States Pursue Their Own Broker-Conduct Rules; DE Shaw to revert to ‘3 and 30’ model

Apr 19, 2019

First Read

Hits & Takes
JLN Staff

Today is an abbreviated newsletter as it is Good Friday. Good Friday is not an official holiday in the United States. However, financial markets, as well as many businesses, public schools and universities/colleges are closed.~JJL

Save the date in Chicago. The MarketsWiki Education World of Opportunity series is set for Chicago on July 16 and 17. On July 16 we will kick off the event at Trading Technologies’ offices. The following day we will move to the Stewart School of Business at Illinois Tech for the last session.~JJL

We are targeting July 9 and 10 for our New York MWE World of Opportunity series, but we don’t have a venue set yet for those dates.~JJL


DRW real estate token deal falls apart; A pioneering effort by Don Wilson to sell ownership stake “tokens” in a South Carolina student housing complex through a real estate investment trust has collapsed.
Lynne Marek – Crain’s Chicago Business
Chicago trader Don Wilson’s real estate arm planned to carve up the equity in a South Carolina student housing complex and sell ownership stakes through a digital token sale, but the pioneering effort has fallen apart.

***** You win some, you lose some. That is the way the game is played. But if you win enough you can contemplate the lessons from your losses while doing other great things.~JJL


Meat needs to justify its place on our tables; Yet we do not all have to go vegetarian to save our health or planet
The editorial board – FT
The meat trade has enjoyed this week, with people buying Easter lamb for a festive meal on Sunday. But many livestock farmers and butchers in the western world are becoming worried by a longer-term threat to their livelihood from the growing popularity of vegetarian and vegan diets, accompanied by a small but an increasingly militant anti-meat movement. While carnivores can dismiss the most aggressive vegan campaigns as counterproductive bullying, we should consider seriously the multiple reasons that people give for stopping consumption of meat or, in the case of vegans, all animal products.

***** I have no beef with vegans.~JJL


Friday’s Top Three
Yesterday’s top story was a tie between two crypto stories from Bloomberg – Crypto’s Most-Controversial Man Explains His Cartoon Cat Fight and ICE’s Bakkt Has Issues. A N.Y. Crypto License Might Fix Them. In second was JLN’s video with Jim Downs of Connamara Systems – Finding the Perfect Matching Engine.


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CryptoMarketsWiki Coin of the Week: Zcash (ZEC)
Zcash, a privacy-focused cryptocurrency, has invested in Bolt, an off-chain piece of technology designed to speed up peer-to-peer transactions on Zcash’s blockchain. Bolt is similar to bitcoin’s Lightning Network, which also speeds up P2P transactions, but also encrypts the details of the transaction, preventing them from being read by unauthorized individuals.

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Lead Stories

States Pursue Their Own Broker-Conduct Rules; New Jersey’s proposal is latest state fiduciary standard; industry warns of unwieldy patchwork of regulations
Gabriel T. Rubin – WSJ
Several states are rolling out stricter standards for investment-broker conduct, bucking industry warnings about an unwieldy patchwork of rules around the country.

DE Shaw to revert to ‘3 and 30’ model as cost pressures bite; ‘Barbelling’ sees clients move to either cheap, simple funds or pricey, high-octane ones
Robin Wigglesworth – FT
DE Shaw is ratcheting up the cost of its flagship $14bn hedge fund despite falling fees across the asset management industry, highlighting the still-ravenous demand enjoyed by top quantitative investment groups.

Illuminating Big Data will leave governments in the dark; Private firms such as hedge funds are benefiting most from mining ‘alternative’ stats
Robin Wigglesworth – FT
Imagine a world where interminable waits for backward-looking, frequently-revised economic data seem as archaically quaint as floppy disks, beepers and a civil internet. This fantasy realm may be closer than you think.

‘Non-transparent’ ETFs set to be a boon for fund managers; Regulators give nod to new tool that mimics active fund management
Richard Henderson – FT
Buying stocks has traditionally meant making selective bets or buying an entire index ó an increasingly popular approach that catapulted the exchange traded fund to prominence.

Sears sues Lampert, claiming he looted assets and drove it into bankruptcy
Jonathan Stempel and Jessica DiNapoli – Reuters
Sears Holdings Corp sued longtime former chairman Eddie Lampert, his hedge fund ESL Investments and others like Treasury Secretary Steven Mnuchin, claiming they illegally siphoned billions of dollars of assets from the retailer before it went bankrupt.

The World’s Largest Crypto Exchange Has Launched Its Own Blockchain
Olga Kharif – Bloomberg
Binance’s ledger seen as competitor to Ethereum network
Platform will let startups issue coins directly, handle trades
Binance, the world’s largest cryptocurrency exchange, launched its own digital ledger as the fast-growing company seeks to leverage its clout to get developers to switch projects from rival platforms such as Ethereum to its own native blockchain.

Nomura boss says bank has ‘no choice’ but to change; For the second time in his seven years as CEO, Koji Nagai has announced massive cost cuts
Leo Lewis, Stephen Morris and Katie Martin – FT
When Koji Nagai enters the meeting room in Nomura’s headquarters with the Marc Chagall masterpiece at one end and the panorama of Tokyo’s financial district from the window, he looks like a leader under siege. Unfortunately, there is no sign of relief.

Stifel to Acquire Mooreland Partners; Addition of Global M&A Advisory Firm Solidifies Stifel’s Leadership in Technology
Stifel Financial Corp. (NYSE: SF) today announced it has signed a definitive agreement to acquire Mooreland Partners, a leading independent M&A and private capital advisory firm serving the global technology industry. Terms of the transaction were not disclosed.

Exchanges, OTC and Clearing

Which Stock Markets Are Closed for Good Friday
Connor Smith – Barron’s
U.S. stock exchanges were open when Tiger Woods started his incredible Masters run last week, but many traders will get a longer weekend this time around.

Gratuitous upgrade of the low-bandwidth Eurex Multi-Interface-Channel (MIC) from 5 Mbit/s to 7 Mbit/s
With this circular, Eurex Frankfurt AG is announcing the gratuitous upgrade of the low-bandwidth Multi-Interface Channel (MIC) from 5 Mbit/s to 7 Mbit/s. The change to the Price List to the Agreement on the technical connection and the utilization of the Trading System of Eurex Deutschland (Connection Agreement) to document this change will be effective as of 3 June 2019.

Pinterest shares leap 25% in spectacular New York stock exchange debut
Dominic Rushe – The Guardian
Pinterest, the digital pin board company, made a spectacular debut on the New York stock exchange on Thursday when its shares leapt 25% in its first few hours of trading.


Computer Attack Knocks Weather Channel Off the Air; FBI investigating ransomware incident at cable channel
Lillian Rizzo and Robert McMillan – WSJ
A computer attack knocked the Weather Channel off the air for more than an hour Thursday morning, and federal authorities are investigating the incident.

KRM22 Launches Conduct Risk Training Offering through Global Risk Platform
KRM22, a technology and software investment company focusing on risk management in capital markets, today announced a new partnership agreement with Dutch online training firm Entrima to make its online training portal, the Market Abuse Centre, available to buy through the KRM22 Global Risk Platform.


Mueller Report: Russia Used Bitcoin to Fund DNC Hacks
Colin Harper – Bitcoin Magazine
An intelligence branch of the Russian government used bitcoin to fund its cyberwarfare efforts to interfere with the 2016 U.S. presidential election, the Mueller Report claims. The culmination of a two-year investigation, the “Report On The Investigation Into Russian Interference In The 2016 Presidential Election” details the findings that Special Counsel Robert Mueller and his team uncovered during their inquiry into whether or not the Trump campaign colluded with Russia to hamper Hillary Clinton’s 2016 run for the presidency.

***We wrote about this in February.~MR

Russia is realizing it has no clue how to regulate cryptocurrency
Allen Scott – Bitcoinist
The proposed ‘digital assets’ law aims to “legalize ICOs” in Russia and is expected to be reviewed in May. But lawmakers are slowly realizing the futility of regulating Bitcoin and cryptocurrency that are un-regulatable by design.

Self-Described Bitcoin Creator Craig Wright Sues a Podcaster for Libel
Olga Kharif – Bloomberg
Lawsuit filed in U.K. after series of disparaging tweets; Wright’s claim to be Satoshi Nakamoto has been challenged
The Craig Wright crypto legal fight is heating up. The controversial digital-asset entrepreneur filed a claim in a British court on Wednesday, accusing podcaster Peter McCormack of writing a libelous series of tweets about him in March and April over Wright’s claim that he developed Bitcoin under the pseudonym Satoshi Nakamoto.

In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws
Yogita Khatri – Coindesk
The Financial Crimes Enforcement Network (FinCEN) has for the first time penalized what it dubs a “peer-to-peer cryptocurrency exchanger” for breaking anti-money laundering (AML) rules.

Overstock’s tZERO Token Market Misses Closing Date for $100 Million Raise
Anna Baydakova – Coindesk
Overstock’s tZERO security token trading platform has once again failed to close on a capital injection by the targeted date.

NYDFS: Why We Rejected Bittrex’s Application for a BitLicense
Shirin Emami – Coindesk
Bittrex purportedly aims to get the facts straight about the denial of its license applications by the New York State Department of Financial Services (DFS) in recent statements to the media (including CoinDesk). But, the cryptocurrency exchange leaves out the context necessary to understand its failures to comply with DFS’s licensing requirements, it continues to misstate the facts and it presents a misleading picture about the denial.

PayPal Wins Patent for Way to Defend Against Crypto Ransomware
Yogita Khatri – Coindesk
Online payments giant PayPal has been awarded a patent for a technique that could detect a type of crypto malware and mitigate its effects.

Will Binance Chain Succeed Where Other DEXs Have Failed?
Charles Bovaird – Forbes
Binance announced earlier today that it had launched the mainnet for Binance Chain. The major exchange plans to perform its mainnet swap on April 23.
Binance announced earlier today that it had launched the mainnet for Binance Chain. The major exchange plans to perform its mainnet swap on April 23. GETTY
Major cryptocurrency exchange Binance recently launched Binance Chain, a custom blockchain that features a permissionless decentralized exchange (DEX).

Japan requires cryptocurrency exchanges to tighten cold wallet security, source claims
The Block Crypto
Japanese Financial Services Agency (FSA) is planning to force cryptocurrency exchanges to tighten their security, particularly by strengthening internal oversight over cold wallets, a source told Reuters.

Ledger and Nomura’s Crypto Custody Launch May Be Delayed to 2020
Ian Allison – Coindesk
Ledger’s partnership with Japanese bank Nomura is still in full swing, but launching the institutional-grade custody solution for digital assets may take longer than expected, the crypto startup’s president said.

Crypto Startups Barred from Indian Central Bank Fintech Sandbox
Nikhilesh De – Coindesk
India’s central bank is setting up a fintech sandbox that may include blockchain startups and tools – but notably, explicitly excludes any cryptocurrency-related projects.

Charlie Shrem and Winklevoss Capital Fund privately settle bitcoin lawsuit
The Block Crypto
The Winklevoss lawsuit against Charlie Shrem for allegedly taking $61,000 to buy 5,000 bitcoin in 2012 has resulted in a private settlement, according to a court filing.

Binance Reveals Timeline for BNB Cryptocurrency’s Move Off Ethereum
Yogita Khatri – Coindesk
Cryptocurrency exchange Binance has launched its new custom blockchain, Binance Chain, which will support its $3 billion BNB cryptocurrency that currently runs on ethereum.


Climate protesters fail to ‘shut down’ Heathrow; Extinction Rebellion organisers had said they would target UK’s busiest airport
Elliott Kime and Yasemin Craggs Mersinoglu i- FT
Environmental activists who have occupied key thoroughfares in London for four days demanding the UK government declare a climate emergency failed to disrupt road traffic at Heathrow airport on Friday morning.

Barr Embarrasses Himself and the Justice Department; His strategy to spin first and release later left many questions unanswered and raised the specter of a cover-up.
Jonathan Bernstein – Bloomberg
Attorney General William Barr’s cheerleading for President Donald Trump on Thursday morning was entirely inappropriate, and forces the question of whether a cover-up is underway.

Read the Mueller Report: Searchable Document and Index
The New York Times
These findings, from the special counsel, Robert S. Mueller III, detail his two-year investigation into Russian interference in the 2016 presidential election. The document has been redacted by the Justice Department.

Politics Again: The Mueller Report And The Markets
Brad McMillan – Financial Advisor Magazine
With the Mueller report scheduled to be released later today (as of this writing), preceded by the press conference with the attorney general this morning, the newspapers are on high alert. This report is being billed as a potential constitutional crisis and, if it doesn’t approach that level (as it almost certainly will not), as the beginning of the next round of political wars. Both sides have already started dialing up the rhetoric, without even really seeing what is in the report itself. So it goes.


Cryptocurrency Trading Platforms: Do Your Homework
FINRA Staff and the BBB Institute
In the new world of cryptocurrencies and blockchain technology, a number of service providers have emerged to assist users in managing their cryptocurrencies. An important development is the emergence of cryptocurrency online platforms that let users buy, sell, exchange, and in some cases, store cryptocurrencies.

Musk and SEC request delay on deadline to resolve tweet dispute
Nicolas Vega – NY Post
Judge orders Elon Musk, SEC to put ‘reasonableness pants’ on, settle SEC claims
Elon Musk and the Securities and Exchanges Commission are still struggling to put their “reasonableness pants on.”

U.S. regulators propose rule to ease leverage rule for custody banks
U.S. banking regulators on Thursday proposed a rule that would allow custody banks to exclude deposits with central banks from a stringent capital requirement.

Investing and Trading

Funds full of returns and do-goodery just got harder to find; You aren’t just choosing a financial instrument any more, you’re choosing a moral universe
Merryn Somerset Webb – FT
There’s a stock market “melt-up” coming. So, at least, says Larry Fink, chief executive of the world’s largest asset management company, BlackRock.

One Profit Puzzle Is Weighing on Stock Investors
Sarah Ponczek and Vildana Hajric – Bloomberg
Wall Street is making several bearish cases on profit margins; Stocks hover near an all-time high as the earnings roll in
In the middle of what may be the worst quarter for company profits since 2016, there’s a common refrain: This is as bad as it will get. The last few months are the trough, and one quarter doesn’t make a year.

Fed Should Buy Muni Bonds to Fight the Next Recession; There’s a strong case for letting the U.S. central bank help states weather an economic downturn.
Brian Chappatta – Bloomberg
U.S. state governments suffered major damage from the last recession 10 years ago. During the second quarter of 2009, the final months of the downturn, personal income taxes tumbled 27 percent from a year earlier. At the same time, expenses grew as enrollment for Medicaid and state unemployment insurance soared, while crumbling asset prices suddenly left public pension systems with massive shortfalls relative to their liabilities. In statehouses across the country, money was tight, to say the least. California went so far as to issue IOUs.


Two Female Executives Top Short List for Next JPMorgan Chief
Marianne Lake and Jennifer Piepszak are viewed as possible successors to CEO James Dimon
David Benoit – The Wall Street Journal
JPMorgan Chase put two women with decades of experience at the bank at the top of the list to one day succeed James Dimon as chief executive.
Marianne Lake, who has served as chief financial officer since 2012, will leave the role to run all of the bank’s consumer-lending businesses, including its growing credit-card operations as well as auto lending and mortgages. Jennifer Piepszak, who was running JPMorgan’s credit-card business, will take over as finance chief. The changes will take effect May 1.

Merger Talks of Deutsche Bank and Commerzbank Roil Emotions
Jack Ewing and Melissa Eddy – NYTimes
If the proposed merger between Deutsche Bank and Commerzbank were a film, it would already be racking up the rotten tomatoes.

Blankfein Ignores Bank News to Help Push Daughter-in-Law’s Business
Amanda L Gordon – Bloomberg
Ex-Goldman CEO says ‘not in a steady state’ yet since retiring; Samberg, Pritzker join Blankfein at Lincoln Center jazz gala
“Boy, I really miss my old job,” Lloyd Blankfein sarcastically tweeted last week as lawmakers grilled current bank CEOs on Capitol Hill.

No Volatility, No Problem: How BlackRock, Amundi Are Beating It
Charlotte Ryan – Bloomberg
Delve into emerging markets, options and carry, funds say; Take risks as cost of being wrong is low: State Street
A collapse in volatility across currencies is leading fund managers to scour every corner of the market for profit opportunities.

Nomura CEO Vows to Stay Independent, Swiftly Cut Costs
Takashi Nakamichi and Takako Taniguchi – Bloomberg
Douses any speculation for mergers in wake of stock price drop; Signals he may step down before end of three-year revamp plan
Nomura Holdings Inc.’s chief executive vowed to keep Japan’s biggest brokerage independent and quickly implement his latest turnaround plan as a slumping share price puts the question of a potential merger in focus.


China’s Dagong rating agency taken over by state-owned investor; Poor-quality assessments seen as a barrier to foreign investment in bond market
Lucy Hornby – FT
A Chinese state-owned investment company has taken over one of the country’s better-known credit rating agencies, after regulators suspended its licences for lax corporate governance and conflicts of interest.

China Minsheng Investment embroiled in $800m of cross-defaults; Private group linked to premier shows deeper stress after missed debt payment
Don Weinland – FT
An investment group often described as the “brainchild” of Chinese premier Li Keqiang has seen cross-defaults triggered on $800m in bonds after showing signs of stress earlier this year with a missed debt payment.

China’s Far From Done With Coal as Regulator Eases New Plant Ban
Bloomberg News
11 provinces and regions allowed to build coal plants again; New plants still barred in 10 regions seen having overcapacity
Transport trucks transfer raw coal in pits in Changji Hui Autonomous Prefecture,
China allowed 11 provinces and regions to resume building coal power plants, in another sign that the world’s largest energy user is far from finished with the most-polluting fossil fuel.

WTO Finds Fault With China’s Agricultural Trade Restrictions
Bryce Baschuk – Bloomberg
The ruling can increase U.S. farmers’ access to China market; China may have to revise quota programs or face retaliation
China didn’t follow proper procedures when it imposed trade restrictions on agricultural imports, the World Trade Organization said on Thursday in a ruling that bolsters President Donald Trump’s dispute against Beijing.

Why Is Everyone Worried About Turkey’s Foreign Reserves?
Onur Ant – Bloomberg
Turkey’s central bank won’t explain what’s behind the recent moves in its foreign currency reserves — and that’s making investors nervous.

Crisis at China’s JPMorgan Wannabe Deepens on Bond Defaults
Bloomberg News
CMIG cross defaults triggered on $800 million of dollar bonds; Conglomerate earlier spooked investors with late debt payment
A debt crisis at one of China’s most well-known private conglomerates entered a new stage Thursday, with the company saying cross-default clauses had been triggered on dollar bonds worth $800 million.


Britain is once again the sick man of Europe; If treachery becomes part of the debate, there can only be total victory or total defeat
Martin Wolf – FT
When I was young, in the 1960s, the UK was known as the “sick man of Europe”, for its prolonged economic weakness. But after Margaret Thatcher’s time as prime minister, this grim epithet no longer seemed applicable. Yet now, once again, as I go abroad ó and especially in continental Europe ó people ask me, with a mixture of bewilderment, pity and Schadenfreude, “What is wrong with Britain?” I do not pretend to know the answer (or answers). But I can describe the symptoms: the UK is undergoing six crises at the same time.

Brexit inertia means London’s finance workers face summer slump
Sinead Cruise, Josephine Mason, Huw Jones – Reuters
The weeks before Easter are usually some of the busiest of the year for bankers, lawyers and consultants in the City of London, as clients rush to get deals done before a run of public holidays.

Britain Turns to Politics of Protest as Brexit Drift Persists
Tim Ross , Thomas Penny , and Lucca De Paoli – Bloomberg
“The government is completely constipated with Brexit and it needs some treatment.” This was the professional medical opinion of Alex Armitage, a pediatrician who this week took time to join the mass climate change protest in central London with his young son. The U.K. is in the grip of a political impasse that shows no prospect of easing. Theresa May’s government is failing to deliver Brexit, Parliament is deadlocked over the way forward, and the European Union’s 27 remaining nations have given the U.K. another six months to try to work it out.

Brexit: Nancy Pelosi steps up pressure on UK over Irish border
John Campbell – BBC
The impact of Brexit on the Irish border was back in the spotlight this week. The most powerful US Democrat, Nancy Pelosi, visited the border and delivered a stark message. If the UK’s manner of leaving the EU damages the Good Friday Agreement then forget about a US-UK trade deal. “That’s just not on the cards if there’s any harm done to the Good Friday accords,” she said.


Venture capital’s fate may be written in the stars; Astrology apps are the future ó and I foresee a swindle
Henry Mance – FT
Silicon Valley’s venture capitalists have found a new growth story: astrology. According to The New York Times, star-reading is having a “cultural moment”. Investors are keen not to miss out on apps such as Sanctuary, the “Uber for astrological readings”.

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