Rogue Oil Trader Causes $320 Million Loss at Mitsubishi Corp. Unit

Sep 20, 2019

First Read

Hits & Takes
By JLN Staff

The CME Group’s University Trading Challenge registration is open. College students can participate in the challenge, where they can experience the excitement of real-time trading.~JJL

Alison Rose was named the CEO of RBS. The number two at the bank is Katie Murray, who serves as CFO. Name another big bank, or any bank, where the CEO and CFO are women?~JK

The CME Group officially announced they will be launching Bitcoin options trading in the first quarter of 2020.~JJL

The U.S. Commodity Futures Trading Commission announced charges against Tate Street Trading, Inc. and Leonard J. Cipolla with misappropriating customer funds and fraudulent solicitation in connection with a commodity pool. According to the release, Cipolla only deposited $1,462,834 into trading accounts instead of the $7,096,303 the firm received from pool investors. The pool’s cumulative net losses were $1,462,305, meaning some broker allowed Cippolla to trade from $1.4 million down to $529. Nice job avoiding the debit account, but you totally blew the bigger picture.~JJL

If you want to know all the FAQs about the Cboe’s move of its trading floor to the CBOT Building, look HERE.~JJL

Trading Technologies is seeking site reliability engineers for its Chicago Site Reliability Engineering (SRE) team. You can go here for more information on this and other TT job openings. ~SR

Eurex has reached one million traded contracts on Eurex EnLight RFQ platform.~JJL

Several notable representatives of the SEC, including Jay Clayton and Hester Peirce, are scheduled to speak to the House of Representatives Committee on Financial Services on September 24th. According to a memorandum published by the committee Thursday, the SEC representatives will be questioned in a hearing entitled, “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat.” In addition to Wall Street oversight, cryptocurrency appears to be on the agenda – in particular Facebook’s Libra.~MR

CME Group Inc. will announce earnings for Q3 2019 before the markets open on Wednesday, October 30, 2019 and will post highlights for the quarter on its website at 6:00 a.m. Central Time, the same time it provides its earnings release. The company will hold an investor conference call that day at 7:30 a.m. Central Time. ~SR

Kelsey Donohue, the daughter of Craig and Elsa Campo Donohue, is raising money for the Relay For Life, an American Cancer Society fundraiser. She is doing this through Facebook. She says, “I’m participating in the Relay For Life event because I know I am making a difference in the fight to end cancer by raising funds and cancer awareness.” Please support her efforts.~JJL


Mary Savoie: The Importance of Investor Education

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Mary Savoie, executive director of the Options Industry Council and first vice president, investor education, for OCC, talks about the importance of investor education and how to become an informed investor. She discusses the role of the OIC in unbiased education for the complicated options industry. Education can lower barriers to options investing and boost people’s confidence, she said, and it is good for the health of the financial markets as a whole.

Watch the video »


RBS Taps Alison Rose as CEO, First Woman to Run U.K. Lender
Stefania Spezzati – Bloomberg
Rose had long been viewed as the successor to Ross McEwan; Hiring means RBS has women in both CEO and CFO positions
Royal Bank of Scotland Group Plc promoted Alison Rose to chief executive officer, making her the first woman to run one of Britain’s big four lenders. Rose, the former head of British commercial and private banking at RBS, was seen as being groomed for the role for years.

***** More progress.~JJL


Traders Who Can’t Code May Become Extinct, Goldman’s Tech Pioneer Warns
Sonali Basak – Bloomberg
Senior Goldman executive reflects on industry as he steps down; Distinction between trading, engineering to disappear, he says
Just how important will the ability to write computer code be to a successful career on Wall Street? According to R. Martin Chavez, an architect of Goldman Sachs Group Inc.’s effort to transform itself with technology, “It’s like writing an English sentence.”

***** Does pig latin count?


Billionaire investor on Elizabeth Warren as president: Market might not even open
Shawn Langlois – MarketWatch
‘They won’t open the stock market if Elizabeth Warren is the next president.’
That’s Leon Cooperman, the billionaire boss at Omega Advisors, joking to a crowd at the Delivering Alpha conference in New York this week about what a win for the left could ultimately mean for investors.

****This is pure political BS. Markets are stronger than Mr. Cooperman is giving them credit for. I remember when Bill Clinton was elected President. The expectations were that bonds would drop and gold would rally. One client of mine put that trade on after the election and was absolutely destroyed as bonds rallied and gold dropped. Put the trade on, Mr. Cooperman. Let’s see how well you do.~JJL


Sponsored Content

BCause LLC has received a proposal to sell its equity interests in BCause Secure, LLC and its cryptocurrency spot exchange platform (the “Spot Exchange”) as part of the chapter 11 bankruptcy cases of BCause LLC and BCause Mining LLC, which are jointly administered as Case No. 19-10562 and pending before the U.S. Bankruptcy Court for the Northern District of Illinois.

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CryptoMarketsWiki Coin of the Week: Stellar Lumens (XLM)
Although many altcoins saw significantly improved performance this week compared to recent weeks, the price of Stellar’s XLM outdid them all, shooting up a whopping 30.3 percent in just a few hours. In true crypto fashion, the spike was followed by a crash, and at press time, the coin appears to be slowly sliding back down. Some who noticed this increase commented on Twitter that XLM’s price movements show signs of a pump-and-dump, but this is unconfirmed at press time.


Thursday’s Top Three
Our top story of the day on Thursday contained an underutilized word these days – morass, as in Boris Johnson’s lies are plunging Britain into a dark morass. Second and third were our videos from the MarketsWiki Education Series, with Robert Khoury, the CEO of Agile Rainmakers, presenting Interviewing and Career Tips For Your Future in second and Donna Heidkamp, executive director of RJO Futures, speaking on myths about the futures markets, in third. Both are worth a look if you haven’t had a chance to see them.


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Lead Stories

Rogue Oil Trader Causes $320 Million Loss at Mitsubishi Corp. Unit
Bloomberg News
Unauthorized trades disguised as transactions for customers; Mitsubishi still assessing if trades will impact earnings
Mitsubishi Corp. said a rogue oil trader at its Singapore unit lost $320 million in unauthorized transactions disguised as legitimate hedges for customers.

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

LBMA ‘in discussions’ with JPMorgan after board member indictment; US bank’s head of precious metals who sits on LBMA’s board was indicted in the US
Henry Sanderson – FT
The London Bullion Market Association is in “discussions” with JPMorgan after its board member was indicted by the US Department of Justice for a “massive, multiyear scheme” to manipulate the precious metals markets.

Repo gyrations bode ill for move away from Libor; This week’s spikes suggest blockages in money flows could cause serious problems
Philip Stafford – FT
It is not only money markets dealing with the fallout of whipsawing prices this week. The New York Federal Reserve offered a huge injection of cash for a third day in a row on Thursday, to try to steady the repurchase or “repo” market. But the moves are not just relevant for short-term deals to swap Treasuries for cash; they have implications for the big, global effort to move off the Libor lending rate by the end of 2021.

U.S. stock exchange competition to heat up in 2020 with new entrants
John McCrank – Reuters
At least three new U.S. stock exchanges are expected in 2020, executives from the companies said on Thursday, potentially lowering trading costs as the upstarts try to take business from the incumbents, while also adding complexity to the marketplace.

Tribunal exposes gender gap in banking culture and pay; BNP Paribas employee subjected to ‘direct sex discrimination and victimisation’
Eva Szalay – FT
When Stacey Macken arrived at work at the main London office of BNP Paribas one morning in 2013, she found a witch’s hat on her desk. A witness to the incident said male members of her team had left it there the previous night, when they returned from the pub “visibly drunk”.

Repo Squeeze Has Upset Funding Markets. It’s About to Get Worse
Stephen Spratt – Bloomberg
Another round of Treasury settlement coming at month end; Concern around quarter-end dollar funding still showing up
The dollar-funding squeeze, which rocked short-term interest rate markets this week, may deepen further with the end of the quarter approaching.

Young People Take to Streets in Global Climate Protest; Anxious about the future and angry about the failure to curb the crisis, thousands joined an urgent call for action against climate change.
Somini Sengupta – NY Times
They are in open revolt. Anxious about their future on a hotter planet, angry at world leaders for failing to arrest the crisis, thousands of young people began pouring into the streets on Friday for a day of global climate protest.

SEC Chair Clayton: Bitcoin needs to be ‘better regulated’ before it is traded on major exchanges
The Block Crypto
Speaking at a conference today hosted by CNBC and Institutional Investor, Securities and Exchange Commission Chairman Jay Clayton said that bitcoin would need better regulation before being listed for trading on major traditional exchanges like NYSE or Nasdaq.

SEC’s Clayton Says SEC Doesn’t Judge Direct Listings; When comparing direct listings versus more traditional IPOs, the agency chairman asks, ‘Who are we to judge if one is better than the other?’
Dave Michaels – WSJ
The Securities and Exchange Commission doesn’t mind when companies go public using a cheaper “direct listing” on exchanges instead of a traditional offering, where investment banks underwrite the deal, the agency’s chairman said.

Wall Street investment giants voting against key climate resolutions
Edward Helmore – The Guardian
Some of Wall Street’s largest asset management companies are failing to live up to commitments to use their voting power to fight the climate crisis, according to a new report.

LSE calls in JPMorgan to fend off £32bn Hong Kong bid; HKEX intends to pursue its rejected offer for the iconic City exchange operator
Samuel Agini – Financial News
The London Stock Exchange has drafted in bankers from JPMorgan to help it fend off Hong Kong Exchanges and Clearing’s £31.6bn bid.

Row Over Brexit Harms Derivative Trading, French Watchdog Argues
Silla Brush – Bloomberg
AMF chief says it’s damaging to insist trades stay within EU; European banks may lose business to rivals in London and U.S.
France’s top markets regulator said Brexit threatens to push derivatives away from Europe toward London and the U.S., calling for major changes to European rules to prevent an exodus.

Exchanges, OTC and Clearing

London Stock Exchange chief launches robust defence of Refinitiv deal
Philip Stafford – Financial Times
The chief executive of the London Stock Exchange Group has launched a robust defence of its $27bn acquisition of data and trading group Refinitiv that the Hong Kong Exchanges and Clearing is trying to gatecrash with its bid for the UK bourse.

LSEG chief says Refinitiv integration could take up to five years to complete; LSEG CEO, David Schwimmer, told delegates at the ISDA conference in London this week that integrating Refinitiv will take years to complete.
Hayley McDowell – The Trade
The chief executive of the London Stock Exchange Group (LSEG) has said it could take up to five years for the exchange to fully integrate and realise synergies from its £27 billion acquisition of Refinitiv.

Nasdaq hires hedge fund alternative data veteran for analytics firm Quandl; Evan Reich joins Quandl from $18 billion hedge BlueMountain Capital, where he oversaw alternative and market data for the quant and fundamental teams.
Hayley McDowell – The Trade
US exchange group Nasdaq has appointed alternative data veteran, Evan Reich, as head of data strategy and sourcing at its recently acquired analytics firm Quandl.

INTL FCStone joins SGX as derivatives trading and clearing member; The addition of INTL FCStone brings SGX’s total derivatives trading members to 62, and clearing members to 25.
Hayley McDowell – The Trade
Securities and commodities broker INTL FCStone has joined the Singapore Exchange (SGX) as a trading and clearing member. The addition of INTL FCStone Pte, a subsidiary of New York-based INTL FCStone Inc, to the SGX derivatives market expands its footprint in North America, and takes its total trading members to 62, and clearing members to 25, the exchange operator said in a statement.

Caisse des Dépôts and Euronext throw their weight behind listed high-tech SMEs
Due to the Tech sector’s tremendous potential to boost French economic growth, Caisse des Dépôts, the biggest institutional investor in listed French SMEs, and Euronext, the leading pan-European exchange in the Eurozone, today announced a joint initiative to accelerate growth at small and medium-sized Tech companies listed in Paris. This involves:

Three questions: Lee Batholomew on Eurex Inter-Product Spreads
On 16 September 2019, Eurex launched Eurex Inter-Product Spreads. We spoke to Lee Batholomew, Head of Fixed Income Product Design at Eurex about the new Fixed Income Futures combinations (Bund-Buxl Spread, Long-term BTP-Bund Spread and Schatz-Short-term BTP Spread).

Merging of the Price List to the Connection Agreement and the Price List to the Provider Connection Agreement
Eurex Frankfurt AG will merge the currently separate Price Lists to the Connection Agreement and to the Provider Connection Agreement into one Price List as of 1 November 2019, to reduce both the complexity as well as offer one complete overview of the connection fees.

Hauke Stars will not renew her contract for a third term of office as a member of the Executive Board of Deutsche Börse AG
Deutsche Börse Group
Hauke Stars informed the Chairman of the Supervisory Board of Deutsche Börse AG that she will not be available for a third term as a member of the Executive Board of Deutsche Börse AG, following two appointments to the company’s Executive Board. Hauke Stars will leave the company at her own request at the end of November 2020, which is when her current contract expires.

SGX welcomes INTL FCStone as Derivatives Trading and Clearing Member
Singapore Exchange (SGX) today welcomed INTL FCStone Pte. Ltd. as a Trading and Clearing Member of its derivatives market. INTL FCStone Pte. Ltd. is a subsidiary of INTL FCStone Inc., a Fortune 500 company. Headquartered in New York, it is a diversified brokerage and financial services firm providing execution, risk management, market intelligence and post-trade services across asset classes and markets around the world.

CME Group to Launch Bitcoin Options in Q1 2020
CHICAGO, Sept. 20, 2019 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced it will launch options on its Bitcoin futures contracts in Q1 2020, pending regulatory review.

CME Group Inc. Announces Third-Quarter 2019 Earnings Release, Conference Call
CME Group
CME Group Inc. will announce earnings for the third quarter of 2019 before the markets open on Wednesday, October 30, 2019. Written highlights for the quarter will be posted on its website at 6:00 a.m. Central Time, the same time it provides its earnings press release. The company will hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts’ questions.


Four Major Banks Invest In An ID Authentication Firm
Tom Groenfeldt – Forbes
The VC arms of four major banks this week announced a C$60 million investment in Trulioo, a Vancouver-based global identity verification provider.

Huawei Argues Ban on Doing Business with U.S. Government is Unconstitutional; Judge Amos L. Mazzant III in the Eastern District of Texas will await briefs from both parties before issuing a ruling
Tawnell D. Hobbs – WSJ
Attorneys for China’s Huawei Technologies Co. argued in court Thursday that a law barring it from doing business with U.S. government agencies is unconstitutional for selectively targeting the company for punishment using legislation.

Fintech Company Stripe Joins Silicon Valley Elite With $35 Billion Valuation; Stripe surpasses Airbnb and Palantir valuations in new funding round
Peter Rudegeair – WSJ
Stripe Inc. climbed closer to the top ranks of the highest-priced U.S. startups after a new fundraising round valued the financial-technology company at $35 billion.

BNY Mellon and Bloomberg to Deliver Front-To-Back Integration Capabilities
The Bank of New York Mellon Corporation (“BNY Mellon”) and Bloomberg today announced a strategic alliance that further integrates BNY Mellon’s data, analytics, and servicing capabilities with AIM, Bloomberg’s portfolio management, trading and compliance solution. The new connectivity streamlines data delivery between the two firms and enables clients to access BNY Mellon’s data and analytical workflow tools directly through Bloomberg AIM, delivering unique capabilities and insights to investors, technology leaders, and risk and operations professionals.


First Singapore Bank Joins JPMorgan’s Blockchain Payments Initiative
Daniel Palmer – Coindesk
JPMorgan’s blockchain payments platform has just onboarded its first Singapore-based bank. With the addition of OCBC – the second-largest bank in Southeast Asia by assets – JPMorgan’s Interbank Information Network (IIN) now has around 345 banking members across the globe. Roughly 40 percent of those are from the Asia-Pacific region. Built on Quorum, a permissioned blockchain based on ethereum and developed in-house by JPMorgan, IIN is designed to enable member banks to “exchange information in real-time as a way to verify that a payment has been approved,” according to recent announcement from JPMorgan.

Venezuela’s Maduro Mandates Petro Use in Funding of Housing Project
Daniel Palmer – Coindesk
Venezuela’s president has ordered that his pet cryptocurrency, the petro, must be used in funding an ongoing social housing initiative. According to a news announcement on the government’s website Thursday, President Nicolas Maduro mandated that the oil-backed petro token must be used for constructing new homes under the Great Housing Mission Venezuela – a project set up by his predecessor Hugo Chaves in 2011.

Portugal Tax Authorities Clarify That Buying Or Selling Cryptocurrency Is Tax-Free
Kelly Phillips Erb – Forbes
The United States may be taking a hard line on cryptocurrency, but not all countries are seeking to collect from the virtual currency boom. The Portuguese Tax & Customs Authority (PTA) has announced that buying or selling cryptocurrency in Portugal is tax-free.

Facebook’s Mark Zuckerberg seeks to reassure wary lawmakers about Libra, elections in rare D.C. trip
Tony Romm – Washington Post
Facebook chief executive Mark Zuckerberg told lawmakers in a private meeting this week that his company’s controversial digital currency would not be launched anywhere in the world until it receives the backing of regulators in the United States.

Ripple Asks to Toss Lawsuit Over Crypto Securities
Jeff John Roberts – Fortune
The cryptocurrency company Ripple has asked a federal court to throw out a class action lawsuit in which investors allege it illegally sold unregistered securities. The case is significant because it has the potential to resolve the contentious legal question of when cryptocurrencies should be classified as a security—and expose companies like Ripple to potentially massive liability.

Ripple says XRP is not a security, in a motion filing to dismiss a lawsuit
The Block Crypto
Ripple has filed a motion to dismiss a lawsuit, saying that XRP is not a security “because it is not an ‘investment contract.'”

Ripple Avoids Securities Question in Motion to Dismiss XRP Lawsuit
Nikhilesh De – Coindesk
Ripple has filed a motion to dismiss a lawsuit claiming it violated U.S. securities laws by selling XRP. In a new filing posted early Friday, attorneys for Ripple pushed back on allegations made by XRP purchasers suing the company, its subsidiaries and executives. Notably, the motion to dismiss specifically claims that the plaintiff, Bradley Sostack, does not have standing to file a complaint, rather than address claims that XRP is a security.

Square Crypto Completes Inaugural Developer Team With Three New Hires
Ana Alexandre – Cointelegraph
Square Crypto has hired Valentine Wallace, Jeffrey Czyz and Arik Sosman to its inaugural developer team. The crypto-focused branch of Jack Dorsey’s payment company announced the appointments in a series of tweets on Sept. 19. Wallace joined the company from Lightning Labs, Czyz came from Google and Sosman from Facebook’s Libra. With the latest hires, Square Crypto said it has completed its inaugural developer team.

OTC crypto trader Genesis makes its first acquisition, Qu Capital, to strengthen trading technology
The Block Crypto
Genesis Global Trading, an institutional over-the-counter (OTC) cryptocurrency trading firm, has made its first-ever acquisition, according to an announcement Thursday. The firm has bought out Qu Capital, a New York-based quantitative trading and research firm, to strengthen its trading technology including improved order routing and advanced execution tools.

Byrne Sells Overstock Stake to Buy Crypto and Battle ‘Deep State’
Danny Nelson – Coindesk
Patrick Byrne, the former CEO of Overstock who resigned abruptly in August, has dumped his 13 percent stake in the e-commerce company he founded 20 years ago to buy cryptocurrency and precious metals, he announced late yesterday. In a blog post at his, Byrne said that, by the end of the week, he will have reinvested all of the proceeds into “investments that are counter-cyclical to the economy.”

Bitwise pitches SEC for Bitcoin ETF in new presentation, saying market has become ‘efficient’
Yogita Khatri – The Block Crypto
Bitwise Asset Management, the cryptocurrency asset manager that has been awaiting approval for a bitcoin exchange-traded fund (ETF), has once again tried to convince the U.S. Securities and Exchange Commission (SEC) on the product. In a new presentation, delivered to three SEC Commissioners – Hester Peirce, Robert Jackson Jr., and Elad Roisman, Bitwise said that the bitcoin spot market has “materially improved” and become “efficient” in the past two years.

What the Holy Land Reveals About Bitcoin
Leigh Cuen – Coindesk
When hundreds of entrepreneurs, investors and technologists descended on Tel Aviv Blockchain Week (TLVBW), few could have expected a better backdrop for exploring the lofty ideals and greedy impulses that drive today’s cryptocurrency industry. Duality is something Israelis know well. More than 430 people attended the D&DD Summit on Sept. 10, several dozen came to the Scaling Bitcoin conference on Sept. 11 and 700 attended the first Israeli Ethereal on Sept. 15, just to name a few of the week’s dozen events.

Bank of America Joins R3’s Marco Polo Blockchain Global Trade Network
Joeri Cant – Cointelegraph
Bank of America has joined R3’s Corda-powered Marco Polo Network “to tackle trade finance challenges.” On Sept. 19, Marco Polo announced the multinational investment bank was joining its network to improve international trade inefficiencies and deliver a better service for its customers. Geoff Brady, head of global trade at Bank of America, said: “Joining the Marco Polo Network supports our strategic objective of turning technology advances into trade solutions that address client needs. We look forward to exploring how the new technology can generate greater transparency for our clients throughout the transaction lifecycle, making traditionally paper-based, opaque processes easier and more efficient.”

Traders Could Lose Weekends in Digital Age, BitMex’s Hayes Says
Joanna Ossinger – Bloomberg
Arthur Hayes, head of one of the world’s most popular cryptocurrency exchanges, says traders may lose their midday breaks and even their weekends as traditional assets absorb some characteristics of digital ones. Digital finance is going to end up affecting everything from traditional equities, bond and currency trading, to the way payments are processed and recorded, Hayes, the chief executive of BitMex, said in remarks at the Milken Institute Asia Summit in Singapore.

Coinbase Considers Listing Telegram, Polkadot Cryptocurrencies Among Others
William Foxley – Coindesk
Coinbase has announced the possible addition of 17 new cryptocurrencies to its current line up. According to a blog post from the exchange, Coinbase is exploring the addition of avalanche, celo, chia, coda, dfinity, filecoin, handshake, kadena, mobilecoin, NEAR, nervos, oasis, orchid, polkadot, solana, spacemesh, and telegram.


Merkel Coalition Agrees on Landmark Package to Cut C02 Emissions
Arne Delfs and Chris Reiter – Bloomberg
Climate protests taking place in Berlin and across Germany; Merkel, Finance Minister Scholz to hold press conference later
German Chancellor Angela Merkel’s ruling coalition agreed on a multi-billion euro package to get the country’s climate policies back on track, giving her something to showcase at a UN conference next week.

Leon Cooperman Says Trump Is Doing Damage by Criticizing Fed
Hema Parmar and Annie Massa – Bloomberg
Legendary hedge fund manager Leon Cooperman criticized President Donald Trump for attacking the Federal Reserve, adding that negative interest rates are destructive to the economy.

Economic divide in the US is becoming as stark as its politics
John Harwood – CNBC
Republicans and Democrats have long since separated themselves by ideology, leaving each more uniformly conservative or liberal than ever. And now a new data analysis by the Brookings Institution documents just how fast their economic fortunes have diverged as well.


CFTC Charges Trader and his Company with $7 Million Fraud
The U.S. Commodity Futures Trading Commission announced the filing of a civil enforcement action in the U.S. District Court for the Eastern District of Virginia charging Tate Street Trading, Inc. of Richmond, Va. and Leonard J. Cipolla of Chesterfield, Va. with misappropriating customer funds and fraudulent solicitation in connection with a commodity pool. The complaint also charges Tate Street and Cipolla with failure to register as a Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA), respectively.

FCA finds research unbundling has saved equity investors £70 million under MiFID II; Industry review from UK regulator finds positive results since MiFID II implementation with no negative impact to research access for small-to-mid caps.
John Brazier – The Trade
The Financial Conduct Authority (FCA) has released the findings of its survey on the effects of research unbundling on the UK financial services industry, most notably a cost saving of £70 million for investors in UK equities funds.

ESMA issues opinion on accepted market practice by Spanish CNMV
The European Securities and Markets Authority (ESMA) has issued today an opinion supporting a revised Accepted Market Practice on liquidity contracts notified by the Spanish market regulator, the Comisión Nacional del Mercado de Valores (CNMV).

FINRA EVP of Enforcement Susan Schroeder Announces Departure
FINRA announced today that Susan Schroeder plans to leave FINRA later this year, after leading the Department of Enforcement since 2017. Schroeder led the consolidation of FINRA’s enforcement functions into a new, unified group. The consolidated enforcement team now comprises 340 employees working in New York, Rockville, and 14 district offices handling disciplinary actions from across FINRA, from potential fraud to trading-based misconduct to sales practice violations.

SEC Adopts New Rules and Amendments under Title VII of Dodd-Frank
The Securities and Exchange Commission today announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These actions establish recordkeeping and reporting requirements for security-based swap dealers and major security-based swap participants and amend the recordkeeping and reporting requirements for broker-dealers. Under these rules, these companies will be required to create and retain fundamental business records to document and track their operations, facilitating the Commission’s ability to monitor compliance and reducing risk to the market.

Update to June 2019 Joint CFTC-SEC-FCA Statement on Opportunistic Strategies in the Credit Derivatives Market
On the 24th of June 2019, the Chairmen of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission, along with the Chief Executive of the U.K. Financial Conduct Authority, released a joint statement on opportunistic strategies in the credit derivatives markets (the Joint Statement). The Joint Statement outlined mutual concerns about the pursuit of these strategies and the adverse impact they may have on the integrity, confidence and reputation of the credit derivatives markets, as well as markets more generally. These opportunistic strategies include, but are not limited to, what have been referred to as ‘manufactured credit events’ or ‘narrowly tailored credit events’.

Sheree Howard appointed as FCA Executive Director of Risk and Compliance Oversight
The Financial Conduct Authority (FCA) has today announced that Sheree Howard has been appointed as Executive Director of Risk and Compliance Oversight (R&CO).

FCA review showed contingent charging used in 80% of cases
The review of defined benefit transfer files conducted by the Financial Conduct Authority showed contingent charging structures were used in 80 per cent of cases, Edwin Schooling Latter revealed.

FCA attacked by research houses over Mifid II reforms; Independent groups and small brokers complain bigger rivals have adopted predatory pricing
Siobhan Riding and Chris Flood – FT
The Financial Conduct Authority has shelved its probe into unfair competition in the investment research market, drawing the ire of independent research houses which complain that they have been squeezed by EU regulations.

Investing and Trading

Tackling climate change — an investor’s guide; What counts as a climate-friendly investment strategy?
Alice Ross – FT
“I don’t want your hope. I don’t want you to be hopeful. I want you to panic.” Climate change activist Greta Thunberg was not giving investment advice when she delivered this message to the World Economic Forum in Davos this year. Just as well: panicking is not widely considered to be part of a good investment strategy, as those who sell at the bottom of the market can attest.

Swiss gold exports to UK hit seven-year high in August
Henry Sanderson – FT
Swiss gold exports to the UK reached their highest levels in seven years last month, driven by strong investor demand for gold-backed exchange traded funds and a slowdown in demand for the metal in India and China.

Federal Reserve intervenes for third day to ease market strains; Pressure mounts to launch longer-term measures after successive financial injections
Adam Samson and Joe Rennison – FT
The Federal Reserve intervened in the US money markets for the third day in a row on Thursday and promised it would do so on Friday, too, as pressure mounted for the central bank to open a permanent facility to ease pressure on short-term lending.

Central Bankers Worry There’s No Happy Ending to Trade Story
Fergal O’Brien – Bloomberg
Central bankers are listening intently to the trade story, and increasingly signing up to fight back. Dig into recent comments and there’s a clear divergence between domestic and external factors, with optimism about consumers and the jobs market, but a growing sense of apprehension over the impact of trade tensions.

The World’s Biggest Offshore Wind Farm Will Be as Cheap as Coal
Will Mathis – Bloomberg
British CFD auction handed out 5.5 gigawatts of new capacity; Costs have plummeted as turbines grow and financing improves
The world’s biggest offshore wind park planned off the coast of England will probably in the next decade generate power cheaper than by burning coal.

The repo markets mystery reminds us that we are flying blind; Quantitative easing means there is a greater chance of the global financial machine misfiring
Gillian Tett – FT
What the heck happened? That is a question many market participants are asking about events this week at the US Federal Reserve.

The Repo Market’s a Mess. (What’s the Repo Market?)
Liz McCormick and Alex Harris – Bloomberg
When plumbing works well, you don’t need to think about it. That’s usually the case with a vital but obscure part of the financial system known as the repo market, where vast amounts of cash and collateral are swapped every day. But when it springs a leak, as it did this week, it rivets the attention of the U.S. Federal Reserve, the nation’s largest banks, money-market funds, corporations and other big investors. The Fed calmed things down by pumping in billions of dollars, but it may have a lot more work to do on the pipes.

The Cannabis Market Is Looking Up, Even If Cannabis Stocks Aren’t; The outlook for the industry is upbeat, but it’s hard to tell which companies will prosper.
Sarah Halzack – Bloomberg
Almost exactly a year ago, a small Canadian cannabis company was generating a lot of buzz (sorry, couldn’t resist the pun). Despite trifling quarterly revenue of $9.7 million, Tilray Inc.’s market capitalization got so high (sorry again, I’ll stop) that it briefly eclipsed that of major companies people have actually heard of, such as American Airlines Group Inc.


Quant funds lick wounds after rout in bonds and hot stocks; Man Group’s AHL unit is among those nursing losses from September sell-off
Laurence Fletcher – FT
Several computer-driven hedge funds have had a tough time this month, after their models were caught out by a sharp reversal of long-term price trends.

Goldman, China’s Sovereign-Wealth Fund Begin Investing in U.S. Manufacturing; But China Investment Corp. says trade-war tensions will make it more cautious about further investments
Lingling Wei – WSJ
China’s sovereign-wealth fund has started investing in the U.S. manufacturing sector through a joint venture with Goldman Sachs Group Inc., but warned it would be more cautious about the American market because of the trade war.

Top Wall Street bankers say firm botched $10M compensation payment
Kevin Dugan – NY Post
Two top Wall Street dealmakers say they were snookered into a four-year legal battle over $10 million in back pay — only to learn from the New York Post that they were legally entitled to that money years ago.

JPMorgan Says ‘Next Stop $1 Trillion’ for Hedge Fund Balances
Viren Vaghela – Bloomberg
Bank reaches $500 billion prime brokerage customer balances; Big banks generated about $18.3 billion revenue from prime
JPMorgan Chase & Co. hit a major milestone in its business that caters to the world’s largest hedge funds. And now the bank has even loftier goals.

Tax Fraud Deals Were Easily Discernible, Banker on Trial Says
By Karin Matussek
Pricing, volumes showed deals weren’t based on real dividends; Second day of testimony of prime defendant in Bonn tax trial
A former investment banker on trial in Germany said nearly everyone in the financial industry was able to spot the controversial tax-driven deals that cost taxpayers billions in lost revenue.


One of the World’s Top Investors Just Rang the Alarm, Again
David Ramli – Bloomberg
Singapore’s Lim Chow Kiat suggests increasing cash reserves; Lim says investors face rising uncertainty but falling returns
The head of one of the world’s largest sovereign wealth funds wants to get one thing straight — markets are becoming increasingly dire and investors face a very uncertain future.

Credit Suisse to Charge Wealthy for Swiss Franc Holdings
Patrick Winters – Bloomberg
Charges on euro deposits already imposed by Credit Suisse, UBS; Lenders looking to ease the blow of negative interest rates
Credit Suisse Group AG plans to impose charges on more wealthy clients as it prepares to spread the pain of negative interest rates.


Brexit Backer’s Fortune Surges by $900 Million
Benjamin Stupples – Bloomberg
Money keeps coming in for a rich backer of the U.K.’s effort to get out of the European Union. The fortune of Anthony Bamford, chairman of excavator-maker JCB, surged almost $900 million to $4.3 billion after the world’s largest closely held construction-equipment maker filed its 2018 results this week. Revenue for the Rochester, England-based business rose 22% from a year earlier to a record high 4.1 billion pounds ($5.1 billion). It also paid a 75 million-pound dividend to the Bamford family, the biggest in five years, according to data compiled by Bloomberg.

Ex-Prime Ministers Line Up to Criticize U.K.’s Johnson; Brexit destroys the British convention of former leaders treading carefully around the incumbent
Max Colchester – WSJ
Brexit has dented another distinguished British convention: Former prime ministers no longer refrain from criticizing successors from their own parties.

Brexit angst spurs record bets on UK interest rates; Boom in traders seeking to hedge against or speculate on moves from Bank of England
Philip Stafford – FT
Investors have taken out a record number of options contracts to bet on or hedge against moves in UK interest rates, amid rising concerns that Britain may leave the EU at the end of October without an agreement on its future relationship with the bloc.


Turkey Trial of Bloomberg Reporters, Others Starts in Istanbul
Bloomberg News
A Turkish court held its first hearing on Friday of a case against two Bloomberg reporters accused of trying to undermine the country’s economic stability. The action stems from a 2018 story about how authorities and banks were responding to the biggest currency shock in the country since 2001.

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Past Newsletters

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