SEC Pressures Exchanges on Long-Delayed Market-Surveillance Project

Sep 10, 2019

First Read

Hits & Takes
By JLN Staff

Yesterday was Spencer Doar‘s last day at John Lothian News. Today he is starting a career in public relations at 3Points Communications. We wish Spencer the best of luck in his new endeavor and thank him for his years of incredible service to JLN and the industry through his work here.~JJL

The “11th Annual Conference on Futures and Derivatives” will be held on Thursday, October 17, 2019 at the Chicago-Kent College of Law. This is a full day program for compliance officers, in house counsel, regulators, accountants and attorneys who work within the futures industry. Attorneys will receive 6 hours of CLE credit, including an hour of ethics. Accountants will receive 7 hours of CPE including an hour of ethics. A cocktail and networking reception will follow the program. Register HERE.~JJL

Congressman Lance Gooden (R-TX) introduced on Friday an updated version of the Options Market Stability Act. The bill directs the banking agencies to finalize SA-CCR by the end of the year, or, alternatively, to provide relief by end of year for calculating counterparty credit risk exposure for client listed, cleared derivatives positions. Here is a link to the text of the bill:
H.R.4233 – Options Market Stability Act of 2019.~JJL

Want to know more about regulatory guidance on CME Group block trades? Join the FIA and CME Group, including Robert A. Sniegowski, Executive Director, Rules & Regulatory Outreach, and Urmi Graft, Manager, Investigations on September 12 for a webinar reviewing the updates to CME Group’s Market Regulation Advisory Notice (MRAN) concerning the execution of block trades in CME, CBOT, NYMEX, and COMEX products. The updated guidance includes provisions related to 1) the authority of the Chief Regulatory Officer or his designee to permit block trades to be executed at less than the block trade minimum threshold, 2) the time of execution of block trades, 3) the disclosure of customers’ identity by brokers, and 4) principals engaging in pre-hedging.~JJL

CME Group is looking for a manager for Customer Marketing in London.~JJL

Jin Mun has left Fidessa after 5+ years and is going back to the CME Group as a freelancer, working on the NEX integration.~JJL

OCC CEO John Davidson is in Munich at the Cboe Global Markets RMC Europe Conference. He speaks tomorrow on “Changes in Margin and Capital Requirements that Will Affect You.”~JJL

You learn something new every day. New market terms I just learned included BTIC+ and TACO+. That would be Basis Trade at Index Close and Trade and Cash Open. Who knew?~JJL

A big fine hit the tape at ICE: Classic Energy LLC, while neither admitting nor denying the violations, was fined $125,000 for misreporting the execution times of block trades.~The Editorial Ghost of Spencer Doar

The law firm of Crow & Cushing wants to know “What Constitutes Manipulation in the Commodity Markets? We’re Still Waiting for an Answer.”~JJL

The SEC is questioning Starbucks about its accounting practices as the company adjusts to new guidelines that came into effect last year for most public companies, the WSJ reports. 208 companies received letters from the SEC about their revenue-recognition practices in 2018.~SR

Elena Patimova is now director, equities & FICC at SGX. Formerly she was senior vice president, business development at R.J. O’Brien & Associates. She has also been at the LME and NYSE Euronext.~JJL

Don’t forget to donate to ABN AMRO executive Andrej Bolkovic’s fundraiser for Cradles to Crayons. He is running a marathon. The least we can do is help support this important cause he is running for.~JJL


The Spread – In/Stability

It appears Congress still has us little old options folks on the radar as the Options Market Stability Act is back in action! Also, JPMorgan has a Trump-related volatility measurement that we talk about in this week’s episode of “The Spread,” the last with Spencer Doar as host.

Watch the video »


Ken Griffin Adds a $99 Million Florida Beach House to His Property Empire
Tom Metcalf and Oshrat Carmiel – Bloomberg (via Yahoo)
Ken Griffin’s splurge on luxury real estate shows no signs of abating.
The hedge fund titan spent $99.1 million for a beachfront house adjacent to his existing Palm Beach, Florida, estate, according to the Palm Beach Post, citing sources with knowledge of the transaction and a deed filing. A Palm Beach County document confirmed the purchase price, but didn’t identify the buyer.

*****$700 million in real estate purchases in total. He is breaking every real estate maxim in the book.~JJL


Tradeweb lines up new benchmark for $16tn Treasuries market; Move aims to reduce reliance on informal prices from a range of data providers
Philip Stafford – FT
Investors and traders in the $16tn US Treasuries market — which sets borrowing costs for the government, while also providing a starting point to price trillions of dollars in other assets — now have a daily “closing price” to use as an independent benchmark.

***** What is $16tn in Treasuries between friends? How many decimal points does this go to?~JJL


While MPs argue, fintech must take the lead on driving growth
Charlotte Crosswell – City AM
Political discord, uncertainty, rapid change to the country’s prospects every day – this is the present state of Britain. To top it all off, the latest survey from IHS Markit suggests that a new recession is possible, with economic growth slipping over the recent period. The UK is at a crucial point. How we respond now will shape our economic development in the coming decades.

***** When Charlotte Croswell talks, I listen.~JJL


A wave of layoffs looms for Wall Street
Aaron Elstein – Crain’s New York
It’s been reported that up to 15% of Goldman Sachs partners are preparing to leave by year’s end. Truth is, firms across Wall Street are having a crummy year and lots of personnel are going to be purged soon.

*****What year is this story from? Oh, today!~JJL


Monday’s Top Three
Our top read item was Julie Winkler’s blog post|Three Keys to Driving Innovation at a 170+ Year-Old Financial Services Company. Second was Bloomberg’s JPMorgan Creates ‘Volfefe’ Index to Track Trump Tweet Impact. Third was Gary DeWall’s Bridging the Week post Clearing Organization Sanctioned; Programmer Seeks End to CFTC Enforcement Action. That’d be the OCC and Jitesh Thakkar.


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Lead Stories

SEC Pressures Exchanges on Long-Delayed Market-Surveillance Project; Exchanges could face financial penalties for missing deadlines to build database
Alexander Osipovich – WSJ
The Securities and Exchange Commission is stepping up pressure on exchanges to finish a huge, long-delayed database designed to help detect market manipulation and investigate episodes of anomalous trading. The exchanges would face financial penalties if they miss further deadlines for building the database project, called the Consolidated Audit Trail, or CAT, according to a proposal released Monday by the SEC.

‘Zombie Libor’ Threatens Market’s Complacent View, JPMorgan Says
Alex Harris – Bloomberg
Beleaguered benchmark could exist after 2021 with fewer banks; ‘There is a substantial risk of much higher volatility’
Even though substantial progress has been made toward weaning the global financial system off of Libor, markets have undervalued the risk that a zombie version of the vital benchmark will continue on, according to JPMorgan Chase & Co. strategists.

Technology Is Banks’ New Battleground; European banks are playing catch up with their American rivals in tech spending, particularly in cutting-edge areas like artificial intelligence
Rochelle Toplensky – WSJ
European banks are spending vast sums on technology—but it may not be enough to defend against the incursions of bigger, richer American rivals.

The Small Exchange Secures OCC Clearing and Settlement Services
Business Wire
The Small Exchange, a new futures exchange backed by renowned innovators in the financial industry, today announced that OCC, the world’s largest equity derivatives clearing organization, received approval from its Board of Directors to provide central counterparty clearing and settlement services for the exchange. The proposed clearing agreement with OCC is subject to the regulatory approval process.

Battle Erupts Between Traders, Exchanges Over Data Access Fees
Viren Vaghela and Silla Brush – Bloomberg
Bourses argue that traders get value for money from data feeds; But investor lobbyist says providers “exist as an oligopoly”
Trading venues have clubbed together to attack the latest European effort to curb what they charge clients for data.

The Massive Cost of Not Adapting to Climate Change; The world must invest $1.8 trillion by 2030 to prepare for the effects of global warming. A new report said the payoff could be four times that.
Eric Roston – Bloomberg
Slowing the planetary march toward climate catastrophe—and the multitrillion-dollar investment required to do it—has become a central issue of global and national debate. But there’s the equally expensive matter of dealing with the here and now: From historic wildfires to unprecedented hurricanes, global warming has reshaped the lives of millions, with increasingly tragic consequences.

New York’s rival bourses are in a ‘knife fight’ for IPOs; The next big unicorns could settle this year’s tight contest between Nasdaq and the NYSE
Richard Henderson – FT
If the WeWork IPO goes ahead — if being the operative word, after the Financial Times reported its biggest investor SoftBank was pushing it to cancel the flotation — it will help decide who wins this year’s hard fought race between New York’s rival stock exchanges.

Brexit flips LCH-Eurex basis
Natasha Rega-Jones –
Brexit uncertainty and falling European swap rates helped push the LCH-Eurex basis into negative territory in June as more traders sought to receive fixed rates at Eurex, causing unbalanced flows, say traders.

SEC Chairman Scolds Weak Anticorruption Enforcement Abroad; SEC’s Clayton says some international companies get a leg up on U.S. firms due to spotty enforcement
Dave Michaels – WSJ
The chairman of the U.S. Securities and Exchange Commission chided counterparts around the world for spotty enforcement of antibribery laws.

Delta Capita And DTCC Collaborate On SFTR Testing
Delta Capita, the international business and technology consulting and managed services firm, has today announced it is collaborating with The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, to help market participants meet their Securities Financing Transactions Regulation (SFTR) trade reporting obligations.

Euronext equity derivatives markets suffer outage
Samuel Agini – Financial News
Euronext, the company behind the Paris, Brussels and Amsterdam stock exchanges, was forced to halt trading in single stock options on those bourses on September 9, becoming the latest exchange to suffer a technical mishap this year.

New Index Tracks Trade Uncertainty Across the Globe
Hites Ahir, Nicholas Bloom, and Davide Furceri – IMF Blog
Rising trade uncertainty is cited as a driving factor for “sluggish global growth” in the current issue of the IMF’s World Economic Outlook, which describes the state of the world economy.

Local apartment landlord faces SEC lawsuit alleging Ponzi scheme
Alby Gallun – Crain’s Chicago Business
The SEC alleges that the West Chicago resident Glenn C. Mueller and his companies defrauded investors over the last five years through the sale of nearly $42 million in unregistered securities to more than 300 people. Local apartment landlord Glenn C. Mueller raised millions of dollars from investors with religious and charitable appeals, using brochures to play up ties to a “soccer ministry” and orphanages in Romania.

Kardashian-inspired prison law frees $70M Wall Street scammer
Kevin Dugan and Bruce Golding – NY Post
A notorious inside trader who was slapped with a then-record, 11-year prison term in 2011 was quietly released to home confinement in his swank Upper East Side apartment this summer — thanks in part to Kim Kardashian.

Bigger Is Better for Europe Stocks as SocGen Sees Liquidity Risk
Namitha Jagadeesh – Bloomberg
Small is decidedly not beautiful for European equities, according to Societe Generale SA.

Jack Ma Ends 20-Year Reign Over Alibaba Wealth Creation Empire
Venus Feng – Bloomberg
Ex-English teacher steps down as chairman on his 55th birthday
His stake in e-commerce giant surged almost 10-fold since 2012
Jack Ma is giving up the reins of Alibaba Group Holding Ltd. after presiding over one of the most spectacular creations of wealth the world has ever seen.

CFTC orders Iowan to pay $1.25 million over cattle futures fraud
The Hagstrom Report
The Commodity Futures Trading Commission today issued an order filing and simultaneously settling charges against Nathan Harris, a CFTC registrant, of Akron, Iowa, for fraud, unauthorized trading, and violating speculative position limits in live cattle futures contracts.

Exchanges, OTC and Clearing

Tradeweb Markets and ICE Benchmark Administration Launch Tradeweb ICE U.S. Treasury Closing Prices
Tradeweb Markets Inc. (Nasdaq: TW), a leading global operator of electronic marketplaces for rates, credit, equities and money markets, and Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced the launch of Tradeweb ICE U.S. Treasury Closing Prices by Tradeweb and ICE Benchmark Administration Limited (IBA).

APEX signs licence to use Argus’ Singapore low-sulphur fuel oil price for proposed new derivatives contract
Global commodity price reporting and news agency Argus and the Asia Pacific Exchange (APEX) signed an agreement today licensing the use of the Argus Bunker Index (ABI) Singapore LSFO 0.5%S as the settlement price for a proposed new derivatives contract. The contract can be used by oil traders, bunker fuel suppliers and shipowners to manage their price risks related to the new low-sulphur fuel oil (LSFO) required to comply with the 0.5% sulphur cap being introduced by the International Maritime Organisation in January 2020 (IMO 2020).

Euroclear plans bond investment link with China; Move would allow foreign investors to use renminbi debt as collateral elsewhere
Don Weinland – FT
Euroclear plans to open a link for international investors to access the Chinese bond market, which will allow renminbi-denominated debt to be used as collateral anywhere in the world.

Boursa Kuwait set for boost from index upgrade and oil sell-offs; Domestic stock market takes inspiration from planned Aramco IPO
Chloe Cornish – FT
Kuwait’s stock exchange is encouraging state-owned oil companies to offer shares on the public market, a move aimed to open the country’s main economic sector — the oil and gas industry — to private investment.

Tokyo Financial Exchange: Rollover Of Leading Contract Month For Three-month Euroyen Futures
Tokyo Financial Exchange has decided to shift the leading contract month for Euroyen futures from the current September 2019 contracts to the December 2019 contracts, effective from 6 Sep 2019.

HKFE Announces Revised Margins For Futures Contract – CNOOC Limited
Please be advised that pursuant to Exchange Rule 617(d) and HKCC Rule 402, the Exchange and the Clearing House have determined that with effect from the commencement of trading on Wednesday, 11 September 2019, the margin levels of the following Futures Contract shall be as follows:

SGX reports market statistics for August 2019
Concerns over global growth fuels demand for risk-management solutions; Singapore equities market volume gains amid regional market volatility
Singapore Exchange (SGX) today released its market statistics for August 2019. Market participants continued to use SGX’s suite of risk-management tools to manage their positions across multiple asset classes as concerns over the outlook for both developed and emerging economies intensified. With ongoing US-China trade tensions, a yield-curve inversion in the US bond market – interpreted by some participants as a recession signal – as well as fresh uncertainties over Brexit, global growth concerns dominated the markets throughout August.

Scrip Dividend Scheme in relation to the Interim Dividend for the year ending 31 December 2019
Calculation of Market Value
On 14 August 2019, the Board declared an Interim Dividend which will be payable in cash with a
scrip alternative to the Shareholders whose names appeared on HKEX’s register of members on the Record Date. Pursuant to the Scrip Dividend Scheme and subject to the terms set out in the Circular, the eligible Shareholders have the right to elect to receive the Interim Dividend in New Shares instead of in cash, or partly in New Shares and partly in cash.

Quarterly review for the BEL 20®, BEL Mid®, and BEL Small® indices
Euronext today announced the results of the quarterly review for the BEL 20®, BEL Mid®, and BEL Small® indices. The changes due to the review will be effective from Monday 24 June 2019.

Euronext launches the fifth edition of its pre-ipo programme TechShare and expands its geographical reach; More than 130 companies from nine European countries to attend Euronext’s academic campus at the Erasmus Centre for Entrepreneurship in the Netherlands
Amsterdam, Brussels, Dublin, Lisbon, London, Oslo and Paris – 10 September 2019 – The fifth edition of TechShare, Euronext’s dedicated programme for European tech companies focused on the IPO, brings together a record number of companies, including, for the first time, six companies from Ireland.

Moscow Exchange Signs Memorandum Of Understanding With Zhengzhou Commodity Exchange
Moscow Exchange signed a Memorandum of Understanding (MoU) with China’s Zhengzhou Commodity Exchange to facilitate further collaboration and strengthen ties between the two exchanges.

Tradeweb Monthly Activity Reports


How to address the cybersecurity problems faced by smaller businesses in the financial sector
Paul Barnes –
Small and medium sized businesses (SMBs) are increasingly under attack by cybercriminals skilled in a variety of sophisticated tactics.

Council Post: Five Trends Shaping Fintech Into 2020
Trevor Dryer – Forbes
Fintech has become a fast-moving field, and the next decade should be no different. Not every startup threatens small and midsize banks, but community banks and credit unions should stay on top of fintech trends to know when it’s time to act on a new opportunity.

7 Fintech Companies Making Waves In 2019
Renato Capelj – Yahoo Finance
Every year, Benzinga showcases the most innovative and forward-looking companies shaping the fintech industry.
In preparation for the fifth annual Benzinga Global Fintech Awards in New York City on Nov. 19, Benzinga is taking a look at companies that have captured news waves this year.

Bloomberg is investing in ways to make complex alternative data sets easier to use for hedge funds Dan DeFrancesco – Business Insider
One of the largest data providers in the world wants to make it easier for investors to digest complex, unique data sets.

BNP Paribas to offer Kantox hedging tech to clients across Emea
BNP Paribas
BNP Paribas today announces its strategic partnership with Kantox, a leading fintech specialising in FX risk management solutions.


‘Bad things could happen’: Turning to tech to tame the crypto jungle
Tom Wilson – Reuters
“Hi guys, could you please show me a firm bid for 100 bitcoin?” a seller texts on Skype.
“One sec. $10270.” Two minutes later: “Sorry guys, that was an old order from Friday when skype wasn’t working.”

Libra cryptocurrency must meet tough regulatory standards-U.S. Treasury
The Facebook-led Libra cryptocurrency project must meet the highest standards for combating money laundering and terrorism financing, a senior U.S. Treasury official said on Tuesday.

Crypto Firm COO Exits After Less Than a Year in Role
Benjamin Robertson
Kwan had worked in compliance for Hong Kong bourse operator; Regulator said to look at whether U.S. residents used exchange
BitMEX, the cryptocurrency trading platform that is said to be under investigation by U.S. authorities, lost Chief Operating Officer Angelina Kwan weeks shy of her first anniversary.

ICE have released the margin requirements for trading BTC futures (Bakkt) on their exchange
Rajan Dhall – FX Street
Intercontinental Exchange (ICE) have announced the margin requirements for the Bakkt futures trading contracts that are available on Monday 23rd September.

Gemini Launches Custody Service With 18 Cryptos Including ERC-20 Tokens
Nikhilesh De – Coindesk
The Gemini exchange is launching an institutional-grade crypto custody solution, according to an announcement Tuesday.

Vlad Zamfir-led blockchain project CasperLabs bags $14.5M Series A to improve Ethereum 2.0 scalability
Yogita Khatri – The Block Crypto
CasperLabs, the startup that is working to improve Ethereum 2.0 scalability without sacrificing decentralization or speed, has raised $14.5 million in Series A funding, according to an announcement on Tuesday.

Nasdaq adds a new index for decentralized finance ‘DeFix,’ covering Augur, MakerDAO
The Block Crypto
Stock exchange operator Nasdaq has added yet another crypto-related index – this time for decentralized finance (DeFi), according to an announcement Monday. The operator has partnered with London-based brokerage firm EXANTE to offer the DeFix index, which includes “real-time” information for projects such as Augur and MakerDAO, among others.

**** HERE is the Coindesk version of this story.~JJL

Little-Known Exchange Claims It Will Be First to Sell Telegram’s TON Tokens
Anna Baydakova – Coindesk
When Telegram launches its long-awaited blockchain sometime this month or next, the go-to marketplace for the new gram tokens could be a fledgling exchange with fewer than 4,000 users.

SEC Chair Clayton: There’s work left to be done on bitcoin ETF
The Block Crypto
In an interview with CNBC, Securities and Exchange Commission Chairman Jay Clayton said that “progress is being made” on the bitcoin ETF front. Still, concerns hang over the decision to approve such a product. During the interview, Clayton raised those concerns, noting the lack of a proper crypto custody provider and the threat of price manipulation on unregulated exchanges. That’s despite a number of new custody providers coming online this year, including Fidelity’s new custody business and San Francisco-based Anchorage, and efforts to expose wash trading on certain exchanges.

In first, Tether pledges to donate $1M for Hurricane Dorian relief
The Block Crypto
Stablecoins issuer Tether has pledged to donate $1 million to help support victims of Hurricane Dorian that devastated the northwestern Bahamas and caused significant damage to the Southeastern U.S. and Atlantic Canada.

IBM Now Holds 6 of 11 Seats on Hyperledger Blockchain Steering Board
Nathan DiCamillo – Coindesk
IBM has doubled the number of its employees on the technical steering committee (TSC) of Hyperledger, stoking concerns about the tech giant’s influence on the enterprise blockchain consortium.

Jack Dorsey: Bitcoin is ‘not functional as a currency’ right now
Catherine Clifford – CNBC
Twitter and Square CEO Jack Dorsey is an advocate of digital currency bitcoin. But he also says it is not ready to be a currency.


Trump administration to defend Fannie, Freddie overhaul before U.S. Congress
Pete Schroeder – Reuters
U.S. lawmakers on Tuesday will question Trump administration officials on their plan to release mortgage giants Fannie Mae and Freddie Mac, which guarantee over half the nation’s mortgages, from government control more than a decade after they were bailed out during the 2008 financial crisis.

America must support the people of Hong Kong; Congress should pass a new act allowing the US to impose sanctions on China
Kevin McCarthy (the Republican leader of the US House of Representatives)- FT
Last week, after three months of increasingly violent protests, Hong Kong’s Chinese-backed government withdrew an extradition bill that would have removed the right of citizens to a fair trial.

New law requires NY schools to observe 9/11 anniversary
Carl Campanile – NY Post
New York schools are required to provide a moment of silence to observe the anniversary of the 9/11 terror attacks, according to a new state law approved by Gov. Andrew Cuomo Monday.

Why it pays traders to keep a close eye on Trump tweets; ‘Volfefe’ index from JPMorgan measures market impact of president’s words on Twitter
Katie Martin – FT
US president Donald Trump is tweeting more often these days. The bad news is that, despite the mental health benefits of switching off the social media platform, if you manage money for a living, you cannot afford to ignore him.

U.S. Intelligence Had to Pull Spy From Russia Because Trump Is a Security Risk
Jonathan Chait – NY Magazine
In May 2017, Donald Trump hosted Russian foreign minister Sergey Lavrov and then – Russian ambassador to the U.S. Sergey Kislyak for a friendly chat in the Oval Office. There, he promised his guests that, having just fired FBI director James Comey, he now had a free hand to establish chummy relations. Trump also casually shared a highly classified intelligence secret, one that blew up a sensitive Israeli counterterrorist operation. In the wake of that debacle, American intelligence decided to extract a high-level intelligence asset from Russia, CNN’s Jim Sciutto reports

The Volfefe Index, Wall Street’s new way to measure the effects of Trump tweets, explained; The president is tweeting more — and he’s moving markets with it.
Emily Stewart – VOX
President Donald Trump is moving markets more with his Twitter account. The president’s tweets have become increasingly consequential for some investors in recent months, specifically when it comes to interest rates and bonds. According to analysts at JPMorgan, who created and coined the “Volfefe Index” — a combination of the word “volatility” and the infamous Trump “covfefe” tweet (more on that in a bit) — Trump’s missives related to trade and monetary policy, specifically, have been pushing markets around.

As billions flow to farmers, Trump administration faces internal concerns over unprecedented bailout
Jeff Stein – Washington Post
Senior government officials, including some in the White House, privately expressed concern that the Trump administration’s nearly $30 billion bailout for farmers needed stronger legal backing, according to multiple people who participated in the planning.

‘Absolutely Impeachable’ for Trump to Direct ‘Hundreds of Thousands’ of Dollars to His Business, Congressman Says
Jason Lemon – Newsweek
Representative Jamie Raskin slammed President Donald Trump, accusing him of violating the emoluments clauses of the Constitution by directing “hundreds of thousands if not millions of dollars” to his personal businesses.

Illinois soybean farmers fear Trump tariff damage will be permanent; For the approximately 75,000 farmers in Illinois, losing market share in China could lead to dwindling bank accounts, shrinking credit lines, and a rise in foreclosures and bankruptcies.
Claire Bushey – Crain’s Chicago Business
Donald Trump is dredging up memories of Jimmy Carter for some Illinois farmers.


CFTC Orders Registrant to Pay $1.25 Million for Fraud, Unauthorized Trading, and Violating Speculative Position Limits in Live Cattle Futures
The U.S. Commodity Futures Trading Commission today issued an order filing and simultaneously settling charges against Nathan Harris, a CFTC registrant, of Akron, Iowa, for fraud, unauthorized trading, and violating speculative position limits in live cattle futures contracts. The order imposes a civil monetary penalty of $1,250,000 and permanent restrictions on Harris’s registration with the CFTC.

CFTC Charges Unregistered Forex Trading Firm and Its Principal with Fraud and Misappropriation
The U.S. Commodity Futures Trading Commission has filed a civil enforcement action in the Southern District of New York against defendants Dominick Vincent Carducci and his company VOS Capital Management, LLC (VOS Capital), both of South Carolina. The defendants are charged with fraud and misappropriation in connection with the unlawful operation of a commodity pool that purported to trade leveraged or margined foreign currency (retail forex). The CFTC complaint alleges fraudulent solicitation of at least 30 commodity pool participants, as well as the misappropriation of over $1.1 million of pool funds that defendants used to reimburse certain participants and for Carducci’s personal use, such as international travel, luxury automobiles, and student loan debt.

SEC Proposes Transparency and Financial Accountability Amendments to the CAT NMS Plan
The Securities and Exchange Commission today voted to propose amendments to the national market system plan governing the Consolidated Audit Trail (the “CAT NMS Plan”).
The proposed amendments to the CAT NMS Plan would require self-regulatory organizations that are participants to the CAT NMS Plan (the “Participants”) to file with the Commission and publish a complete implementation plan for the Consolidated Audit Trail (“CAT”) and quarterly progress reports, each of which must be approved by the Operating Committee established by the CAT NMS Plan and submitted to the CEO, President, or equivalently situated senior officer at each Participant.

CFTC’s Global Markets Advisory Committee to Meet on September 24
The U.S. Commodity Futures Trading Commission’s Global Markets Advisory Committee (GMAC) announced today that it will hold a public meeting on Tuesday, September 24, 2019, at CFTC’s Washington, DC headquarters.

Investors face increasing risks amid renewed market volatility
The European Securities and Markets Authority (ESMA), the EU’s securities regulator, has published the second Trends, Risks and Vulnerabilities (TRV) report for 2019. The report identifies a deteriorating outlook for the asset management industry and continued very high market risk. Recent trade tensions have triggered renewed volatility, and concerns over a no-deal Brexit remain key risk drivers for the second half of 2019.

ASIC extends relief for foreign financial services providers
ASIC has extended to 31 March 2020 licensing relief for foreign financial services providers (FFSPs) to allow them to provide certain financial services to Australian wholesale clients without needing to hold an Australian financial services licence.

Top U.S. regulator warns over corporate debt, market risks
Katanga Johnson – Reuters
The head of the top U.S. markets regulator on Monday issued a warning over market risks including rising corporate debt, a U.K. withdrawal from the European Union, and the transition away from a key lending rate.

FDIC Walks Fine Line Between Regulation, Innovation (Podcast)
Jelena McWilliams, Chairman of the FDIC, on the evolution of fintech and the role of regulators. Brad Levy, Global Head of Loans and CEO of MarkitSERV/IHS Markit, on the financial system of the future, and why we haven’t seen a real credit event in the loan market. Dr. Ellen Wald, President of Transversal Consulting and a Bloomberg Opinion contributor, on why regulators should be wary of Saudi Aramco tapping the Kingdom’s richest to be anchor investors for its IPO. Nadine Chakar, Head of Global Markets at State Street, on the role of human versus machine in this transformative time of technology.

Japan’s regulators boost scrutiny of financial firms’ foreign assets
Japan Times
Regulators are surveying Japan’s financial firms to determine their exposure to foreign assets, including risky credit products, as the global economy slows, according to sources.

Investing and Trading

Universities Join Century-Bond Boom After Rates Tumble Worldwide
Danielle Moran – Bloomberg
American universities, used to taking the long view of history, seem to see the current era of rock-bottom interest rates as one that may not come around again for another century.
Rutgers University in New Jersey this week is planning to sell $330 million of bonds that don’t mature for 100-years, joining a small but growing number of schools that are seeking to lock in current borrowing costs by issuing unusually long-dated debt.

Investors Bet on Further Rallies by Gold, Silver
Inyoung Hwang – The Wall Street Journal
Options bets are signaling the precious-metals resurgence has much further to go, with traders making wagers that gold may rally an additional 40% and silver almost another 80%.
The most popular option on the SPDR Gold Trust exchange-traded fund, known as GLD, are tied to prices reaching jumping 27% to $180 a share, according to options data provider TradeAlert.

SoftBank urges WeWork to shelve IPO over valuation concerns: FT
SoftBank Group , a leading shareholder in the holding company of U.S. office-sharing startup WeWork, has urged it to shelve a planned IPO on concerns over the valuation, the Financial Times reported on Monday.

Sharp rise in number of investors dumping fossil fuel stocks; Paris climate accord has been a massive boon to the global divestment campaign
Billy Nauman – FT
The number of institutional investors committed to cutting fossil fuel stocks from their portfolios has risen from 180 in 2014 to more than 1,100 now, as activists turn up the heat on companies over climate change.

Saudi Aramco chief says IPO to happen ‘very soon’
Simeon Kerr – FT
Saudi Aramco’s chief executive Amin Nasser said the oil giant’s initial public offering would take place “very soon”, with a primary listing on its home market of Riyadh.

Some Investors Actually Make Money on Negative-Yielding Debt; Currency trades give managers an edge.
Katherine Greifeld – Bloomberg
Money managers at BNY Mellon and Pacific Investment Management Co. have snapped up Japanese bonds. Both companies have made the country the second-largest geographic allocation in some of their biggest international fixed-income funds. Ordinarily that wouldn’t seem remarkable, but right now many of Japan’s government bonds have a negative yield—it actually costs money to hold them to maturity.

The Hunt for Yield Could Still Get Fiercer; Falling interest rates have pushed money into corporate bonds, but there may be further gains to be had
Jon Sindreu – WSJ
The hunt for yield is back with a vengeance and corporate bonds look to be among the biggest winners.

Wellington Management and CalPERS Launch Innovative Framework to Help Executive Teams Better Evaluate Physical Risks of Climate Change; New P-ROCC (physical risks of climate change) framework aims to facilitate more informed investment decisions through enhanced corporate disclosures
Business Wire
Wellington Management (“Wellington”) and the California Public Employees’ Retirement System (“CalPERS”) today announced the launch of a new framework designed to help companies and their executive teams assess and disclose the potential effects of the physical risks of climate change (P-ROCC) on their business. This new P-ROCC framework seeks to improve how companies disclose their physical vulnerabilities, and thereby help asset owners and investment managers better evaluate the ability of the companies they invest in to adapt to or mitigate such risks. For the purposes of the P-ROCC framework, Wellington and CalPERS define physical risks as inclusive of but not limited to extreme heat, drought, wildfires, hurricanes, flooding, and water access.

Universities Join Century-Bond Boom After Rates Tumble Worldwide
Danielle Moran – Bloomberg
Rutgers University following University of Virginia’s sale; ‘We thought this would make great business sense,’ one says
American universities, used to taking the long view of history, seem to see the current era of rock-bottom interest rates as one that may not come around again for another century.

Trafigura Accused of Throttling Nyrstar With Lopsided Deals
Andy Hoffman and Mark Burton – Bloomberg
A group of Nyrstar investors filed a lawsuit in Belgian court; The documents include contracts between Nyrstar and Trafigura
Commodities trader Trafigura Group Ltd. used its influence at Nyrstar NV, one of the world’s biggest zinc refiners, to undermine the company and unfairly enrich itself, a group of Nyrstar shareholders has alleged.

Robert Shiller on Recession Risk, 2020 Democrats and Fear Itself
Ksenia Galouchko – Bloomberg
Yale professor argues viral stories can drive economic trends; Sanders, Warren likely too left wing to beat Trump in election
It’s a famous adage on Wall Street that markets are sending mixed messages this year: Bond investors and trade-war worrywarts tell stories of economic doom, while stock traders recite bullish tales about Corporate America.


Lyxor launches yield curve ETFs; Allow investors to play US and German yield curves
David Brenchley – Investment Week
Lyxor on Tuesday listed an exchange traded fund (ETF) based on the US yield curve in London, adding to a similar offering it launched in early August.

Goldman Sachs expands MTF data distribution with QuantHouse; QuantHouse has expanded its API Ecosystem with market data from the Goldman Sachs SIGMA X MTF, including indicative auction quotes.
Hayley McDowell – The Trade
Market data from the Goldman Sachs SIGMA X multilateral trading facility (MTF) is now accessible via QuantHouse, providing users with information on executed trades within the bank’s auction book.

Deutsche Bank CFO Weakens Revenue Goal Two Months Into Plan
Steven Arons – Bloomberg
Analysts have expressed doubt about bank’s revenue goals; Says economic environment has become more fragile recently
Deutsche Bank AG Chief Financial Officer James von Moltke softened the lender’s mid-term revenue target just two months after setting it.

State Street Global Advisors Announces Impact of Receiving Payment
Business Wire
The SPDR® Exchange Traded Funds (ETFs) listed in the table below, announced today that each Fund received a payment as an authorized claimant from a class action settlement related to General Motors Company (NYSE: GM).

Hedge Funds Getting Burned as Growth Stocks Trounced by Value
Lu Wang and Melissa Karsh – Bloomberg
Worst day since 2010 for investors long momentum, short value; Hedge funds’ growth-stock exposure highest since at least 2016
A hedge-fund favorite is rapidly losing ground in the stock market just as one of the industry’s least-loved sectors picks up.

America’s First Gay Credit Union Gets Green Light From Michigan
Jeff Green – Bloomberg
Superbia has specific aim to meet LGBT banking requirements; Online access may come in early 2020 after Monday signing
Do lesbian, gay, bisexual and transgender people need a bank of their own? Superbia Credit Union is about to find out.

Barclays Sees $2 Billion in Insurance Costs, Threatening Buyback
Harry Wilson – Bloomberg
Bank to set aside up to 1.6 billion pounds for PPI claims; U.K. lenders’ provisions rise after late spike in complaints
Barclays Plc is putting aside an estimated 1.6 billion pounds ($2 billion) more after a rush in last-minute payment protection insurance claims, threatening the lender’s promise to return more money to shareholders.


China scraps purchasing cap for approved foreign investors; Beijing courting greater international investment as economic growth slows
Hudson Lockett – FT
China is scrapping a quota system for foreign institutional investors, freeing them to buy up stocks and bonds without a hard limit as Beijing seeks to court more international investment to help cushion the impact of an economic slowdown and its trade war with Washington.

Capital surges into Hong Kong stocks from the mainland; Inflow comes despite dismal performance during territory’s political crisis
Hudson Lockett – FT
Chinese state media attacks have helped to send the shares in Hong Kong-listed companies tumbling in recent weeks, with criticism of the territory’s flag carrier Cathay Pacific even claiming the scalps of its chief executive and chairman.

China Scraps Foreign Investment Limit in Stock, Bond Markets
Bloomberg News
QFII and RQFII programs required government approval; It’s another step in the country’s financial opening
China removed one more hurdle for foreign investment into its capital markets almost 20 years after it first allowed access. Global funds no longer need approvals to purchase quotas to buy Chinese stocks and bonds, the State Administration of Foreign Exchange said in a statement on Tuesday. It removed the $300 billion overall cap on overseas purchases of the assets, about two-thirds of which remain unused.

Nigerian Exchange Wants to Kick-Start Mortgages to Boost Trading
Emele Onu – Bloomberg
FMDQ says cheap home loans will free up funds for investment; Bourse also planning to act as a counterparty clearing house
Nigeria’s FMDQ Securities Exchange Plc is working on a plan to kick-start mortgages to boost trading on the nation’s capital markets.

Hong Kong Stonewalls China’s Trillion-Dollar Easing; The city’s unrest is a cautionary tale of income inequality. Stimulus dollars only widen the gap between rich and poor.
Shuli Ren – Bloomberg
The longer Hong Kong protests drag on, the less likely China will be to unleash the trillion-dollar stimulus markets seem to want. Beijing has become painfully aware that its easy-money policies of the past inflated asset bubbles and widened the wealth gap. Any repeat endeavors could risk stoking social unrest on the mainland.

Saudi Tadawul expects $3 bln additional inflows from FTSE inclusion – chairwoman
Marwa Rashad – Reuters
The Saudi Stock Exchange (Tadawul) expects additional passive funds’ inflows worth $3 billion from the remaining phases of inclusion in the FTSE Russell emerging market index starting in September, its chairwoman said.

Good times, bad times for Australian major bank funders
Gerard Perrignon –
Australia’s big-four banks are at a fascinating juncture, as their wholesale funding strategies adjust to comply with new Loss Absorbing Capacity regulations locally, and the ever present challenges of global macro event driven volatility.

Nomura’s New China Venture on Track to Hire 100 by December
Cathy Chan – Bloomberg
Japanese firm plans to start securities operations in December; Initial focus on wealth management, institutional brokerage
Nomura Holdings Inc. is on track to have more than 100 employees in its Chinese securities venture when it starts operations in December, people familiar with the matter said, as China opens up its $42 trillion financial industry to foreign competition.


Former Brexit negotiator Olly Robbins to join Goldman Sachs; Powerful aide to Theresa May was lightning rod for criticism by hardline Brexiters
George Parker and Laura Noonan – FT
Olly Robbins, the civil servant who led Theresa May’s efforts to strike a Brexit deal with the EU and became a bogeyman to Eurosceptics, is to join Goldman Sachs, in the latest example of a high-profile public service appointment to the Wall Street giant.

Six Times The Loser With No Brexit Plan B
Flavia Krause-Jackson – Bloomberg
It was close to 1 a.m. when Boris Johnson’s Conservatives exited the House of Commons, to cries of “shame on you” over the prime minister’s five-week suspension of Parliament. His “do-or-die” plan to quit the European Union on Oct. 31 has alienated many. Earlier, he suffered his sixth defeat in as many days, and now he has to somehow conjure a plan B for the mess he — and the U.K. — are in. Another attempt to force an early election before the Brexit deadline was also rejected.

Boris Johnson loses second attempt to hold snap general election; UK parliament suspended for five weeks amid protests by opposition MPs
George Parker – FT
Boris Johnson accused Jeremy Corbyn’s Labour party of “preposterous cowardice” after opposition MPs blocked the prime minister’s second attempt to hold a snap general election to break Britain’s Brexit impasse.

EU-Swiss trading dispute has Brexit implications, says Swiss stock exchange boss
Elliot Smith – CNBC
A stock exchange dispute between Switzerland and the European Union could be a sign of things to come for the U.K., according to the CEO of Switzerland’s biggest exchange.


Risky derivatives are in fact risky, investors learn-INSIDE Korea JoongAng Daily
Korea JoongAng Daily
A 50-something man surnamed Kim breathed a sigh of relief when the Hong Kong government withdrew the contentious extradition bill.
He has invested 200 million won ($168,000) into an equity-linked securities (ELS) tracking the Hang Seng China Enterprises Index, a stock market index of H Shares, or the shares of Chinese mainland companies listed on the Stock Exchange of Hong Kong.

We Love the Smell of Monetary Napalm in the Morning; This month’s book club features an even more radical attempt to ignite the economy by spraying it with cash. And it has helicopters.
John Authers – Bloomberg
Summer is over and it is time to try a little good reading again. And for this month the Bloomberg Authers’ Note will go a different route by suggesting you read a book that has only just been published (at least in the U.S.): The Case For People’s Quantitative Easing by Frances Coppola.

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