The SEC Wants to Give Public Investors a Fair Shot

Jul 19, 2019

First Read

Distrust for Facebook unites Republicans and Democrats against Libra
Matt Raebel – John Lothian News

In 2019, congressional Republicans and Democrats have at least one thing they all seem to agree upon…none of them trust Facebook.

David Marcus, co-creator of Libra and head of Libra and Calibra, testified before Congress Wednesday about the goals of those who are developing Libra, the proposed digital currency of Facebook.

The hearing, which was live streamed over the Internet, largely consisted of congresspeople reiterating questions that have been brought up in the past about the stability of Libra as a digital asset, what kinds of KYC/AML and consumer protection measures would be applied to Libra, how it would conform to local, national, and international regulations – and, of course, how Libra users’ personal information would be protected. Representatives from both the Democratic and Republican party took part in the hearing; for once, it seemed like both parties agreed that launching Libra would be an unequivocally bad idea.

To read the rest of this commentary, go here.


Hits & Takes
JLN Staff

We are exploring ideas for creating a MarketsWiki Education World of Opportunity Professional program aimed at industry professionals who are less likely to be part of industry organization education efforts. We welcome ideas for issues that professionals face where additional education efforts would be helpful. Email me your ideas at

Women in Listed Derivatives (WILD) just announced a new corporate sponsor: ED&F Man Capital Markets. More information on WILD’s corporate sponsorship opportunities can be found on WILD’s website. ~SR

Speaking of women in derivatives, 3Points’ own Katie O’Shea is going to be questioned by Alex Trebek on today’s episode of Jeopardy airing at 3:30 pm Central. She works with an array of firms in the trading industry including Matrix, CMT Digital, Connamara Systems, and QuantConnect. Go Katie! ~SD

Trade Alert’s Henry Schwartz had this background to add regarding yesterday’s record volume in MIAX’s SPIKES options: 30K contracts traded in a single four-way spread at 11:19 a.m. ET. The package involved 1×2 call spreads in August and September terms, likely rolling what remains of the August 1×2 call spread bought 5k x 10k last month into a similar structure in September. Data shows the trader bought 5K Aug 18 calls for $1 to sell 10K Aug 26 calls at 20c (likely closing) and sold 5K Sep 17 calls for $1.95 to buy 10K Sep 25 calls at 62c. The September spread nets a $350K credit, while the unwind in August for a net 60c debit appears to be take a dime loss based on the entry levels of $2 vs 75c on June 12th when the index (and Aug synthetic future) was about 1 point higher. SPIKES option volume near 8% of Cboe’s VIX option volume is notable.~SD

Two individuals – Zhengyu Liao and Zhi Jian Senky Kay – were permanently banned from CME platforms for failing to fully answer questions posed by the exchange’s investigatory committee. Aaron Dao-Chang Pang was banned for not showing up to his interview.~SD

A fifth of students scheduled to take the CFA Institute’s chartered financial analyst exams were no-shows this year.~SD

The TABB Group published its 15th annual Institutional Equity Trading (IET) report titled “ 2019, Liquidity: Blocks, Algos, Analytics, and Impact.”~JJL

Kudos to the interns from Chicago Trading Company who volunteered this week at the Greater Chicago Food Depository.~JJL

Next Tuesday, July 23, it’s the third Annual City against MND Cricket Day at the Honorary Artillery Club in the City of London. It’s an all-day six a side tournament starting at 10 AM with the final starting c.530/6 PM. The teams competing are LME, INTL FC Stone, Interxion, Euronext, KRM22 & Intertrader.~JJL


Chairman Tarbert Announces CFTC Executive Leadership Appointments
U.S. Commodity Futures Trading Commission Chairman Heath P. Tarbert announced the following appointments to key executive leadership positions at the CFTC:
-James M. McDonald will continue to serve as Director of the Division of Enforcement
-Amir R. Zaidi will continue to serve as Director of the Division of Market Oversight
-Joshua B. Sterling will serve as Director of the Division of Swap Dealer and Intermediary Oversight
-Bruce A. Tuckman will continue to serve as Chief Economist and Director of the Office of the Chief Economist
-Michael C. Short will serve as Director of the Office of External Affairs and Chief Communications Officer
-Sarah J. Summerville will continue to serve as Director of the Office of Minority and Women Inclusion

***** So far as expected as key staffers (mostly men) stay in existing positions, however there are still more roles to fill, and women were named as acting heads of those divisions~JJL


Please support the Martha Wright-Reed Just and Reasonable Communications Act of 2019, S. 1764, which would restore FCC authority to stop prison phone companies from charging incarcerated people and their families predatory rates.
United Church of Christ

***** I have helped start a social justice ministry at my church, St. Peter’s United Church of Christ. This is an issue raised by the denomination that is pushing families apart when a family member is in prison.~JJL


Area 51: Bud Light is offering free beer to any aliens that make it out
Allen Kim – CNN
The world is ready to finally see the secrets hidden inside Area 51. And if one of those secrets happens to be living aliens, well, we have good news — they’ll be greeted with free cans of Bud Light.

**** Seems about right. It is traditional to offer a visitor water. ~JB


Thursday’s Top Three
Our top read item of the day was the announced death of David Westcott, who died suddenly on Tuesday. Second was the Crain’s Chicago Business story Former Chicago Board Options Exchange director pleads guilty to fraud, about Alvin Wilkinson, who was accused of collecting about $13 million from 30 people, including friends, acquaintances and former colleagues in a type of Ponzi scheme. And the news wasn’t so great for Facebook either. The Financial Times’ story G7 warns on ‘serious risks’ posed by Libra and other digital coins was third.


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CryptoMarketsWiki Coin of the Week: Litecoin (LTC)
The Miami Dolphins announced Tuesday that the NFL team has decided to make Litecoin (LTC) its official cryptocurrency. Why? With this new partnership, fans of the Miami Dolphins, Litecoin, or both will be able to use LTC (or bitcoin, for some reason) to purchase tickets for the team’s 50/50 Raffle at Miami Dolphins home games – half the proceeds of which go to charitable causes. Charlie Lee, the creator of Litecoin, said in an official Miami Dolphins press release that he is “thrilled” to see the partnership come to fruition. “This collaboration propels Litecoin in front of an audience of millions of people around the world…” The partnership will “kick off” September 5, 2019.


Lead Stories

The SEC Wants to Give Public Investors a Fair Shot; Its pilot study reevaluates stock-exchange fee practices that advantage high-frequency-trading firms.
Larry Harris – WSJ
A war is escalating between the Securities and Exchange Commission and the stock exchanges it regulates. The conflict started last December, when the SEC mandated an experimental pilot study to determine whether investors are being hurt by exchanges’ methods of collecting fees and paying rebates. In February the three largest U.S. exchanges responded with a lawsuit to stop the pilot, which promised to limit their rebates, and in June a trio of high-frequency-trading firms filed a brief in support of that suit.

Wall Street’s Trading Desks Endure Worst First Half in a Decade
Michael J Moore and Elizabeth Rembert – Bloomberg
Bank chiefs bemoan clients sitting ‘on the sidelines’; U.S. results are a bad omen with European firms set to report
Bank investors could be forgiven for mistaking executives on recent earnings calls for sports commentators. Their new favorite way to describe trading clients: “on the sidelines.”

Wall Street Trading Costs to Surge as New Rules Hit Derivatives
Jennifer Surane – Bloomberg
Requirements mean Wall Street has to hold more collateral; A Citi model shows prime-broker fees getting 31 times pricier
Wall Street’s heavyweights are prepping their clients for bad news: Some trades are about to get a lot more expensive. Firms including Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are warning customers to get ready for new rules that require more collateral for certain trades. The regulations take effect for some clients in September, but the snare gets even tighter in 2020, when more than 1,000 hedge funds, asset managers and insurers will get caught for the first time.

Options Clearing Corp readies plan to boost capital
Philip Stafford – Financial Times
The US’s Options Clearing Corp is putting the finishing touches on a long-awaited new plan to boost its capital, risking unhappiness among customers and shareholders as it tries to shore up its balance sheet. The Chicago clearer expects to file a revised plan to the Securities and Exchange Commission, the US markets watchdog, by the end of the month, according to John Davidson, chief executive of the OCC. Key parts of the plan include cutting the annual dividend to shareholders and increasing daily fees for users.

FCA criticised for slow response to complaints; Financial regulator hit with 100% rise in the number of grievance cases
Caroline Binham – FT
The UK’s financial regulator has been hit with a nearly 100 per cent rise in complaints which it is slow to respond to, in some cases exacerbating vulnerable consumers’ anxiety, official reports reveal.

U.S. Regulator Probing Crypto Exchange BitMEX Over Client Trades
Benjamin Robertson and Gregor Stuart Hunter – Bloomberg
Trading platform known for 100x leverage futures contract; Probe comes as regulators ramp up scrutiny of crypto sector
The U.S. Commodity Futures Trading Commission is investigating crypto exchange BitMEX, according to people familiar with the matter, a platform that’s become wildly popular in Asia for letting people make big bets with little money down.

Wall Street’s Trading Desks Endure Worst First Half in a Decade
Michael J Moore and Elizabeth Rembert – Bloomberg
Bank investors could be forgiven for mistaking executives on recent earnings calls for sports commentators. Their new favorite way to describe trading clients: “on the sidelines.”

Cboe speed bump proposal gets mixed reviews
Hazel Bradford –
Cboe Global Markets’ proposal to introduce a speed bump in the U.S. equities market to allow for order updates ahead of opportunistic traders is hitting some speed bumps of its own.

ErisX Announces Membership to Chamber of Digital Commerce
Business Wire
ErisX today announced that they have become members of the Chamber of Digital Commerce, the world’s leading trade association representing the digital asset and blockchain industry. The Chamber of Digital Commerce promotes and advocates for the acceptance and use of digital assets as well as blockchain technologies.

Societe Generale begins trading Eurex FX futures; Societe Generale clients can now trade FX futures on Eurex Exchange as part of expansion.
Hayley McDowell – The Trade
Societe Generale has expanded its current derivatives offering to support trading and clearing in Eurex Group’s FX futures.

‘China’s Nasdaq’: Shanghai’s new tech trading venue explained; Beijing hopes Star Market will take business from Hong Kong and New York
Hudson Lockett – FT
More than 140 technology and science companies across China have signed up to list their stocks on a new facility run by the Shanghai Stock Exchange. On Monday, the first batch of 25 will begin trading on the new venue, the Star Market.

G7 crypto opposition masks warmer stance for wholesale markets; Regulatory fears over digital assets are narrow, focusing on consumer protection
Philip Stafford – FT
It started with Donald Trump, who last week lashed out at cryptocurrencies and bitcoin, saying they are “not money” and he is not a “fan”.

Deutsche Bank among the near-dead? No, but watch for Plan C; Getting cash from a quick sale of DBTC subsidiary is not how the bank’s management sees its future
John Dizard – FT
I always look well when I’m near death?.?.?.?Marguerite Gautier in Camille (1936) Certain types of people, such as the Parisian demimondaine portrayed by Greta Garbo, have long and tear-filled partings from an unfeeling world. As do some institutions, such as social democratic political parties.

Credit Suisse Loses U.K. Case Over Crisis-Era Banker Bonus Tax
Kaye Wiggins – Bloomberg
Swiss bank argued impact of 2010 levy was ‘arbitrary,’ unfair; One-time tax levied at height of crisis generated $4.2 billion
Credit Suisse Group AG lost a U.K. lawsuit over a one-time tax on banker bonuses at the height of the financial crisis.

Q1 Equities: Volatility Strikes Back
Larry Tabb – TABB Forum
… US equity average daily volume (ADV), after increasing to a monthly average of 9.1 billion shares in December 2018, settled back down to an average of 7.1 billion shares in May 2019 and averaged 7.2 billion shares through the first five months of the year. US equity average nominal volume traded also declined, from a record high of $435.7 billion in December 2018 to a more somber $334.3 billion in May 2019.

Global watchdog hits back at Bank of England over funds debate; Iosco defended international rules over investment funds after Carney comments
Caroline Binham – FT
The global group of markets watchdogs has hit back at the Bank of England’s assertion that it was putting investment funds under review partly because earlier international attempts to tighten the rules were not detailed enough.

Is it time to declare the end of globalisation?; Two books try to make sense of what has gone wrong — but ignore the successes of emerging markets
James Crabtree – FT
Globalisation is coming undone. Once thought unstoppable, the forces of liberalisation that spurred many decades of rising cross-border trade are faltering. And while President Donald Trump’s policies are hardly helping, this malaise of interconnectedness appears more profound than any mere trade war.

Goldman Turns Rare Pessimist on Hong Kong Exchanges as Turnover Fades
Benjamin Robertson – Bloomberg
Hong Kong’s plunging stock market volumes make the city’s exchange operator an unappealing investment, according to Goldman Sachs Group Inc.

Exchanges, OTC and Clearing

Nasdaq and the Iraq Stock Exchange Signs New Market Technology Agreement
Nasdaq Inc. and the Iraq Stock Exchange (ISX) have signed a new agreement to extend their market technology relationship. As part of the agreement, Nasdaq will continue providing ISX with matching engine and central securities depository (CSD) technology. This new agreement marks the next chapter of a technology partnership between Nasdaq and ISX which originated in 2007.

Societe Generale starts trading Eurex FX Futures; Eurex FX Futures gains the support of key off-exchange FX liquidity provider
Societe Generale, one of Europe’s leading financial services groups, now offers full support for the Eurex FX Futures – from clearing to trading.

SGX welcomes Prime US REIT to Mainboard
Singapore Exchange (SGX) today welcomed Prime US REIT to its Mainboard under the stock code “OXMU”.
Prime US REIT has an initial portfolio of 11 Class A and freehold office properties strategically located across 9 office markets in the U.S.; namely San Francisco Bay Area, Salt Lake City, Denver, St Louis, Dallas, San Antonio, Philadelphia, Washington D.C. and Atlanta.

Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange Closed for Civic Holiday
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange will be closed on Monday, August 5, 2019 for the Civic Holiday. The Exchanges will re-open and resume regular trading on Tuesday, August 6, 2019.

Date and location of ASX Annual General Meeting 2019

Removing risk components from single stock futures with Eurex’s new Stock Tracking Futures
On July 29 Eurex is launching Stock Tracking Futures on all stocks in the EURO STOXX 50 ® index. We spoke to Sascha Semroch, product developer in Equity & Index Product Design at Eurex, about the new futures.

Moscow Exchange: The Additional Trading Session Starts Later For The Derivatives Market On 1, 8, 14, 15, 22, 27 And 29 August 2019
MondoVisione Please note that the Derivatives Market evening trading session will begin five minutes later, i.e. at 7:05 pm MSK, on 1, 8, 14, 15, 22, 27 and 29 August 2019, as these are the last trading days for options contracts (in accordance with clause 6.2 of the Rules of organized trading for the Moscow Exchange Derivatives Market).

The future’s bright for SGX’s rubber derivatives
Anita Gabriel – Business Times
THERE is an unmistakable bounce on the derivatives corner of the Singapore Exchange which has been outshining the bourse operator’s securities business – thanks to markedly higher volatility in financial markets.Yet, the story of its Sicom rubber contracts has been rather overlooked in the bigger scheme of things. Rubber is one of the oldest commodities traded in Singapore and part of the city state’s legacy as it developed into a major trading and economic hub in the 1900s.

Best clearing services provider of the year: LCH ForexClear; LCH ForexClear voted Best clearing services provider of the year at the 2019 FX Week e-FX Awards
Paddy Boyle – wider landscape
Luke Clancy – FX Week
ForexClear, which LCH launched in 2012 as the world’s first 24-hour over-the-counter foreign exchange clearing service, has continued to see strong growth as market participants adopt clearing for deliverable and non-deliverable FX products following the uncleared margin rules (UMR) phased implementation in September 2016.


TriOptima Announces Completion of First Cleared Inflation Swap Compression Run in LCH SwapClear
CME Group
TriOptima, a leading infrastructure service that lowers costs and mitigates risk in OTC derivatives markets, today announced that it has completed the first cleared inflation swap compression run at LCH SwapClear.

Infini Capital Management Selects TORA’s Cloud-based OEMS for Multi-Asset Pairs Trading
Globe Newswire
TORA, provider of the industry’s most advanced cloud-based order and execution management system (OEMS), has today announced Hong Kong-based multi-strategy hedge fund Infini Capital Management Ltd has selected TORA for its Pairs Trading solution.

Hong Kong hedge fund deploys TORA OEMS for pairs trading; Infini Capital will use the TORA OEMS for pairs trading across multiple counterparties and regions.
Hayley McDowell – The Trade
Order and execution management systems (OEMS) provider TORA is set to deploy its software at Infini Capital Management to support the firm’s pairs trading activities.

Microsoft’s Cloud Business Drives Record Sales; Both revenue and profit top expectations for the latest quarter, continuing strong run for CEO Satya Nadella
Asa Fitch – WSJ
Microsoft Corp. MSFT 0.11% said strength in its cloud-computing business drove record revenue in the latest quarter, extending the strong performance under Chief Executive Satya Nadella that has made it the world’s most valuable public company.

Quantum computing is building on Alan Turing’s legacy; Scientists are mining mathematics for ‘hard problems’ from which to concoct new algorithms
Anjana Ahuja – FT
The Bank of England has a new hero: Alan Turing. The gay mathematician, computing pioneer and wartime codebreaker — whose work helped decrypt messages encoded by Germany’s Enigma machine but whose sexuality saw him criminalised and chemically castrated — was unveiled this week as the face of the new £50 note.

11 Top Tips for Algo Monitoring
In August 2012, the capital markets witnessed a trading catastrophe of monumental proportions as a new market-making algorithm deployed by Knight Capital Group (KCG) managed to elude the firm’s core monitoring systems and amass a multi-billion dollar position which ultimately resulted in over a $440 million loss. KCG was left hobbled and needed to sell to Getco in order to survive. After a fairly short period of time, the issue of algo monitoring seemingly vanished from the press and market structure landscape. In reality, however, nothing could be further from the truth. While the likelihood of another KCG-scale meltdown is unlikely (but not impossible, see Tether), the stakes around algo monitoring have continued to rise due to increased usage of algos from all industry participants and a heightened interest from regulators.


Nouriel vs the “scammers”
Izabella Kaminska – FT
A quick post to flag Nouriel Roubini’s latest Project Syndicate piece where he takes aim at crypto shenanigans at exchanges like BitMEX and, it must be said, takes no prisoners. The piece was influenced by Dr Doom’s debate with the CEO of Seychelles-based BitMEX Arthur Hayes in Taipai on July 3, moderated — incredibly — by political broadcaster Andrew Neil.

US Treasury Secretary Mnunchin Says G7 in Agreement on Libra, Cryptocurrencies
Daniel Kuhn – Coindesk
Treasury Secretary Steve Mnuchin said his executive agency was in line with other financial ministries of the Group of Seven (G7) regarding Facebook’s leap into cryptocurrencies. “There was a clear agreement from all G7 finance ministers and central bank governors that Libra in particular raises some very significant concerns, and cryptocurrencies more broadly,” adding, “before any of us let these go through, we’re going to make sure those concerns are satisfied,” Mnuchin said on CNBC’s Squawk Box.

Facebook’s cryptocurrency hopes hit a wall in Washington; Distrust is the consistent theme as Libra co-creator David Marcus testifies to Congress
Kiran Stacey and Hannah Murphy – FT
David Marcus, the co-creator of Facebook’s potentially revolutionary new cryptocurrency, spent much of this week reassuring members of Congress that it would not be launched until it had regulatory sign-off.

Steve Wozniak Has Joined an Energy-Focused Blockchain Startup in Malta
Daniel Palmer – Coindesk
Apple co-founder Steve Wozniak has joined a blockchain enterprise targeting more efficient use of energy in Malta. Speaking at an event on the island Thursday, Wozniak said he has invested in the EFFORCE project – which enables investors to back energy efficient projects around the world – and become a co-founder. According to the Malta Independent, Wozniak explained that the firm aims to bring money savings on energy, but also help the environment, something he said was important to him. Blockchain, he continued, will bring improvements to energy use and reduce consumption without consumers needing to change their habits.

Privacy Cryptocurrency Zcash Prepares for ‘Friendly’ Fork
Christine Kim – Coindesk
In about five hours, the privacy-oriented cryptocurrency Zcash will spawn a new blockchain network called Ycash. It’ll be the first of its kind to boast a near-identical codebase to the Zcash blockchain but function as a separate network and de facto competitor. First announced in April, the effort is spearheaded by long-time Zcash supporter Howard Loo. Loo described in a Zcash forum post that Ycash was a preemptive move to resist future community decisions that may extend Zcash’s system of developer funding known as the “Founder’s Reward” beyond a promised 10 percent cap of total token supply.

Someone Just Bought 20,000 ETH Tokens on Binance
Rachel McIntosh – Finance Magnates
The price of Bitcoin and other cryptocurrencies seems to change just as randomly and as often as the direction of the wind. Up, down, sideways; for all of the technology and analytical tools that have been developed to trade in the cryptocurrency market, we still can’t predict the future. But some can influence it.

‘Dr. Doom’ Nouriel Roubini accuses cryptocurrency exchanges of ‘systematic illegality’; points to BitMEX
Carol Gaszcz – The Block via Yahoo Finance
Noted crypto sceptic Nouriel “Dr. Doom” Roubini believes important crypto players are “openly involved in systematic illegality,” he wrote in his commentary on Project Syndicate. As an example, Roubini pointed to Seychelles-based cryptocurrency derivatives exchange BitMEX. The exchange allows retail investors to place bets with 100-to-1 leverage, applies high fees, and “siphon[s] customers’ savings into a ‘liquidation fund’.” He cites research that estimated liquidations comprise as much as half of BitMEX’s revenue.

Facebook Libra App Development Already Exploding Despite Lawmakers Concerns
Michael del Castillo – Forbes
As elected officials frantically try to make sense of Facebook’s libra cryptocurrency, application developers are getting down to business. Since the release of libra, a hybrid of public blockchains like bitcoin (which are accessible to anyone with an internet connection) and private blockchains like Hyperledger Fabric, developers have been rushing to learn how it works and, in many cases, build actual products.

Bitcoin-Seeking Ransomware ‘Ryuk’ Virus Found and Studied in China
Max Boddy – Cointelegraph
Tencent Yujian Threat Intelligence Center says that a Ryuk ransomware virus has been spotted in China. The intelligence center released information on the outbreak in a report on July 16. According to the report, Ryuk viruses are a family of malware aimed at infecting government and enterprise machines holding valuable data. According to the report, a Ryuk virus derives from the Hermes virus, with code that is directly modified off of the latter. As noted in the report, Ryuk is the name of a death spirit in the popular manga Death Note. As per its title, Ryuk possesses a notebook that can be used to kill a person by writing their name on one of its pages.

Bitcoin vs Libra: Here are the key differences between the two cryptocurrencies
Ryan Browne – CNBC
Facebook has made headlines of late with its plans to create a cryptocurrency. The social media company has been forced to defend the project on Capitol Hill, amid regulatory concerns around data privacy and potential illegal usage, while the G-7 has warned it poses “serious” legal risks.

Binance Jersey Lists Exchange’s New UK Pound-Backed Stablecoin
Daniel Palmer – UK FCA
The Jersey arm of Binance has listed the cryptocurrency exchange’s own British pound-backed stablecoin.

Indian Government Breaks Silence on Crypto Regulation
Kevin Helms – News
The Indian government has finally spoken up about the regulatory framework for cryptocurrency it has been deliberating, providing answers to questions presented in the upper house of the Parliament of India. The government also confirmed that the report with the recommended crypto regulation has already been submitted by the interministerial committee tasked with drafting the regulation.

What It’s Like to Review Bitcoin’s Code
Alyssa Hertig – Coindesk
On June 19, Chaincode developer John Newbery gathered a group of developers to examine a proposed change to bitcoin’s code.

WATCH: ‘Mother of Blockchains’ Defends Facebook’s Choice of Controversial Swiss Foundation
John Biggs – Coindesk
Joshua Ashley Klayman Kuzar, founder and CEO, Klayman LLC and Inflection Point Blockchain Advisors, is one of the best known cryptocurrency lawyers. In her chat with CoinDesk Editor Pete Rizzo she talks about how uniquely odd and exciting this moment is for cryptocurrency as a whole.


One Bull Case Says Election Politics End Up Stoking Stocks
Min Jeong Lee – Bloomberg
BNP Paribas Asset says strong market needed for his reelection;That cuts risk of trade war escalation, steps targeting Europe
A $473 billion manager says the biggest threat to the rally in equities is also the reason it won’t be derailed.

Labor fight roils Bernie Sanders campaign, as workers demand the $15 hourly pay the candidate has proposed for employees nationwide
Sean Sullivan – Washington Post
Unionized campaign organizers working for Sen. Bernie Sanders’s presidential effort are battling with its management, arguing that the compensation and treatment they are receiving does not meet the standards Sanders espouses in his rhetoric, according to internal communications.

Trump wants weaker dollar but it could be a hard sell
Jason Lange, Ann Saphir – Reuters
President Donald Trump wants a cheaper dollar, saying earlier this month the United States should match what he says are efforts by other countries to weaken their own currencies – giving them an unfair trade advantage.

Congresswoman Maloney: Trump misled us in his economic report. I’m setting the record straight
Carolyn Maloney for CNN Business Perspectives
Every year, the public gets a window into the White House’s views of the economy when the administration publishes the Economic Report of the President. Typically, it is a dense but interesting read, offering a data-driven assessment of the economy, and highly anticipated by economists, policymakers and others who care about economic policy. However, the Trump administration’s 2019 report is a sharp departure from those of previous administrations.

Elizabeth Warren Declares War on Private Equity ‘Vampires’ in 2020 Plan
Sahil Kapur – Bloomberg
Democratic candidate says she’ll combat Wall Street ‘looting’; New proposal ends carried interest tax break for fund managers
Elizabeth Warren unveiled a policy proposal Thursday to impose new rules on private equity and “useless speculation” on Wall Street while rolling back President Donald Trump’s deregulation of the financial industry.

Buttigieg hires former Goldman Sachs executive as national policy director
Tucker Higgins – CNBC
Democratic presidential contender Pete Buttigieg has hired a former Goldman Sachs vice president and Google executive to run his policy shop, his campaign announced Thursday.


CFTC Orders Former Hedge Fund Portfolio Manager to Pay More than $700,000 in Monetary Sanctions for Fraudulently Mismarking Swaps
The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Swapnil Rege, a former portfolio manager for a Connecticut-based hedge fund registered with the CFTC as a commodity pool operator (CPO), for fraudulently mismarking swap valuations to artificially inflate the profits of his employer’s trading book in order to obtain an increased performance bonus.

****SD: Swapnil fined for swap infractions? CFTC wasn’t the only regulator in on the action – see SEC Charges Portfolio Manager with Mispricing Fund Investments.

Prosecutors shielding ex-Goldman banker from 1MDB’s financial documents
Emily Saul – NY Post
Prosecutors are trying to keep sensitive financial information out of the hands of an ex-Goldman Sachs banker linked to the money laundering scandal behind “Wolf of Wall Street.”

ESMA readies stress testing requirements for money market funds
The European Securities and Markets Authority (ESMA) has today issued two sets of guidelines regarding the stress testing of money market funds and reporting on money market funds to national competent authorities (NCAs), aimed at ensuring a coherent application of the Money Market Fund (MMF) Regulation.

FINRA Encourages Firms to Notify FINRA if They Engage in Activities Related to Digital Assets
Last year, FINRA took several steps to engage with members regarding their current and planned activities relating to digital assets. These efforts included the issuance of Regulatory Notice 18-20, which encouraged firms to keep their Regulatory Coordinator informed if the firm, or its associated persons or affiliates, engaged, or intended to engage, in activities related to digital assets, including digital assets that are non-securities. Regulatory Notice 18-20 requested that firms provide these updates to Regulatory Coordinators until July 31, 2019. FINRA appreciates members’ cooperation over the past year and is encouraging firms to continue keeping their Regulatory Coordinators abreast of their activities related to digital assets until July 31, 2020.

SEC Obtains Asset Freeze in Microcap Pump and Dump Scheme Targeting Elderly Retail Investors
The Securities and Exchange Commission today announced an emergency action charging two individuals with running a pump and dump scheme targeting retail investors. The SEC also obtained an emergency court order freezing the defendants’ assets.

SEC Charges Portfolio Manager with Mispricing Fund Investments
The Securities and Exchange Commission today announced settled administrative proceedings against Swapnil Rege, a North Brunswick, New Jersey portfolio manager and trader, for mispricing private fund investments, resulting in a large personal bonus.

FCM and IB Members—FinCEN updates list of FATF-identified jurisdictions with AML/CFT deficiencies
On July 12, 2019, the Financial Crimes Enforcement Network (FinCEN) issued an Advisory announcing that the Financial Action Task Force (FATF) had updated its list of jurisdictions with strategic AML/CFT deficiencies. NFA Member FCMs and IBs should review this Advisory to ensure that their AML programs have the most current information on FATF identified jurisdictions with AML/CFT deficiencies and revise their AML programs accordingly. A copy of the Advisory is available on FinCEN’s website.

FCA Statement on the MoU with the Bank of England
We have published an updated Memorandum of Understanding (MoU) between the FCA and the Bank of England (when exercising its prudential regulation functions through the Prudential Regulation Authority).

SEC freezes assets of alleged fraudsters targeting elderly
Francine McKenna – MarketWatch
The Securities and Exchange Commission imposed an emergency assets freeze on Thursday related to charges that two individuals are running an alleged pump-and-dump scheme targeting elderly retail investors. According to the SEC’s complaint, Florida resident Garrett M. O’Rourke and Maryland resident Michael J. Black allegedly worked together between 2016 and 2018 to sell shares in several microcap companies to investors, including elderly retail investors, using high-pressure stock promotional campaigns.

Chat room messages are ‘smoking gun’ in $25 million Merrill CFTC spoofing penalty
Todd Ehret – CFTC
The U.S. Commodities Futures Trading Commission (CFTC) last month chalked up another impressive settlement over the market manipulation tactic known as “spoofing.” The $25 million penalty for Merrill Lynch Commodities in the case is the second largest related to spoofing.

Commodity Futures Trading Commission Updates Systems To Protect Against Hacking
The Commodity Futures Trading Commission has been criticized by watchdogs for outdated systems, making the confidential information collected from hedge funds and brokers, a vulnerable target. Dawn Stump, Commissioner of the Commodity Futures Trading Commission joined Cheddar to discuss the updates.

Investing and Trading

S&P Risk Parity Indices Surge on the Back of a Rally in Treasuries
Rupert Watts – S&P Dow Jones Indices Blog
Expectations have diverged in 2019, as equity markets welcomed a dovish Fed, while the bond market exhibited pessimism. In the second quarter, the S&P 500® finished up 4.3% despite ongoing trade tensions, while the yield on the 10-Year U.S. Treasury Bond fell 40 bps to 2.0% and the U.S. Treasury curve remained inverted.

Distressed Debt Traders Have Tons of Cash and Nothing to Buy
Allison McNeely and Katherine Doherty – Bloomberg
Money managers’ dry powder could buy almost the whole market; Only $8.5B has been raised for distressed debt funds in 2019
The hardest part of being a distressed debt investor now may be finding something to do.

The Gold Rush Heats Up as Sub-Zero Yields Spread
Eddie van der Walt and Ranjeetha Pakiam – Bloomberg
Ray Dalio cites gold as a haven in markets paradigm shift; $25 trillion of debt has negative real yields: Bloomberg data
Gold, once mocked for its lack of yield and practical use, offers something the growing pile of negative-yielding bonds doesn’t — inflation protection. Plus, it makes a great doorstop.


The Legend of David E. Shaw: Hiding in Plain Sight
Paul Rowady – Alphacution Research Conservatory
Founded in 1988 by former Columbia University computer science professor, David Shaw, above a bookstore in New York’s Union Square, The DE Shaw Group is now reported to manage over $50 billion in assets. LCH Investments ranks it as the fourth-highest grossing hedge fund group of all time; among the ranks of the likes of Soros, Bridgewater, and Citadel. It is for reasons like these – and many others – that we have been eager to add comprehensive modeling of the available regulatory data for the main reporting entity, D. E. Shaw & Co., Inc., to our expanding library, and moreover, to our evolving understanding of the global market ecosystem.

Jane Street’s Twist on Stock Selection
Paul Rowady – Alphacution Research Conservatory
One of the greatest dividends that’s just now starting to come from Alphacution’s expanding library of models is the one that results from comparing a bunch of legendary trading firms with one another. In this case, what we are able to do is use the aggregate value of product class exposures along with total product class positions through time to determine the weighted average implied price of that product class. The obvious product class to look at in this way first is cash equities. In the chart below, Alphacution presents the various time series’ of average implied stock prices for each of a selection of some of the most legendary trading firms and hedge funds of all time, including our latest modeling on D. E. Shaw, Bridgewater, Susquehanna, Citadel, Millennium and Renaissance Technologies.

RJ O’Brien expands European leadership ahead of launch in Paris; Simon Prangnell has been appointed managing director of France at RJ O’Brien as the firm prepares to launch new business in Paris.
Hayley McDowell – The Trade
US futures broker RJ O’Brien has expanded its senior leadership with several new hires in Europe, shortly after establishing a new business in France.

Morgan Stanley Profits Hit by Wall Street Weakness; Cost control and gains on principal investments helped paper over weaker results in the firm’s trading and investment banking arms
Liz Hoffman and Peter Rudegeair – WSJ
Quarterly profit fell 10% at Morgan Stanley, the last of the big U.S. banks to report earnings in a mixed quarter where trading slowed and Main Street banks carried the day.

BlackRock’s Cash Engine Gets Boost, but Its Profit Falls; Total net flows rose to more than $150 billion
Allison Prang and Dawn Lim – WSJ
Investors increased the flood of cash flowing into money-management giant BlackRock Inc. BLK 0.88% in the last quarter. But the firm saw profits fall 6.5% from the comparable quarter a year earlier to $1 billion.

Goldman’s bankers are left waiting on the ‘platform’; Emphasising technology makes sense but electronic rivals have a lead
Tom Braithwaite – FT
Chilling words for Goldman Sachs’ investment bankers during this week’s earnings call. “Platform” was uttered 18 times. The P-word had never breached double digits before last year, according to a review of transcripts from S&P Capital IQ. Now it is all Goldman’s senior management can talk about.

Credit Suisse loses legal fight with UK over banker bonuses; Swiss bank had attempted to claw back £239m it paid on bonuses after 2008 financial crisis
Jane Croft – FT
Credit Suisse has lost its legal battle with the UK tax authorities to claw back £239m which it paid as a fee on banker bonuses after the financial crisis.

National Australia Bank appoints RBS head Ross McEwan to top job; Chief executive won plaudits for restructuring and returning British lender to profit
Daniel Shane and Jamie Smyth – FT
National Australia Bank has appointed the man who oversaw Royal Bank of Scotland’s lengthy restructuring as its new chief executive, as the Australian lender looks to put its own troubles behind it.

State Street Reports 20% Earnings Drop; Assets under management rise 7.2%
Robert Barba – WSJ
State Street Corp. STT 3.11% reported a nearly 20% drop in earnings in the second quarter as income from fees and net interest fell.

Deutsche Bank’s planned sale of prime brokerage unit to BNP still in ‘preliminary’ stage
Joy Wiltermuth – MarketWatch
Deutsche Bank’s DBK, -1.71% planned sale of its prime brokerage unit to BNP Paribas BNP, -1.16% is not yet a done deal as both sides of the proposed transaction keep a close eye on hedge fund withdrawals, two people with knowledge of the situation told MarketWatch.


Oil Executive Pleads Guilty in U.K.’s Iraqi Pipeline Bribes Case
Franz Wild – Bloomberg
Basil Al Jarah pleads guilty in relation to five offenses; Three other former executives to go on trial in January
A former oil executive pleaded guilty to five counts of corruption in the U.K. as part of one of the white-collar financial crime prosecutor’s biggest bribery investigations.

EU sets out first stress test for money market funds
Huw Jones – Reuters
The European Union’s trillion euro money market funds sector must complete its first “stress test” to assess its ability to cope with market shocks by 2020 under new guidelines from the bloc’s regulators published on Friday.

VertoFX raises $2M for its African and EM currency trading platform
Jake Bright – Tech Crunch
VertoFX, an Africa and emerging markets focused currency trading and payment startup, has raised a $2.1 million seed round, led by Accelerated Digital Ventures.

India’s Unicorns Are More Like Workhorses; Forget robots and AI. The latest wave of startups is coming from consumer-focused local businesses and enterprise software.
Tim Culpan – Bloomberg
China has birthed some pretty impressive billion-dollar startups. Bytedance Inc.’s TikTok is so hip it makes Snap Inc. look like it’s for your parents.


Boris Johnson Faces a Fight for Survival Before He’s Even Won
Tim Ross – Bloomberg
Stephen Hammond hints he would vote to topple new government; Tory 1922 Committee weighs rule change to protect next leader
Boris Johnson has not even entered Number 10 Downing Street as Britain’s prime minister and already he is facing a battle to keep the government he hopes to lead alive.

‘No-deal’ Brexit dealt blow by UK parliament
Al Jazeera
British parliamentarians dealt a blow on Thursday both to the dying embers of Prime Minister Theresa May’s administration and to the likely next leader, Boris Johnson, even before he’s been confirmed. MPs defeated the government in a vote that should thwart any efforts to suspend parliament in order to push through a “no-deal” Brexit.

Philip Hammond signals he could vote to bring down Boris Johnson
Philip Hammond – The Guardian
Philip Hammond has suggested he is prepared to vote to bring down a Boris Johnson government should the likely new prime minister push for a no-deal Brexit. In an outspoken intervention days before Johnson is expected to win the keys to Downing Street, the chancellor said it was “absolutely necessary” for the UK to extend its EU membership beyond 31 October. Asked whether he would rule out voting in favour of a no-confidence motion against Johnson, Hammond told Le Monde and Süddeutsche Zeitung: “I will take steps to avoid an exit without agreement apart from an explicit parliamentary approval.

Merkel Says Brexit Can Be Postponed, Hopes for Irish Border Fix
Arne Delfs – Bloomberg
German Chancellor Angela Merkel said the U.K. should be given more time to leave the European Union if it needs it, as she pointed to a way out of the Brexit impasse that falls far short of what the U.K.’s next prime minister wants. Merkel reiterated that Britain’s divorce agreement with the EU, and the controversial Irish border backstop within it, cannot be renegotiated, but pointed to other ways to potentially make the measure more palatable.


Gannett Closes In on Deal to Combine With GateHouse Media; A cash-and-stock deal could be announced in next few weeks, as the companies grapple with brutal environment for local newspapers
Cara Lombardo and Dana Cimilluca – WSJ
USA Today publisher Gannett Co. is nearing a deal to combine with rival GateHouse Media, people familiar with the matter said, a move that would join the nation’s two largest newspaper groups by circulation at a time local media is in a battle for survival.

The perils of storing fine wine; In an era of rising wine prices, just how secure is storage in professional warehouses?
Jancis Robinson – FT
Last February, to celebrate his 54th birthday, wine merchant Tuggy Meyer took his 15-year-old son out for dinner to the Chinese restaurant on top of the Royal Garden Hotel and enjoyed its famous duck and the views across Kensington Gardens.

When the Law Says Using Marijuana Is O.K., but the Boss Disagrees
Dan Hyman – WSJ
Smoking pot cost Kimberly Cue her job. Ms. Cue, a 44-year-old chemical engineer from Silicon Valley, received an offer this year from a medical device manufacturer only to have it rescinded when the company found out that she smoked prescription marijuana to treat post-traumatic stress disorder.

Safe Deposit Boxes Aren’t Safe; When Philip Poniz opened Box 105 at his local Wells Fargo, he discovered it was empty — and that he was totally unprotected by federal law.
Stacy Cowley – WSJ
In the early 1980s, when Philip Poniz moved to New Jersey from Colorado, he needed a well-protected place to stash his collection of rare watches. He had been gathering unusual pieces since he was a teenager in 1960s Poland, fascinated by their intricate mechanics. His hobby became his profession, and by the time of his relocation, Mr. Poniz was an internationally known expert in the history and restoration of high-end timepieces.

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