Temenos in advanced talks to buy Fidessa; Congress sets sights on cryptocurrency rules; Bitcoin surges

Feb 20, 2018

First Read

Hits & Takes
JLN Staff

This Thursday in Chicago, the FIA will hold its 2018 Annual Meeting & Washington Update where Walt Lukken will mention CQG’s Pat Kenny at least three times during his remarks. That is just my prediction.~JJL

This year’s FIA International Conference in Boca Raton, Florida will be the 43rd. The FIA Law and Compliance Division Conference on May 2 to 4 in Washington, DC will be its 40th.~JJL

Trading Technologies’ annual Tennis Tournament benefiting Futures For Kids will be held on March 13th at FIA Boca. Sign up here.~JK

Euronext is participating in the World Exchange Congress, the largest meeting for senior executives of the world’s trading venues.~JJL

Bills and note auctions today! First up are 3-month and 6-month bills, then 4-week bills and 2-year notes.~SD

Since the CPI has been in focus due to inflation concerns, check out the NPR Planet Money episode “The Price Of Lettuce In Brooklyn” which gives an inside peek at the federal employees who go around gathering the prices that constitute the CPI.~SD


Wedbush’s Bob Fitzsimmons Says We’re Just Beginning To Build A Market For Bitcoin
John Lothian News
Q: Now almost two months into the launch of bitcoin futures, how would you assess them?
A: I think it has done incredibly well. There are a lot of MIT Ph.D.s who have been mining these things for years. I’m surprised at how long this has been out there in terms of digital currencies and how many businesses have been built out there. Then you get off on tangents such as ICOs and then the ponzi schemes. There are some legitimate businesses out there that many people are a part of. It’s like 1989 and someone is trying to predict where the internet is going. So long-term, we’re only just beginning. If we look at this in battle terms, the volumes we are seeing in futures are just skirmishes.

**Interesting Q&A with Bob Fitzsimmons from last week’s CryptoCon event.~JK


Rosenthal Collins Group Promotes Manumaleuna To President, Mackey To Deputy President
Rosenthal Collins Group LLC (RCG), a leading independent futures brokerage and clearing firm, today announced the promotions of Jason Manumaleuna to President and Richard Mackey to Deputy President.

***** Does Rich Mackey get a badge for being a deputy? Congratulations to both on their promotions.~JJL


Students Ratcheting Up Anti-Gun Protests After School Shooting; As nationwide marches and walkouts are in the works, one mother says of politicians: ‘Our kids are coming after them for change’
Cameron McWhirter – WSJ
High-school students are planning marches and school walkouts across the country in the coming weeks and months as the number of protesters on social media grows, galvanized by last week’s school shooting in Florida that left 17 dead.

*****Young people have the potential to change politics in the U.S. if they can coalesce around this issue of universal concern. This generation is connected to each other like none before. Stay tuned.~JJL


How Banks Could Control Gun Sales if Washington Won’t
Andrew Ross Sorkin – NY Times
For the past year, chief executives have often talked about the new sense of moral responsibility that corporations have to help their communities and confront social challenges even when Washington won’t.

****** Banks have a big public relations issue. Helping fix the gun problem in the U.S. could go a long way to restoring their reputations.~JJL


Monday’s Top Three
Yesterday’s top read piece was led by Gary DeWaal’s Bridging The Week, which led with the CFTC action against a firm that failed to supervise, leading to a cyber attack. Second went to Reuters’ piece LSE goes head to head with ICE over Libor replacement. Third went to Bloomberg’s piece What Shaped the Stock Market’s $3 Trillion Trauma

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Lead Stories

Temenos in advanced talks to buy Fidessa
Philip Stafford – FT
Temenos, the Swiss banking software supplier, is in advanced talks to buy Fidessa in a deal that values the UK trading and technology vendor at more than £1.3bn.

****Reuters here.

Congress sets sights on federal cryptocurrency rules
David Morgan – Reuters
Jolted by the global investment craze over bitcoin and other cryptocurrencies, U.S. lawmakers are moving to consider new rules that could impose stricter federal oversight on the emerging asset class, several top lawmakers told Reuters.

Bitcoin Rises as South Korea Talks ‘Active’ Support for Trading
Eric Lam – Bloomberg
Largest cryptocurrency extends rally after passing $11,000; S. Korea wants to see ‘normal’ trading in digital tokens
Bitcoin’s stunning rebound continued on Tuesday, with the world’s largest digital token extending February’s gains after South Korean regulators signaled they will actively support what they called “normal” cryptocurrency trading.

Washington’s $500 Million Financial-Storm Forecaster Is Foundering; Office of Financial Research was supposed to anticipate trouble and issue warnings, but initiatives have been delayed or scaled back
Ryan Tracy – WSJ
Congress created a brand new agency after the 2008 financial crisis with a gargantuan mission: Serve as the finance world’s version of the National Weather Service.

Global regulators neutral on new rules for ‘hyped’ fintech
Huw Jones – Reuters
Global banking regulators signaled on Monday they were in no rush to adapt their rules to financial technology firms that have begun nibbling away at banks’ markets. The regulators looked at how fintechs could disrupt banks’ business models by offering payments services, crowdfunding, mobile banks and online trading.

Morgan Stanley Says Stock Slide Was Appetizer for Real Deal
Chris Anstey – Bloomberg
The U.S. stock market only had a taste of the potential damage from higher bond yields earlier this year, with the biggest test yet to come, according to Morgan Stanley.

Tudor Veteran Says a Little More Inflation Could Rock Bonds
Adam Haigh – Bloomberg
Ellerston Capital’s institutional global macro fund up 6.9%; Brett Gillespie is betting bond-market sell-off not over yet
The apparent stabilization in the bond market of the past couple weeks could just mark the eye of the storm, according to a former Tudor Investment Corp. trader whose bets on ructions in fixed income have been paying off.

South Korean Cryptocurrency Regulator Found Dead at Home; Jung Ki-joon was 52 years old
Steven Russolillo in Hong Kong and Min Sun Lee – WSJ
A South Korean official who guided Seoul’s regulatory clampdown on cryptocurrencies was found dead on Sunday, according to a government spokesman.

PayPal’s Vision for the Future of Mobile Payments; John Rainey, CFO, explains the allure of Venmo for millennials
Kari Paul – WSJ
PayPal is growing fastóand so are its competitors.
The global payments giant has 227 million active customer accounts, 8.7 million added in just the fourth quarter. One of its newer products, Venmo, a peer-to-peer mobile-payment platform with a social-media feature, has become a verb to many young customers. Venmo processed payments totaling $10.4 billion in the fourth quarter, up 86% from a year earlier.

Vote Again on Brexit; The U.K.’s voters should get a chance to change their minds.
Editorial Board – Bloomberg
Almost two years after the U.K. voted to quit the European Union, and barely more than a year before the actual exit is scheduled to happen, an all but leaderless Britain is fumbling its way to disaster. The country needs to find a way to change course. There should be a second referendum as soon as possible.


Exchanges, OTC and Clearing

Ireland steps up plans to avoid market disruption from Brexit; Euroclear moves to build settlement facility for Irish securities by March 2019
Philip Stafford in London – FT
Ireland’s efforts to build infrastructure that will prevent its securities markets being upended by a hard Brexit were boosted after Euroclear announced plans to create a settlement system that does not rely on London.

Japan’s cryptocurrency exchanges to form new self-regulating body: sources
Takahiko Wada – Reuters
Sixteen Japanese cryptocurrency exchanges will fix plans as early as next week to create a self-regulating body in a bid to better safeguard investors after a $530 million digital money heist last month, two source familiar with the plan said.

HKEX Connect Hall Inaugurated As Trading In Year of Dog Begins
Hong Kong Exchanges and Clearing Limited (HKEX) on Tuesday celebrated the Year of the Dog’s first trading day with the unveiling of the HKEX Connect Hall, an iconic venue for Hong Kong’s financial community that exemplifies HKEX’s mission in connecting global markets and forging lasting relationships.

Hong Kong gold exchange seeks to create gold trading corridor along Belt and Road
South China Morning Post
Creation of such a gold trading corridor could boost demand for 1kg gold bars while also increasing turnover for yuan-denominated products, says exchange president


Bitcoin Thieves Threaten Real Violence for Virtual Currencies
Nathaniel Popper – NY Times
The currency they were after was virtual, but the guns they carried were anything but. In the beach resort of Phuket, Thailand, last month, the assailants pushed their victim, a young Russian man, into his apartment and kept him there, blindfolded, until he logged onto his computer and transferred about $100,000 worth of Bitcoin to an online wallet they controlled.

BlackRock bulks up research into artificial intelligence; World’s biggest investment group to create AI lab in Palo Alto
Robin Wigglesworth and Chris Flood – FT
BlackRock is setting up a new centre dedicated to research in artificial intelligence, underscoring the heightened interest among asset managers in how machine learning can revolutionise many facets of the investment industry.

2,000 Confiscated Bitcoins Create a Storage Puzzle in Finland
Kati Pohjanpalo – Bloomberg
Authorities given virtual-currency guidelines by Treasury; Treasury says cryptocurrencies should be stored offline
Finland is trying to figure out how to handle the roughly 2,000 Bitcoins authorities in the country have confiscated.

Commodities Shipper Seeks $150 Million to Start Digital Coin
Isis Almeida – Bloomberg
Prime Shipping Foundation is looking to raise funds mid-2018; New digital coin meant to speed bulk freight settlement
The shipping agency that struck the first freight deal settled in Bitcoin is now seeking $150 million to launch its own cryptocurrency.

Is Big Tech facing its version of the 2008 financial crisis?; Ten years after the global banking collapse, is 2018 the year when Big Technology faces its own existential crisis?
Charlie Beckett – London School of Economics and Political Science
Ten years ago, not all financial institutions were the same or equally culpable, though the causes and impacts of that economic disaster were systematic, widespread and long-lasting. That sector struggled to respond to public anger in a way that has left a legacy of mistrust with those brands and, arguably, with the kind of capitalism they represented.

Bringing Swiss order to initial coin offerings; The national watchdog’s attempt at regulating the market makes some sense
Switzerland, as a financial centre, has a double reputation. On the one hand, clockwork: practical, competent, reliable. On the other, chocolate: indulgent and dark. The country’s private banks are still living down their reputations as facilitators of tax evasion. It is natural, then, that there should be knowing smiles at the news that Switzerland is keen to become a hub for cryptocurrency finance, and initial coin offerings in particular.


How to Test Your Favorite Conspiracy Theory; In most cases, witnesses are unreliable, and the stories are too complicated to be true.
Tyler Cowen – Bloomberg
I am of the view that incompetence, random error and sheer complexity explain most of the mistakes and strange events in our world, and that we shouldn’t readily jump to conspiracy theories. I’m pretty sure Neil Armstrong did walk on the moon, and still inclined to think (although not certain) that Lee Harvey Oswald acted alone, there is no Bigfoot and aliens have not recently visited humans on Earth.

Donald Trump ranked worst president in US history by nearly 200 political scientists; The president ranks even below Richard Nixon
Emily Shugerman – Independent
Nearly 200 of America’s top political scientists have voted Donald Trump the worst president in US history.

A decade after meltdown, Senate moves to roll back bank rules; That the legislation is coming 10 years after the worst credit crunch since the Great Depression has fueled passions around the debate.
Zachary Warmbrodt – Politico
U.S. senators are planning to mark the 10th anniversary of Wall Street’s meltdown this year with a gift to the nation’s banks: a bill that would unravel regulations put in place after the crisis.

If Trump has nothing to hide, why is he so soft on Russia?
Walter Shapiro – The Guardian
This is a question the press must keep asking over and over again – until they receive an answer


FCA launches call for input on the use of technology to achieve smarter regulatory reporting
The Financial Conduct Authority (FCA) has today announced that it is seeking views on how technology can make it easier for firms to meet their regulatory reporting requirements and improve the quality of the information they provide.

Operation of the MoU with the Bank of England for market infrastructure – 2017 performance statement
Domestically, the Bank co-operates closely with both the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) in relation to supervising market infrastructure and payment systems respectively. The frameworks for co-operation are set out in Memorandums of Understanding (MoUs) which are reviewed annually by the parties involved, including by seeking feedback from supervised Financial Market Infrastructures (FMIs). Co-operation supports effective supervision and policymaking by sharing information between the regulators and promotes efficiency by minimising duplication.

FCA and CFTC join forces on FinTech; FinTech agreement is the first of its kind between US and UK financial authorities.
Hayley McDowell – The Trade
Financial authorities in the UK and in the US have agreed to work together and support technology start-ups through each other’s FinTech initiatives.

Strict US market rules limit corporate sellers of green bonds; Litigation fears deter North American companies from environmentally-labelled debt
Kate Allen – FT
Companies seeking to raise green-labelled finance are avoiding the US market over fears that supposedly environmentally-friendly debt will not meet the country’s strict legal standards, which aim to protect investors from mis-selling.

William Hill fined £6.2m for failure to prevent money laundering; Bookmaker profited from customers who may have used crime proceeds, regulator finds
Murad Ahmed and Nicholas Megaw – FT
William Hill has been handed the second-largest fine issued to a UK gambling operator following “systemic” failures to prevent money laundering and problem gambling.

Investing and Trading

Natural Gas Industry Surprised It Could Be So Much Cleaner
Matthew Carr – Bloomberg
Industry tends to underestimate need to cut methane: institute; CCS is probably needed to meet Paris climate limits: Cicero
The natural gas industry may be one of its own worst enemies.

BHP Is Still Caught Between a Rock and an Oil Well; BHP is emerging as a copper powerhouse, but that strength conceals some troubling signs in oil and coal
Nathaniel Taplin – WSJ
Everyone knows that breaking up is hard to do. That is especially true when the assets you are bidding farewell to suddenly start looking more attractive.

How Will the Buy Side Evidence Best Execution for Corporate Bond Trading Under MiFID II?
Rebecca Healey, Liquidnet via TABB Forum
The opportunity cost of corporate bond trading often remains a secondary consideration given the lack of price transparency and limited liquidity. But MiFID II’s unbundling rules will drive a new evolution in execution performance and liquidity provision. The latest installment of Liquidnet’s ‘New Execution Champions’ report focuses on how firms will respond to the new regulatory obligations, in particular on the need to evidence best execution. Download a complimentary copy here.

Oil Prices Diverge as Investors Mull U.S. Crude; Investors assessing conflicting recent U.S. data
Neanda Salvaterra – WSJ
Oil prices were mixed Tuesday, as lower-than-expected inventories buoyed the U.S. crude grade while refinery maintenance in Europe weighed on oil prices in the region.

KFC runs out of chicken in logistics fiasco; Most UK outlets closed after new DHL supply deal fails to deliver
Cat Rutter Pooley – FT
Almost two-thirds of the UK branches of KFC remained closed on Monday after the breakdown of a new supply contract for chicken with delivery network DHL, which had promised to set “a new benchmark” for service to the global fast food outlet.

How to Survive the Regime Change in Markets; The phase of the European Central Bank’s pledge to do “whatever it takes” is coming to an end
Richard Barley – WSJ
The dust appears to be settling in markets: stocks rebounded sharply last week. But compared with previous market wobbles, there are key differences. Central bankers especially will take this as an important cue.


HSBC Misses Profit Target as Bad Loan Charges Weigh on Results; Bank hit by the high-profile collapses of two borrowers in the U.K. and South Africa
Margot Patrick – WSJ
HSBC Holdings PLC’s full-year profit missed analysts’ expectations after the bank was hit by the high-profile collapses of two borrowers in the U.K. and South Africa.

HSBC’s Gulliver bows out with mixed results; Shares slide despite bank showing first revenue gain in 6 years
Don Weinland and Martin Arnold – FT
Departing HSBC chief Stuart Gulliver has signed off with mixed results for 2017, hitting several hard-fought targets but also coming in below analysts’ expectations on profits and revenues in the fourth quarter.

HSBC Says Swiss Bank Tax Probe Could Cost More Than $1.5 Billion
Gavin Finch – Bloomberg
Bank fined 300 million euros by French authorities last year; The firm had related provisions of $604 million at end of year
HSBC Holdings Plc said it could face penalties exceeding $1.5 billion stemming from multiple investigations into claims that its Swiss private bank unit helped clients evade paying taxes.

Germany’s Oldest Bank Is Pushing Into U.S., Hiring Analysts
Stephen Kahl – Bloomberg
Berenberg wants to cover 300 U.S. stocks within two years; Bank moves into new New York office for up to 150 employees
About 130 years after leaving the U.S., Germany based lender Joh. Berenberg Gossler & Co. KG is pushing back to the other side of the Atlantic. The second oldest bank in the world after Banca Monte dei Paschi di Siena S.p.A. wants to expand coverage of U.S. stocks dramatically.


Latvian Premier Says Norvik Banka Seeks to Hurt Country’s Image
Aaron Eglitis – Bloomberg
Prime Minister Maris Kucinskis lashed out at representatives of Norvik Banka JSC, saying that they’re trying to hurt Latvia’s image following a report that the lender was asked for bribes by central bank Governor Ilmars Rimsevics.

Latvia’s banking sector rocked by U.S. probe, central bank chief’s detention
Gederts Gelzis – Reuters
Latvia’s ABLV Bank sought emergency support on Monday after U.S. officials accused it of helping breach North Korean sanctions while the country’s central bank chief faced bribery allegations, turning up the spotlight on its financial system.

‘A nightmare’: Banker tells tale of Latvian corruption
Associated Press
Latvia’s top banking official explained the “rules of the game” for successful banking in the small European country. His sidekick sat the owner of Norvik bank down, scribbling the sum on a piece of paper: 100,000 euros ($125,000) a month.

Russia set for rating review by S&P, Fitch, upgrade in prospect
Andrey Ostroukh – Reuters
Russia may get a long-awaited upgrade to its sovereign ratings this week when international rating agencies are expected to consider a diminished risk of new sanctions and improved economic fundamentals, analysts and officials said.


SacrÈ bleu! Paris lags in bid to lure City financiers as Frankfurt leads the way
Jasper Jolly – City AM
A Parisian charm offensive, designed to lure financial businesses to France in the wake of Britain’s decision to leave the EU, appears to have floundered according to commercial property data obtained by City A.M.

Campaigners to stop Brexit prepare 6-week advertising blitz; Billboard and digital publicity will target voters in the Midlands and north
Henry Mance in London – FT
Exactly two years ago David Cameron returned from talks in Brussels to launch the campaign to keep Britain in the EU. Now a handful of well-funded groups are trying to succeed where Mr Cameron failed.

Corbyn Vows to Stop Hostile Bids and Humble the City of London
Flavia Krause- Jackson – Bloomberg
Labour leader vows to make finance the ‘servant of industry’; In speech to manufacturers he cites Melrose and GKN as example
Jeremy Corbyn pledged that a Labour government would make it harder for asset strippers to take over U.K. companies while vowing to make finance the “servants of industry not the masters of us all.”

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