excessive System Usage Fee (ESU) concept is designed to protect the T7 trading system from excessive system usage. With the introduced amendments to the T7 trading system architecture in the last two years, Eurex Exchange achieved a reduction in the median latency, but more important, the variance of the latency dropped dramatically, leading to more deterministic and resilient system behaviour.
bit.ly/2N6868m

Fintech

Data will be key differentiator for FX platforms amid consolidation concerns; Intelligent use and provision of data sets to buy-side clients will be a defining factor for FX trading venues going forward according to TradeTech FX USA panel.
John Brazier – The Trade
The intense competition for FX trading venues may come down to the quality and use of data as a key differentiator, according to speakers at this year’s TradeTech FX USA conference.
bit.ly/2N5X9DK

Trading firms seek ‘in-flight’ TCA to flag potentially bad FX trades; Speakers at TradeTech FX USA told delegates that traders would be empowered if ‘in-flight’ TCA could flag when trades aren’t going as planned.
Hayley McDowell – The Trade
Foreign exchange market participants are seeking efficient methods of alerting traders if an ongoing transaction isn’t going as planned using real-time, or ‘in-flight’, transaction cost analysis (TCA).
bit.ly/2N52Hi3

Buy-side looking for flexibility as top technology requirement from vendors; Buy-side panellists highlight importance of working with forward-looking technology vendors and warn those that do not take a pro-active approach.
John Brazier – The Trade
Buy-side panellists at this year’s TradeTech FX USA conference identified flexibility as their key requirement from both technology systems and vendors to maintain high workflow standards and to increase automation.
bit.ly/2N9iegw

Everything still to play for with AI in its infancy; IBM and Google’s differing approaches highlight extent to which field is wide open
Richard Waters – FT
Ginni Rometty, head of IBM, has a phrase that describes how Big Blue’s customers are applying the tech world’s most powerful new tools, such as AI: “Random acts of digital”.*
/on.ft.com/2N6jTna

The rise of ML in the investment industry
Natasha Mathur – Packtpub.com
The investment industry has evolved dramatically over the last several decades and continues to do so amid increased competition, technological advances, and a challenging economic environment. In this article, we will review several key trends that have shaped the investment environment in general, and the context for algorithmic trading more specifically.
bit.ly/2NeTjZn

BigTech Poses A Greater Threat To Financial Institutions Than Fintech
Mayra Rodriguez Valladares – Forbes
Competition from large, established technology companies (BigTech) and financial technology (FinTech) could put pressure on the profitability of financial institutions and lead them to take on more risks to protect their margins. As part of its ongoing monitoring of BigTech and FinTech influence on financial institutions, the Financial Stability Board (FSB), today published “FinTech and market structure in financial services: Market developments and potential financial stability implications.”
bit.ly/2N7RUUi

Big tech disrupters may pose risk to financial stability, warns global regulator
Caroline Binham – FT
Big tech firms’ move into finance could do more to disrupt the sector than niche challengers, and may pose fresh threats to financial stability, a global financial rulemaker has warned.
/on.ft.com/2N9rYrs

Cryptocurrencies

JPMorgan’s Crypto Coin Puts Ripple’s Relevance in Question
Alastair Marsh – Bloomberg
Delphi Digital’s Shaughnessy calls it a ‘slap in the face’; Biggest U.S. bank unveiled prototype digital coin for payments
The newest cryptocurrency on the block has been used in just one trial transaction and it’s already being hailed as a game changer for digital assets.
/bloom.bg/2N6DXpC

JPMorgan Just Killed the Bitcoin Dream
Ben Walsh – Barron’s
About a decade ago, a group of anarcho-capitalist coders rallied around the utopian notion that the digital protocol developed by the pseudonymous Satoshi Nakamoto would one day create marginal efficiencies for JPMorgan Chase ‘s back-office operations.
bit.ly/2N9euvu

Bitcoin Buyers Offered Chance to Make Money and Avoid Big Losses
Alastair Marsh – Bloomberg
Cedric Jeanson has a tempting proposition for investors scared of Bitcoin after it cratered last year: they can benefit from gains in the digital currency, but still get most of their money back if it tumbles.
/bloom.bg/2NccQcU

Indonesia’s futures exchange authority publishes new rules for crypto assets
Coingeek.com
The Indonesia Futures Exchange Supervisory Board has published new regulations for crypto assets, designed to improve consumer protection and legal certainty for market participants.
bit.ly/2N8lSHH

Luxembourg Passes Bill to Give Blockchain Securities Legal Status
Daniel Palmer- Coindesk
The European nation of Luxembourg has just passed a bill providing a legal framework for securities issued over blockchains. According to a notice published Thursday, the country’s Chamber of Deputies, the county’s parliament, passed the bill on Feb. 14 with 58 members supporting the legislation and only two voting against.
bit.ly/2NciXxS

Coinsquare Acquires Decentralized Cryptocurrency Exchange StellarX
Daniel Palmer – Coindesk
Canada-based cryptocurrency exchange Coinsquare has acquired decentralized exchange (DEX) StellarX.
bit.ly/2N8GZtl

Judge Delays Decision On Legal Representation for Quadriga Creditors
Nikhilesh De – Coindesk
A Canadian judge declined to name any law firms to represent as many as 115,000 users of QuadrigaCX, deferring that significant decision by a week. Nova Scotia Supreme Court Judge Michael Wood said during a hearing Thursday that he would not appoint any firms as representative counsel or make any other decisions regarding creditor representation immediately, though he plans to have a final decision within the week.
bit.ly/2N9rwcK

Coinbase Exchange Users Can Now Withdraw Bitcoin Cash Fork BSV
Coindesk
Coinbase, the largest US-based cryptocurrency exchange, is finally allowing users to withdraw bitcoin Satoshi vision (BSV) – the cryptocurrency created in a hard fork of the bitcoin cash blockchain on Nov. 15.
bit.ly/2NeUKqJ

Judge Hits Crypto Startup With Injunction In Reversal of Past Court Order
Nikhilesh De – Coindesk
The U.S. Securities and Exchange Commission scored a legal victory Thursday after a federal judge placed a preliminary injunction against a crypto startup, reversing a previous decision made last year.
bit.ly/2N8t1rv

TRX/USD gears up for growth as Tron leverages South Korean gaming market
John Isige – FXStreet
Tron recently ran a successful token issue for its BitTorrent Token (BTT). The token was released to leverage the torrenting space. Moreover, Tron as an achiever on the market is already looking forward to harnessing the gaming industry following a memorandum of understanding (MoU) that was signed recently.
bit.ly/2SCeGJV

Politics

Donald Trump’s risky national emergency; A key moment in his presidency that will reverberate long after he has left office
Edward Luce – FT
No, Capitol Hill is not the Reichstag and it did not just catch fire. Nor is Donald Trump Adolf Hitler. His national emergency is not the prelude to a suspension of US democracy. Nor is it the dawn of a fascist America. It is nevertheless a key moment in his presidency that will reverberate long after he has left office.
/on.ft.com/2N9s1Dj

Trump to Invoke Broad Powers in High-Risk Bid to Build His Wall
Margaret Talev and Justin Sink – Bloomberg
Plans to redirect nearly $7 billions in federal funds; Gambit avoids shutdown but risks protracted legal fight
Donald Trump is turning to an expansive use of presidential power to build his promised border wall, shifting the fight over funding to uncertain ground in the federal courts rather than risking another politically damaging government shutdown.
/bloom.bg/2N8hx7p

Every Day Is a New Low in Trump’s White House; The president steps over bright ethical and moral lines wherever he encounters them. Everyone in America saw it when he fired my boss. But I saw it firsthand time and time again.
Andrew G. McCabe – The Atlantic
On Wednesday, May 10, 2017, my first full day on the job as acting director of the FBI, I sat down with senior staff involved in the Russia caseóthe investigation into alleged ties between the Trump campaign and the Russian government. As the meeting began, my secretary relayed a message that the White House was calling. The president himself was on the line. I had spoken with him the night before, in the Oval Office, when he told me he had fired James Comey.
bit.ly/2N8d7gP

Anger, Confusion Over Dwindling Refunds. Is Trump’s Tax Plan To Blame?
Daniella Cheslow – NPR
President Trump promised that his tax changes, passed in 2017, would give most Americans a tax cut.
/n.pr/2N6Lx3y

Do Americans really want outsider politicians?
Grace Sparks – CNN
More than half of Americans said that all things being equal, they would be more likely to support a candidate for Congress who is seen as a political outsider over a political insider, according to a Monmouth University poll from August 2018. In that poll, 52% of respondents said they preferred an outsider candidate while 25% said they preferred an insider candidate.
/cnn.it/2UYAImH

The Trailer: The centrists are entering the Democratic primary
David Weigel – The Washington Post
At every stop of his latest trip to New Hampshire, John Hickenlooper got the same question. On Thursday, it came from a student at New England College, who wanted to know how the former governor of Colorado would bring the country together. “I look at what we were able to achieve in Colorado, and in every case it was because we were able to sit down with people who were feuding and at each other’s throats,” said Hickenlooper, who is expected to announce his presidential plans next month. “We were able to get them to put down their weapons.”
/wapo.st/2BD3XV4

Trump Plans National Emergency to Build Border Wall as Congress Passes Spending Bill
Peter Baker, Emily Cochrane and Maggie Haberman – The New York Times
President Trump will declare a national emergency as early as Friday to bypass Congress and build his long-promised wall along the nation’s southwestern border even as he agreed to sign a spending package that does not finance it, White House officials said Thursday.
/nyti.ms/2IcC0Jr

Regulation

Brexit briefings for regulated firms
UK FCA
We are hosting 2 briefings for regulated firms in preparation for the UK leaving the European Union. These will take place in London and Edinburgh with live webcasts.
bit.ly/2NchqYE

CFTC Charges Principal of a Purported Commodity Trading Firm with Social Media Based Fraudulent Scheme
CFTC
The Commodity Futures Trading Commission (CFTC) today announced that a federal court in a CFTC enforcement action entered a preliminary injunction prohibiting defendant Kelvin O. Ramirez (Ramirez), of Houston, Texas from engaging in fraud, misappropriation of customer funds, and regulatory violations in connection with an off-exchange foreign currency (forex) scheme. The CFTC’s complaint charges that Ramirez defrauded more than 140 clients by falsely claiming he had millions of dollars in assets under management when he did not and there is no evidence of him trading. Instead, as alleged, he absconded with his clients’ money.
bit.ly/2N9AKFA

ASIC to pursue harsher penalties after laws passed by Senate
ASIC
ASIC will shortly be able to pursue harsher civil penalties and criminal sanctions against banks, their executives and others who have breached corporate and financial services law, after a significant bill passed the Senate last night.
bit.ly/2N846UR

This Iowa day trader scammed more than 40 people. Is he building a $500,000 house?
Lee Rood, Des Moines Register
In November, an Alton man was the subject of a $2.1 million judgment by a federal commission for illegally trading crude oil futures and swindling more than 40 customers across the country.
bit.ly/2NeN7R7

CFTC Asks Court To Nix Bid To Move EOX Insider Trading Suit
Law360
The Commodity Futures Trading Commission told a New York federal court on Wednesday to reject EOX Holdings’ request to transfer an insider trading suit to Texas, arguing that a change would…
bit.ly/2N8mjlj

German watchdog widens Deutsche monitor mandate over Danske
Arno Schuetze – Reuters
German financial watchdog Bafin has extended the mandate of its monitor at Deutsche Bank over the bank’s role in a money laundering scandal involving Danske Bank.
/reut.rs/2N9kJzq

Big Tech’s banking foray on regulators’ radar
Huw Jones – Reuters
Global regulatory body watching for competitive impact on banks; Says Big Tech may pose bigger threat to banks than fintech firms; Flags potential undermining of financial stability
The march of so-called Big Tech into financial services could pose a bigger threat to banks than upstart fintech specialists, warranting scrutiny for threats to financial stability, a global regulatory body said on Thursday.
/reut.rs/2N7QCZs

Investing and Trading

Brent-WTI Oil Spread Taking Cue from Houston-Midland?
Erik Norland – CME Group
The price spread between two relatively new futures contracts, WTI Midland and WTI Houston, has been over the past two years a leading indicator of the spread between the two most venerable crude oil futures contracts: WTI and Brent. The economics behind this might offer clues about how oil markets evolve in the future.
bit.ly/2SysxB2

Volatility and Active Management
Hamish Preston – S&P Dow Jones Indices Blog
Recently, a number of reports highlighted a surge in popularity for actively managed U.S. equity funds in 2019. The main explanation for this trend appears to be the volatility observed in the final few months of 2018: market participants seem to believe active managers are better able to navigate more volatile markets. However, the data belies this belief: most active managers underperform regardless of market direction.
bit.ly/2SwP01j

Ask Any Stock Market Pro: Buying Is Easy, Selling Is Hard; Investors are so bad at knowing when to give up on a holding, they’d be better off doing it at random.
Michael P. Regan – Bloomberg
Princeton economist Burt Malkiel is famous in investing circles for suggesting that blindfolded monkeys throwing darts at a newspaper’s stock pages could build a portfolio that would do just as well as one chosen by expert money managers. A recent academic study suggests that the blindfolded monkeys actually may do even better than the average institutional investor. However, the monkey traders should be given the darts when it’s time to sell holdings, not when deciding what to buy.
/bloom.bg/2N91LJp

If You Wanted the Best Muni Trade, You’re Three Hours Late
Martin Z Braun – Bloomberg
When’s the best time to buy municipal bonds? Around three hours ago, according to an analysis of daily trading patterns by BondWave LLC, a financial technology company.
/bloom.bg/2N9lFDW

U.S. stocks poised to rise as China-U.S. officials extend tariff talks to next week
Chris Matthews, Barbara Kollmeyer – MarketWatch
U.S. stock futures higher Friday morning as investors focused on continued progress in trade negotiations between China and the U.S. in the final day of its weeklong round of discussions. Reports that talks are set to be continued next week in Washington added fresh hope that a resolution was near, even if key the parties appeared far apart on some key points.
/on.mktw.net/2tomKio

Institutions

Credit Suisse Returns to Profit but Trading Weakness Remains; Swiss lender reports a weaker-than-expected performance in its trading unit
Pietro Lombardi – WSJ
Credit Suisse Group AG swung to a profit in the fourth quarter, despite weakness in its trading business, and posted its first annual profit since 2014 following a three-year restructuring plan.
/on.wsj.com/2N8yGOr

Asset managers fight to prevent limits on company ownership; US regulator probes whether consumers suffer if investors own big stakes in competing companies
Brooke Fox – FT
BlackRock, State Street and other asset managers have come out in force against an idea to put limits on their stakes in companies, after the US Federal Trade Commission held a hearing on whether such holdings hurt consumers in the world’s largest economy.
/on.ft.com/2N8wCGb

Investors flee European stocks at fastest pace since Brexit vote; Almost $6bn in weekly outflows come on concerns over UK’s departure and continent’s growth
Richard Henderson – FT
Investors have fled European stocks at the fastest pace since the aftermath of the Brexit vote in 2016, as concerns rise over Britain’s disorderly departure from the EU and slowing economic growth on the continent.
/on.ft.com/2N65oQt

RBS dividend beats forecast despite long-term Brexit caution; Bank warns bad loans likely to increase in 2019
Nicholas Megaw – FT
Royal Bank of Scotland will pay a significantly larger dividend than expected after reporting a strong end to 2018, but cautioned that the impact of Brexit would make it unlikely to reach some of its longer-term targets.
/on.ft.com/2N6izAI

How Bloomberg Calculated the Top Hedge Fund Managers’ Income
Tom Maloney – Bloomberg
Bloomberg’s inaugural ranking of hedge fund manager income shows that the top 10 individuals reaped approximately $7.7 billion last year.
/bloom.bg/2N5Vkqo

Warren Buffett Doubles Down on Big Banks as Berkshire Trims Apple Stake
Katherine Chiglinsky and Ben Foldy – Bloomberg
Berkshire cuts Apple holding by 1% amid stock plunge; Company adds stake in Red Hat while exiting Oracle holding
Warren Buffett’s Berkshire Hathaway Inc. took advantage of a plunge in bank stocks to pile even further into his bet on financials, while trimming a giant stake in Apple Inc.
/bloom.bg/2N6xued

Former Goldman Sachs Banker Charged in 1MDB Fraud Will Return to U.S.
Emily Flitter and Matthew Goldstein – NY Times
A former Goldman Sachs banker implicated in a multibillion-dollar fraud in Malaysia will return to the United States to face the criminal charges against him, his lawyer said in an email on Thursday.
/nyti.ms/2N7ZHBj

Deutsche, Commerzbank exposed to takeover because of weak stock value: Kukies
Reuters
Both Deutsche Bank and Commerzbank have fairly low stock values which naturally exposes them to possible takeovers from bigger financial institutions, German Deputy Finance Minister Joerg Kukies told the Sueddeutsche Zeitung newspaper.
/goo.gl/T7x343

Regions

Drip. Drip. Asia’s Liquidity Taps Start to Gurgle; Whisper it for now, but we may see the region’s asset markets start to operate more smoothly in the second half of the year.
Andy Mukherjee – Bloomberg
Last year marked the deepest deterioration in Asian liquidity conditions since 2008. While it’s nowhere close to over, the worst of the squeeze may have passed. The gears of the region’s asset markets could turn more smoothly in the second half of the year.
/bloom.bg/2N6KtwA

China Stocks Are Overheating Just as Bond Traders Flee to Safety
Sofia Horta e Costa – Bloomberg
Warning signs abound for stocks in Shanghai, Hong Kong and Shenzhen this week, with buying momentum particularly notable in the market’s most speculative segments.
/bloom.bg/2N8gSmr

VTB deal gives it major control over Russian grain exports; Kremlin-run bank has agreed to buy grain terminal of country’s busiest port
Nastassia Astrasheuskaya and Max Seddon – FT
Kremlin-run bank VTB has agreed to buy the grain terminal of the country’s busiest port in a deal that will give it significant control over Russian grain exports.
/on.ft.com/2N65FCK

US founder of Russia-focused private equity firm arrested; Michael Calvey denies claims of ‘large-scale’ fraud made by Moscow prosecutors
Max Seddon- FT
The American founder of Baring Vostok, one of the largest Russia-focused private equity firms, has been arrested in Moscow for “large-scale fraud”, a court said Friday. Michael Calvey was arrested alongside Baring partners Vagan Abgaryan and Phillipe Delpal as well as three other unnamed suspects, a court spokeswoman told state newswire RIA Novosti.
/on.ft.com/2N9goME

Norway’s Biggest Bank Is Now Selling Off More of Its Loan Book
Jonas Cho Walsgard – Bloomberg
Norway’s biggest bank, DNB ASA, is picking up speed in selling off more of its corporate loans to investors. “There will be long-term structural growth in that market,” Ottar Ertzeid, head of DNB Markets, said in an interview on Monday.
/bloom.bg/2NcdTcQ

One Weird Trick for Avoiding Bad Chinese Bonds; The private sector and companies that boast high-level connections are no substitute for genuine government debt.
Shuli Ren – Bloomberg
China’s $12 trillion bond market is like a push-up bra – one wonders how much support there really is. Corporate defaults have flared up again. China Minsheng Investment Group Corp., with interests in real estate and renewable energy, is the latest basket case. Coal miner Wintime Energy Co., one of China’s largest defaulters last year, missed interest payments again this month.
/bloom.bg/2NccOli

Exclusive: China offers to end market-distorting subsidies but won’t say how
Michael Martina, David Lawder – Reuters
China has pledged to end market-distorting subsidies for its domestic industries but offered no details on how it would achieve that goal, according to three people familiar with the U.S.-China trade talks in Beijing this week.
/reut.rs/2N8dk3B

China’s bad debt managers risk becoming bad credits themselves
Samuel Shen, Shu Zhang – Reuters
China’s bad debt managers, whom Beijing hopes to play a key role in resolving financial risks, are in danger of becoming bad credits themselves as the leverage crackdown that fueled a boom in their business now threatens their own access to funding.
/reut.rs/2N9BRFg

Brexit

Brussels official calls IAG Brexit plan ‘totally absurd’; Airline group criticised for counting UK shareholders as EU investors after Britain leaves bloc
Josh Spero – FT
The announcement by IAG, the owner of British Airways, that it would consider UK shareholders as EU investors after Brexit has been described as “totally absurd” by a senior official in Brussels.
/on.ft.com/2N6OPUf

Deal or delay? Wall Street doesn’t believe no-deal Brexit threat
Guy Faulconbridge, Helen Reid, Andrew MacAskill – Reuters
As the United Kingdom’s Brexit crisis deepens, Goldman Sachs and JPMorgan have differing views of the ultimate outcome but the two titans of Wall Street agree on one thing: They don’t believe there will be a no-deal Brexit.
/goo.gl/KyK8SE

UK regulator warns no-deal Brexit will ‘heavily constrain’ its investigations; Antitrust watchdog says its ability to launch new probes will be affected
Caroline Binham – FT
The UK’s antitrust regulator has warned that a no-deal Brexit will “heavily constrain” its ability to launch investigations into price-fixing and markets that are not working well for consumers over the next financial year.
/on.ft.com/2N6Od0T

U.K. Set to Tell EU It Doesn’t Want to Renegotiate Brexit Deal
Ian Wishart – Bloomberg
Brexit Secretary said to drop demand to re-open exit deal text; EU looking at ways to reassure U.K. that backstop is temporary
British Prime Minister Theresa May’s officials are preparing to compromise on their demands for a re-write of the Brexit agreement, according to a person familiar with the matter.
/bloom.bg/2N5V3nm

May Scrambles for Brexit Compromise With Two Weeks to Save Deal
Ian Wishart, Tim Ross and Kitty Donaldson – Bloomberg
British officials water-down demands for backstop changes; Parliament rejects May’s strategy after Conservatives rebel
British Prime Minister Theresa May is preparing to compromise with the European Union over the future of Ireland’s border, with just two weeks left to save her Brexit deal.
/bloom.bg/2N9qZYi

Banks have not moved enough staff from London to EU for Brexit: Bundesbank
Reuters
Some banks that conduct their euro zone business from London have failed to meet regulators’ expectations to move enough staff into other EU countries in time for Brexit, the German bank supervisor Joachim Wuermelling said on Thursday.
/reut.rs/2N5Z3Eo

RBS warns of Brexit harm as profits double
BBC News
Royal Bank of Scotland has reported profits of £1.62bn for 2018, more than double the £752m it made a year earlier. RBS chief Ross McEwan called the results “a good performance in the face of economic and political uncertainty”. Mr McEwan said the UK economy faced “a heightened level of uncertainty related to ongoing Brexit negotiations”.
/bbc.in/2TRVgx9

Brexit: Theresa May pushes on with her deal after latest defeat
BBC News
Theresa May will press on with efforts to secure a revised Brexit deal, despite another Commons defeat, and will return to Brussels “within days”. MPs voted against a motion endorsing the government’s strategy by 303 to 258, with 66 Tory MPs abstaining. Steve Baker, of the Conservative backbench European Research Group, which led the rebellion, called the loss a “storm in a teacup”.
/bbc.in/2BDKcwv

Miscellaneous

How Identity Politics Admissions Hurts Most College Students; Despite good intentions, the school’s racial diversity goal was thwarted, parents were disappointed and no student was well served.
Roy Brooks – WSJ
Regarding Heather Mac Donald’s “Diversity Delusions at North Carolina” (op-ed, Feb. 11): A simplified example of the direct counterproductive outcomes of lowered admissions standards for minority STEM applicants was clearly on display at my daughters’ small, rural Virginia middle school in the 1990s.
/on.wsj.com/2UV9oWo

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