SEC Charges 18 Traders in $31 Million Stock Manipulation Scheme; ICE closes acquisition of BAML fixed income volatility indices

Oct 17, 2019

First Read

Hits & Takes
JLN Staff

On page 9 of this newsletter from the Securities Lending Times, Matt Wolfe of the Options Clearing Corporation (OCC) discusses how the securities lending market is undergoing its own back-office revolution to smooth out inefficiencies and processing errors.~SR

The incredibly loud Kenny Polcari has written an article for Investopedia titled “What the Future Looks Like for Exchanges and Brokers.”~JJL

Ladies AND gentlemen are reminded that the Morgan Lewis/WILD panel on cybersecurity will begin at 6 pm this evening. Contact bernice.kyereme@morganlewis.com to register or for more information. The event address is 77 W. Wacker Drive in Chicago.~Thom Thompson

Bcause was in court on Thursday along with the bankruptcy trustee’s attorney and the usual string of creditors’ attorneys. Far from picking over carcass bits, paying attorneys’ fees was foremost on everyone’s minds. There is, after all, close to $1 million in cash which will have to go somewhere, and why shouldn’t a lot of it go to the lawyers? David Agay, the attorney for Wesco whose secured claim has driven the case forward, questioned how the creditor committee’s attorney had already been paid $50,000; Judge Baer had the same question. The court will order the money returned to the trustee. The spot market auction garnered two bidders – a group headed by Tom Flake, the most recent acting CEO, and a group headed by the most recent CEO, Fred Grede. The trustee is reviewing the bids. The next hearing in winding up Bcause is October 28.~Thom Thompson

If you loved Bob Zagotta’s band The Simpletone’s at the ALTSO event in Chicago, you’re gonna love his ultra-talented singer Katie Kadan on The Voice.~JK

Jeff Bergstrom became a homeowner yesterday when he closed on a condo near the CBOT Building and our offices. Congratulations to Jeff and good luck!~JJL

If you are interested in seeing the text of a letter to be sent to Senators Durbin and Duckworth of Illinois in support of Jitesh Thakkar, please email me at johnlothian@johnlothian.com. We need broad industry support for Jitesh and the risk his case implies for the industry and our markets moving forward.~JJL

The LaSalle Street Trading Tech Awards event will be on November 7 at the Chicago Board of Trade Building. This is the 48th edition of what was the LaSalle Street Dinner in support of the Boy Scouts of America. If you are interested in attending, or even sponsoring, please let me know.~JJL

Thank you to George Hanley and the Hanley Foundation for becoming a sponsor of this year’s LaSalle Street Trading Tech Awards event. George has been instrumental in helping Scouts in the past (and present), and many good things have come from his and others’ generosity.~JJL

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EU and UK reach agreement on Brexit deal; Breakthrough leaves Boris Johnson with challenge of selling plan to political allies
Sam Fleming and Jim Brunsden and Laura Hughes – FT
EU and UK negotiators have agreed a new Brexit deal, leaving Boris Johnson with the challenge of selling the accord to political allies at home.
/on.ft.com/32jgDM5

***** Which number agreement is this? How many of them were approved by Parliament?~JJL

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“There Is Definite Hanky-Panky Going On”: The Fantastically Profitable Mystery of the Trump Chaos Trades; The president’s talk can move markets—and it’s made some futures traders billions. Did they know what he was going to say before he said it?
William D. Cohan – Vanity Fair
In the last 10 minutes of trading at the Chicago Mercantile Exchange on Friday, September 13, someone got very lucky. That’s when he or she, or a group of people, sold short 120,000 “S&P e-minis”—electronically traded futures contracts linked to the Standard & Poor’s 500 stock index—when the index was trading around 3010. The time was 3:50 p.m. in New York; it was nearing midnight in Tehran. A few hours later, drones attacked a large swath of Saudi Arabia’s oil infrastructure, choking off production in the country and sending oil prices soaring. By the time the CME next opened, for pre-trading on Sunday night, the S&P index had fallen 30 points, giving that very fortunate trader, or traders, a quick $180 million profit.
bit.ly/33CkP9T

*****There is an electronic footprint to check out.~JJL

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Ken Fisher Client Exodus Nears $1 Billion as Boston Divests
Janet Lorin – Bloomberg
Pension in Boston joins Michigan and Philadelphia in divesting; Boston Mayor says Fisher’s comments ‘incredibly disturbing’
The city of Boston has joined two other government pensions in yanking money from Fisher Investments.
/bloom.bg/2Bip4LL

*****Investors are starting to get into Ken Fisher’s pants. His wallet to be specific.~JJL

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Wednesday’s Top Three
Our top read stories on Wednesday were led by the Financial Times’ Fed ‘repo’ plan could face fund manager resistance. Second was the opinion piece in The Wall Street Journal, We Sent a Man to the Moon. We Can Send the Dollar to Cyberspace. Third was the Marketswiki page on Jitesh Thakkar, following John Lothian’s push for the CFTC to end its case against him. John will be sending two letters to Illinois U.S. Senators Durbin and Duckworth
Anyone who wants to co-sign them can contact John at johnlothian@johnlothian.com to see the text of the letter and to agree to co-sign.

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Lead Stories

SEC Charges 18 Traders in $31 Million Stock Manipulation Scheme
SEC
The Securities and Exchange Commission has filed an emergency action and obtained an asset freeze against 18 traders in a scheme to manipulate more than 3,000 U.S.-listed securities for over $31 million in illicit profits. The SEC alleges that the traders, who are primarily based in China, manipulated the prices of thousands of thinly traded securities by creating the false appearance of trading interest and activity in those stocks, thereby enabling them to reap illicit profits by artificially boosting or depressing stock prices. For example, according to the SEC’s complaint, the traders used multiple accounts to place several small sell orders to drive down a stock’s price before using a different set of accounts to buy larger amounts of the stock at the artificially low prices. After accumulating their position, the traders then flipped the script and placed several small buy orders to push up prices so they could then sell their stock at artificially high prices.
bit.ly/2VUNR1V

ICE closes acquisition of BAML fixed income volatility indices; ICE confirmed plans to acquire the MOVE index from Bank of America Merrill Lynch in August this year.
Hayley McDowell – The Trade
Exchange operator ICE has completed the acquisition of Bank of America Merrill Lynch’s suite of US fixed income volatility indices.
bit.ly/2VLzddo

Inside Facebook’s Botched Attempt to Start a New Cryptocurrency; Major partners bolted after Washington challenged the social-media giant’s foray into finance
AnnaMaria Andriotis, Peter Rudegeair and Liz Hoffman – WSJ
David Marcus gathered a team inside Facebook Inc. ‘s headquarters in May to toast a skunk works project a year in the making: a bitcoin-like payments system that the social-media giant figured would upend the global flow of money.
/on.wsj.com/2VWlgte

Negative U.S. Interest Rates? Options Traders Say Yes; Wagers via Eurodollar options indicate investors’ belief that ‘negative rates are not just possible but reasonably probable’
Gunjan Banerji – WSJ
Derivatives traders are betting on something once considered inconceivable: zero or negative interest rates in the U.S.
/on.wsj.com/2MmboFY

Federal Reserve sets out regulatory challenges facing Facebook’s Libra; Central bank governor says digital coin will need to address several consumer concerns
Kiran Stacey and Brendan Greeley and Hannah Murphy – FT
Facebook will need to make a series of promises on money laundering, consumer protection and privacy before it can launch its digital currency, a top US official has warned — the first time a regulator has gone into detail about what they want from Project Libra.
/on.ft.com/2VWj8Sg

Why hedge fund managers are happy to let the machines take over; Some claim computers are getting better at finding profitable patterns in market data
Robin Wigglesworth – Ft
A month ago many computer-driven investors watched astonished as markets were wracked by a financial tempest, with once-hot stocks tumbling and previously shunned sectors enjoying a revival.
/on.ft.com/2VOIcuh

Are more women at the top good for banks? Alison Rose appointment at RBS will lead to more meaningful comparisons
Brooke Masters – FT
When Royal Bank of Scotland confirmed last month that Alison Rose would be its next chief executive, my first reaction was “finally!”. As in, finally, a woman would have the chance to head one of the UK’s — and the world’s — biggest banks.
/on.ft.com/31o1BTO

Why Global Investors Want Access to China’s Gold Market
Debbie Carlson – Open Markets
The Shanghai Gold Exchange has become the world’s largest physical gold exchange less than 20 years after launching. China mines 11 percent of the world’s gold, making it the world’s largest gold producer. Two new futures contracts connecting CME Group gold futures to Shanghai Gold Exchange launched in October.
bit.ly/2BdEDo3

Former Goldman Sachs FICC global operating chief joins MarketAxess board of directors; Justin Gmelich retired from Goldman Sachs earlier this year after 20 years with the investment bank.
Hayley McDowell – The Trade
The former global chief operating officer for fixed income, currencies and commodities (FICC) at Goldman Sachs has been elected to the board of directors at MarketAxess.
bit.ly/2puZ64U

Dublin declared ‘winner’ of City Brexodus; Think-tank updates assessment of City companies’ Brexit moves — with the Irish capital out in front
Emily Horton – Financial News
Dublin has been the “clear winner” of the shift in financial services activity from London to other European cities due to Brexit, accounting for almost a third of the companies that have moved at least some functions out of the City.
bit.ly/2MlYIi8

Tough market abuse rules should cover currency markets – BoE’s Carney
David Milliken, Huw Jones – Reuters
Bank of England Governor Mark Carney said on Tuesday that currency dealers should face the same tough market-abuse rules that govern share and bond trading, adding to scrutiny of London’s $5 trillion-a-day foreign-exchange market.
/reut.rs/31odWYm

Finra exams show some firms lack mechanisms to detect unsuitable sales; Regulator’s reviews also reveal lack of branch office supervision
Mark Schoeff Jr. – InvestmentNews
Some brokerages are not doing enough to prevent sales of investment products that are inappropriate for their customers, Finra said in a report on recent examination results released Wednesday.
bit.ly/2Moi9a5

McLeodaglaw LLC: The Worst Financial Scandals of the Last 20 Years
PRNewswire
In this book Mike McLeod, who is America’s most experienced lawyer in Agriculture and Derivatives Law, takes us through the numerous financial scandals that have happened since the attacks on America on Sept. 11, 2001.
bit.ly/32mOMKR

Exchanges, OTC and Clearing

SGX establishes S$1.5 billion multicurrency debt issuance programme
SGX
Singapore Exchange Limited (SGX) today announced that it has established a S$1.5 billion Multicurrency Debt Issuance Programme. Under the programme, SGX may issue medium term notes or perpetual securities (together, the “Securities”) denominated in any currency, amount and tenor. The programme allows for such Securities to be issued to institutional investors, as well as for retail notes to be issued and made available for trading on the SGX Mainboard.
bit.ly/31oNdei

Intercontinental Exchange Completes Acquisition of the Merrill Lynch Option Volatility Estimate (MOVE) Index from Bank of America Merrill Lynch
Released : 16 October 2019
ICE
Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced it has completed its acquisition of a family of U.S. fixed income volatility indices from Bank of America Merrill Lynch.
bit.ly/2MlSYVC

LCH expands deliverable FX offering
LCH
FX forwards now available for clearing at LCH; first CCP to clear the product; Utilises settlement model developed in collaboration with CLS; ForexClear expansion builds on existing clearing service for FX non-deliverable forwards and deliverable options
LCH, a leading global clearing house, today announced that it has expanded its deliverable FX offering to include FX forwards. Members of the ForexClear service are now able to clear this product in eight currency pairs.
bit.ly/2nPbsEy

Buy-side moves on central clearing
Eurex
Jonathan Lombardo, senior vice president fixed, income derivatives funding and financing division for Eurex Clearing, outlines the strategy for buy-side clients to access centrally cleared repo and securities lending markets in the current issue of the Securities Lending Times.
bit.ly/2MpBXKl

Fintech

Huatai Financial implements Itiviti connectivity for Shanghai-London Stock Connect; Huatai was the first global depository receipts issuer to use the Shanghai-London Stock Connect.
Hayley McDowell – The Trade
Hong Kong-based Huatai Financial has deployed a connectivity service from Itiviti to bolster its ability to issue and trade global depository receipts (GDRs) via the Shanghai-London Stock Connect initiative.
bit.ly/2BkWPfs

RBC Capital Markets adds algo suite to BidFX EMS; Foreign exchange EMS platform BidFX has expanded number of algo providers with RBC in response to client demand.
Hayley McDowell – The Trade
BidFX has expanded the list of algorithmic trading providers to its execution management system (EMS) with the addition of RBC Capital Markets.
bit.ly/2BitemR

EU sets sights on Apple Pay over antitrust concerns; Brussels seeks information on digital payments from groups including banks and app makers
Patrick McGee and Javier Espinoza – FT
The European Commission says it is taking a look at antitrust concerns involving Apple Pay, the digital payment tool for iPhones.
/on.ft.com/2puuIYm

Vela launches next generation FPGA-enabled ticker plant appliance for US equities; Posted 16th October 2019; Latest generation appliance more than halves latency, while providing access to US equity markets on a single device
Vela
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, announced today the availability of its latest ultra-low latency Ticker Plant Appliance for US Equities. In partnership with Enyx, a leading developer and provider of ultra-low latency technologies and solutions for the financial industry, Vela has integrated Enyx’s nxFeed FPGA card into the appliance to provide a step change in capacity and performance on the smallest of footprints.
bit.ly/2VLFK7U

BSO and Gemini Collaborate to deliver direct crypto exchange connectivity worldwide
Press Release
BSO, the award-winning Ethernet network, cloud and hosting provider for the financial services industry, today announced the availability of connectivity solutions to Gemini, a leading cryptocurrency exchange and custodian, directly from the global BSO network.
bit.ly/2Mnen0H

Cryptocurrencies

Facebook’s Libra is a threat to national sovereignty; The company has shown economic and political ambitions with its plan for a digital currency
Bruno Le Maire – FT
When 11 countries in Europe joined the euro in 1999, they freely relinquished their national currencies. They didn’t just say yes to a new currency as a medium of exchange; they consciously decided to transfer part of their sovereignty to the European level.
/on.ft.com/2nXmJ5Y

NYSE Arca & Wilshire Phoenix Update Bitcoin ETF Proposal, But Approval Isn’t Coming “Anytime Soon”
Bitcoin Exchange Guide
The US Securities and Exchange Commission is yet again accepting comments on a Bitcoin exchange-traded fund (ETF) proposal filed by investment management firm Wilshire Phoenix and NYSE Arca. According to the public filing published on Oct. 15, both the companies filed an amendment to their ETF proposal earlier this month. Per the proposal, Coinbase Custody will act as the custodian for the BTC held by the trust. Coinbase will further confirm the availability of the assets it holds within five business days of its monthly rebalancing, a detail not present in the first application.
bit.ly/2oDAgQz

CFTC Files Lawsuit Against $11M Ponzi-Like Cryptocurrency Scam
Joeri Cant – Cointelegraph
The United States Commodity Futures Trading Commission (CFTC) has announced the filing of a civil enforcement action against Nevada-based Circle Society. On Oct. 16, the CFTC announced that it was charging Circle Society and its owner, David Gilbert Saffron, with “fraudulent solicitation, misappropriation, and registration violations relating to an $11 million binary options scheme.”
bit.ly/2MoNvxo

How Ex-Ripple, Binance US CEO Plans to Win Over America
Robert Hackett – Fortune
In its two short years of existence, Binance has gained a reputation for being fast and ferocious—sweeping aside peers on its rise to the top as one of the world’s biggest cryptocurrency exchanges by trading volume. The business’ newly launched American counterpart, Binance US, intends to take a more careful approach. Debuting on September 23 in 37 states, plus Puerto Rico, the company says it seeks to comply with U.S. financial laws, where the legal status of digital coins remains in question.
bit.ly/32nR0Kf

Banksy banks on HODLers
Izabella Kaminska – Financial Times
He’s anonymous. He’s contrarian. And ultimately, he’s a troublemaker. Just like Alphaville. What’s not to like when it comes to Banksy? His contempt for all things institutional is admirable. His ability to find beauty in the ugly is profound. And who isn’t continuously amused by his subtle digs against the very establishment he emanates from? But what to make of grossdomesticproduct.com, the Banksy shop?
/on.ft.com/2qkdEot

YouGov’s “blockchain-based” sell-your-own data platform makes no sense
Jemima Kelly – FT
YouGov, the London-listed polling and market research company, has diversified its offering in recent months, in a (successful) effort to generate more revenues. It is now focusing less on traditional market research activities, and more on “real-time data analytics” — ie data that is served up in some kind of intelligible and useful format as soon as it is generated.
/on.ft.com/31oBhJx

Binance just crossed $1 billion in cumulative profit
Yogita Khatri – The Block Crypto
Crypto exchange Binance has just hit a massive $1 billion mark in cumulative profit; In Q3 of 2019 alone, the exchange made a profit of $183.5 million; Binance CEO CZ said: “We will continue to hunker down, and BUIDL”
“Keeping barriers to entry low” mantra seems to have paid off well for cryptocurrency exchange Binance. The exchange has just crossed a whopping $1 billion in cumulative profit as of Sept. 30, 2019, according to The Block’s research.
bit.ly/2MoNwkW

Telegram to delay TON blockchain launch; could return investors’ money after SEC lawsuit
Yogita Khatri – The Block Crypto
Messaging app provider Telegram has informed investors that the launch of its native blockchain network TON will get delayed and thus investors could get their funds back as part of their deal.
bit.ly/2BgoVbE

Bitcoin ‘Maybe Is a Partial Store of Value,’ Concedes Nouriel Roubini
Marie Huillet – Cointelegraph
Economist Nouriel Roubini — also known as “Dr. Doom” for his prediction of the 2007-2008 financial crisis and a notorious critic of cryptocurrencies — has conceded that Bitcoin (BTC) is “a partial store of value.” Roubini made the concession during a panel together with a host of high-profile crypto industry figures such as Brock Pierce, Bobby Lee and Tone Vays — during the CC Forum 2019 conference in London on Oct. 16.
bit.ly/2OURMdK

Fed Governor Warns: Facebook’s Libra Users Lack Clear Rights
Marie Huillet – Cointelegraph
A member of the Federal Reserve’s Board of Governors has said that Facebook’s Libra could pose risks to consumers due to a lack of clarity over their rights with respect to the token’s underlying assets and to the system overall. Lael Brainard — who chairs the Fed’s Committees on Financial Stability, Federal Reserve Bank Affairs, Consumer and Community Affairs, and Payments, Clearing and Settlements — outlined her critique of Libra during a speech delivered at “The Future of Money in the Digital Age” forum in Washington D.C. on Oct. 16.
bit.ly/32qwLLY

Top Fed Official Says US Central Bank ‘Actively’ Debating Digital Dollar
Brad Keoun – Coindesk
A top Federal Reserve official said Wednesday that the U.S. central bank is “actively looking at and debating” issuance of a digital currency, amid growing worries among current and former regulators that the dollar might be at risk of losing its status as the world’s reserve currency. Speaking at a local business event in Austin, Texas, Federal Reserve Bank of Dallas President Rob Kaplan said: “We have not at the Fed decided to pursue or drive to develop a digital currency, but it’s something we’re actively looking at and debating.”
bit.ly/2MRPj11

Venezuelan Migrants Are Using Bitcoin for Remittances, But There’s a Catch
Diana Aguilar – Coindesk
In 2018, Deimer González packed his college diploma, clothes and a mobile wallet with 1.5 BTC in savings and left Venezuela. What unfolded throughout 2019 offers a microcosm for Venezuelan bitcoin users around the world. As a mechanical engineer from Caracas, formerly employed by Venezuela’s state-owned oil and natural gas company (PDVSA), González told CoinDesk that those very same savings allowed him to support his parents as he started to build a new life in Buenos Aires, Argentina.
bit.ly/33CfQWJ

IRS Followed Bitcoin Transactions, Resulting In Takedown Of The Largest Child Exploitation Site On The Web
Kelly Phillips Erb – Forbes
The largest dark web child pornography site in the world has been taken down. That was the word today from the U.S. Attorney’s Office for the District of Columbia, the Justice Department’s Criminal Division, the IRS Criminal Investigation (IRS-CI), and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), together with the National Crime Agency of the United Kingdom and Republic of Korea at a joint press conference announcing arrests and forfeitures.
bit.ly/31oI1qP

The central bank of Canada is exploring a digital currency
Steven Zheng – The Block Crypto
The Bank of Canada, the country’s central bank, has been researching the possible issuance of digital currency, according to an internal presentation obtained by the Financial Post.
bit.ly/2BmdrmV

CoinMarketCap now publishes interest rates on cryptocurrencies, allowing users to compare and choose
Yogita Khatri- The Block Crypto
CoinMarketCap has started offering interest rates information on cryptocurrencies; Until now, LoanScan.io was the only platform to provide such information under one roof; Carylyne Chan, chief strategy officer of CoinMarketCap, told The Block that the new offering took about 1.5 months of development – from concept to delivery.
bit.ly/32nGimZ

Politics

The risks behind foreign banks’ dollar funding
Claire Jones – FT
Many of you will remember Izzy’s great post last month in which we discussed the causes of the spike in dollar repo rates to a whopping 10 per cent. There were many reasons behind this, ranging from the way in which the New York Federal Reserve doles out dollar liquidity to a raft of withdrawals owing to tax season in the US.
/on.ft.com/31tDNOM

Does Trump Realize the Trouble He’s In? Recognizing when things are going wrong is an essential skill of the presidency. Trump doesn’t seem to have it.
Jonathan Bernstein – Bloomberg
Wednesday, the 1,000th day of Donald Trump’s presidency, went badly. That’s no surprise; most of the first 999 days went badly too. I have no idea if he’s going to wind up getting ousted from office, either as a result of the impeachment House Democrats are readying or the 2020 election. But things are getting worse for Trump — whether he realizes it or not.
/bloom.bg/32oJ0sk

Only once has Gallup seen more support for removing a president. Nixon was gone four days later; Which, again, is why a fight with Senate Republicans is bizarre
Philip Bump – Washington Post
When President Trump’s 2020 campaign claims Democrats have always wanted to see Trump impeached, it’s not entirely incorrect. While the Democratic Party’s establishment has only relatively recently embraced the idea of impeaching Trump, Democrats broadly — that is, voters — have long approved of the idea.
/wapo.st/2VMzzjW

House Democrats Walk Out Of White House Syria Meeting, Accusing Trump Of ‘Meltdown’
Brian Naylor, Jessica Taylor – NPR
Congressional Democrats walked out of a bipartisan White House meeting with President Trump about his decision to pull U.S. troops out of Syria, a meeting in which Trump called House Speaker Nancy Pelosi “a third-rate politician” according to Senate Minority Leader Chuck Schumer. Speaking to reporters on the White House driveway Wednesday after the meeting, Pelosi said the president had a “meltdown” inside, looked shaken, “and was not relating to reality.” Trump lobbed the same insult back Wednesday night, tweeting that it was Pelosi who had the “meltdown.”
/n.pr/2VOauFj

Stock Market Refuses to Cooperate With Trump’s ‘Up Big’ Call
Lu Wang – Bloomberg
The Dow Industrials meander to a 23-point loss; S&P 500 falls; Dow briefly turned positive before ending the day lower
President Donald Trump was reminded Wednesday of something investors have known for decades: it’s hard to predict the market.
/bloom.bg/2Bl4ZEE

Never-Before-Seen Trump Tax Documents Show Major Inconsistencies; The president’s businesses made themselves appear more profitable to lenders and less profitable to tax officials. One expert calls the differing numbers “versions of fraud.”
Heather Vogell – ProPublica
Documents obtained by ProPublica show stark differences in how Donald Trump’s businesses reported some expenses, profits and occupancy figures for two Manhattan buildings, giving a lender different figures than they provided to New York City tax authorities. The discrepancies made the buildings appear more profitable to the lender — and less profitable to the officials who set the buildings’ property tax.
bit.ly/32ol8oz

Regulation

FCA data show 4.29m complaints for first half of 2019
UK FCA
The Financial Conduct Authority (FCA) has today published the complaints figures for regulated firms for the first half of 2019. The data showed an increase in complaints from 3.91m in the second half (H2) of 2018 to 4.29m for the first half (H1) of 2019.
bit.ly/2VLBUvw

FCA seeks compensation for Park First investors
UK FCA
The FCA has started proceedings against Park First Limited, its senior managers, including its chief executive officer and a number of other companies connected to the Park First group. The FCA is seeking compensation orders in favour of investors in respect of losses they have suffered in the Park First scheme.
bit.ly/2MpvGOA

Reminder: Dues surcharge for certain Member firms engaged in swaps activities effective January 1, 2020
NFA
In June 2019, NFA issued Notice to Members I-19-15 announcing the CFTC’s approval of an annual dues surcharge of $1,750 on certain NFA Members including FCMs for which NFA is the DSRO, IBs, CPOs and CTAs that are approved as swap firms pursuant to NFA Bylaw 301(l)1.
bit.ly/2BfUX7N

CFTC Charges Nevada Company and its Owner in $11 Million Cryptocurrency Fraud and Misappropriation Scheme
Federal Court Issues Restraining Order Against Defendants
CFTC
The U.S. Commodity Futures Trading Commission today announced the filing of a civil enforcement action in the U.S. District Court for the District of Nevada, charging David Gilbert Saffron of Las Vegas, Nevada and Circle Society, Corp., a Nevada corporation, with fraudulent solicitation, misappropriation, and registration violations relating to an $11 million binary options scheme Saffron operated through Circle Society. The complaint was filed on Monday, September 30, 2019.
bit.ly/2nPd01k

CFTC Approves Two Proposed Rules at October 16 Open Meeting
CFTC
At an open meeting today, the U.S. Commodity Futures Trading Commission voted to approve two proposed rules. The Commission voted unanimously to approve a proposed amendment to Regulation 23.161 – Compliance Schedule Extension. The Commission also approved proposed amendments to the Margin Rules for Uncleared Swaps – 23.151 and 23.157, with a vote of 4 to 1.
bit.ly/32ujrGs

FINRA Publishes 2019 Report on Examination Findings and Observations
FINRA
FINRA today published its 2019 Report on FINRA Examination Findings and Observations. The report reflects key findings and observations identified in recent examinations, and contains effective practices that could help firms improve their compliance and risk management programs. It summarizes findings and observations across a range of topics, including supervision, cybersecurity, best execution, segregation of client assets, and Uniform Transfers to Minors Act (UTMA) and Uniform Grants to Minors Act (UGMA) accounts.
bit.ly/2BgmTZ4

ESMA sees significant room for improvement in national regulators’ supervision of derivatives data
ESMA
The European Securities and Markets Authority (ESMA) has today published the results of a peer review it conducted into supervisory actions of six National Competent Authorities (NCAs) regarding their approaches at enhancing the quality of derivative data reported under the European Market Infrastructure Regulation (EMIR).
bit.ly/2Bl0UjO

GRC Conference: Regulatory Panel
ASIC
A speech by ASIC Commissioner Sean Hughes at the Governance Risk Compliance Institute (GRC) Conference: Regulatory Panel, Melbourne, 17 October 2019
bit.ly/2nRGr2Q

ASIC regulatory and enforcement update
ASIC
Keynote address at the Australian Institute of Credit Management (AICM) 2019 National Conference by ASIC Commissioner John Price, Gold Coast, 17 October 2019.
bit.ly/2pw6u0c

ASIC Annual Report for 2018-19
ASIC
ASIC’s Annual Report for the 2018-19 financial year has been tabled today in the Australian Parliament.
bit.ly/2Bkm2H2

New Frontiers in Regulation
ASIC
Opening statement by ASIC Chair, James Shipton, at the CFA Societies Australia Investment Conference, Sydney, 17 October 2019
bit.ly/2VNcmOq

Concurring Statement of Commissioner Dan M. Berkovitz
CFTC
Proposed Rule Extending Uncleared Swap Margin Deadline for Certain Financial Entities with Smaller Swap Portfolios
bit.ly/2VQnMkL

Opening Statement of Commissioner Brian Quintenz before the Open Commission Meeting on October 16, 2019
CFTC
Open Meeting on Proposed Rule: Amendment to Regulation 23.161 – Compliance Schedule Extension and Proposed Rule: Amendments to the Margin Rules for Uncleared Swaps – 23.151 and 23.157
bit.ly/32pwnx3

Statement of Commissioner Dawn D. Stump for CFTC Open Meeting, October 16, 2019l; Extending Compliance Schedule for Phase 5 of the Margin Rule for Uncleared Swaps
CFTC
Regarding the exchange of initial margin (IM) for non-centrally cleared derivatives, now is a good time to step back and reflect on the past implementation phases and to explore in more detail the issues faced by market participants who have, or will in a future phase, become subject to the requirement. This exercise is important, in my view, in order to understand whether there are actions that we, as regulators, can take to mitigate the potential compliance bottleneck that will be caused by an unprecedented number of market participants coming into scope in the last implementation phase.
bit.ly/2nSLsIt

Opening Statement of Chairman Heath P. Tarbert Before the Open Commission Meeting on October 16, 2019
CFTC
Good morning, and thank you for attending today’s open meeting of the U.S. Commodity Futures Trading Commission (“CFTC”). We have two important items on the agenda: (1) a proposed rule to extend the compliance date for phase five of the CFTC’s margin rule for uncleared swaps (“Margin Rule”),[1] and (2) a proposed rule regarding the application of the Margin Rule to the European Stability Mechanism (“ESM”).
bit.ly/2nRLoIY

Statement of Concurrence by Commissioner Rostin Behnam
CFTC
Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (Notice of Proposed Rulemaking)
bit.ly/31mh2Mx

Investing and Trading

David Driscoll, Top Ranked Food Industry Analyst, Launches DD Research in Partnership with Analyst Hub
Analyst Hub, LLC
Analyst Hub, LLC, an independent research infrastructure platform company that provides talented sell-side analysts a path to owning their own enterprises, and DD Research, a boutique sell-side equity firm focused on providing in-depth intelligence and corporate access to understand the food industry consumer by using unique, proprietary methods, today announced their partnership with the launch of DD Research as the latest independent research provider to join Analyst Hub’s growing roster of leading IRPs.
bit.ly/2prfzY4

Institutions

HSBC Considers Equity Pullback in London, New York, Germany
Harry Wilson and Stefania Spezzati – Bloomberg
People familiar with the matter say jobs in France may also go; Review is part of overhaul of lender under interim CEO Quinn
HSBC Holdings Plc may partially exit stock trading in some developed Western markets as part of a cost-cutting drive by Noel Quinn, the interim chief executive who wants the top job on a permanent basis.
/bloom.bg/32pIHgH

Ex-Credit Suisse Banker Says He Hid $45 Million in Bribes
Patricia Hurtado – Bloomberg
Pearse tells Brooklyn jury other bankers also accepted bribes; Banker says son of former Mozambican president got $50 million
Former Credit Suisse Group AG banker Andrew Pearse told a jury in Brooklyn, New York, that he pocketed at least $45 million in illicit payments for his role in the arrangement of loans worth $2 billion to companies in Mozambique.
/bloom.bg/31k3Wzq

Highland Says It Lacks Cash to Pay Clients $175 Million Now
Katia Porzecanski – Bloomberg
Arbitration panel issued ‘partial final award’ in early March; Crusader Fund shut in 2008 following high-risk loan losses
Highland Capital Management said it doesn’t have the cash on hand to make a payment of $175 million if that amount is eventually awarded to investors in its shuttered hedge fund by an arbitration panel.
/bloom.bg/32uo8A4

Regions

Mexico Elite Tremble From Threat of Tax Crackdown Under New Law
Michael O’Boyle – Bloomberg
Statutes define major tax evasion as a type of organized crime; Business leaders warn abuse of law could chill investment
Mexico’s elite are quaking after leftist lawmakers passed a new law that makes tax evasion a type of organized crime that could justify the seizure of assets even before judges rule on the validity of charges.
/bloom.bg/32oY2yj

Turkey Short-Selling Ban Is Blow to Bank Stocks’ Trading Volume
Tugce Ozsoy – Bloomberg
Borsa Istanbul Banks Index’s volume fell to four-month low; Turkish regulators moved to limit losses on financial markets
Turkey’s moves to protect and buoy its banking shares has triggered a slump in trading volume.
/bloom.bg/2nXk8sI

$1 Billion Pulled From Hong Kong Hedge Funds, Most Since 2009
Ishika Mookerjee – Bloomberg
Hong Kong’s hedge fund industry saw its biggest quarterly outflow since the global recession a decade ago, a shift that may deepen concern about investor sentiment in the protest-wracked financial hub.
/bloom.bg/2BkcXOd

Brexit

How a Hard Brexit Could Cause Chaos in the British Power Market
Jesper Starn – Bloomberg
Daily price is the benchmark for futures and import cables; Previous cooperation in EU power was punished by regulators
If the U.K. crashes out of the European Union without a deal, one unintended consequence could be chaos in the nation’s power market.
/bloom.bg/2MkyjRQ

A Brexit Deal Is So Close But It Could All Still Go Belly Up
Ian Wishart, Nikos Chrysoloras, and Robert Hutton – Bloomberg
Negotiators in Brussels look to tie up a deal before summit; The threat of a DUP veto still hangs over Johnson’s efforts
Over the past 24 hours, a Brexit deal has seemed exasperatingly near, only for a series of conflicting messages, denials and clarifications to muddy the waters.
/bloom.bg/2pquz8u

EU and U.K. Reach Agreement to Put Brexit Within Boris Johnson’s Grasp
Ian Wishart, Nikos Chrysoloras, and Kitty Donaldson – Bloomberg
Negotiators complete agreement before EU leaders’ summit; Johnson still needs to win the backing of U.K. lawmakers
Negotiators from the U.K. reached an agreement with officials in Brussels Thursday that could pave the way for Britain to finally break 46 years of ties with the European Union. But the Democratic Unionist Party said it still can’t support the deal.
/bloom.bg/31ljHpF

Prospect of Brexit hits UK participation in EU research programmes; British applications for Horizon 2020 funding fall by 39% in 2015-2018
Clive Cookson and Andrew Jack – FT
Brexit uncertainty is costing the UK more than EUR400m a year in EU research funding as fewer European scientists choose to work in Britain or collaborate with British scientists.
/on.ft.com/2nTAjY1

Miscellaneous

The importance of role models in shaping a young professional; Hearing about the challenges successful people faced builds confidence and self-belief
Elizabeth Uviebinene – FT
“You can’t be what you can’t see” is a phrase that is said time and time again. In 2014, when I was on the graduate scheme at Deutsche Bank, Anne-Marie Imafidon, chief executive of Stemettes, which encourages girls to pursue careers in science, technology, engineering and maths, was also working there. I didn’t meet her at the time, but I did read an internal intranet article about her and her career.
/on.ft.com/2pqWyow

Chicago teachers are on strike. The reasons why come down to politics, time and money.
Juan Perez Jr. – Chicago Tribune
Teachers at Chicago Public Schools will go on strike Thursday after the Chicago Teachers Union and the city failed to settle on a new contract before the union-imposed deadline. Talks had resumed Wednesday morning, but CPS announced classes are canceled Thursday because of the anticipated walkout. Despite talk of some progress at the bargaining table, neither side had reached consensus on multiple issues, including pay, staffing and the potential duration of a contract.
bit.ly/33D6I4g

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