Options Clearing Corp. to Pay $20 Million to SEC, CFTC

Sep 5, 2019

First Read

Ah, September! Litigation is in the air
Thom Thompson – John Lothian News

This year, early September is back-to-federal-court time in Chicago. Three of our favorite cases have seen some recent action in the Dirksen Building.

CFTC v Kraft and Mondelez. Last week, the CFTC asked to move the date of the evidentiary hearing in the parties’ latest spat in U.S. federal court from September 12 to October 2. Its motion was granted. (Btw, it is pronounced “mon-del-ease.”)

The upcoming hearing arises from the now-soured settlement agreement in the CFTC’s wheat futures manipulation case that dates back to 2011. Having agreed to pay $16 million in fines to the CFTC on August 15, Kraft/Mondelez hauled the plaintiff back into court on August 19 after the CFTC published a press release and other statements on its website. It appeared to Kraft/Mondelez that the documents were one part defamatory and two parts indicative of extreme bad faith in settling the case. While brief, the August 19 hearing was tense.

To read the rest of this commentary, click here.


Hits & Takes
JLN Staff

The Chicago Emerging Manager Forum/CTA Expo is set for September 11 and 12, at 1 N. Wacker Drive, Chicago in The Conference Center. This year’s event is a 2-day conference for the first time with September 11th set for emerging managers to meet with allocators and September 12th for the main program.~JK

Congratulations to FIA’s Chief Commercial Officer Emma Davey and Innovate Finance Head of Communications and Diversity Clare Black, who have been recognized by Brummell Magazine as part of ” 30 Inspirational Women: City leaders 2019.” Since Brummell is a luxury lifestyle magazine and the list was in association with Jimmy Choo, they were sure to mention the shoes that Emma and Clare were wearing as part of the captions of their pictures.~JJL

BTW, in case I get named to any list, I am wearing Timberland Icon 3-Eye Classic Handsewn Lug Shoes. And I do my own hair (sometimes some gel) and makeup (none).~JJL

A few CME disciplinary notices hit the tape: Nicholas Murphy was fined $65,000, made to disgorge $41,418 in profits and suspended for three weeks for entering orders without the intent to trade in various energy futures traded on NYMEX. Cornerstone Global Commodities was fined $60,000 for failing to promptly report “numerous block trades for customers.” Deepak Patwari was fined $50,000 and suspended for a year for entering pre-open orders in cattle markets for the purpose of identifying depth of book, rather than executing bona fide transactions. Baruch Glaubach, while neither admitting nor denying the findings, was fined $45,000 and suspended for two weeks for spoofing. Kunal Makhijani was fined $45,000 and suspended for five years for spoofing and layering.~SD

On September 10, a new ETF will be available for trading, ticker VEGN. Can you guess what it is? That’s right, the US Vegan Climate ETF. It will avoid investing in companies that rely on animal testing, animal derived products and/or fossil fuel use. ~SD

Visual Capitalist has an iShares infographic posted regarding the “Meteoric Rise of Bond ETFs.”~SD

Both TD Ameritrade and E*Trade announced integration with Google Assistant yesterday. See our “Fintech” section for more.~SD

ViableMkts and BondCliQ CEO Chris White narrates a Youtube PowerPoint presentation on the BondCliQ corporate bond market data solution.~JJL

Former MF Global CEO Kevin Davis has a commentary on CEOWorld.biz titled “Invest Early In Diverse Talent To Stay Competitive In A Changing Workforce.”~JJL


SEC and CFTC Charge Options Clearing Corp. with Failing to Establish and Maintain Adequate Risk Management Policies
The Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission today announced that the Options Clearing Corporation (OCC) will undertake remedial efforts and pay $20 million in penalties to settle charges that it failed to implement policies to manage certain risks as required by U.S. laws and SEC and CFTC rules.

***** JLN has a unique perspective on the OCC as we interview their executives often, and they are among our sponsors. I want to defend them regarding this fine, pointing out there has been dynamic change from the country-club style of management to the Craig Donohue led complete transformation. This is not your father’s OCC. And John Davidson has taken the OCC to a higher level as CEO, with his long previous experience leading a clearinghouse. However, the results of this transformational change versus the standard regulators are applying will only be established when there is a major market event or cyber attack on the system or the entire financial infrastructure. Then we will know. Is all the change enough? Not just to meet the potentially arbitrary regulatory requirements, but to meet the true risk management challenges. Here is the OCC’s transformation in the OCC’s own words to show how it is meeting the challenge. The OCC is a SIFMU, a strategically important financial market utility. It is also the only equity options clearinghouse, a potential single point of failure. I am hesitant to criticize the SEC and CFTC on this, as I am holding my CFTC criticism back for their terrible decision to make a bigger martyr out of Jitesh Thakkar.~JJL


Venture-Capital Stalwart Battles Washington’s Crypto Crackdown
Dave Michaels and Alexander Osipovich – The Wall Street Journal
Venture-capital firm Andreessen Horowitz, known for early investments in innovative companies such as Facebook Inc., FB +2.60% is putting up a fight against Washington’s cryptocurrency crackdown.
The aim: advance its latest bet on futuristic technology. In late May, at a full-day, private conference in San Francisco, the firm was host to officials from the Treasury Department and Washington’s alphabet soup of regulatory agencies.

***Thom Thompson: While it is pretty shocking to read about our federal regulators going to a private, VC-sponsored conference on crypto regulation, it is reassuring that they didn’t seem to cave in. I hope the CFTC and SEC staffers got individual bills and receipts for their dinner “at San Francisco’s Angler restaurant.” It must have been lovely.


Wednesday’s Top Three
Our top three on Wednesday were led by Bloomberg’s Index Fund Investment Strategy: Michael Burry Warns of Bubble and why he’s worried about passive funds. Second was The Wall Street Journal’s Goldman’s Coder-in-Chief Ditches Wall Street for California Sunshine, about Martin Chavez’s retirement and move to sunny California, no doubt making many others in the industry jealous. Third was The Wall Street Journal’s What France – Yes, France – Can Teach the U.S. About Free Markets. The question is, is he right that the US has given up on free markets?


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Lead Stories

Options Clearing Corp. to Pay $20 Million to SEC, CFTC; Regulators’ allegations focused on OCC’s efforts to comply with heightened standards imposed on clearinghouses
Dave Michaels and Gunjan Banerji – WSJ
The central clearinghouse serving as a backstop for trades in the options market has agreed to pay a $20 million fine and strengthen its compliance programs to settle U.S. regulatory investigations.

**** Here is the FT version of the story.~JJL

Hong Kong exchange operator suspends derivatives trading; ‘Connectivity issues’ plague futures trading as volumes fall to nearly zero
Hudson Lockett and Daniel Shane – FT
Hong Kong’s exchange operator suspended trading on its derivatives market on Thursday amid trading disruptions for options and after volumes for some futures contracts in the territory dropped precipitously.

**** Here is the Bloomberg version of this story.~JJL

European watchdog warns on bond fund liquidity risk; Market shock would leave up to 40% of junk bond funds unable to cope with investor withdrawals
Chris Flood – FT
As many as four in ten European high-yield bond funds would not have enough liquid assets immediately available to meet investor withdrawals in the event of a market shock, according to Europe’s top securities regulator.

Goldman Sachs’s Partnership Is Shrinking; CEO David Solomon is culling upper ranks he feels have grown bloated
Liz Hoffman – WSJ
Goldman Sachs Group Inc. GS 1.39% ‘s partnership is shrinking under a new chief executive who wants to restore its exclusivity.

OCC Statement on SEC and CFTC Settlement
OCC, the world’s largest equity derivatives clearing organization, released the below statement in response to a settlement reached with the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) regarding allegations that OCC failed to comply with certain SEC and CFTC regulations.
The SEC and CFTC both considered OCC’s cooperation and remediation efforts in reaching their settlement with the company. The SEC noted that OCC developed remediation plans that have been provided to the Commission staff and has already obtained SEC approval to enhance the company’s margin policy, incorporate stress testing and liquidation costs into its clearing fund and margin methodologies, respectively, among other approvals. The CFTC specifically noted that “OCC developed remediation plans to bring OCC into compliance with [clearing agency] Core Principles and Regulations.”

CME Group is sharing details on bitcoin options that could signal an ‘imminent’ product launch
Frank Chaparro – The Block Crypto
CME Group appears to be gearing up to add a new bitcoin product to its marketplace; According to documents obtained by The Block, the exchange is sharing contract specifications for a bitcoin option; Sources say launch could come this year
CME Group, the Chicago-based exchange giant, is gearing up to add another product to its family of bitcoin derivatives, according to sources familiar with the situation.

5 Things That Are Making MIFID II Data Useless
Chris Barnes – Clarus Financial Technology Blog
To all of our readers who, like me, are responding to the latest ESMA consultation, I thought I would provide a simple list of ways that MIFID II data is being made difficult to access. Hopefully this can help to get transparency right in Europe.
ESMA reports that the users of data that they spoke to at roundtable events do indeed find the data unusable.

DTCC and Accenture Unveil Governance Operating Model to Manage Risks and Promote Safety Across Distributed Ledger Technology Landscape
Press Release
The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry, and Accenture (NYSE: ACN), a leading global professional services company, today published a white paper, Governing DLT Networks, introducing a DLT governance operating model to manage risks and consequences of an evolving DLT landscape, to ensure the safety and soundness of the network for the benefit of all participants and to better enable DLT to reach its full potential.

China Approves First Commodity-Linked Exchange-Traded Funds
Alfred Cang – Bloomberg
Chinese authorities have given the go-ahead for the first exchange-traded funds that track domestic energy, metal and agricultural futures as the country seeks to boost the liquidity of its capital markets.

ESMA publishes stress simulation framework for investment funds
The European Securities and Markets Authority (ESMA), the EU’s securities markets’ regulator, has developed a framework to be used for stress simulations for the investment fund sector. The method developed by ESMA is presented in detail in its Economic Report published today, and is accompanied by a case study where it is applied to 6,000 UCITS bond funds.

‘Great Recession’ linked to long-term mental health issues: study
Hannah Sparks – NY Post
Millions of Americans are still recovering from the “Great Recession” of 2008. But it’s not just their finances that took a hit.

High-profile Wall Streeters hit by ‘Ponzi-like scheme’: lawsuit
Kevin Dugan – NY Post
A New York business consultant known for throwing lavish wine parties at five-star eateries like Daniel has bilked a cadre of Wall Street bigwigs out of millions, according to a shocking new lawsuit. Omar Khan, who runs the Sensei International consulting firm on Park Avenue, used his fancy Rolodex to stage wine-fueled shindigs that lured more than a dozen captains of industry into a “Ponzi-like scheme,” according to the lawsuit filed in New York State Supreme Court on Wednesday.

We’re maybe sort of kinda getting close to a real bitcoin ETF
Matthew De Silva – Quartz
For more than a year, investment management firms have been pushing for a bitcoin exchange-traded fund (ETF), a financial vehicle which would allow retail customers to purchase the cryptocurrency through stock brokerage accounts. To date, though, the US Securities and Exchange Commission has nixed—or delayed decisions on—every proposal for a crypto-linked ETF.

The new best jobs at U.S. banks in New York and London
Sarah Butcher – eFinancialCareers.com
It’s September, summer is over and any bank which still has budget to hire will want to use it before the end of the year. If you aspire for a new banking job in 2019, now is therefore the time to circulate your credentials. To help ease the process we’ve identified some of this autumn’s biggest hiring trends at big U.S. banks – and some of the curiously niche opportunities that are out there.

Credit Suisse makes play to trade Europe’s passive investing snowball; The Swiss bank has set up an alternative way for fund managers to trade away from stock exchanges’ closing auctions
Samuel Agini – Financial News
Credit Suisse has joined the battle for the billions of pounds of shares bought and sold by passive investors at the end of Europe’s trading day.

Credit Suisse Scores Legal Win in Forex-Rigging Case; Bank scores victory against currency traders who claimed it helped rig foreign-exchange rates
Margot Patrick – WSJ
Credit Suisse Group AG CS 1.81% scored a legal victory in New York federal court against currency traders who claimed the bank and others helped rig foreign-exchange rates, in a case that rivals have already paid $2.3 billion to settle.

Exchanges, OTC and Clearing

CME Group to Launch SOFR Options on January 6, 2020
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that it will launch options on Three-Month Secured Overnight Financing Rate (SOFR) futures starting on Jan. 6, 2020, pending regulatory review.

CME Group to Launch First-Ever Physical LNG Futures Contract Connecting Global Gas Market Participants to U.S. Exports in October
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced its new liquefied natural gas (LNG) futures contract – U.S. LNG Export futures – will be available for trading on October 14, 2019, pending regulatory review.

Straits Times Index (STI) Quarterly Review – September 2019; Mapletree Commercial Trust to be added to the STI
FTSE Russell announces that there will be one change to the constituents of the Straits Times Index (STI), following the September quarterly review. Mapletree Commercial Trust will be added to the index and, as a result, Hutchison Port Holdings Trust will be excluded.

Nasdaq August 2019 Volumes
Nasdaq (Nasdaq:NDAQ) today reported monthly volumes for August 2019, on its investor relations website.

ASX Monthly Activity Report – August 2019

Temporary Suspension to the Trading in Derivatives Market
In order to preserve an orderly market, Hong Kong Exchanges and Clearing Limited (HKEX) has suspended trading in its derivatives market for the afternoon and After-hours Trading sessions at 2 pm on 5 September due to prolonged connectivity issues on the Hong Kong Futures Automatic Trading System. The clearing system for derivatives will remain open for the afternoon session only.

DTCC Sponsored Service Achieves Key Milestone in Treasury Market Clearing with Citadel Activity
The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry, and Accenture (NYSE: ACN), a leading global professional services company, today published a white paper, Governing DLT Networks, introducing a DLT governance operating model to manage risks and consequences of an evolving DLT landscape, to ensure the safety and soundness of the network for the benefit of all participants and to better enable DLT to reach its full potential.

Pakistan’s Bourse to Close for Second Session in Sign of Solidarity With Kashmir
Faseeh Mangi – Bloomberg
Pakistan’s stock market will be shuttered for a second trading session this week to mark solidarity with the disputed Muslim-majority region of Kashmir after India’s government revoked the restive province’s autonomy.


E*TRADE Makes Managing Investments Easier Through Google Assistant Voice Commands
Yahoo Finance
E*TRADE Financial Corporation (ETFC) today announced investors can use the Google Assistant to check their E*TRADE brokerage accounts and positions with easy-to-use voice commands.

TD Ameritrade Expands Voice-Enabled Services with the Google Assistant
Yahoo Finance
TD Ameritrade has long been a leader in giving greater market access to investors; it was the first in the industry to offer trading over the phone, on a desktop, and through a mobile app. Now, with its rollout on the Google Assistant, the firm is further empowering investors to manage their investments using a voice-controlled device.

Five years on, the first fintech innovators are thriving
Euromoney Magazine
In 2014, KPMG published a report on the 50 best fintech innovators as selected on the basis of four factors: total capital raised; rate of capital raising; location and degree of sub-industry disruption; and a subjective call from a judging panel on these companies’ products, service, customer experience and business model innovation. Back then, the excitement was discernible. Global fintech financing had more than trebled in the prior three years and by 2014 was running at an estimated $3 billion annually.

Commcise launches buy-side commission management-as-a-service platform; COMMICSECM platform to automatically unbundle trades for US asset managers for increased spending transparency.
John Brazier – The Trade
Commission management systems specialist Commcise has announced the launch of its as-a-service offering for US asset managers.

Credit Suisse automates post-trade equities operations with Torstone; Credit Suisse will bring its post-trade processes back in-house through its partnership with Torstone Technology.
Hayley McDowell – The Trade
Credit Suisse has made moves to automate its equities post-trade processes by replacing its third-party outsourced platform and deploying Torstone Technology’s cloud-based system.

BondCliQ to provide US corporate bond pricing in Charles River IMS; Traders will be able to view bids and offers, attribution and size data aggregated by BondCliQ from 27 dealers on the Charles River IMS.
Hayley McDowell – The Trade
Charles River Development has formed a partnership with fixed income market data provider BondCliQ to bolster its investment management solution (IMS) with pricing in corporate bonds.

OpenDoor Names Former Luminex Head as COO
OpenDoor Securities LLC, the first all-to-all marketplace for illiquid US Treasuries, has named Michael Cashel its new Chief Operating Officer. Cashel will lead efforts to scale OpenDoor’s platform across the $16.2 trillion US Treasury market and expand the Company’s client base globally. He will report directly to OpenDoor’s CEO, President and co-founder, Susan Estes.

Capitolis Appoints Joseph A. Molluso as Chief Financial Officer
Capitolis, the pioneering technology provider for capital markets, announced today that it has appointed Joseph (Joe) A. Molluso as Chief Financial Officer. Mr Molluso brings with him an extensive background in corporate finance, operations, financial planning and analysis, investor relations and strategic planning, most recently at Virtu Financial and JP Morgan. Joe will join Capitolis in October and he will report directly to Capitolis CEO and Founder, Gil Mandelzis.

Prudential to Pay $2.35 Billion for Online Startup Assurance IQ; Largest insurer by assets expects three-year-old company to help it draw middle-class customers
Leslie Scism – WSJ
Prudential Financial Inc. PRU 1.28% has agreed to pay $2.35 billion for an online startup as traditional life insurers seek to reach digital-savvy customers who shop on the internet.

The Indian government can thank Google for the popularity of its digital payment system
Sangeeta Tanwar – Quartz
Google Pay is winning the race in enabling digital payments powered by India’s state-run platform.

A new digital bank is scooping up teenage customers before big banks get to them
John Detrixhe – Quartz
America’s biggest banks are used by hundreds of millions of people. A digital startup bank is hoping to challenge these incumbents by scooping up the next generation of customers before the titans can get to them.


Fewer People Are Sending Bitcoin to Largest Crypto Exchanges
Olga Kharif
Power users are dominating trading, TokenAnalyst data show; Binance, Bitfinex are offering more services to boost revenue
The notion that more people are trading cryptocurrencies? Well, it just may be wrong. Fewer people have been sending Bitcoin to major exchanges in recent months, according to crypto data tracker TokenAnalyst. After peaking in 2017, the number of unique addresses sending the world’s most-popular cryptocurrency to exchanges such as Binance and Bitfinex has been declining, it found.

Will We Realize Blockchain’s Promise of Decentralization?
Hanna Halaburda and Christoph Mueller-Bloch – Harvard Business Review
Since its inception, blockchain has promised to make trusted third parties redundant. In practice, though, whether blockchain is actually decentralized depends on what is governed and how this governance is enacted. As more businesses explore blockchain this distinction becomes increasingly important. There are many expected benefits from decentralization and those benefits may elude us if decentralization fails in practice.

Rainforest Charity Launches Crypto Appeal to Help Protect Amazon
William Foxley – Coindesk
A veteran non-profit is embracing the crypto community to fight Brazil’s forest fires. The Rain Forest Foundation, founded in 1987, announced today a campaign to fight the Brazilian forest fires with the help of the crypto community. Although the Foundation has accepted crypto for years—and even developed their own, BitSeed, in 2014 – the Brazilian fires has given the Foundation a new impetus for embracing the crypto community.

Altcoins Are Taking a Beating While Bitcoin Price Holds Around $10,500
Joeri Cant – Cointelegraph
Wednesday, Sept. 4 — The top-20 cryptocurrencies are showing red candlesticks across the board, as the number one cryptocurrency continues to test support at $10,500. The Bitcoin (BTC) price has shown little price movement in the last 24 hours, and has been trading close to $10,500 for most of the day. At press time the world’s most popular cryptocurrency is trading at $10,532, down 0.63% on the day.

Mobile-Based Cryptocurrency Praised by Co-Inventor of Blockchain
Connor Blenkinsop – Cointelegraph
The “founding father of blockchain” has praised the company behind a mobile-based cryptocurrency — and how its long-term goals go beyond profit maximization to create a better world for everyone.

Cryptocurrency investors not as active on weekends
Matthew Yamamoto – The Block
For the past couple of years, trade volumes have taken a noticeable dip over weekends. The decrease in volume has been caused by a mix of lower trade frequencies coupled with smaller trade sizes likely due to a drop-off in institutional investor activity on Saturdays and Sundays.

Jack Dorsey: Mass Crypto Adoption Will Transform Square’s Business
Daniel Kuhn – Coindesk
As cryptocurrency becomes more widely used, Square will transition to providing a broader range of “internet services” rather than just financial technology, co-founder Jack Dorsey predicted. In an Aug. 5 interview with The Australian Financial Review, Dorsey detailed how he believes the emerging asset class will shape his company’s development.

Litecoin Price Suffers Worst Weekly Losing Streak in a Year
Omkar Godbole – Coindesk
In ending last week in the red, the world’s fifth-largest cryptocurrency, litecoin, has confirmed its longest weekly losing streak in a year. LTC suffered an 8 percent drop in the week ended Sept. 1, having registered 3.17, 15.10, and 5.74 percent losses in the preceding three weeks, according to Bitfinex data. That is the longest losing streak since August 2018. Back then, the fifth-largest cryptocurrency by market capitalization had suffered losses in each of the four weeks of August.

What’s the overall cryptocurrency market sentiment towards Libra?
Christina Comben – Coinrivet via Yahoo News
There seems to be no shortage of opinions when it comes to Facebook’s Libra cryptocurrency. While some voices believe that Libra (trustless or not) is a good thing for facilitating cross-border payments, others are not so sure. Many believe that a lack of trust in the giant social media corporation will be the biggest stumbling block to its release. But regulators, central banks, and governments aside, what’s the overall cryptocurrency market sentiment towards the project?

Top crypto wallet provider Blockchain said to be raising $50M venture capital fund to invest in startups
Yogita Khatri – The Block
Blockchain.com, the largest cryptocurrency wallet provider claiming to have more than 40 million users, is raising a $50 million venture capital fund to invest in startups. Yahoo Finance reported the news on Wednesday, citing two sources, who added that Sam Harrison of Blockchain is leading the venture fund effort.

Thai Gang Member Arrested Over Alleged $16 Million Crypto Fraud
Daniel Palmer – Coindesk
A Thai man has been arrested for his alleged involvement in a crypto crime ring that fleeced investors for 500 million baht (over $16 million).

SEC investigation into tZERO’s token sale is ‘almost dormant,’ says Overstock interim CEO
The Block Crypto
Jonathan Johnson, the recently-appointed interim CEO of online retailer Overstock, has said that an investigation by the U.S. Securities and Exchange Commission (SEC) into the company’s blockchain subsidiary tZERO’s token sale is “almost dormant.”


Jim Mattis and the surrender of America’s adults; Former staff may be critical of Donald Trump but they will not denounce him publicly
Edward Luce – FT
The thing about grown-ups is they are supposed to say when enough is enough. Jim Mattis had obviously had enough when he resigned as Donald Trump’s secretary of defence in December. Now the retired general — and the former leading “adult” in Mr Trump’s administration — says he owes a “duty of silence” to the government in which he could no longer serve. Some attribute Mr Mattis’s coyness to the military code of honour — though he retired from the marines two years before Mr Trump picked him. Either way he joins a small army of people who could damage Mr Trump but have chosen not to.

Trump Altered Dorian Map to Show Storm Threatened Alabama
Josh Wingrove and Jennifer Jacobs – Bloomberg
President holds up changed version of six-day-old forecast; Trump said Alabama was at risk after forecasts had changed
After facing ridicule for suggesting over the weekend that Hurricane Dorian might strike Alabama, Donald Trump showed reporters a map on Wednesday that he personally altered to help prove his point.

Boris Johnson Has Badly Miscalculated; His party is dissolving, his government is collapsing, and his strategy is backfiring. Also, there’s Brexit.
Editorial Board – Bloomberg
After just 43 days in office, U.K. Prime Minister Boris Johnson has gotten himself into a dire fix. Unfortunately, there’s no easy way out — for him or for the country he nominally leads.

Trump Says Dow Would Be 10,000 Points Higher Without Trade War
Josh Wingrove – Bloomberg
President says he acted because China was ‘out of control’; Trump says ‘that’s fine’ if China doesn’t want to make a deal
Donald Trump said his trade war with China has hurt the performance of the U.S. stock market, but that he had to confront the country’s economic practices.

Conservative activist Jacob Wohl charged with illegal sale of securities; Wohl allegedly tried to sell unqualified securities to one of his financial companies, Montgomery Assets, in July and August of 2016.
Doha Madani – NBC News
Jacob Wohl, a conservative activist who once attempted to smear special counsel Robert Mueller with false sexual assault allegations, was charged in California for the illegal sale of securities.

Dudley: I picked a fight with Trump because the Fed didn’t stand up for itself
Greg Robb -,MarketWatch
Ex-New York Fed head William Dudley on Wednesday said he started a fight with President Donald Trump because he was concerned U.S. central bank officials had not pushed back on the president’s attack on interest-rate policy.


File Transfer Service Notification
FINRA File Transfer service, (filetransfer.finra.org and filetransfer.ct.finra.org), will be unavailable between 9/7/2019 8 PM and 9/8/2019 4 PM due to a scheduled maintenance. Please contact FINRA Helpdesk if you have questions about the outage.

FCA hints at restrictions on high risk assets
Rachel Mortimer – FT Adviser
The Financial Conduct Authority is poised to restrict the sale of high risk assets but warned banning unregulated products altogether was “not quite so simple”.

Financial Conduct Authority appoints new Chief Economist
The Financial Conduct Authority (FCA) has appointed Kate Collyer as its Chief Economist. Kate is currently Chief Economist for Energy and Market Frameworks and Joint-Director of Analysis at Department for Business, Energy and Industrial Strategy (BEIS).

FCA announces new chair of the Smaller Business Practitioner Panel
Charles Randell, Chair of the Financial Conduct Authority, has today announced the appointment of Marlene Shiels, Chief Executive of Capital Credit Union, as Chair of the FCA’s Smaller Business Practitioner Panel from 1 October 2019. She has been a member of the Panel since 2015 and succeeds Craig Errington, Group Chief Executive of Wesleyan.

The fight against skimmers and scammers
Charles Randell, Chair of the FCA, delivered at the Cambridge Economic Crime Symposium.
Financial crime, specifically fraud against individuals, has reached epidemic proportions. One of the most damaging financial crimes is investment fraud, where people are scammed out of their savings. This evening I want to pose some questions about the system for combatting investment fraud, from the point of view of the Financial Conduct Authority, one of the many bodies with a role within this system.

CFTC Commissioner Behnam Announces Agenda for the September 9 Market Risk Advisory Committee Public Meeting
U.S. Commodity Futures Trading Commission Commissioner Rostin Behnam today announced the agenda for the upcoming Market Risk Advisory Committee (MRAC) public meeting that will be held via teleconference on September 9, 2019. Commissioner Behnam is the sponsor of MRAC.

SEC and CFTC Charge Options Clearing Corp. With Failing to Establish and Maintain Adequate Risk Management Policies; OCC to Pay Combined $20 Million Penalty
The Securities and Exchange Commission and the Commodity Futures Trading Commission today announced that the Options Clearing Corporation (OCC) will undertake remedial efforts and pay $20 million in penalties to settle charges that it failed to implement policies to manage certain risks as required by U.S. laws and SEC and CFTC rules.

Chief of fixed income standards body quit after investigation; Gerry Harvey said FMSB ‘was toast’ if employee’s work on Deutsche Bank lawsuit became public
Antonia Cundy – FT
The chief executive of the body set up by the Bank of England to improve standards in fixed income trading resigned after an internal investigation recommended disciplinary proceedings against him.

German watchdog against ban on banks charging customers for deposits
Germany’s financial markets watchdog would not support banning banks from charging retail customers for storing their money, its president said on Thursday.

Investing and Trading

Fed’s Quarles Floats Countercyclical Capital Buffer Changes; Central bank considers activating dormant tool to combat credit crunches in a downturn
Lalita Clozel – WSJ
The Federal Reserve is weighing whether to activate a dormant tool to combat credit crunches in a downturn as part of a broader overhaul of big-bank-capital and stress-testing requirements.

ECB set to consider damage done by negative rates; Economists debate effect of such measures on eurozone banks as policymakers prepare to meet
Martin Arnold – FT
When policymakers at the European Central Bank meet next week to debate the prospect of a fresh economic stimulus package, one of the key issues on the table will be whether their own measures are doing more harm than good.

After 32 Rate Cuts in 2019, Traders Say Many More Are Coming
Stephen Spratt – Bloomberg
Policy makers eased by a cumulative 13.85%, according to BIS; Interest-rate markets are pricing around 58 additional cuts
Central banks have delivered 32 interest-rate cuts globally this year as a worsening U.S.-China trade war drags down global economic growth. Swap markets suggest we’re not even at the halfway mark for cuts yet.

Home Bidding Wars Hit Eight-Year Low as Buyers Lose Confidence
Prashant Gopal – Bloomberg
Recession fears in the U.S. are killing homebuyers’ fighting spirit, sending the rate of bidding wars to an eight-year low.


Virtu Announces Expansion of Executive Team and CFO Transition
Virtu Financial, Inc.
Virtu Financial, Inc. (NASDAQ: VIRT), a leading provider of financial services and products that leverages cutting edge technology to deliver liquidity to the global markets and provide execution services and data, analytics and connectivity products, today announced new executive hires and changes to its leadership team.

Sideways: Goldman’s Varadhan looks lonely
Jon Macaskill – Euromoney Magazine
The dominance of the investment banking lieutenants of Goldman chief executive David Solomon at the top of the firm was reinforced on September 3 when Chavez was replaced as one of three global securities co-heads by Marc Nachmann, who had been a co-head of investment banking.

Schroders overhauls investment leadership with hire from Lombard Odier; Schroders has hired Carolina Minio-Paluello who joins after six years with Lombard Odier as global head of solutions.
Hayley McDowell – The Trade UK asset manager Schroders has made several changes to its leadership team, including the appointment of Lombard Odier’s global head of solutions to oversee its quantitative investment teams.

Investment banking revenues plunge to 13-year low; Bleak start to 2019 exacerbates industry’s downward trend since crisis
Stephen Morris and Laura Noonan – FT
Revenues at the world’s top investment banks plunged to a 13-year low in the first half of 2019 as geopolitical tensions, slowing growth and low interest rates compounded a structural decline that set in after the financial crisis.

UBS plots revamp of investment bank after performance falters; Hundreds of jobs could be on the block especially in the higher ranks at Swiss lender
Stephen Morris – FT
UBS is preparing an overhaul of its investment bank as the Swiss lender seeks to galvanise earnings and cut costs after a drop off in performance over the past few quarters.

JPMorgan to SocGen Tout Hedges as U.S. Stock Market Masks Risk
Joanna Ossinger – Bloomberg
BofAML suggests protection amid signals of market stress; SocGen, Credit Suisse say far-out tail risk is priced cheaply
The reasons may vary but an awful lot of strategists are recommending hedges on U.S. equities right now. JPMorgan Chase & Co. recommends buying bearish options on the SPDR S&P 500 ETF Trust because the market may be underpricing risks that a deterioration in corporate America’s health could hurts jobs. Bank of America Merrill Lynch suggests put-option trades because its model suggests increasing risk of trouble for the S&P 500. And Societe Generale SA and Credit Suisse Group AG see some pockets in options tied to the index that are cheap.

The worst front office jobs in banks in the second half of 2019
Sarah Butcher – eFinancialCareers.com
If, as seems likely, banks decide to cut costs yet again in the final four months of 2019 before bonuses are paid, there are a few places you probably don’t want to be working. These include any banks with an abnormally high cost base and any business areas that have seen undue levels of revenue shrinkage.

Top banks’ first half commodities revenue down 1 percent: consultancy Coalition
Commodities-related revenue at the world’s 12 biggest investment banks was 1% lower in the first half of the year than in the same period in 2018 due to weaker activity in power and gas, consultancy Coalition said on Thursday.


Charles Schwab to close Singapore office
Discount brokerage company Charles Schwab Corp (SCHW.N) said on Thursday it will close its Singapore office by the end of this year, about two years after opening it in late 2017.

Why Spain’s 50-year bond auction will cap a return to favour; Yield-hungry investors are coming back to a country seen as having ‘done its homework’
Tommy Stubbington – FT
Seven years ago, investors all but refused to lend to the Spanish government, pushing the eurozone close to breaking point. Today, they are on the brink of paying for the privilege of lending to the country for maturities of up to a decade.

EY chief warns on global impact of forced audit split in UK; British break-ups will make it harder for firms to manage global contracts
Tabby Kinder – FT
The global chief executive of EY said the Big Four firm had done “zero” contingency planning for how a forced break-up of its UK business could affect its work in the US, despite fears of regulatory contagion to other major economies.

Poland Rebukes Banks as S&P Warns of Swiss-Loan Ruling Risks
Wojciech Moskwa and Konrad Krasuski – Bloomberg
Development minister says government not eager to help banks; Cabinet has touted economic ‘miracle’ ahead of Oct. elections
Poland’s government played down the risk of a European court ruling that looms over its banking industry and made clear it wasn’t about to help lenders who doled out mortgages in foreign currencies.

London Banker’s Arrest Sparks 6-Year Fight With Citigroup and the Taxman
Jonathan Browning – Bloomberg
Criminal tax probe against Sattar dropped without charges; Civil cases with Citigroup over pension, firing continue
Mukarram Sattar, one of Citigroup Inc.’s longest-serving employees, was at home on a July morning in London six years ago when officers and agents from the U.K. tax authority showed up to arrest him.

Troubled Nordic Banks Push Through Yet Another Executive Purge
Frances Schwartzkopff and Kati Pohjanpalo – Bloomberg
The two biggest Nordic banks extended a purge at the very top of their ranks in the hope of improving revenue and restoring confidence tattered by money laundering scandals.

Attacks, Protests Spoil South Africa’s Investment Showcase
Michael Cohen and Paul Vecchiatto – Bloomberg
The World Economic Forum on Africa was supposed to be South African President Cyril Ramaphosa’s chance to prove his nation’s claim to being the continent’s top investment destination. It’s all gone horribly wrong.

China’s Private Bond Defaults Climb to Record $4.4 Billion
Bloomberg News
More defaults among private bonds versus public: Chengxin; Investors seeking higher risk premium on private bonds: Chen
More Chinese companies are defaulting on private bonds this year as the slowing economy weighs on weaker companies and firms seek to repay publicly traded debt first.

Argentina Is Investors’ Groundhog Day; Capital controls, a controlled exchange rate and an outright default may prove to be the country’s best option
Jon Sindreu – WSJ
They say humans are the only animals to trip twice over the same stone. This is the ninth time international investors have tripped over Argentina.


Boris Johnson’s brother quits over Brexit in fresh blow to PM; Jo Johnson to step down from UK government and leave parliament
Jim Pickard and Sebastian Payne – FT
Jo Johnson has delivered a fresh blow to his brother’s premiership by announcing he will quit politics due to “unresolvable tension” between his family and the national interest.

Johnson Boxed In Over Brexit as Bill Is Pushed Through Lords
Tim Ross and Robert Hutton – Bloomberg
Prime Minister suffers series of defeats over his strategy; House of Lords to send Brexit bill back to Commons by Friday
Boris Johnson was humiliated by Parliament for a second day running, with his do-or-die Brexit strategy derailed and even his plan for a general election rejected. But having bet everything on getting Britain out of the European Union by Oct. 31, he can’t back down.

Boris Johnson defeated in no-deal Brexit and election votes
George Parker and Jim Pickard in London and Mehreen Khan in Brussels – The Financial Times
Boris Johnson has suffered a humbling double defeat, as MPs backed legislation to stop Britain leaving the EU without a deal and then blocked the prime minister’s attempt to call an election to regain the initiative on Brexit. Mr Johnson, facing growing anger from Tory MPs over his handling of Brexit, endured two defeats inside two hours on Wednesday night, leaving him, in effect, trapped in 10 Downing Street by a hostile parliament.

Industry pulls plug on investment before Brexit; UK manufacturing companies face ‘perfect storm’ of negative factors
Daniel Thomas – FT
Manufacturers are halting investment in their businesses ahead of Brexit, with even stockpiling activity now subdued only weeks before the UK is set to leave the EU, raising worries over whether the sector is less prepared than six months ago.

Britain Can’t Fix Brexit Until It Drafts a Constitution; First things first.
John Authers – Bloomberg
Democracy, Winston Churchill once famously said, was the worst way to run a country “apart from all the others that have ever been tried.” Unfortunately, he did not make clear what kind of democracy he favored.

The Brexit Debate Is Mostly an Illusion; Most voters don’t understand the consequences of public policies – and referendums aren’t really democratic.
Jonathan Bernstein – Bloomberg
I’m not your best guide to the substance or procedures of Brexit. But when people start talking democracy, my ears perk up. In particular, I’ve been annoyed for a while now at Brexit proponents who claim that the only democratic outcome is to go along with the 2016 referendum. A comment from Slate’s Joshua Keating really made me cranky:


Why You May Hate Your New Job and What to Do if This Happens
David Wiseman – via LInkedIn
There’s a job opening. It’s a more senior role at an incredible company/organization. You’re excited by the possibilities it promises, and this opportunity could do wonderful things for your career.

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