The index providers are quietly building up enormous powers; The Dog That Didn’t Bark: What Soybean Prices Say About Trade Deal

Jan 20, 2020

First Read

Hits & Takes
By JLN Staff

Today is the Martin Luther King Jr. Day holiday in the U.S. and JLN will not be publishing its Options Newsletter today. In fact, after JLN goes out, the team has the rest of the day off, or you could say after JLN goes out, they are “free at last.”~JJL

Bitcoin options had a newsy time last week. On Monday, the CME launched cash-settled five-bitcoin options, the same size as their futures contract. First day trading volume was 55 contracts, only five of which traded on Globex. The next three days’ volumes totaled only 54 option contracts. Over at ICE, the futures on their one-bitcoin options traded lightly as the contract went through its first ever expiration. 36 of the European-style calls were exercised into the January futures contract on Monday. ICE’s report center might need to take a close look at its website because not only is there no report for Tuesday, but 24 January calls and 25 January puts were phantom – neither offset or exercised. Further afield, Deribit, the world’s largest bitcoin options exchange, announced that it will spare its customers undue anti-money laundering compliance burdens by moving out of the EU to Panama next month.~ Thom Thompson

The New York Times Editorial Board has broken with convention and endorsed two separate women for the Democratic nomination for President of the U.S., Amy Klobuchar and Elizabeth Warren.~JJL

Chuck Mackie has a recap of day one of last week’s STAC conference, “Alive and Kicking: STAC Mid-Winter Meeting” on his Medium page. He called the meeting “refreshing” and “cutting edge” – with such topics as Cannabis, Women in Finance, and ESG and Cryptoassets.~SR

Here is the modified trading schedule for the Cboe on Martin Luther King Day in the U.S.~JJL

Tomorrow the Cboe is holding their annual press lunch in Chicago. It is a good chance to put the senior leaders of the Cboe on the record with tough questions.~JJL

Along with other trade associations, AFME published a letter on how areas of #Mifid2 need to be recalibrated to avoid unintended harm to the market and to deliver on the intended outcome of the policy.~JJL

Debbie Carlson has published a piece titled “A Beginner’s Guide to Alternative Investments” on


The Spread: It Takes Two to Contango

This week on The Spread – low natural gas prices lead to an increase in swaptions trading, the CME has another successful launch, and a Binance-backed exchange boasts a ton of trading volume.

Watch the video »



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Replacing the Wisdom of Crowds With the Wisdom of Fink; BlackRock CEO’s push toward ESG investing highlights the power he wields over the direction of corporate America
James Mackintosh – WSJ
Climate change poses two distinct risks for investors, and a special one for fund managers. The pledge last week by Larry Fink, CEO of fund giant BlackRock Inc., to push clients toward environmental, social and governance investing highlights another risk: that markets are shifting from harnessing the wisdom of crowds to the wisdom of a handful of powerful money-management executives.

*****Leadership can influence the crowds. The premise is baloney.~JJL


Airbus plans derivatives trading for airline tickets; Skytra to offer futures and options contracts based on indices that track price changes
Philip Stafford and Peggy Hollinger – FT
Airbus is setting up a trading venue for derivatives designed to hedge the air travel industry’s exposure to highly volatile ticket prices. The European aircraft manufacturer is due to announce the project, named Skytra, on Monday after more than two years of preparation.

*****I think I will bag a few trades with this new contract. The option contracts are supposed to even have extra leg room.~JJL


People no longer believe working hard will lead to a better life, survey shows
ABC Australia
A growing sense of inequality is undermining trust in both society’s institutions and capitalism, according to a long-running global survey. The 2020 Edelman Trust Barometer – now in its 20th year – has found many people no longer believe working hard will give them a better life.
Despite strong economic performance, a majority of respondents in every developed market do not believe they will be better off in five years’ time.

*****There are some pretty stiff headwinds out there, but those same winds can be used to soar ahead. Work smarter, not just harder.~JJL


Spoofing; Compliance Officer Fined and Banned; Security or Virtual Currency?
Gary DeWaal – Bridging the Week
A non-US-based investment and brokerage firm agreed to settle spoofing allegations by the Commodity Futures Trading Commission by payment of a US $700,000 fine. In accepting this settlement, the CFTC emphasized the cooperation of the defendant. Separately, a Dubai court declined to authorize an appeal of a fine and ban on assisting financial services firms in the Dubai Financial Centre imposed on a compliance officer by the Dubai Financial Services Authority. DFSA claimed that the compliance officer recklessly provided false information to it for approximately two years.


Friday’s Top Three
Our most read story on Friday was the big story, India’s NSE overtakes CME Group as largest derivatives exchange globally, from The Trade News, citing the FIA’s newly released volume statistics. Second was Is CME Group Inc. Excessively Paying Its CEO?, from Yahoo Finance, about Terry Duffy’s salary and compensation. Spoiler alert: the answer is no. And in third place was Nasdaq Decodes: Tech Trends 2020, from Nasdaq.


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Lead Stories

The index providers are quietly building up enormous powers; Passive investing’s rise has helped make the benchmark setters the new gatekeepers of capital
Robin Wigglesworth – FT
Last summer, US senator Marco Rubio sent an incendiary open letter to MSCI — a financial index provider and analytical software provider little-known outside the world of investing. He accused it of putting US pensioners at risk, supporting Chinese human rights abuses and even imperilling American national security.

The Dog That Didn’t Bark: What Soybean Prices Say About Trade Deal; China’s promise to buy more U.S. farm products hasn’t pushed up agricultural futures—a sign of doubt about the real economic impact
Jon Hilsenrath – WSJ
In an 1892 mystery story by Sir Arthur Conan Doyle, Sherlock Holmes figures out what happened to a missing racehorse named Silver Blaze by observing a dog that didn’t bark in the night. Likewise, sometimes what doesn’t happen in markets can be a clue to something significant.

Citadel Securities Agrees to $97 Million Settlement in China
Bloomberg News
Amount is more than four times Goldman Sachs agreed to pay; Settlement may free Citadel Securities to resume expansion
Citadel Securities LLC agreed to pay a 670 million-yuan ($97 million) settlement for alleged trading irregularities during the 2015 market rout in China. The settlement was announced by the China Securities Regulatory Commission in a statement on its website. With that, the regulator has ended investigation into suspected account and asset management rule violations, it said, without giving more details. Citadel has tightened its internal controls accordingly, said the CSRC.

After a Four-Year Freeze, Citadel Securities Can Trade Again in China; Brokerage’s Shanghai-based unit pays $97.6 million to resolve probe of trading practices
Stella Yifan Xie – WSJ
Citadel Securities’s long wait for resolution in China is over. China’s stock-market regulator on Monday said a Shanghai-based unit of Citadel Securities LLC paid 670 million yuan ($97.6 million) to resolve a probe into its trading practices in 2015, during a historic plunge in Chinese stocks that year.

Why banks are bowing out of Europe’s bond markets; Number of primary dealers is around the lowest in data going back to 2006
Philip Stafford – FT
Ultra-low interest rates and reduced trading profits are taking their toll on the banks that play a pivotal role in Europe’s sovereign debt markets.

Global Banks Rush Back Into Repo Markets; Increased dependence comes as growth among the main shadow-banking funding sources has slowed
Paul J. Davies – WSJ
Global banks’ use of funding from markets rather than from customer deposits has grown rapidly in recent years, mostly in the form of short-term funding, which was a central problem of the 2008 financial crisis, according to a body that monitors global financial risks.

The End of Libor Is a $12 Trillion Headache for Loan Bankers
Jacqueline Poh and Ruth McGavin – Bloomberg
The whole financial world is working to move away from Libor and other interbank lending benchmarks, which for decades have been used to set borrowing costs on bonds and loans, as well as products ranging from derivatives to credit cards. Since 2018, more than $150 billion worth of bonds have been sold using rates set by a new generation of benchmarks. The syndicated loan market is lagging far behind, with at least $12 trillion of deals needing to be replaced or rewritten so they follow a Libor alternative. There are no easy fixes in sight despite potential deadlines as early as this year.

Buy-side firms face up to operational challenges of incoming collateral rules; Despite the extension to comply with the final phase of the uncleared margin rules, major operational challenges remain for buy-side firms.
Charles Gubert – The Trad
In July 2019, the Basel Committee on Banking Supervision (BCBS) along with the International Organisation of Securities Commissions (IOSCO) provided a respite for firms caught out by the incoming bilateral margining rules for non-centrally cleared derivatives.

Life on the front lines
Head trader for EMEA equities at Invesco, David Miller, has spent almost 40 years on the frontlines of the European trading landscape. The winner of The TRADE’s prestigious buy-side lifetime achievement award talks about his career from the floor of the London Stock Exchange in the 1980’s to Invesco’s trading desk today, and why the buy-side are now the primary price makers in the market.
John Brazier – The Trade
There probably aren’t that many people in the UK that can claim to have four consecutive generations of heritage in the trading world, but Invesco’s head trader for EMEA equities, David Miller, is one such example.

Ex-con hedgie Boaz Manor charged in $30M cryptocurrency fraud scheme
Thornton McEnery – NY Post
A convicted hedge-fund swindler assumed a fake name and donned a disguise to lure investors into a $30 million cryptocurrency fraud in New York that spanned two years, the feds alleged on Friday.

Brian Moynihan: focused on remembering the financial crisis; Bank of America chief is ensuring his bank doesn’t forget the mistakes of the past
Laura Noonan and Robert Armstrong – FT
Ten years into his leadership of Bank of America, and a quarter of a century in finance, Brian Moynihan has seen it all. The highs of boom times, the sharp lows of the 1990s recession, which he describes as his “graduate school”, and the even darker days of the financial crisis and the lay-offs that followed.

‘Green Swan’ Climate Event Could Trigger Global Financial Crisis, BIS Warns
Jana Randow – Bloomberg
Officials say global warming could trigger systemic turmoil; Villeroy urges ECB collateral rule overhaul to reflect risks
Climate change threatens to provoke “green swan” events that could trigger a systemic financial crisis unless authorities act against such risks, according to the Bank for International Settlements.

Can You Get $10 Billion of Stock Orders in 10 Hours? Active managers are still making money in China. With the market opening up to foreigners, Goldman Sachs and BlackRock are piling in.
Shuli Ren – Bloomberg
The last place on earth where bankers and traders can make real money is opening up. As part of its trade deal with the U.S., China vowed to grant Western financial institutions more access to its $14 trillion wealth-management industry. A number of foreign-controlled joint ventures with banks are in the works. Days before Christmas, Beijing approved the first one, a tie-up between Amundi Asset Management and a unit of Bank of China Ltd. Shortly afterward, China Construction Bank Corp. agreed to partner with BlackRock Inc. and Temasek Holdings Pte, while Industrial & Commercial Bank of China is flirting with Goldman Sachs Group Inc.

Exchanges, OTC and Clearing

Three questions: Danny Chart on the industry’s first dealer-to-client central limit order book
TRAD-X, the industry’s first dealer-to-client (D2C) pure electronic central limit order book (CLOB) completed several live transactions in euro interest rate swaps between dealers and non-dealers. We spoke to Danny Chart, Head of OTC Product & Clearing Business Development at Eurex Clearing, about the implications for the market.

Moscow Exchange: The Additional Trading Session Starts Later For Derivatives Market On 6, 13, 14, 19, 20, 25 And 27 February 2020
Please note that the Derivatives Market evening trading session will begin five minutes later, i.e. at 7:05 pm MSK, on 6, 13, 14, 19, 20, 25 and 27 February 2020, as these are the last trading days for options contracts (in accordance with clause 7.2 of the Rules of organized trading for the Moscow Exchange Derivatives Market).

TADAWUL Announced the Approval of the Derivatives Exchange Trading and Membership Rules and Procedures.
In reference to the public consultation drafts of the Derivatives Exchange Trading and Membership Rules and Procedures announced by the Saudi Stock Exchange (Tadawul) on 17/7/1440H Corresponding to 24/3/ 2019G, and after extensive consideration on the suggestions and the comments received and applied the necessary amendments. The Exchange (Tadawul) announces that the Board of the Capital Market Authority (“CMA”) has issued its Resolution Number (2-137-2019) Dated (12/4/1441H) Corresponding to (9/12/2019G) regarding the approval of the Exchange Rules below:


ICAP founder gives backing to £100m fintech fund; Michael Spencer to invest £25m in markets technology fund Element Ventures
Philip Stafford – FT
Michael Spencer, one of the City’s best-known entrepreneurs, has become the cornerstone investor for a new UK fintech fund that aims to raise up to £100m.

Artificial Intelligence ‘Needs to Be Regulated’, Says Google CEO
Natalia Drozdiak – Bloomberg
Sundar Pichai speaks on AI at Bruegel event in Brussels; EU is set to unveil plans for AI legislation in mid-February
Alphabet Inc.’s chief executive officer urged the U.S. and European Union to coordinate regulatory approaches on artificial intelligence, calling their alignment “critical.”

FinTech Trade Association Appoints Renowned Industry Expert As Its European Leader
Ghela Boskovich, the economist, fintech expert and diversity champion has been appointed as the European Chapter Leader at the Financial Data and Technology Association (FDATA). She goes into post with immediate effect and joins fellow chapter leaders at FDATA North America, FDATA Australia/New Zealand and FDATA Asia.

After Plaid’s $5.3 Billion Sale, Which Fintech Is Next?
Luisa Beltran – Barron’s
Plaid’s $5.3 billion sale to Visa is expected to spur M&A activity, but don’t expect a flood of venture-backed fintech sales.
Visa (ticker: V) surprised many when it announced its $5.3 billion purchase of six-year old startup Plaid on Jan. 13. Founded in May 2013, Plaid provides technology that eases consumer payments. The company’s platform lets users connect their bank accounts to finance apps and transfer money. For example, Plaid’s technology lets Venmo’s customers pay their friends and family. Plaid works with other well-known fintechs, including investment platform Robinhood; Transferwise, which offers international money transfers; and Coinbase, a digital currency exchange.

Fenics GO announces leading liquidity provider Citadel Securities joins its electronic trading platform for exchange listed futures and options
Fenics GO, a division within BGC Partners, Inc. (NASDAQ: BGCP) (“BGC Partners,” “BGC” or the “Company”), today announced that Citadel Securities, a leading global market maker, has joined its pioneering electronic trading platform for exchange listed futures and options. Citadel Securities joins IMC, Maven Securities and Optiver in providing committed two-way liquidity in Eurex listed Euro Stoxx 50 Index Options and related Delta 1 strategies through the Fenics GO platform.


Facebook’s ‘Failed’ Libra Cryptocurrency Is No Closer to Release
Hugo Miller – Bloomberg
Facebook cryptocurrency unit picked Geneva as its base; Policy makers worldwide have expressed concerns about project
Facebook Inc.’s Libra cryptocurrency starts 2020 looking no closer to release, with authorities in its base in Switzerland raising fresh questions about its suitability as a global currency.

Peter Schiff Says He’s Lost His Bitcoin After Wallet Freeze-Out
Eric Lam – Bloomberg
Cryptocurrency skeptic Peter Schiff said he can’t access his Bitcoin holdings after his digital wallet stopped accepting his password.

What Abkhazia’s crypto dalliance teaches us about monetary sovereignty
Financial Times – Maximilian Hess
Carry trade investors are always on the lookout for new havens. Low interest rates in developed markets have accelerated capital flows into ever more frontier-markets. Yet there is one such territory – not found on most maps – where the returns on offer seem genuinely too good to be true: Yield-hungry investors feast your eyes upon Abkhazia!

Bitfinex Investor’s Crypto Lending Startup Posts $2.3M in 2019 Revenue
Wolfie Zhao – Coindesk
China-based RenrenBit, a peer-to-peer cryptocurrency lending and wallet startup, has disclosed it took $600,000 in net income from revenue of $2.3 million in 2019. The startup, founded by well-known Chinese over-the-counter trader Zhao Dong, who’s also an investor in Bitfinex and Binance, published an unaudited income statement on Monday as part of its commitment to revealing financial data when it raised $21 million in a token sale last year.

Russia’s New Prime Minister Wants Cryptocurrency To Be Taxed
Kenneth Rapoza – Forbes
Russia’s new Prime Minister, Mikhail Mishustin, is a former tax man. And he’s coming for Russia’s Bitcoins. Mishustin was the director of the Russian version of the Internal Revenue Service. One of his most noted achievements was to stop fraud in VAT tax refunds, and reduce red tape so companies are not being audited all the time. He is known as being tough on tax fraud, which is not easy in Russia, considering its wealthiest have been hiding money in Cyprus, the Caymans, and elsewhere since the fall of the Soviet Union when they first took money out in droves.

Libra Association Member Anchorage Opens Up One-Stop Crypto Shop
Darryn Pollock – Forbes
Anchorage, the qualified custodian company aiming at institutional investors, has announced it will be expanding its services to not only hold onto clients’ cryptocurrency, but also allow them to trade. Anchorage Trading is the new brokerage service from the Libra Association member that will allow institutional clients the chance to buy and sell crypto through the company’s expert traders.

Oklahoma lawmaker proposes state-chartered crypto depository
Mike McSweeney – The Block
A lawmaker in the U.S. state of Oklahoma has proposed creating a state-chartered financial institution that, if approved, would serve as “the central depository for virtual currency used by governmental agencies in this state.” The measure, sponsored by state senator Nathan Dahm, seeks to provide a level of state-backed infrastructure for work done related to cryptocurrencies and blockchain. According to public records published via LegiScan, the proposed bill’s introduction date is Feb. 3rd, indicating that the bill is at its earliest stages in development.

Why the World Economic Forum Is Creating a Blockchain ‘Bill of Rights’
Sheila Warren, Sumedha Deshmukh – Coindesk
Sheila Warren is the Head of Blockchain and Distributed Ledger Technology at the World Economic Forum. Sumedha Deshmukh is a Project Specialist on the Blockchain and Distributed Ledger Technology team at the World Economic Forum. The opinions expressed here are their own.

South Korea plans 20% tax on crypto gains
Yogita Khatri – The Block
The government of South Korea is planning to charge a 20% tax on income from cryptocurrency transactions. The country’s Ministry of Economy and Finance recently ordered its office of income tax to review a crypto taxation plan, local news outlet Pulse reported Monday, citing “multiple” government sources. Previously, the ministry’s office of property tax had reviewed the plan.

How Was It Possible for Bitmain to Oust Its Largest Shareholder Overnight?
Wolfie Zhao – Coindesk
Co-founder Ketuan “Micree” Zhan was stripped of his director role at not only Beijing Bitmain Technology, but the cryptocurrency miner maker’s parent entity, BitMain Technologies Holding Company, corporate records show.

Libra won’t launch in 2020, majority of 2020 Outlook Survey respondents say
The Block
Most respondents to The Block’s 2020 Outlook Survey believe Libra, the cryptocurrency project begun by Facebook, won’t launch this year. Of the 106 respondents – drawn from the worlds of venture capital investing, financial services, and the digital assets industry as a whole – 72 or 67.9% of them said “no” when asked whether Libra will launch in 2020. Thirty-four or 31.1% of participants said “yes.”

Bitcoin miners made an estimated $5 billion in revenue during 2019Mike McSweeney – The Block
The world’s bitcoin miners brought in an estimated $5 billion in revenue during 2019. Of that figure, $4.89 billion was in the form of block rewards – that is, the 12.5 BTC generated every time a new transaction block is created. The rest – some $146 million – was made via transaction fees. That reward number is set to change later this year during the so-called halvening, when the per-block subsidy will drop from 12.5 BTC to 6.25 BTC.

Investing spare change in bitcoin – Australian firm launching a fund with Gemini as the custodian
Yogita Khatri – The Block
Raiz Invest, Australia-based micro-investing platform that allows users to invest spare change from everyday purchases, is launching a fund with bitcoin exposure. George Lucas, CEO of Raiz Invest, told The Block on Monday that the fund will have a 5% target asset allocation to bitcoin (BTC), and the rest 95% into stocks, bonds and cash, among other assets. “In this asset allocation, bitcoin is treated as similar to an alternative asset class,” Lucas told The Block, adding that the fund is expected to launch in June of this year.

What Abkhazia’s crypto dalliance teaches us about monetary sovereignty
Maximilian Hess – FT
Carry trade investors are always on the lookout for new havens. Low interest rates in developed markets have accelerated capital flows into ever more frontier-markets. Yet there is one such territory – not found on most maps – where the returns on offer seem genuinely too good to be true:

Fidelity is hiring bitcoin mining engineer to scale its operations
Yogita Khatri – The Block
Asset management giant Fidelity, with over $7 trillion in client assets, is seeking a bitcoin mining engineer to scale its operations.

Investing spare change in bitcoin – Australian firm launching a fund with Gemini as the custodian
Yogita Khatri – The Block
Raiz Invest, Australia-based micro-investing platform that allows users to invest spare change from everyday purchases, is launching a fund with bitcoin exposure.

Palestinian Militant Group Has Received 3,370 Bitcoins in Donations Since 2015: Report
Paddy Baker – The Trade
A Palestinian militant group took millions of dollars-worth of bitcoin donations to finance its operations, according to a new report.


Free Markets Made Davos. Now Governments Are Crashing the Party
Ben Holland – Bloomberg
Corporate chiefs face hands-on approach to trade, climate, tax; ‘We’re past peak laissez-faire’ and managed economies are back
In a memorable exchange at Davos last year, tech billionaire Michael Dell was explaining how higher taxes on the rich had never done much good anywhere, when he was contradicted. Actually, said Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology, they’d worked pretty well within living memory in his own country, the U.S.

BlackRock’s Hildebrand Says Lawmakers Key to Climate Fight
Lucca De Paoli – Bloomberg
Vice chairman speaks at annual World Economic Forum in Davos; BlackRock will shape investment process around sustainability
BlackRock Inc. Vice Chairman Philipp Hildebrand says the fight against climate change will require a joint effort between governments and the private sector.

The World’s 2,153 Billionaires Are Richer Than 4.6 Billion People, Says Oxfam
Marc Daniel Davies – Bloomberg
Charity says global economic inequality is ‘out of control’; World’s 22 richest men ‘wealthier than all women in Africa’
The world’s richest 1% have more than twice the wealth of the rest of humanity combined, according to Oxfam, which called on governments to adopt “inequality-busting policies.”

Trump administration steps up push to sway antitrust cases; Justice department seeks to influence competition cases where it is not a party
Kadhim Shubber – FT
The Trump administration embarked on an extensive effort to sway judges in antitrust cases in 2019, with the justice department filing more legal arguments in competition lawsuits where it was not a party over 12 months than the Obama administration did in eight years.

For Tech Companies, Election-Year Politics May Limit New Regulation; The industry can expect plenty of criticism, but the two parties don’t share all the same grievances or agree on what kind of regulatory role the government should play.
Sarah E. Needleman – WSJ
The U.S. electoral calendar will likely lead to an escalation in Washington’s criticism of big tech companies this year.

A Liberal Manifesto in a Time of Inequality and Climate Change; Liberalism has much better answers to the burning questions of the age than the loony left and the loony right.
Andreas Kluth – Bloomberg
It’s hard being a liberal these days. The world seems to want to go in the opposite direction. Authoritarianism is on the rise in China, mercantilism in the U.S., populism everywhere from Brazil to the Philippines, and an oxymoronic “illiberal democracy” in Hungary and Poland.

Democrat Bloomberg vows to narrow wealth gap for black Americans
Jason Lange – Reuters
Democratic presidential candidate Michael Bloomberg on Sunday pledged to narrow the wealth gap between black and white Americans by boosting black ownership of homes and businesses and investing in poor neighborhoods.

Under Trump, Made in America Is Losing Out to Russian Steel; An oligarch-owned steel company is winning pipeline contracts, and foreign steel imports are up 24 percent this year.
Margaret Newkirk, Joe Deaux – Bloomberg
Four days after his inauguration, Donald Trump signed a handful of executive memos to advance the Keystone XL pipeline and revive the U.S. steel industry. He invited builder TransCanada Corp. to reapply for a permit denied by Barack Obama and ordered up fast-track rules forcing not only Keystone but also all new U.S. pipelines to be made from American steel. “From now on, we’re going to be making pipeline in the United States,” he said.

In Its 50th Year, Davos Is Searching for Its Soul; Critics say the gathering of elites is out of touch. But the World Economic Forum’s founder, Klaus Schwab, is still making the case that the annual event in Switzerland makes a difference.
David Gelles – NY Times
It was just weeks before the World Economic Forum would host its 50th anniversary gathering in Davos, Switzerland, and Klaus Schwab, the event’s patrician founder, was pensive. In an interview at his organization’s midtown Manhattan offices, Mr. Schwab lamented the apparent retreat of ideals he has championed for a half-century.


FINRA Promotes Jessica Hopper to Head of Enforcement
FINRA announced today that it has promoted Jessica Hopper to Executive Vice President and Head of Enforcement. Hopper has been Acting Head of Enforcement since Susan Schroeder announced her departure in September 2019. Hopper will report directly to CEO Robert Cook.

Trade associations outline key priorities for MiFID II review; The MiFID II SI regime, best execution reporting, market data costs and the share trading obligation were among the areas the EFSA has urged authorities to prioritise.
Hayley McDowell – The Trade
Several large trade associations across Europe have called on policy makers to amend certain aspects of MiFID II ahead of a review, including reporting on best execution, the systematic internaliser (SI) regime, market data costs and more.

FCA blindsided by investment fund suspensions; Regulator admits it does not track frequency of funds that block investor withdrawals
Owen Walker – FT
The Financial Conduct Authority has conceded it has failed to keep track of investment fund suspensions, an admission that raises questions over the effectiveness of its oversight and its ability to protect investors.

Hedge-Fund Felon Hid Criminal Past to Woo Crypto Investors, U.S. Charges
David Voreacos and Olga Kharif – Bloomberg
Boaz Manor charged in New Jersey after guilty plea in Canada; Prosecutors say he defrauded investors of $30 million
A Toronto man who served time in prison after his hedge fund collapsed later concealed his identity and criminal past to defraud investors of $30 million through an initial coin offering of digital tokens, U.S. prosecutors said.

SEC Charges Convicted Criminal Who Conducted Fraudulent ICO Using a Fake Identity
The Securities and Exchange Commission today charged convicted criminal Boaz Manor, his business associate, and two businesses, CG Blockchain Inc. and BCT Inc. SEZC, with raising over $30 million from hundreds of investors in a fraudulent initial coin offering (ICO).

Lagarde Prepares to Modernize ECB With a Plan for the 2020s
Paul Gordon – Bloomberg
President wants to announce start of review on Thursday; Inflation goal may change, climate change may gain prominence
Christine Lagarde is poised to make her mark as president of the European Central Bank with the institution’s biggest-ever strategy review.

SEC to Report on State of Small Business Capital Formation in the U.S.; Will host first ever “Capital Call” on January 23
The U.S. Securities and Exchange Commission’s Office of the Advocate for Small Business Capital Formation will report on its findings regarding the state of capital formation for small businesses and its latest recommendations to the Commission during a virtual conference call event on Jan. 23, 2020, at 1 p.m. ET.

Markets regulators struggling to keep up with technology: SEC’s Jackson
Steven Scheer – Reuters
The rapid growth of digital assets and computer-driven investment advice has become a key challenge for regulators in trying to keep up with technological advances while seeking to protect investors, a U.S. markets regulator said on Monday.

Hong Kong Securities And Futures Commission Highlights Importance Of Risk Management
The Securities and Futures Commission (SFC) today published the latest SFC Compliance Bulletin: Intermediaries which emphasises the importance of sound risk management for brokers and fund managers during times of market volatility. Liquidity and credit risks associated with exposures to illiquid assets are highlighted along with precautionary responses and good risk management practices.

FCA admits not holding central record of fund suspensions – reports; Head of regulator prepares to move to BoE
The Financial Conduct Authority (FCA) has told the Financial Times that it does not keep a record of investment fund suspensions. FTfm reported that it asked the FCA to provide data on the frequency of fund suspensions under the Freedom of Information Act.

AML penalties skyrocket during 2019, doubling 2018 figures
A record number of AML-related fines were issued globally in 2019, totalling £6.2 billion in financial penalties at an average of $145.33 million per fine.

Chicago Investment Manager Allegedly Swindled $500K From Women He Met Online; A former employee and one family member were also referenced by prosecutors
Dylan Van Sickle – NBC5
A financial wizard’s spell was finally broken after prosecutors claim to have caught him swindling at least $500,000 from women he encountered through online dating websites.

Investing and Trading

America Is Awash With Natural Gas and It’s About to Get Worse
Rachel Adams-Heard, Naureen S Malik, and Sayer Devlin – Bloomberg
Despite a glut and depressed prices, shale output still grows; Prices fell Friday below the $2 mark for the first time since 2016
One chilly day in October, President Donald Trump boarded Air Force One and flew to Pennsylvania to hail one of the state’s most important industries — not coal, but natural gas.

J.P. Morgan Releases 2020 Alternatives Outlook to Help Clients Identify Alternative Sources of Diversification, Yield and Return
J.P. Morgan Asset Management today released its second annual Global Alternatives Outlook, providing a 12-18-month outlook across key alternative asset classes and highlighting the views of the CEOs, CIOs and strategists from the firm’s 15 distinct alternatives investment engines. The report offers an assessment of opportunities in alternatives as investors look to construct resilient portfolios in an environment of high public equity valuations and lower fixed income yields.

Trafigura takes stake in Argentine-focused oil and gas producer; Commodities trader’s deal helps UK-listed President Energy to pay down debt
Nathalie Thomas – FT
Trafigura, the global commodities trader, has taken a 6 per cent stake in President Energy, a London-listed oil and gas producer with assets in Argentina, as part of a deal to help the small company pay down debt.

Steven Mnuchin Plays It Ultra-Safe Instead of Going Ultra-Long; The Treasury listened to Wall Street dealers and decided against extending maturities to 50 or 100 years.
Brian Chappatta – Bloomberg
After three years of will-he-or-won’t-he, U.S. Treasury Secretary Steven Mnuchin officially decided that it’s not worth rocking the boat when it comes to financing the federal government.

Markets must face up to new deadlines for Libor transition
Jasper Cox, Mariam Meskin, Michael Turner, Tom Brown – Global Capital
Banks should stop issuing loans and bonds linked to Libor by October, according to the Bank of England’s Working Group on Sterling Risk-Free Reference Rates. But the scale of the challenge facing firms, particularly in the loan market, is causing concern.


Wall St banks escalate asset management battle; The investment units of Goldman Sachs, JPMorgan and Wells Fargo are lucrative fee earners but often overshadowed
Chris Flood – FT
The competitive challenges faced by the asset management units of the big US banks against the might of BlackRock and Vanguard was underlined this week as US banks unveiled mixed 2019 results for their investment units.

Larry Fink rules on the best global standards for climate risk reporting; BlackRock backs two sustainability accounting standards in warning to companies
Attracta Mooney and Billy Nauman – FT
BlackRock chief Larry Fink has warned that the world’s largest asset manager will take a “harsh view” of companies that fail to provide hard data on the risks they face from climate change.

UK bond chief Stheeman expresses doubts on green gilts; Investors should pay more for this type of sovereign debt, says key official
Tommy Stubbington – FT
The head of the UK’s Debt Management Office has poured cold water on the case for issuing “green” government bonds, saying it could end up costing taxpayers more than standard gilts.

How too much virtue signalling hinders stakeholder capitalism
Lutfey Siddiqi – FT
Milton Friedman versus Klaus Schwab – it was a battle between two world views. In 1970, Friedman wrote his seminal essay on the role of the firm, effectively arguing that “the business of business is business” and that wider stakeholder considerations can be value-destructive. In 1973, Klaus Schwab’s Davos Manifesto argued that management must also serve employees and society, as a “trustee of the material universe for future generations”.

Largest US banks double profits in past decade; Lenders shrug off worries about regulation, low interest rates, and technological disruption
Rob Armstrong and Laura Noonan – FT
The past decade has been kind to America’s biggest banks. This week’s earnings round showed that for all the worries about regulation, low interest rates, and technological disruption, the largest universal and investment banks have more than doubled their collective profits since 2009.

Bank of America aims to ‘double’ its slice of ?US retail business; Chief Brian Moynihan’s comments come amid political scrutiny of largest institutions
Robert Armstrong and Laura Noonan – FT
Bank of America can double its consumer market share despite growing fears about the power of the country’s largest institutions, according to Brian Moynihan, chief executive.

Morgan Stanley’s Drive to Rein in Costs Starts With CEO Gorman
Anders Melin and Sridhar Natarajan – Bloomberg
Morgan Stanley just had its most profitable year on record. It wasn’t enough for its chief to land a raise. James Gorman’s compensation fell as the firm announced he will receive $27 million for 2019, according to a regulatory filing Friday. That’s a 6.9% decline from the prior year and on par with the package the chief executive officer received in 2017.

JPMorgan Says Analysts Are ‘Unusually’ Pessimistic on Earnings
Ksenia Galouchko – Bloomberg
U.S. companies start off earnings season with profit beats; Profit upgrades could again coincide with equity gains: JPM
JPMorgan Chase & Co. strategists believe analysts are starting 2020 with an overly negative outlook on earnings and say positive surprises will give a boost to global equities.

Hedge Funds That Bet on Big Trends Are Trying to Bounce Back; Low interest rates and growing competition make it harder to find an edge.
Katherine Burton, Katia Porzecanski – Bloomberg
Greg Coffey’s hedge fund firm, Kirkoswald Asset Management, gained 28% for clients in 2019. That’s a decent profit by any standard, but what makes it more impressive is that Coffey is what’s known as a macro investor. That’s a tough trade to ply.

Morgan Stanley’s Top-Performing Fund Buys Undervalued Stocks
Ishika Mookerjee – Bloomberg
Consumer stocks are a focus; more than half of assets in China; Meituan, Moutai among drivers of fund’s 44% gain in past year
A top-performing Morgan Stanley fund is betting on cash-rich consumption-focused stocks in Asia, especially China, to manage risks in market cycles this year.

Hedge-Fund Titans Hohn, Mandel Lead $178 Billion Year of Profits
Nishant Kumar – Bloomberg
Top 20 managers generate a third of industry’s gain in 2019; Strong gain was a result of long-only wagers: LCH’s Sopher
Billionaire money managers Chris Hohn and Stephen Mandel led hedge fund gains last year as surging markets helped the $3 trillion market post its best performance in a decade.


Big Australian investors under scrutiny over climate change; Voting records show lack of support for green policies at a time of global warming crisis
Attracta Mooney – Ft
Australia’s biggest asset managers and public pension funds are facing tough questions over how they view risks from global warming, after data revealed that many investors failed to support climate change resolutions at the country’s businesses last year.

China’s falling birth rate threatens economic growth; Fewer women are willing to have a second baby owing to high costs
Sun Yu in Beijing – FT
Fewer than one in four women of child-bearing age in Shanghai is willing to have a second baby, exposing another threat to a Chinese economy that is already growing at its slowest pace in 29 years.

China’s Pneumonia Outbreak Hits Some Travel Stocks Hard
Bloomberg News
Virus may keep people away from crowds during holiday; Health-care names best performers on the MSCI China Index
Stock traders are preparing for the risk that a pneumonia outbreak in China will discourage residents from leaving their homes during the Lunar New Year holiday.

Deutsche Bank Bids for Another Ailing India Power Project’s Debt
Suvashree Ghosh and Bijou George – Bloomberg
Deutsche offers 11.5 billion rupees for GVK’s Goindwal Power; Banks lent 39 billion rupees to project, undecided on offer
Deutsche Bank AG is offering to buy the debt of an Indian power producer at a discount of about 70%, according to people familiar with the matter, the second such proposal from the German lender in recent weeks.

Goldman Gets South African Bank License in Expansion Drive
Jacqueline Mackenzie and Vernon Wessels – Bloomberg
Goldman Sachs Group Inc. got approval from South African regulators to operate a bank, as the Wall Street firm seeks to tap into fast-growing economies on the continent.

Confused Danes Turn on Economists Over Negative Rates
Nick Rigillo – Bloomberg
In the country that’s had negative interest rates longer than anywhere else, economists are going through a bit of a rough patch.

Marubeni and Total to build Qatar solar plant; Project to meet 10% of Gulf state’s peak electricity demand as it moves away from burning oil
Simeon Kerr in Dubai and Anjli Raval – FT
Qatar has signed a deal with Japan’s Marubeni and France’s Total to construct an 800-megawatt solar plant, the gas-rich state’s first such large-scale facility.


JPMorgan to Buy Former BNP Building in Exclusive Part of Paris
Rudy Ruitenberg – Bloomberg
Move could more than double the number of bank’s Paris staff; Banks look to limit impact of hard Brexit on EU businesses
JPMorgan Chase & Co. is buying the former BNP Paribas SA offices in central Paris with space to house as many as 450 employees, as banks seek to bolster their footprint in the European Union after Brexit.

U.K. and EU Draw Battle Lines as the Hard Part of Brexit Begins
Ian Wishart – Bloomberg
Brussels and London already at odds before trade talks start; EU demand for level playing field complicates deal for U.K.
If the past three years of Brexit have been difficult and intense, the next 11 months threaten to be even more so. The U.K. and European Union are already at odds before they even start thrashing out the terms of their future relationship.

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