SEC Increases Oversight for Hedge Funds, High-Speed Traders

Feb 7, 2024

First Read

Hits & Takes
John Lothian & JLN Staff

I am big enough, I trade enough and gosh darn it, the SEC wants to regulate me. Yep, the U.S. Securities and Exchange Commission finally came out with new rules for oversight of hedge funds and high-speed traders of a certain size participating in the U.S. government bond markets and stock market. At the center of the new rules, which include capital requirements, registration of activities and activity reporting, is what is the definition of a “dealer.”

The SEC said in a press release that it has adopted rules to include certain significant market participants as “Dealers” or “Government Securities Dealers.”

Research cited by the SEC indicates that unregistered market participants behaving like dealers made up approximately half of the daily Treasury trading activity across electronic platforms in recent years, The Wall Street Journal reported. Overall, the analysis revealed that the new dealer rule could potentially affect up to 43 firms. However, those overseeing assets of less than $50 million would be exempt from compliance.

CME Group said it will launch U.S. Corporate Bond Index futures in summer 2024, expanding its interest rate complex to provide market participants with tools for managing growing credit exposure, pending regulatory review.

I received a letter in the mail from a company I had never heard of before, Keenan & Associates. The letter explains that it is an insurance brokerage company that provides insurance-related risk management and claims services throughout California and to clients across the country. They wrote because they experienced a cybersecurity incident on some Keenan network servers and that data obtained from the Keenan servers included my date of birth, Social Security number, passport number, driver’s license number, health insurance information and general health information. WOW!

Now, what is interesting to me is that I don’t ever remember giving my passport number to any health care provider. So I am wondering how Keenan & Associates came across that information. Or, if the Keenan client was the U.S. government (who has access to my passport number), then why would the government want or need my general health information?

The letter also includes a free 24-month subscription to Experian’s IdentityWorks Credit 1B product that helps protect the possible misuse of my personal information. Maybe this whole thing is a come-on for selling identity theft protection. Who knows? But I guess I will sign up.

Have a great day and stay safe and treat people the same way you want to be treated: with respect, equality and justice.~JJL


Our most read stories from our previous edition of JLN Options were:
Eurex launches Mid-Curve Options on EURO STOXX 50 Index Dividend Futures from FX News Group.
We’re heading for new cryptocurrency crisis, predicts Wall Street veteran from the Daily Mail.
SEC forces hedge funds, high-frequency traders to register in latest showdown with industry from MarketWatch. ~JB

Subscribe to the JLN Options Newsletter HERE (it’s free).


Futures Discovery: Regulation & Do You Need to be Registered

Today, we’re diving head first into a crucial topic that affects every trader’s journey in the world of futures trading – “Regulation & Do You Need to be Registered.” Buckle up as we unravel the intricate web of rules and regulations that shape the landscape of the futures market.

Watch the video »


Decline of the star stockpicker: investors pull $150bn from equity hedge funds; Clients tire of managers’ poor returns in bull and bear markets; ‘Equity long-short funds’ have underperformed the US stock market in nine out of the
Costas Mourselas – Financial Times
One of the oldest and best-known hedge fund strategies has suffered nearly $150bn in client withdrawals over the past five years, as investors tire of their inability to capitalise on bull markets or protect them during downturns. So-called equity long-short funds, which try to buy stocks likely to do well and bet against names set to perform poorly, have underperformed the US stock market in nine out of the past 10 years, according to Nasdaq eVestment, after failing to adapt to markets largely dominated by central banks.

****** The long and short of this is eeny, meeny, miny, moe is not working as well anymore.~JJL


New York Community Bank seeks to reassure investors after Moody’s downgrade; Regional bank promotes former Flagstar chief to executive role after rating cut to junk
Joshua Franklin and Stephen Gandel – Financial Times
US regional lender New York Community Bancorp has sought to reassure inventors that it is still taking in new deposits, after a week in which its share price has more than halved and it was downgraded to “junk” status by Moody’s. The bank also announced that Alessandro DiNello, the former chief executive of Flagstar Bank, which NYCB bought in 2022, would take on an executive role.

****** “Remain calm, ALL IS WELL!” ~JJL


‘Meme-lord’ Litquidity reveals his true identity; Banker whose satirical alter ego gained a cult-like following on Wall Street talks exclusively to the FT
Madison Darbyshire – Financial Times
Being friends with Hank Medina is a dangerous game. Better known by his pen name Litquidity, he is always quietly looking for content – and even your attire could turn you into a viral meme. People who know him say Medina is the last person you would expect to be the “fin-meme lord” who has built a following of 800,000 followers on Instagram. He is soft-spoken, polite – the opposite of his Patrick Bateman-meets-enthusiastic junior analyst alter-ego.

****** Good thing the identity of ‘Meme-lord’ Loquacious has not been discovered yet. I am still safe. Oops!~JJL


Tuesday’s Top Three
Our top clicked item Tuesday was Intercontinental Exchange Reports January 2024 Statistics, from the Intercontinental Exchange (ICE). Second was our MarketsWiki page for Jahmal Cole, the founder of My Block, My Hood, My City. Third was Cboe Global Markets Reports Trading Volume for January 2024, from Cboe Global Markets.



Lead Stories

SEC Increases Oversight for Hedge Funds, High-Speed Traders; Traders and funds have warned the cost of new rules could lead them to pull back from key markets
Peter Rudegeair – Bloomberg
Wall Street’s top regulator extended its authority into new corners of the financial industry on Tuesday, adopting rules targeting firms that are among the most active buyers and sellers of U.S. government bonds and stocks. The Securities and Exchange Commission will now require dozens of firms, including high-speed traders and hedge funds, to face new capital requirements, register their activities and report more information on their transactions. The changes resulted from the SEC’s 3-2 vote to broaden its definition of what it considers to be a securities “dealer.”

Brussels agrees new rules to shift derivatives clearing from London; EU-based traders required to send ‘minimum’ amount of swaps contracts through ‘active accounts’
Paola Tamma – Financial Times
Brussels has agreed rules that will force derivatives traders to funnel part of their deals through accounts at clearing houses in the bloc, in a plan to wrestle a share of the vast market away from the City of London. The revised rules, agreed early on Wednesday, will force EU-based banks trading quantities of contracts that are deemed “systemic” by regulators to send a minimum amount of business to an EU clearing house.

US Commercial Real Estate Contagion Is Now Moving to Europe; Bonds at Deutsche PBB suffer over bank’s property exposure; Warning signals from US to Asia have multiplied recently
Giulia Morpurgo, Tasos Vossos, and Neil Callanan – Bloomberg
The troubles in the US commercial property market, which have already hit banks in New York and Japan, moved to Europe this week, elevating fears about broader contagion. The latest victim was Germany’s Deutsche Pfandbriefbank AG, which saw its bonds slump on concern about its exposure to the sector. It responded by issuing an unscheduled statement Wednesday that it had increased provisions because of the “persistent weakness of the real estate markets.” It described the current turmoil as the “greatest real estate crisis since the financial crisis.”

Faster US Stock Trading Has Currency-Market Anchor CLS on Edge; An estimated $65 billion of trades could miss a faster cut-off; CLS says around a third of asset managers not ready for shift
Alice Atkins and Greg Ritchie – Bloomberg
CLS, the world’s largest foreign-exchange settlement firm, is racing to figure out a way to get the $7.5 trillion-a-day currency market ready for a huge change to trading in US stocks. The US is less than four months from introducing what’s known as T+1, when it will halve the time it takes to complete equity transactions to just one day. The move will leave the world of foreign exchange – where trades typically take two days to complete – out of step.

ExxonMobil takes legal hammer to climate shareholder groups; Oil supermajor’s case against Follow This and Arjuna Capital grabs attention of Corporate America
Patrick Temple-West, Myles McCormick and Attracta Mooney – Financial Times
ExxonMobil’s market capitalisation exceeds $400bn. Follow This, a Dutch climate activist group, controls shares in the oil supermajor that at last count were worth less than $4,000. Follow This has repeatedly tried to use its tiny holding as a lever to force Exxon to expand pledges to cut greenhouse gas emissions. This year the oil company has had enough.

How the humble dividend might rise again; Meta’s move to start the payouts could signal an upcoming switch in investor mindset
Katie Martin – Financial Times
Shareholders in Meta are about to start receiving a dividend for the first time. Most of them probably won’t notice. Investors will receive a piddling 50 cents per share each quarter, starting next month. Given the prevailing share price of the social media monster, this equates to an annual dividend yield of just 0.42 per cent. This sounds tiny. It is tiny. But this particular form of microdosing sent out a big signal, for the company and potentially for the wider market.

Why ETFs work better in illiquid markets; -ducks-
Robin Wigglesworth – Financial Times
A lot was happening in markets when Covid-19 shut down the world in March 2020. One of the most noted happenings was how the price of many fixed-income ETFs became unmoored from the value of the bonds they contained. It seemed like vindication for people like Carl Icahn and Michael Burry, who had warned that ETFs had become so big that they were dangerous – especially in less traded markets like bonds. Finally, the illusory liquidity of the ETFs had collided with the harsh reality of the illiquid assets they held!

China Replaces Top Markets Regulator as Xi Tries to End Rout; Banking veteran Wu to replace Yi Huiman as CSRC head; China stocks have slumped this year as economy struggles
Bloomberg News
China replaced the head of its securities regulator, a surprise move that may foreshadow more forceful measures by Xi Jinping’s government to end the rout in the country’s $8 trillion stock market. Wu Qing, a banking and regulation veteran who earned the reputation as “the broker butcher” when he led a crackdown on traders in the mid-2000s, is replacing Yi Huiman as chairman and party chief of the China Securities Regulatory Commission, according to the official Xinhua News Agency.

***** Here is The Wall Street Journal’s version of this story.~JJL

China stock trading surges after Beijing unveils more state-led buying; ‘National team’ support likely to be behind turnover in major indices hitting highest level since August, say analysts
Hudson Lockett and Cheng Leng – Financial Times
Trading activity in China’s largest listed companies has surged to a five-month high, reflecting what analysts said was a likely increase in buying by Beijing’s “national team” of state-run financial institutions. Daily turnover for stocks included in the CSI 300, CSI 500 and CSI 1000 indices – which together account for the majority of the Chinese stock market’s trading activity – rose to Rmb699bn ($98.3bn) on Wednesday, the highest level since August 28, according to Financial Times analysis of figures from Chinese data provider Wind.

A Stock Bailout Won’t Solve China’s Troubles; Chinese stocks have shot higher on expectations of a big state intervention. But even if that materializes, it isn’t much to celebrate
Jacky Wong – The Wall Street Journal
Beijing’s largess might help put a floor beneath China’s ailing stock market. A better foundation for a rally-and China’s future-would be rebuilding the nation’s crumbling housing market. Chinese stocks had their best day in years on Tuesday, after Beijing hinted that it will step up efforts to prop up the market. China’s CSI 300 index, which tracks the biggest stocks in Shanghai and Shenzhen, has gained 4.5% in the past two trading days. The CSI 1000 index, which tracks smaller stocks, has surged 12%.

Why One Shaky Bank Is Stirring Fears of a Wider Financial Mess; New York Community Bancorp’s plunging stock price highlights risks that loom over lenders large and small.
Rob Copeland – The New York Times
As the one-year anniversary approaches of a crisis that brought down several midsize banks, trouble at another lender is putting unwelcome attention on the industry again. Concerns now center on New York Community Bancorp, which operates roughly 400 branches nationwide under brands such as Flagstar Bank and Ohio Savings Bank. The bank ballooned in size over the past year, to more than $100 billion in assets, after taking over the fallen Signature Bank last spring in an auction organized by federal regulators.

Hedge Funds Trading Treasuries to Be Tagged Dealers by SEC
Lydia Beyoud – Bloomberg
Hedge funds and proprietary trading firms that regularly trade US Treasuries are set to be labeled as dealers by the Securities and Exchange Commission – a tag that brings greater compliance costs and scrutiny. The SEC on Tuesday boosted oversight of trading by the firms, which are increasingly responsible for liquidity in the world’s biggest government bond market. The new regulations also apply to market participants in other government bonds, equities and additional securities.

SEC moves to tighten oversight of $26tn Treasury market; US regulator passes rule that will force some high-speed traders and hedge funds to register as dealers
Kate Duguid, Stefania Palma and Costas Mourselas – Financial Times
US regulators are bringing high-speed traders and some hedge funds under direct supervision in the $26tn Treasury bond market, enacting a rule meant to bolster its stability following a series of crises. The Securities and Exchange Commission in Washington voted three-to-two in favour of the rule on Tuesday, which will force high-speed traders and some hedge funds in the market to register with the agency as dealers.

SEC’S Rules On The Definition Of A Dealer Will Help Protect Investors From The Risks That High-frequency Trading Firms Pose
Today, the U.S. Securities and Exchange Commission (SEC) adopted final rules to ensure that market participants that perform dealer functions are required to register as a dealer. Director of Securities Policy Benjamin Schiffrin released the following statement: “High-frequency trading firms using lightning-fast computer technology have begun to dominate our markets. High-frequency trading is responsible for about 50% of U.S. equity trading by volume, and about 50% of trading by volume in the U.S. Treasury market. These firms often trade opposite retail investor orders, but their trading patterns aren’t always fair to investors and they can be primary contributors to huge market price swings and even crashes.

SEC tags hedge funds trading Treasuries as ‘dealers’ under new rule change; New rules would require certain hedge funds active in the Treasuries market to register as dealers as the US regulator looks to reform the $26 trillion market.
Claudia Preece – The Trade
The Securities and Exchange Commission (SEC) has adopted two rules related to changes to the definitions of ‘dealer’ and ‘government securities dealer’, with the final rule set to inflict more scrutiny and compliance burdens on hedge funds. The final rule is set to require certain hedge funds, among other market participants, to register if they meet one of two qualitative standards.

UBS Can Be the Next Morgan Stanley, but a Lot of Things Have to Go Right; Swiss bank needs to juggle the integration of Credit Suisse with strong growth in wealth management
Jon Sindreu – The Wall Street Journal
Could UBS come to look -and be valued- like Morgan Stanley? Yes, but the aftermath of a megadeal isn’t the ideal time to get a celebrity makeover. The Swiss bank’s annual accounts, published Tuesday, show the challenges inherent in its deal last year to acquire Credit Suisse. UBS’s assets increased by 56% in 2023 compared with 2022, but its revenues were only 18% higher. A net loss of $279 million for the final quarter mostly reflected a $1.8 billion expense from the continuing integration of its unprofitable former rival.

EU Agreement on ESG Ratings Seen as World’s Toughest
Frances Schwartzkopff – Bloomberg
A provisional agreement in the European Union setting guardrails around the ESG ratings industry is being hailed as the world’s toughest. The plan goes “much further than any of the other regimes we have seen internationally,” Raza Naeem, financial regulation partner at Linklaters, said in a statement on Tuesday. Naeem pointed to the “very broad scope” of the proposed rules, “which could capture ESG products that don’t fall within the traditional notion of ESG ratings,” as well as a plan to have ratings providers that are covered by the proposal to “hive off and segregate certain conflicting business activities.”

*****More on this story from The Banker, Investments&Pensions Europe and Responsible Investor.

Yellen Says Commercial Property Is a Worry, But Regulators Are on It; Treasury secretary comments on sector at House hearing; Says likely ‘manageable’ though some firms may be stressed
Christopher Condon and Viktoria Dendrinou – Bloomberg
Treasury Secretary Janet Yellen said that while losses in commercial real estate are a worry, US regulators are working to ensure that loan-loss reserves and liquidity levels in the financial system are adequate to cope. A combination of factors “is going to put a lot of stress on the owners of these properties,” Yellen told lawmakers Tuesday in the first of two days of congressional testimony this week. She cited the increase in interest rates, higher vacancy rates thanks to shifting work patterns triggered by the pandemic and a wave of commercial real estate loans coming due this year.

Real Estate Is a Manageable Risk for Canadian Banks, Regulator Says
Christine Dobby – Bloomberg
Commercial real estate loan losses remain a manageable risk for Canada’s biggest banks even in the wake of last week’s turmoil at New York Community Bancorp, according to the head of the country’s bank regulator. “My spidey sense, my intuition, is that we’ll come through this commercial real estate, office commercial real estate problem pretty well,” Peter Routledge said of the Canadian banking sector during a briefing with reporters Tuesday in Toronto. “Not without loss, just everything’s relative and I think relatively, we’ll be OK on that.”

The federal government wants to know how much electricity crypto uses. Crypto firms aren’t happy.
Henry Epp – Marketplace
Bitcoin and some other cryptocurrencies depend on a lot of high-powered computers doing high level math. That’s known as “crypto mining,” and it consumes as much as 2% of all electricity in the U.S., according to the Energy Information Administration. Starting this week, that federal agency will start collecting information from cryptocurrency mining companies about where and how that power is being used, but the crypto industry isn’t thrilled about giving that information up.

*****Here is the story reported by Inside Climate News. Read the announcement from the EIA.

Ukraine Invasion

Ukraine’s Zelenskiy orders creation of separate military force for drones
President Volodymyr Zelenskiy on Tuesday ordered the creation of a separate branch of Ukraine’s armed forces devoted to drones, weapons he and military officials say are crucial to fighting the war against Russia. Zelenskiy signed a decree calling on the government and general staff of the armed forces to “work out issues on the creation within the Ukrainian armed forces of a separate force for drone systems”.

The Odyssey of the Queen Majeda; The capture of a Libyan tanker in Albanian waters opened a window on a $5 billion trade in smuggled fuel – much of it coming from Russia.
K. Oanh Ha – Bloomberg
On a clear morning in September 2022, the Queen Majeda, a faded blue and white tanker loaded with marine gas oil worth more than $2 million, left the Libyan port of Benghazi and set off for Porto Romano in Albania, 600 nautical miles to the north. Zuhair Alkuafi, the 55-year-old Libyan captain, treated the trip like previous ones he had made: He had a signed certificate showing that the fuel originated in Libya from Brega Petroleum Marketing Co., an arm of the country’s state-owned National Oil Corp.

G-7 Aiming to Force Russian Oil Away From Shadow Fleet, UK Government Official Says; Sanctions official says west wants to push trade back to G-7; Price cap led to large fleet of ships run by mystery firms
Alex Longley – Bloomberg
A UK official said that Group of Seven nations are aiming to curb Russia’s ability to use a vast shadow fleet of tankers to deliver its oil, the latest sign of a ramp up in western sanctions on Moscow. Russia, with the help of mystery traders and shipping companies, assembled a hundreds-strong fleet of tankers to ship its oil following the establishment of a price cap by the Group of Seven nations and its allies. That enabled Moscow to transport oil without using western services like ships, insurance and finance – which was the norm until the war in Ukraine.

Ukraine Rations Munitions as Cut to U.S. Aid Looms, Russia Inches Forward; With no new provisions of U.S. military aid in the pipeline, Kyiv’s forces are low on ammunition while Moscow’s forces are ‘taking bites’
James Marson and Daniel Michaels – The Wall Street Journal
KYIV, Ukraine-After a hard day of fighting last month, Ukrainian troops lost a couple of ditches near the northeastern city of Kupyansk. By the following morning, the Russians had dug a mile-long trench and were firmly established. A Ukrainian sniper listening in on a Russian radio channel heard how. The Russians had deployed a special trench-digging team typically made up of drunks and other ne’er-do-wells. When one refused to dig, one Russian officer reported, the laggard was swiftly dealt with: “We eliminated him.”

Israel/Palestine Conflict

Israeli wineries near Lebanon fear ruined crop as war looms
Ilan Ben Zion – AFP
Black clouds loom over grapevines in northern Israel on hills that stretch to the Lebanese border, where months of violence have raised fears of a wider war. The tense border area — where the Israeli army has traded deadly fire with the Hezbollah militant group for months — can be seen from atop the Dalton Winery’s fermentation vats.

If the US Hits Iran Harder, Be Ready for Blowback; The assassination of Qassem Soleimani in 2020 showed that Tehran can be cowed but also that it will seek revenge eventually.
Hal Brands – Bloomberg
If the Pentagon hits Iran hard, will Iran back down or fight back? That’s a critical question as Washington wages its latest Middle Eastern war, in response to attacks by Tehran’s legion of lethal proxies. The answer can be informed by revisiting what happened four years ago, when the US – following another spate of Tehran-backed attacks – escalated matters dramatically by killing Qassem Soleimani, the notorious commander of Iran’s Quds Force.

Hamas proposes lengthy ceasefire as part of Israel hostage deal; Militant group’s demands are likely to face strong resistance inside Israel
Neri Zilber, Raya Jalabi and Andrew England – Financial Times
Hamas is demanding a four-and-a-half month ceasefire in Gaza, an Israeli military withdrawal from the territory and the release of at least 1,500 Palestinians prisoners as part of a proposed three-phase deal to secure the release of all the remaining hostages held by the militant group.

Exchanges, OTC and Clearing

Nodal Exchange achieves daily record in power and January records in natural gas and environmental markets
Nodal Exchange
Nodal Exchange announced new trading records in power, natural gas, and environmental markets. Nodal Exchange achieved a record day of power trading on Tuesday, February 6th with 76.7 million MWh traded in one day which is equivalent to the electricity that over 7.3 million homes would consume in a year in the USA. This surpasses the previous record trading day of 56.2 million MWh on February 9th, 2021. Nodal also almost surpassed last January’s record calendar month traded volume of 270.8 million MWh with 268.2 million MWh. Nodal continues to be the North American power market leader ending January at 1,286 million MWh of futures open interest, a 55% market share.

Eurex to launch first Total Return Futures on MSCI indexes
Eurex is expanding its Total Return Futures (TRF) segment; Launch of first TRFs covering MSCI indexes planned for 11 March; New contracts will be denominated in USD and initially available during US trading hours. Eurex is extending its Total Return Futures (TRF) segment through a cooperation with MSCI, a leading provider of essential decision tools and services to the global investment community. Scheduled for 11 March 2024, the derivatives arm of Deutsche Börse Group plans to launch TRF contracts on three MSCI indexes: MSCI World Index, MSCI EAFE Index, and MSCI Emerging Markets Index.

CME Group to Launch U.S. Corporate Bond Index Futures in Summer 2024
CME Group
CME Group, the world’s leading derivatives marketplace, today announced that its interest rate complex will expand in summer 2024 with the launch of U.S. Corporate Bond Index futures, pending regulatory review. The new futures contracts will be based on the Bloomberg U.S. Corporate Index, which measures the performance of investment grade corporate bonds, and the Bloomberg U.S. High Yield Very Liquid Index, which is designed to measure a liquid, diversified component of the high yield corporate bond market.

Issuance of announcement of the European Commission
PPC SA (“PPC”) announces that the European Commission Directorate-General Competition (“the Commission”) has today sent a Statement of Objections to PPC concerning an alleged breach of EU competition rules. The case commenced with the Commission’s inspection at PPC’s premises in February 2017, and proceedings were formally opened in March 2021. PPC has cooperated with the Commission throughout the entire case. The Commission’s allegations relate to a period from July 2013 to 31 December 2019.

TMX Group Consolidated Trading Statistics – January 2024
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange, Alpha-X & Alpha DRK and Montreal Exchange. TMX Group Limited today announced January 2023 trading statistics for its marketplaces – Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange (Alpha), including Alpha-X and Alpha DRK, and Montreal Exchange.

Moscow Exchange launches futures trading on new currency pairs
On February 13, 2024, trading in settlement futures contracts for the currency pairs “Belarusian ruble – Russian ruble” and “US dollar – Kazakh tenge” will begin on the Moscow Exchange derivatives market. Market participants and their clients will have access to contracts expiring in March, June, September and December 2024, with dates updated quarterly. Calculations are made in Russian rubles.


Big tech will either be fine or probably mostly fine, says Goldman; ‘Say the line, David!’
Bryce Elder – Financial Times
Let’s say Widget Corp shares are being valued at 10 times annual widgets. If in the future demand for widgets goes up then so might the shares, because more widgets times 10 is a bigger number. But if demand for widgets goes down then so might the shares because it’ll be 10 times fewer widgets. This is the kind of insight you can receive as a client of Goldman Sachs.

HSBC’s New ‘Wise Killer’ App Vies for FX Customers; Zing aims to match what low-fee fintech competitors offer, but with the backing of an established bank. That might not be enough to lure customers back.
Harry Wilson and Aisha S Gani – Bloomberg
In the early 2010s, a pack of financial technology startups hit the market with an offer that many consumers found hard to refuse: international money transfers for a fraction of what banks charge. For decades, banks had used their grip on international transactions to impose fees as high as 3% to 4% for sending cash abroad. The newcomers-Wise, Revolut, WorldRemit-did the same thing for practically nothing, instead making money from the sheer volume of transfers.

AI’s bioterrorism potential should not be ruled out; Risk evaluation of the technology cannot be left to the industry alone
Anjana Ahuja – Financial Times
Move along, not much to see here. That seemed to be the message from OpenAI last week, about an experiment to see whether its advanced AI chatbot GPT-4 could help science-savvy individuals make and release a biological weapon. The chatbot “provided at most a mild uplift” to those efforts, OpenAI announced, though it added that more work on the subject was urgently needed. Headlines reprised the comforting conclusion that the large language model was not a terrorist’s cookbook.

AI boom drives demand for server-cooling technology; Taiwan’s Liteon bets on liquid solutions for hot, power-hungry chips
Lauly Li and Cheng Ting-Fang – Nikkei via Financial Times
The market for artificial intelligence is not the only thing heating up. So, too, are the chips and servers that power the cutting-edge technology, driving demand for more efficient cooling solutions. Taiwan’s Liteon Technology is one of several component makers stepping up efforts to develop liquid cooling solutions for AI data centres as energy consumption emerges as one of the most pressing bottlenecks to boosting computing performance.

World’s biggest AI tech companies push UK over safety tests; OpenAI and DeepMind want Britain’s new AI safety institute to speed up evaluations of latest models
Cristina Criddle, Anna Gross and Madhumita Murgia – Financial Times
The world’s biggest artificial intelligence companies are pushing the UK government to speed up its safety tests for AI systems, as Britain seeks to establish a leading role in regulating the fast-developing technology. OpenAI, Google DeepMind, Microsoft and Meta are among the tech groups that signed voluntary commitments in November to open up their latest generative AI models for review by Britain’s new AI Safety Institute. At the time, the companies pledged they would adjust their models if the institute found flaws in the technology.


The far right is scaring away Washington’s private hacker army; Scrutiny from conservative activists and management gripes are straining the government’s plan to enlist elite security pros in the fight against malicious hackers.
John Sakellaridis – Politico
Some of the country’s top cybersecurity experts who’ve been helping protect critical networks say they’re quietly retreating from a highly touted government partnership, citing frustrations with its management and pressure from conservative critics. The Cybersecurity and Infrastructure Security Agency launched the initiative – known as the Joint Cyber Defense Collaborative – in 2021 to enlist outside tech pros in the fight against cybercrime gangs and state-backed hacking outfits following a series of high-profile breaches.

ChatGPT Might Not Be As Secure As You Think It Is; Using the AI chatbot comes with certain security risks-here’s how to mitigate them.
Brendan Hesse –
Recent headlines have shown ChatGPT’s privacy and security measures are… well, pretty bad. The issues began when ChatGPT user Chase Whiteside noticed unrecognized logs in his chat history. The initial theory was that these chat entries belonged to other users that ChatGPT somehow posted to the incorrect account, raising concerns that chat logs or other personal information could be leaked due to the ostensible bug. However, OpenAI, the company behind ChatGPT, investigated the issue and discovered someone else had broken into Whiteside’s account, meaning the unexpected logs were from the hacker using ChatGPT with Whiteside’s username and were not the result of a bug leaking other people’s chat histories.

Dutch Intelligence Blames Chinese State for Cyber Espionage in the Netherlands
April Roach – Bloomberg
The Dutch intelligence agency said it uncovered a Chinese-state-backed attempt to use malware to spy on a computer network that’s used by the country’s armed forces. “Sophisticated” Chinese malware was found on a standalone computer that was used for unclassified research and development, the Dutch Military Intelligence and Security Service said in a statement on Tuesday. The system was self-contained and the malware didn’t result in damage to the defense network, the agency said.

Lurie Children’s Hospital systems outages continue amid reported cyberattacks; All phone, email and electronic systems were taken offline as part of the hospital’s cyberattack protocols, though it was still taking new patients and keeping appointments.
Violet Miller – Chicago Sun-Times
A purported cybersecurity attack has kept systems down at Ann and Robert H. Lurie Children’s Hospital of Chicago for a sixth day, the hospital said. All phone, email and electronic systems were taken offline as part of the hospital’s cyberattack protocols, though it was still taking new patients and previously scheduled appointments were being kept, a Monday evening statement from the hospital said. However, the hospital had no answers for when systems might be back up.


Did Craig Wright invent Bitcoin? This court is deciding; The Australian has been accused of forging documents to support his case.
Amanda Yeo – Mashable
A UK court could finally decide whether Australian computer scientist Craig Wright is the real name of Satoshi Nakamoto – the anonymous inventor of Bitcoin. The Crypto Open Patent Alliance (COPA) filed the case in the UK’s High Court of Justice in April 2021, with the first day of oral arguments taking place this Monday. A non-profit organisation of cryptocurrency advocates, COPA aims to protect the technology against patents while encouraging its adoption and growth.

Self-proclaimed bitcoin inventor denies forging documents to support claim
Sam Tobin – Reuters
An Australian computer scientist who says he invented bitcoin told a London court on Tuesday he had never forged documents to try to prove his hotly-disputed claim, as he began his evidence in a legal battle over ownership of the cryptocurrency. Craig Wright says he is the author of a 2008 white paper, the foundational text of bitcoin, published in the name “Satoshi Nakamoto”.

MicroStrategy’s Bitcoin Bet on Verge of Accounting Windfall for Investors
Olga Kharif and Tom Contiliano – Bloomberg
MicroStrategy Inc. may be at an inflection point when it comes to Michael Saylor’s controversial decision almost four years ago to bet the enterprise-software maker’s future on Bitcoin.

Associate of cryptocurrency fugitive Do Kwon extradited to South Korea; Former Terraform CFO under investigation for alleged fraud, Justice Ministry says
Kim Jaewon – Nikkei
A close associate of the cryptocurrency fugitive Do Kwon was extradited to South Korea on Tuesday, the government said, as authorities continue to pursue the founder of startup Terraform Labs in connection to the collapse of the Luna and TerraUSD stablecoins. Han Chang-joon, Terraform’s chief financial officer, arrived at Incheon International Airport in the afternoon, with his head covered by the hood of a black jacket and his face also obscured by a mask, local media images showed. The Justice Ministry said prosecutors will investigate Han as the 37-year-old was arrested on charges including alleged fraud and market manipulation over the Luna and TerraUSD crash.

Crypto Custody Software Provider Fireblocks Eliminates Jobs; The company shed less than 3% of staff amid a restructuring; Fireblocks is one of the crypto’s most well-funded startups
Muyao Shen and Hannah Miller – Bloomberg
Crypto custody platform provider Fireblocks Inc. reduced its headcount Tuesday following a restructuring, as layoffs continue to rock the tech industry, which has seen 32,000 people lose their jobs this year. “In the last six months, Fireblocks has been working to restructure our go-to-market and customer support operations in an effort to provide our customers with a more efficient and streamlined service, and to position the company for expansion into new geographies,” the company said in a statement to Bloomberg. “Less than 3% of our teams have been impacted by the restructuring, and all those impacted have been granted severance packages.”

UBS launches Hong Kong’s first-ever tokenised warrant on the Ethereum network; New product will utilise the on-chain issuance product framework offered by UBS’ in-house tokensiation service, UBS Tokenize.
Wesley Bray – The Trade

Cryptoverse: DeFi dream is still alive
Medha Singh and Lisa Pauline Mattackal – Reuters


The GOP’s True Priority; The Republicans who won’t take yes for an answer
David Frum – The Atlantic
Sometimes, a negotiation produces a deal. Sometimes, a negotiation reveals the truth. Negotiators in the Senate have produced a draft agreement on immigration and asylum. The deal delivers on Republican priorities. It includes changes to federal law to discourage asylum seeking. It shuts down asylum processing altogether if too many people arrive at once. Those and other changes send a clear message to would-be immigrants: You’re going to find it a lot harder to enter the United States without authorization. Rethink your plans.

Big Business Faces a No-Win Election in 2024; Donald Trump may pose the greatest threat to global capitalism, but Joe Biden Part Deux also bodes ill for the future of free trade and free enterprise.
Adrian Wooldridge – Bloomberg
Karl Marx’s biggest mistake was to overestimate the power and cunning of the capitalist class. Marx posited that the state is nothing more than the executive committee of the ruling class – and that politicians are mere playthings of capitalist forces. Whoever the deluded masses vote for, be it liberal Tweedledee or conservative Tweedledum, they end up with an agent of global capital.

Biden Classified Documents Probe Closed With No Charges Filed
Chris Strohm – Bloomberg
The US Justice Department won’t file charges against President Joe Biden over his handling of classified documents found in his private home and office, but an investigative report will be critical of his actions, a person familiar with the matter said Tuesday. Special Counsel Robert Hur, who was appointed last year by Attorney General Merrick Garland to lead the Biden documents probe, has wrapped up the investigation, according to the person, who asked not to be identified disclosing non-public information. Findings in the investigation report could be released this week, the person said.

Biggest Gas Producer Slams Biden’s LNG Freeze as Political Stunt
Ari Natter – Bloomberg
The chief executive officer of the country’s largest producer of natural gas dismissed the Biden administration’s move to freeze new liquefied natural gas exports as a political stunt, telling House lawmakers during a hearing Tuesday that the decision was designed to secure support at the ballot box.

UK lawmakers say BoE’s bond sales lack value-for-money thinking
Britain’s finance ministry and the Bank of England should take the interests of taxpayers more into account in decisions around the sale of government bonds from the central bank’s massive balance sheet, lawmakers said on Wednesday. The BoE bought some 875 billion pounds ($1.10 trillion) of gilts over more than a decade after the 2008-09 financial crisis, using freshly created reserves to stimulate Britain’s economy, a process known as quantitative easing (QE).

Inside Turkish Central Banker Downfall That Was Months in Making; Erkan’s shock departure follows rift with finance chief Simsek; Governor said she quit to protect family after smear campaign
Beril Akman and Kerim Karakaya – Bloomberg

Argentina’s Milei Says Dollarization Isn’t a ‘Short-Term’ Goal
Manuela Tobias – Bloomberg


Taiwan set to allow active ETFs into booming retail market; Exchanged traded fund assets under management soared more than 60% last year
Sinyi Au – Financial Times
Taiwan’s Financial Supervisory Commission is planning to finalise proposals to allow active exchange traded funds this year. Chang Chen-shan, director general of the Securities and Futures Bureau, said the FSC was aiming to finalise the proposal to allow active ETFs by June, but did not expect a decision before then.

Shein seeks Chinese regulators’ tacit approval for US public offering; Online fast-fashion retailer in delicate dance with Beijing despite severing Chinese roots
Eleanor Olcott and Cheng Leng, Ryan McMorrow and Sun Yu – Financial Times
Online fast-fashion giant Shein, which has gone to great lengths to separate itself from its Chinese roots, has now found itself having to return to Beijing to seek authorities’ tacit approval for its blockbuster overseas initial public offering plan. In recent weeks senior executives of the company, valued at more than $60bn in its most recent private fundraising, have been holding discussions with regulators in the Chinese capital to get their blessing for an imminent listing in New York, according to multiple people briefed on the talks.

NFA orders New York, N.Y. futures commission merchant Lime Trading Corp. to pay a $100,000 fine
NFA has ordered Lime Trading Corp. (Lime Trading) to pay a $100,000 fine. Lime Trading is a futures commission merchant Member of NFA located in New York, N.Y. The Decision, issued by NFA’s Business Conduct Committee (BCC), is based on a Complaint issued by the BCC and a settlement offer submitted by Lime Trading, in which the firm neither admitted nor denied the allegations of the Complaint. The Complaint charged Lime Trading with failing to file various required financial reports and notifications timely with NFA, in apparent violation of NFA Financial Requirements Sections 1(e) and 16(e). The Complaint also charged Lime Trading with a failure to supervise, in apparent violation of NFA Compliance Rule 2-9(a).

SEC Charges China-Based Tech Company Cloopen Group with Accounting Fraud; Commission declines to impose civil penalties because of company’s self-reporting, cooperation and remediation
The Securities and Exchange Commission today announced settled accounting fraud charges against Cloopen Group Holding Limited, a China-based provider of cloud communications products and services whose American depositary shares formerly traded on the New York Stock Exchange. The SEC determined not to impose civil penalties against Cloopen because the company self-reported its accounting issues, cooperated extensively with the staff’s investigation, and undertook prompt remedial measures.

SEC Adopts Rules to Include Certain Significant Market Participants as “Dealers” or “Government Securities Dealers”
The Securities and Exchange Commission today adopted two rules that require market participants who engage in certain dealer roles, in particular those who take on significant liquidity-providing roles in the markets, to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations.

Statement on Final Rules Regarding the Further Definition of a Dealer-Trader
Chair Gary Gensler – SEC
Today, the Commission is considering whether to adopt final rules further defining a dealer and government securities dealer. I am pleased to support this adoption because it requires that firms that act like dealers register with the Commission as dealers, thereby protecting investors as well as promoting market integrity, resiliency, and transparency. The registration, oversight, and regulatory regime for dealers is a cornerstone of the federal securities laws. It was amongst the first authorities that Congress gave the SEC as part of the Securities Exchange Act of 1934.

Modernizing Dealer Oversight
Commissioner Jaime Lizarraga – SEC
While markets and financial regulators will always face the uncertainty of unanticipated shocks, strengthened market resiliency can help reduce the harmful impact from these shocks. It can provide greater protection – and confidence – to investors, capital markets, and the financial system. Today, the Commission takes important steps to strengthen market resiliency by leveling the competitive playing field between and among market participants that act as dealers but have not registered as dealers.

Statement on Further Definition of “As a Part of a Regular Business” in the Definition of Dealer
Commissioner Mark T. Uyeda – SEC
Thank you, Chair Gensler. Thank you to the staff for your presentation. Today’s action is problematic. The Commission’s effort to classify nearly any person who buys and sells securities as a “dealer” under the Securities Exchange Act of 1934 (the Exchange Act) extends beyond its statutory authority. The lack of any limiting principle creates the potential for arbitrary and capricious government action. Further, today’s action may reduce liquidity in the Treasury markets, make them more volatile, reduce the number of liquidity providers, and increase debt costs to taxpayers.

Statement on Adopting Changes to the Definition of Dealer and Government Securities Dealer
Commissioner Caroline A. Crenshaw – SEC
The Securities Exchange Act of 1934 (“Exchange Act”) provides the SEC with broad authority over the securities industry, including the power to register, regulate, and oversee participants in the securities markets.[1] The dealer regulatory regime is a key component of the U.S. Federal securities laws, and dealers perform important market functions such as absorbing order imbalances (i.e., when a market receives more buy orders than sell orders at one point in time, or vice versa) and providing liquidity to buyers and sellers in the market. Under the Exchange Act, the SEC has the authority to define the terms used in the statutory definition of “dealer” and oversee and regulate registered dealers.[2] The Exchange Act defines a dealer as any person engaged in the business of buying or selling securities for their own account.[3] Dealers help facilitate investor trading because dealers are willing to trade for their own account as principals when investors cannot immediately find other investors with whom to trade.[4] In this way, dealers provide the service of immediate trading.[5] The Commission has long identified the provision of liquidity , including acting as a “market maker” or “a de facto market maker,” as a factor that indicates “dealer” status.[6]

Dealer, No Dealer?[1] : Statement on Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer in Connection with Certain Liquidity Providers
Commissioner Hester M. Peirce – SEC
Thank you, Mr. Chair. I cannot support the final rule. Even though streamlined substantially,[2] it perpetuates the proposal’s fundamental flaw. The rule defines dealer in a way that is inconsistent with the statutory framework within which it sits and will distort market behavior and degrade market quality.

SEC Obtains Final Judgment Against Defendant for Role in Bribery Scheme
On February 5, 2024, the Securities and Exchange Commission obtained a final judgment against defendant Jeffrey Auerbach, whom the SEC previously charged for his role in a fraudulent scheme to bribe a stockbroker to buy a company’s stock in his customers’ accounts without the customers’ knowledge.

ASIC announces action against nine SMSF auditors
In the quarter ending 31 December 2023, ASIC took action against nine self-managed superannuation fund (SMSF) auditors where we formed the view that conduct did not meet the required standards. This included concerns about compliance with auditing and assurance standards, independence requirements, registration conditions, or for not being a fit and proper person to remain an SMSF auditor.

ESMA is seeking new members for its Securities Markets Stakeholder Group

Oral reply to Parliamentary Question on high levels of individual bankruptcy applications and increased corporate insolvencies
Mr Yip Hon Weng, MP, Yio Chu Kang SMC – Monetary Authority of Singapore
Question: To ask the Prime Minister (a) in view of individual bankruptcy applications at an 18-year high and increased corporate insolvencies in 2023, whether this is a cause for concern to the Government; (b) whether the rise in insolvency is primarily due to struggles to service existing debts, or is it also driven by a higher risk appetite for new ventures; and (c) whether the Government is planning more services to address this issue, such as expanded debt counselling services or financial literacy programmes.

SFC welcomes appointment of Executive Director
Securities and Futures Commission
The Securities and Futures Commission (SFC) welcomes the appointment by the Financial Secretary of Dr Eric Yip as Executive Director of Intermediaries for a term of three years effective from 2 May 2024 (Note 1). The SFC’s Chief Executive Officer, Ms Julia Leung, said: “Dr Yip brings to the SFC a wealth of market experience in equities, banking and private funds, having held senior roles at leading financial intermediaries in Hong Kong.”

Investing and Trading

Oil Traders Are Piling Into a Market That’s Not Going Anywhere; About 660 million barrels of oil derivatives added this year; Crude benchmarks remain trapped in a tight $10 a barrel band
Alex Longley, Devika Krishna Kumar, and Yongchang Chin – Bloomberg
Oil derivatives are booming, belying the lackluster price moves in a market that’s largely shrugged off a tumultuous start to a year fraught with geopolitical risks. Open interest across the main oil futures contracts – the total volume of futures and options held by oil traders – climbed to the highest since March 2022, according to data compiled by Bloomberg. So far this year, the equivalent of about 660 million barrels of oil derivatives have been added, despite crude prices being firmly stuck in a $10-a-barrel trading band.

Ex-Goldman Partner’s Pretium Nears $1 Billion for Bets on Single-Family Rentals; Firm is using capital to buy rental homes from builders; Don Mullen’s company is also making loans to smaller builders
Patrick Clark – Bloomberg
Pretium, led by former Goldman Sachs Group Inc. partner Don Mullen, has raised nearly $1 billion for a new fund to acquire rental homes from builders. The firm has been gathering capital and expects to exceed its target when the fund closes later this year, according to people familiar with the matter who asked not to be identified citing private information.

Treasuries Brace for Biggest-Ever 10-Year Auction to Test Demand; Strong demand for three-year notes despite pre-auction rally; Wednesday’s $42 billion 10-year note to set high-water mark
Michael Mackenzie and Elizabeth Stanton – Bloomberg
Bond investors, still reeling from Treasuries’ worst two days in more than a year, are preparing for a new test on Wednesday when the government holds its biggest-ever sale of 10-year debt. Treasuries traded slightly lower as of 11 a.m. in London, holding onto a moderate bounceback from a rout that began Friday and saw yields rise to their highest this year. A busy slate of auctions this week could reignite the selloff but a warm reception on Tuesday for the first of this week’s three Treasury note and bond sales has brightened the outlook. The 10-year sale is at 1 p.m. in New York.

Sovereign Debt Ratings Keep Proving Worthless; When it comes to government bonds, the performance of Greek debt shows it pays to ignore S&P, Moody’s and Fitch.
Matthew A. Winkler – Bloomberg
If ever there was an investment belying the prevailing assumption of high-risk it would be Hellenic Republic debt, which over the past five years delivered a return of 14%, the highest among sovereign borrowers with investment-grade credit ratings. What’s unusual about that is Greece was only belatedly upgraded by S&P Global Ratings in October to BBB-, or the lowest rung of what is considered high grade. The takeaway is that no country better demonstrates the futility of using traditional ratings of creditworthiness as anything but a contrary indicator than Greece. Fitch Ratings similarly elevated the nation in December from a high-yield, high-risk status. Moody’s Investors Service for some reason still considers its finances junk.

Environmental, Social and Corporate Governance

Environmental, social and governance (ESG) ratings: Council and Parliament reach agreement
European Council, Council of the European Union
The Council and European Parliament today reached a provisional agreement on a proposal for a regulation on environmental, social and governance (ESG) rating activities, which aims to boost investor confidence in sustainable products. ESG ratings provide an opinion on a company’s or a financial instrument’s sustainability profile, by assessing its exposure to sustainability risks and its impact on society and the environment. ESG ratings have an increasingly important impact on the operation of capital markets and on investor trust in sustainable products. The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers and preventing potential conflicts of interests.

EU recommends ambitious 2040 climate target, goes light on farming
Kate Abnett – Reuters
The European Commission recommended on Tuesday that the EU slash net greenhouse gas emissions by 90% by 2040, an ambitious target that will test political appetite for the region’s fight against climate change ahead of EU elections. Europe’s climate agenda is entering a difficult phase as it begins to touch sensitive sectors, such as farming, and as traditional industries face fierce green tech competition from China.

*****This story from Bloomberg and edie.

Brazil Mogul Wants to Sell the World’s Best ESG Chocolate; Dengo is investing $20 million to expand its sustainable sweets in Europe and North America.
Rachel Gamarski – Bloomberg
Most people would look at the paradisiacal coast of Bahia in northeastern Brazil and think of beachy holidays and the place where F1 star driver Lewis Hamilton chose to celebrate New Year’s Eve 2023. But one enterprising businessman looks at it and sees the opportunity to produce a game-changing chocolate.

Companies test out different ways to talk about ESG without saying ‘ESG’
Ben Werschkul – Yahoo!Finance
Midway through another earnings season, the free-fall in C-suite mentions of the movement for environment, social, and governance (ESG) strategies is on pace to plumb new depths. There have been just nine direct mentions among S&P 500 companies of the politically controversial term amid the sea of hundreds of earnings calls in recent weeks, according to data from financial data company FactSet through Friday afternoon.

China’s Clean Technology Is Made of Dirty Metals; No other country is installing renewable power at the same speed, but blistering electricity demand makes it very hard for renewables to keep pace.
David Fickling – Bloomberg
Two months ago, the world’s governments signed on to an ambitious program for decarbonization. The capacity of renewable power worldwide would triple by 2030, while energy efficiency would improve at double existing rates, delegates to the COP28 climate meeting in Dubai agreed. Right now, those two objectives are pushing in opposite directions.

Ads from BMW, MG and Transport for London banned by UK watchdog over green claims; ASA says details about electric vehicles and capital’s Ulez pollution zone need to be more specific
Philip Georgiadis and Peter Campbell – Financial Times

US strengthens national soot standards, industry objects
Valerie Volcovici – Reuters

What is ESG investing?
Joanne Cleaver, Paul Curcio and David Tony – CNN Underscored

Record rainfall, triple-digit winds, hundreds of mudslides. Here’s California’s storm by the numbers
Associated Press

Zoom Cuts DEI-Focused Team as Corporate America Retreats on Diversity Initiatives; Company will instead work with external consultants in future; Move comes as backlash against corporate DEI intensifies
Brody Ford and Jeff Green – Bloomberg

These Yoga Instructors Are Pressing Lululemon to Clean Up Its Supply Chain
Devin Leonard and Olivia Rockeman – Bloomberg


UBS resumes buybacks, seeks more cost savings from Credit Suisse takeover
Noele Illien – Reuters
UBS said on Tuesday it would restart share buybacks and find $3 billion more in cost savings from integrating Credit Suisse, as the bank signalled a tougher next phase for absorbing its rival after underwhelming fourth-quarter results. Shares in the bank dropped as much as 4%, with analysts pointing to slightly lower-than-expected profitability targets as revenue at the lender falls before the cost savings are achieved.

New York Community Bancorp is sued by shareholders as stock sinks to 1997 level
Jonathan Stempel – Reuters
New York Community Bancorp (NYCB.N) was sued on Tuesday by shareholders after the embattled lender posted unexpected commercial real estate loan losses and slashed its dividend, causing its stock price to sink to a nearly 27-year low. In a proposed class action filed in Brooklyn federal court, shareholders said the regional bank defrauded them by failing to disclose it would set aside more money for credit losses, and cut its dividend 71% to shore up its balance sheet.

NYCB’s Credit Grade Is Cut to Junk by Moody’s; Moody’s cuts regional bank two notches, says it may go further; It cites governance, other risks at commercial property lender
Allison Nicole Smith – Bloomberg
New York Community Bancorp’s credit grade was cut to junk by Moody’s Investors Service less than a week after the regional lender alarmed shareholders by slashing payouts and stockpiling reserves to cover troubled loans tied to commercial real estate. The bank is facing “multifaceted” financial risks and governance challenges, Moody’s wrote in a report Tuesday, lowering the company’s long-term issuer rating two notches below investment grade to Ba2. The ratings firm said it could go further if conditions deteriorate.

Europe’s Top-Performing Bank Has About 50% More Upside, UBS Says
Macarena Munoz Montijano – Bloomberg
This year’s top-performing European bank is primed for further gains of almost 50% over the next 12 months, according to UBS Group AG analysts. UniCredit SpA has rallied 18% in 2024 to date, building on last year’s 85% advance. That’s taken its market value to nearly EUR50 billion ($54 billion) – close on the heels of Intesa Sanpaolo SpA, Italy’s largest bank.

JPMorgan Plans to Open More Than 500 Chase Branches, Hire 3,500
Steve Dickson – Bloomberg
JPMorgan Chase & Co. plans to open more than 500 new branches and hire 3,500 workers over the next three years, expanding into additional markets that include low-income and rural communities as well as locations aimed at the rich. The company said it’s making a multibillion-dollar commitment with the expansion. About 1,700 locations will be renovated as part of the investment, bringing the total number upgraded since 2021 to 3,000, the New York-based bank said in a statement Tuesday.

Prudential Profit Misses on Asset Management, International Drop
Matthew Griffin – Bloomberg

UBS Is Setting Itself Targets It May Easily Beat; The Swiss bank is being cautious on revenue and coy on buybacks as it integrates Credit Suisse.
Paul J. Davies – Bloomberg

Texas Lauds BlackRock’s ‘King of Wall Street’ in Change of Tune
Amanda Albright and Naureen S. Malik – Bloomberg

Work & Management

Layoffs Show That Tech Jobs Aren’t Sacred Anymore; Job cuts used to be taboo in Silicon Valley. Now they’ve become a part of life, even for companies that are doing well.
Antonia Mufarech and Drake Bennett – Bloomberg
For Sydney Russakov, it’s been a year of transitions. In March 2023, she lost her job at a startup called Universe, which offers “no-code” software design tools, when it cut her project manager role. She took a bit of time off before starting a new position at Nextdoor Holdings Inc., the hyperlocal neighborhood social networking service, in June. She was let go again in November, when Nextdoor conducted its own round of layoffs.

The Moment Mark Cuban Knew He Could Not Work In The Corporate World: His Bank Boss Yelled At Him For Trying To Set Up Networking Activities
Aran Richardson – Benzinga
Mark Cuban, a name synonymous with entrepreneurship and success, had humble beginnings that shaped his unconventional approach to business. On a recent appearance on Trevor Noah’s “What Now?” podcast, Cuban recounted when he knew he couldn’t work in the corporate world. After graduating from Indiana University in 1981, Cuban embarked on his corporate journey at Mellon Bank in Pittsburgh. Despite his enthusiasm for the job, Cuban’s proactive initiatives, such as starting a “rookie club” to foster networking and sending interesting articles to the CEO generated resistance from his superiors. He thought informal drinks between junior employees and senior leaders could help with information sharing and mentoring. However, he said on the podcast that his boss did not appreciate his attempts, although Cuban felt he was just trying to create relationships.

Wellness Exchange

Sitting all day increases risk of death. These exercises can help reduce harm
Caroline Kee – Today
Most of us know that sitting for too long is not healthy, but new research sheds light on the dangers of prolonged, uninterrupted sitting over time. What are the health risks associated with sitting for long periods of time and how can you counteract the harmful effects? Here’s how often to take breaks from sitting and the best exercises to move the body throughout the day.


Singapore’s Biggest Bank Cuts CEO’s Pay By Millions on Digital Banking Outage; Digital outages lead to variable pay cut for CEO, management; Bank’s 2023 net profit exceeds S$10 billion; posts ROE of 18%
Natalie Choy, Low De Wei, and Sheryl Tian Tong Lee – Bloomberg
DBS Group Holdings Ltd. slashed Chief Executive Officer Piyush Gupta’s compensation by S$4.1 million ($3 million) after the lender suffered a series of digital banking outages last year and was reprimanded by the central bank. The pay cut, announced on Wednesday alongside DBS earnings, represents a 30% reduction in variable pay for Gupta, one of the highest paid executives in the country who earned S$15.4 million in total in 2022. Last year’s outages that saw payment and ATM transactions stalled across the city-state also resulted in the variable compensation for the group management committee collectively cut by 21% from a year earlier.

China Share Buybacks Hit Three-Year High Amid Market Slump; Share repurchases surged in January in Hong Kong, mainland; Will Semi, WuXi AppTec led in mainland, Tencent in Hong Kong
Jeanny Yu – Bloomberg
Chinese companies are ramping up share buybacks, playing their part in a widening rescue campaign to stem a $7 trillion rout in the world’s second-biggest stock market. Firms listed in mainland China and Hong Kong spent 14 billion yuan ($1.9 billion) and HK$21 billion ($2.6 billion) repurchasing shares last month, respectively, each marking a record since 2021 when Bloomberg began compiling the data.

China’s New Year Buyers Look to Gold as Stocks and Property Crash; Holiday season typically drives demand for gold jewelry; Sales have been brisk for months, drawing younger buyers
Bloomberg News
Gold has never been more expensive in China heading into the Lunar New Year, but consumers are still finding lots of reasons to buy the precious metal. While the holiday season usually drives increased spending on items like jewelry, reports of robust demand this year are remarkable because the shopping season happens to coincide with a stock market crash. It’s just the latest symptom of a loss of confidence in the economy that has weighed on consumer spending. But gold’s billing as a surefire store of value in times of trouble is finding new fans, including from younger buyers.

Star China Banker’s Disappearance Made His Firm a Buyout Target; An unlisted Hong Kong firm held talks with China Renaissance; Bao Fan steps down as CEO after being detained a year ago
Cathy Chan – Bloomberg
About a year after Bao Fan disappeared from public view, his boutique Chinese investment bank is shrinking and being circled by rivals. Almost a third of China Renaissance Holdings Ltd.’s staff in Hong Kong, which includes investment banking, private equity and wealth management teams, have either resigned or lost their jobs, people familiar with the matter said. Li Yuan, who oversees the wealth business, is leaving the company. Including mainland China, about 100 staffers left the firm in the past year, one of the people said.

Star China Funds Turn to Duds in 2024 as Stocks Rout Gets Ugly; Funds focusing on small caps, niche plays have taken a hit; A gauge of actively managed stock funds is down 16% this year
Bloomberg News
Some onshore funds that weathered the Chinese stock rout last year are losing their shine, as recent losses highlight the challenges of investing in the $8 trillion market where trends can swiftly reverse. The Goldstate Capital Principal Guaranteed Mixed Fund, which defied the decline in the mainland benchmark CSI 300 Index with a near 29% return in 2023, has fallen 32% so far this year. Most of its holdings are small-cap stocks, which as a category have suffered steep losses lately.

UK Universities Are Failing Their Finance Exams; British higher education faces a credit crunch.
Matthew Brooker – Bloomberg

Bolivia Cut Deeper Into Junk by Fitch on Falling Reserves; South American nation rating downgraded to CCC from B-; Low reserves pose risk to macroeconomic stability, Fitch says
Ezra Fieser and Maria Elena Vizcaino – Bloomberg


Seizures of Psychedelic Mushrooms Rise in U.S. as Demand Grows
Ernesto Londono – The New York Times
Seizures of psychedelic mushrooms across the nation by law enforcement officials have increased significantly in recent years as attitudes regarding their use have grown more permissive, according to a government-funded study released Tuesday. Researchers found that law enforcement officials confiscated 844 kilograms of mushrooms containing psilocybin in 2022, an increase of 273% from 2017. Psilocybin is the psychoactive component in the fungi commonly known as magic mushrooms.

Carlsberg warns of further price rises as inflation continues to bite; New chief Jacob Aarup-Andersen says prices of products such as sugar and glass are still rising
Madeleine Speed – Financial Times
Carlsberg’s chief executive said the brewer was still experiencing rises in input costs and would need to keep raising prices to cover the increases, as the company reported weaker than expected full-year earnings. The Danish group reported 2023 revenue growth of 4.7 per cent to DKr73.59bn ($10.6bn) on Wednesday, a fraction higher than analysts’ estimates, but said sales volumes remained negative as a result of weaker consumer demand and “sticky” cost inflation.

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