US regulators divided on use of derivatives in investment products

Dec 2, 2019

First Read

Hits & Takes
By JLN Staff

Longtime CBOT member Don Lisle passed away over the Thanksgiving Day weekend. Lisle is the father of Matt Lisle, currently general counsel and chief administrative officer at DrawBridge Lending. Don was a partner in Kelly Grain and a corn pit trader for many years.~JJL

Politico and other publications are reporting that Georgia Governor Brian Kemp will nominate Bakkt CEO Kelly Loeffler to the U.S. Senate.~JJL

Loeffler has long considered a Senate run, but had not pulled the trigger to jump into a race. Her move to become the CEO of Bakkt added to her CV and gravitas and adds a friend of cryptocurrency to the Senate.~JJL

MGEX has suspended trading in SPIKES, the MIAX volatility index futures. Only trades to liquidate positions are allowed. According to the MGEX press release “The decision to halt trading in SPIKES Futures at the end of the Friday, November 29,
2019 trade date results from conversations the Exchange has had with both the Securities
and Exchange Commission and the Commodity Futures Trading Commission.”~JJL

There appears to be a conflict between the CFTC and the SEC over the 2004 agreement they struck on indexes and security futures.

CME Group board member Terry Savage has a new edition of her book “The Savage Truth on Money!”~JJL

If you missed Friday’s JLN, we had Tony Saliba as the interview for the MarketsWiki Education Open Outcry Traders History Project.~JJL

And if you missed the JLN Weekend Update, HERE it is.~JJL

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London Attack Reflects Problems in Tracking Convicted Terrorists; Knife-wielding man was released after serving half his sentence for being part of a group that was plotting to bomb the city’s stock exchange; issue takes center stage ahead of elections
Stephen Fidler and Paul Hannon – WSJ
The killing of two people by a convicted terrorist on early release from prison has highlighted a growing challenge for security services in the U.K. and across Europe: the return into the community of people who have served time in jail for terrorism offenses.
/jlne.ws/34HRax9

****LSE stock exchange plotter term should not have been ended early. Should have gone all the way to maturity.~JJL

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Dennis Gartman Calls Time on Newsletter After More Than 30 Years
Sam Potter – Bloomberg
Veteran pundit says daily missive will cease at end of year; Friday note says bi-weekly or podcasts may be an option
Dennis Gartman plans to halt publication of “The Gartman Letter” after more than three decades of producing his daily investor report. “There comes a time when retirement calls,” Gartman wrote in Friday’s edition of the newsletter. “The simple sums of information available to everyone have made our efforts difficult and yet easier at the same time. Add to this the increased tax and regulation requirements and we’ve chosen to stop doing business as we have in the past.”
/jlne.ws/2Y8BuQR

****It ain’t over till it is over.~JJL

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Griffin, Peltz Paying Palm Beach’s Seven-Figure Property Taxes
Tom Metcalf – Bloomberg
Florida enclave’s property levies can top $1 million a year; Finance billionaires have recently moved to Sunshine State
For most Americans, seven figures would buy them the home of their dreams. For seven Palm Beach homeowners, that’s a year’s property tax. The eye-watering levies underline the Florida enclave’s status as a top destination for America’s wealthiest people. Citadel founder Ken Griffin tops the ranking compiled by the Palm Beach Daily News with a $5.4 million tax, while six of his neighbors also face seven-figure bills. Dozens of others pay more than $500,000, according to the paper.
/jlne.ws/33C4HoF

****For some reason, Ken Griffin real estate stories are always popular.~JJL

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Leader of the (Blockchain) Pack; Audit Trail for Block Trades; Cyber Risk
Gary DeWaal – Bridging the Week
The chairman of the Commodity Futures Trading Commission said it’s important for the United States to lead in blockchain technology and heralded the agency’s own principles-based approach to regulation as a model that could be followed to achieve leadership. Separately, a futures commission merchant operating as a voice broker was sanctioned by the CFTC for numerous purported regulatory lapses in connection with its execution of block trades and audit trails prepared and maintained regarding such transactions.
/jlne.ws/35Yxi9f

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Friday’s Top Three
Friday’s most read story was from Los Angeles Magazine – Former Deutsche Bank Exec Connected to Trump Loans Dies by Suicide in Malibu. Second was from John Lothian News, Tony Saliba – Open Outcry Traders History Project. Third came from the Financial Times, Japanese financial regulator unveils shake-up for stock exchange

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Lead Stories

US regulators divided on use of derivatives in investment products; Proposed updated framework aims to strengthen risk management standards and enhance protections
Chris Flood – FT
Clear divisions have emerged among top US financial regulators over proposed rules covering derivatives which are widely used by portfolio managers to run investment funds more efficiently. Derivative usage by asset managers has ballooned over several decades but the rules covering the use of these financial contracts in investment funds have developed in an unsatisfactory piecemeal fashion.
/jlne.ws/2Y7Xb3t

EU chief issues Brexit warning over City of London access; Dombrovskis says UK could be cut out if it diverges from Brussels standards
Jim Brunsden and Sam Fleming and Philip Stafford – FT
The EU’s financial services chief has warned that Brussels is ready to cut off the City of London’s post-Brexit market access in a sign of the pressure Britain will face to stay closely aligned with European rules after it leaves the bloc.
/jlne.ws/2OG2Omv

ICE Clear Europe president to step down next year; Clearing house has begun search for successor to Finbarr Hutcheson
Philip Stafford – FT
The head of ICE Clear Europe will step down from his position early next year after just 30 months running one of the world’s largest clearing houses.
/jlne.ws/2qaAnDK

CFTC Relying More Heavily on Coordination with Criminal Prosecutors; The number of enforcement actions the Commodity Futures Trading Commission has filed alongside criminal charges reached a record high in the 2019 fiscal year
Kristin Broughton and Dylan Tokar – WSJ
The nation’s derivatives regulator is filing more enforcement cases in tandem with criminal prosecutors, creating a more muscular approach to deterring wrongdoing in the markets it oversees.
/on.wsj.com/2P3mhwu

Brent Oil Set to Disappear as Crude-Price Benchmark Lives On; Royal Dutch Shell is set to plug its last remaining Brent oil wells in the North Sea next year
Sarah McFarlane – WSJ
The world’s most famous oil and gas field—and the backbone of global crude pricing—has dried up. Soon the Brent benchmark will have no Brent oil. Royal Dutch Shell RDS.B -0.86% PLC is expected next year to plug the last remaining Brent oil wells, located in the North Sea’s East Shetland Basin, about 115 miles northeast of Scotland’s Shetland Islands. The closures mark the end of an era, as the industry shifts its focus to smaller oil finds near existing infrastructure.
/jlne.ws/2DEb1RM

FBI says blockchain expert aided North Korea; Virgil Griffith arrested over alleged Pyongyang presentation on cryptocurrencies
Kiran Stacey – FT
American investigators have arrested Virgil Griffith, a 36-year-old cryptocurrency specialist, for allegedly helping North Korea use blockchain technology in violation of US sanctions, the justice department has announced. The Federal Bureau of Investigation arrested Mr Griffith on Thursday, officials said, for travelling illegally to North Korea to give a presentation on how to use cryptocurrency, as well as developing plans to transfer it between North and South Korea.
/jlne.ws/2rIcSCC

Hedge fund TCI vows to punish directors over climate change; Manager seeks disclosure of emissions as he accuses other investors of ‘greenwash’
Leslie Hook and Gillian Tett – FT
Christopher Hohn’s activist hedge fund TCI has outlined plans to punish directors of companies that fail to disclose their carbon dioxide emissions in a move that underlines rising investor concerns over climate change and the pressure on boardrooms to respond.
/jlne.ws/2Y6o7Rr

LIBOR’s End Will Sting The CME And Derivatives Dealers
Kurt Dew – Seeking Alpha
The give and take between market participants and regulators over LIBOR replacement is suddenly pointed. The US Regulators have nominated the secured overnight financing rate (SOFR) to replace LIBOR. While at first SOFR seemed to be a suggestion, lately the regulators are more insistent.
/jlne.ws/33Den1V

Burst of social unrest tests emerging market risk models
Tom Arnold, Karin Strohecker – Reuters
A wave of social unrest across developing countries this year has caught many investors off-guard and is challenging models designed to gauge political risk for investors, prompting some to pull money out.
/jlne.ws/2DG8t5y

China’s Crackdown on Cryptocurrencies Claims First Victims
Zheping Huang and Olga Kharif – Bloomberg
At least five exchanges halted operations or restricted access; Investors move coins to own digital wallets from exchanges
China’s latest crypto-crackdown is already claiming its first casualties. At least five local exchanges have halted operations or announced they will no longer serve domestic users this month, after regulators issued a series of warnings and notices as part of a cleanup of digital currency trading.
/jlne.ws/33GK6PY

Bankers Aren’t Ready to Start Sharing Yet; European banks must make more headway on sharing costs if they don’t want to be gobbled up by rivals.
Elisa Martinuzzi – Bloomberg
Three years ago Tidjane Thiam stirred hopes that the banking industry was looking at new ways to tackle its bloated cost base. The chief executive officer of Credit Suisse Group AG said his company was working on a common platform with another lender to share expenses.
/jlne.ws/33C11Dn

OPEC+ Gambles That U.S. Shale’s Golden Age Is Over
Javier Blas – Bloomberg
Oil traders see a slowdown in American crude output growth; Rising production in Norway, Brazil will offset U.S. weakness
For years, OPEC ignored the rise of the U.S. shale industry and came to regret its mistake. Now, the group is making another bold gamble on America’s oil revolution: that its golden age is over.
/jlne.ws/33zEc36

Exchanges, OTC and Clearing

Equity phobia: New Frankfurt School study explains German investment behavior
Deutsche Börse Group
The Frankfurt School of Finance & Management presented its new study “Zum Rätsel der Aktienmarktteilnahme in Deutschland” on Monday, 2 December in the Frankfurt Stock Exchange. In their study, commissioned by Deutsche Börse, scientists from the Frankfurt School and Goethe University conclude that the combination of risk aversion and overestimated risk, which is mainly caused by an information deficit, prevents Germans from investing more shares ,
/jlne.ws/2LfaJFk

Publication of “Examples of Good Practice in Corporate Governance”; Tokyo Stock Exchange, Inc. published the “Examples of Good Practice in Corporate Governance”
JPX
TSE has selected good examples of companies we consider to have carried out substantial initiatives based on the Principles of the Corporate Governance Code, such as including capital cost in their management strategies and strengthening the function of the board, which are seen as important parts of improving mid- to long-term corporate value in Japan, and communicated these to shareholders in an easy-to-understand way. Examples come mainly from Corporate Governance Reports submitted by listed companies.
/jlne.ws/2P7A9Wj

Trading Overview in November 2019; Japan Exchange Group released Trading Overview in November 2019.
JPX
Cash Equity Market – In November 2019, the daily average trading value for the TSE 1st Section (domestic common stocks) was JPY 2.6552 trillion.
Derivatives Market (OSE) – In November 2019, total derivatives trading volume was 24,617,110 contracts.
/jlne.ws/2OY0F4o

The Spanish Exchange Traded EUR40.92 Bn In November
MondoVisione
The Spanish Stock Exchange traded EUR40.92 billion in Equities in November, in line with that registered in the same period a year ago and down 12.8% on the previous month. The number of trades reported in November came in at 3.15 million, a 14.5% decrease year-on-year and 6.3% lower than in the preceding month.
/jlne.ws/34GyUUP

Tradeweb’s IPO shows how OTC markets are changing; RFQ pioneer is embracing new protocols and liquidity providers in a bid to connect the OTC markets
Kris Devasabai – Risk.net
Amid a crop of disappointing tech IPOs, Tradeweb’s stock market debut in April felt like a coming-of-age party, heavy with symbolism and bursting with promise.
/jlne.ws/33EpxUf

Tokyo Commodity Exchange: Changes To Exchange Rules In relation To Expansion Of Delivery Region In RSS3 Rubber Market
Mondovisione
For the purpose of ensuring/expanding storage space at designated warehouses in the RSS3 Rubber market, the Exchange decided to expand the delivery region, in order to always enable deliveries at designated warehouses all over Japan. The related changes to the Market Rules, including the abolishment of the current special delivery system (i.e. the temporary expansion of delivery region to Aichi when there is a shortage of warehouse space due to tight supply and demand), were approved by the competent ministry today (November 29th, 2019).
/jlne.ws/2DE3u5C

Saudi exchange to limit Aramco index weighting with cap
Davide Barbuscia – Reuters
Saudi Arabia’s Tadawul has introduced an equity index .TASI cap of 15% which is set to address concerns over the weighting oil giant Saudi Aramco will have when it lists on the exchange.
/jlne.ws/2DE3IcY

Swiss exchange operator SIX adds Spanish banks to court BME -sources
Jesús Aguado, Pamela Barbaglia – Reuters
Swiss stock market operator SIX has started working with Spain’s biggest banks as it begins its charm offensive to convince local regulators of the merits of its 2.84 billion euro ($3.13 billion) bid for Spanish bourse BME, three sources told Reuters.
/jlne.ws/33HQeY4

Fintech

LGIM adopts Charles River IMS to streamline trading; Legal & General will use the cloud-based system from Charles River for its global trading operations.
Hayley McDowell – The Trade
Legal & General Investment Management (LGIM) has expanded its relationship with Charles River and implemented its investment management solution (IMS) for more streamlined global trading operations.
/jlne.ws/2RcbwdK

The 5 Debates That Will Shape Fintech In The 2020s
Ron Shevlin – Forbes
It’s that time of the year when banking industry pundits turn their thoughts to the top trends of the upcoming year. I’d like to take a different tact and posit the top debates the industry will wrestle with in the coming decade.
/jlne.ws/2DD483b

Meet Pockit, The Fintech Swiftly Becoming The One-Stop-Shop For The Unbanked
Madhvi Mavadiya – Forbes
I spoke to Virraj Jatania, Co-Founder and CEO of Pockit, about how he is leveraging the business knowledge cultivated at a young age after working for his father to provide an alternative banking platform that spearheads social change and serves those who are unbanked in the U.K. Jatania is also a member of YPO, the global leadership network of 28,000 C-level executives and business leaders whose companies together generate over $9 trillion in annual revenue.
/jlne.ws/2YcwvyD

Cryptocurrencies

Bakkt CEO Will Be Asked to Fill Georgia Senate Seat in 2020: Report
David Pan – Coindesk
Crypto custodian Bakkt’s chief executive Kelly Loeffler has reportedly been picked by Governor Brian Kemp to serve in the U.S. Senate until the special election in November 2020. Loeffler will likely be asked next week to serve as the replacement of U.S. Senator Johnny Isakson, who has announced plans to vacate his senate seat on December 31, according to a report by The Atlanta Journal-Constitution, citing “several senior GOP officials.”
/jlne.ws/2r9lH8v

He Gave a Cryptocurrency Talk in North Korea. The U.S. Arrested Him. A self-styled “disruptive technologist” was arrested after speaking at a conference in Pyongyang on using digital currencies to launder money.
Jan Ransom – WSJ
He was a former hacker from Alabama who styled himself a “disruptive technologist” and believed that he was using his data-mining expertise as a force for good.
/jlne.ws/34Ixvgj

Cryptocurrency exchange IDAX’s CEO reportedly missing with the company’s cold wallet
Matthew Beedham – The Next Web
A relatively small cryptocurrency exchange has halted deposit and withdrawal services after its CEO has reportedly gone missing. The IDAX exchange posted an announcement earlier today saying it had halted some operations after its staff were unable to make contact with the global CEO. The CEO is said to have taken access to the company’s cold wallets with them. At this point, it’s not known why the CEO has supposedly vanished.
/jlne.ws/33ByjSR

Wall Street Has Gone Gaga Over Bitcoin. But Investors No Longer Seem to Care.
Avi Salzman – Barron’s
Bitcoin’s price may be evaporating, but Wall Street players are embracing it like never before. The owner of the New York Stock Exchange has begun Bitcoin futures trading, Fidelity is expanding its Bitcoin custody business, PricewaterhouseCoopers is auditing crypto funds, Davis Polk & Wardwell is giving them legal advice, and Marsh & McLennan is helping companies get insurance. All the boldfaced names are on board.
/jlne.ws/2RbRv7p

Huobi joins China telecom and finance giants to form state-backed blockchain alliance
Celia Wan – The Block Crypto
The Chinese branch of cryptocurrency exchange Huobi is one of the first members of the Blockchain Services Network (BSN), an industry alliance initiated by the State Information Center (SIC), according to several Chinese news sites. The membership was announced on Dec. 1 in a conference partially sponsored by the SIC. In addition to Huobi, the alliance has also recruited China’s equivalence to VISA, China UnionPay, state-backed telecom giants China Mobile and China Telecom, China Merchants Bank International, and Tencent-backed WeBank.
/jlne.ws/35UZKc4

With parliament approval, German banks to sell and custody crypto in 2020
Celia Wan – The Block Crypto
German banks will soon be able to sell and safe-keep cryptocurrencies under a new law, according to a report by German newspaper Handelsblatt. Effective Jan. 1, 2020, the new legislation was passed by the German parliament on Nov. 29 as an amendment to the fourth EU Money Laundering Directive. According to the report, the bill originally required banks to store cryptocurrencies with third-party custodians. However, under the final version of the law, financial institutions can custody cryptocurrencies themselves after procuring proper licenses, and the deadline to apply for such licenses is also extended, per the report.
/jlne.ws/2Lfm4oP

U.S. authorities arrest Ethereum research scientist Virgil Griffith for allegedly assisting North Korea in evading sanctions
Steven Zheng – The Block Crypto
The office of the U.S. Attorney for the Southern District of New York and the FBI announced today that it has arrested and charged Virgil Griffith for violating the U.S. sanctions laws and traveling to North Korea to “deliver a presentation and technical advice on using cryptocurrency and blockchain technology to evade sanctions.”
/jlne.ws/34HiNq4

Japanese crypto exchange BitFlyer adds trading support for XRP
Yogita Khatri – The Block Crypto
Japanese cryptocurrency exchange BitFlyer, recognized as one of the ten exchanges with “real” trading volumes by asset management firm Bitwise, has added trading support for XRP cryptocurrency. Announced Monday, BitFlyer said it has added a new cryptocurrency on its platform after almost two years. The move has been taken as XRP is the second-largest cryptocurrency in Japan after bitcoin (BTC) in terms of trading volumes, said BitFlyer, citing the latest data from the Japan Virtual Currency Exchange Association.
/jlne.ws/2Y8HSHP

The Vertcoin Cryptocurrency Just Got 51% Attacked – Again
Daniel Palmer – Coindesk
Vertcoin, a crypto project that aims to keep mining power decentralized, has suffered its second 51-percent attack in a year. The incident saw 603 genuine blocks on the Vertcoin main blockchain replaced with 553 blocks written by the attacker, according to the project’s lead maintainer, James Lovejoy, in a GitHub notice. Occurring on Sunday, Dec. 1, the blockchain reorganization caused five “double spends” to the value of 125 vertcoin (VTC) worth approximately $29.
/jlne.ws/35TxG8P

The Mechanics of Market Manipulation
Galen Moore – Coindesk
The levers are there to move hundreds of millions in crypto markets, and they’re clearly labeled On May 17 of this year, bitcoin’s price dropped suddenly. The action started on a single exchange: Bitstamp, domiciled in Luxembourg, where the dollar price of bitcoin suddenly dropped more than 18 percent in a matter of minutes. The CoinDesk Bitcoin Price Index, a composite of several market feeds, recorded a 6 percent drop as a result.
/jlne.ws/2Yi2E8h

Dutch Crypto Startups Brawl With Regulators Over Scope of EU Money Laundering Rule
William Foxley – Coindesk
Dutch crypto startups are crying foul as regulators in the Netherlands look to implement the European Union’s 5th Anti-Money Laundering Directive (AMLD5) ahead of a Jan. 10 deadline.
/jlne.ws/2qdwSfZ

Decentralized crypto exchange CryptoBridge shutting down, citing ‘increasing regulation’
Yogita Khatri – The Block
U.S.-headquartered decentralized cryptocurrency exchange CryptoBridge is closing operations, citing several reasons, including “increasing regulation.”
/jlne.ws/2Yi2vlf

The cryptocurrency community is up in arms after a US citizen gave a talk on blockchain in North Korea and was then arrested
Charlie Wood – Business Insider
The cryptocurrency community is up in arms after the arrest of an expert who was accused of helping North Korea evade US sanctions.
/jlne.ws/2OHrWcH

Politics

John Kerry Launches Star-Studded Climate Coalition
Lisa Friedman – NY Times
John Kerry, the former senator and secretary of state, has formed a new bipartisan coalition of world leaders, military brass and Hollywood celebrities to push for public action to combat climate change.
/jlne.ws/33HtDuR

Trump to hit Brazil and Argentina with steel and aluminium tariffs; President accuses the two countries of a ‘massive devaluation’ of their currencies
Philip Georgiadis – FT
Donald Trump is to slap tariffs on imports of steel and aluminium from Brazil and Argentina after accusing the countries of currency manipulation.
/jlne.ws/2DEoIAo

As Climate Protesters Fume, Envoys Build a Wall of Green Money; COP25 talks in Madrid will seek to harness the power of markets to cut greenhouse gas pollution.
Reed Landberg and Jeremy Hodges – Bloomberg
Climate envoys from almost 200 nations will gather in Madrid starting Monday for two weeks of talks organized by the United Nations. The ambition at COP25 is to build on the four-year-old Paris Agreement, at which governments pledged to limit fossil-fuel pollution, by reviving a corner of the market in carbon pollution credits.
/jlne.ws/2rKklB6

Do Nations Survive Populist Demagogues? Ask Argentina; A century of divergence between the economies of Australia and its Latin American twin is testimony to the importance of democratic institutions.
David Fickling – Bloomberg
Looking at the way major economies in recent years have managed to combine chaotic politics with decent growth, it’s tempting to wonder whether we’re all making too much fuss about the behavior of the people in power.
/jlne.ws/33J8ZKO

Who Will Tell the Truth About the Free Press?
The Editorial Board – NY Times
“Concocting fake news to attract eyeballs is a habitual trick of America’s New York Times, and this newspaper suffered a crisis of credibility for its fakery,” the Chinese government declared after The Times broke the news this month of government documents detailing the internment of Uighurs, Kazaks and other Muslims in the northwestern region of Xinjiang.
/jlne.ws/2Y9gutx

Regulation

Banks urged to clean up government bond sale practices; Standards body set up after series of scandals pushes for ‘fairness’ in bond sales
Tommy Stubbington – FT
A standards body tasked with cleaning up the City of London following a series of scandals has warned banks about potential conflicts of interest in the government bond markets.
/jlne.ws/2OFpgMv

Nuns berate SEC over planned shareholder rules; Two religious communities say changes will leave them ‘without a voice’ at corporate meetings
Attracta Mooney – FT
Two groups of nuns, including one that puts living a life of peacemaking at the centre of its work, are gearing up for a fight with the US financial regulator over proposed shareholder rules.
/jlne.ws/33BtyIZ

FCA looks to expand SMR to benchmark administrators; Benchmark administrators could be in-scope of the senior managers regime late next year, as the FCA launches consultation on proposal.
Hayley McDowell – The Trade
The UK’s Financial Conduct Authority (FCA) is looking to bring authorised benchmark administrators in scope of the senior managers regime (SMR).
/jlne.ws/2sE8ogL

MIFID investment firms will need to use a new form to notify FCA of management body changes for Non-SMF Directors
UK FCA
From 9 December 2019, MIFID investment firms and optional exempt firms will need to use a new form to submit information to us when appointing Non-SMF Directors to, or withdrawing them from, their management body.
/jlne.ws/2DEwJVX

Exclusive: U.S. digs deeper into Deutsche role in Danske money laundering scandal – sources
John O’Donnell, Tom Sims, Matt Scuffham – Reuters
The U.S. Department of Justice has in recent weeks stepped up its investigation into Deutsche Bank’s role in the 200 billion euro ($220 billion) Danske Bank money laundering scandal, four people familiar with the inquiry told Reuters.
/jlne.ws/33F1pkk

Investing and Trading

Investors rebel over US director re-elections; Asset managers cast their vote against poor independent oversight
Attracta Mooney – FT
Directors on US boards are being punished by big investors for failings ranging from excessive executive pay to poor independent oversight, with shareholder rebellions on re-elections up more than a fifth this year.
/jlne.ws/2qaSpWr

Assets held in exchange traded funds surge to record $6tn; Failure of most traditional active managers during the crisis prompted many investors to seek less volatile strategies
Chris Flood – FT
Global assets held by exchange traded funds have climbed to a record $6tn, doubling in size in less than four years, in a surge turbocharged by the lengthy US stock market bull run.
/jlne.ws/33Ckzax

Lack of inflows expected to hinder fund houses’ growth in next 5 years; US and European managers are likely to face more severe pressures on profits as the Asia-Pacific gains key role
Chris Flood – FT
Since the financial crisis equity and bond markets have enjoyed an extraordinary bull run, which has provided a powerful supporting tailwind for the investment industry over the past decade.
/jlne.ws/2DEwNVM

Bond ETFs outshine equity rivals in 2019; Investors plough $191bn into passive fixed-income vehicles that track the markets
Chris Flood – FT
Exchange traded funds linked to bond markets have attracted higher investor inflows than equivalent equity products this year in a highly unusual development in the history of the ETF industry.
/jlne.ws/2Y5rIiD

Apple worth more than US stock index’s energy sector; The phonemaker’s stellar run contrasts with unloved resources stocks=
Robin Wigglesworth – FT
Apple is now worth more than all large-cap US energy stocks put together. A roaring share rally has pushed the iPhone manufacturer’s market capitalisation to nearly $1.2tn, surpassing the value of the S&P 500 energy sector and wresting back the crown of the world’s most valuable listed company from rival Microsoft.
/jlne.ws/2Y6nmI5

MSCI Starts Closing Its Open Door to China; Setting new conditions for adding more Chinese companies to its indexes could put out US political fire.
Nisha Gopalan – Bloomberg
MSCI Inc. is showing new toughness on adding domestic China shares into its global benchmarks. The move will better protect investors and may dampen a political backlash in the U.S. after it already opened the door to more Chinese stocks. The new, almost insurmountable conditions will effectively start closing it on further entries.
/jlne.ws/2rP3gGg

Farmers Rushed Into Hemp. Now They Face a Glut. Prices for the crops are falling, and some growers are struggling to unload their product
Arian Campo-Flores and Cameron McWhirter – WSJ
Tony Ockerman, a fourth-generation farmer hoping to diversify his crops by adding hemp, said his first harvest this year turned out well after plenty of trial and error. But he is struggling in one key respect: finding buyers.
/jlne.ws/2rIoQMy

De Beers Diamonds Reflect a Changing Market; Mining giant embraces traceability and synthetic stones as natural diamond deposits shrink
Alexandra Wexler – WSJ
De Beers is facing up to a tough reality: The world’s diamond deposits won’t last forever.
/jlne.ws/33B4UZ6

1,000 Dead ETFs Is Cause for Celebration; The market is a meritocracy, and only the strongest survive.
Eric Balchunas – Bloomberg
Sometimes death is a sign of life. The exchange-traded-fund industry buried its 1,000th product this year as the number of victims is growing almost as fast as new products hitting the market. This is obviously bad for the issuers of the deceased funds, but this Darwinism should be seen as healthy and natural in a thriving — albeit brutal — market.
/jlne.ws/2OHiJB0

Institutions

For Love and Money in Mozambique: How a Credit Suisse Banker Helped Fuel an Alleged $2 Billion Debt Fraud
Margot Patrick and Matt Wirz – WSJ
Andrew Pearse said he negotiated his first bribe while sipping vodka at a hotel in Maputo, the capital of Mozambique, in February 2013.
/jlne.ws/33FWO1p

Can Goldman’s merchant bank help group regain old edge? Reshaping of division will be significant both practically and symbolically
Patrick Jenkins – FT
You used to know where you were with Goldman Sachs. The cockiest firm on Wall Street was also the smartest, edgiest rent seeker of them all, with supposedly unrivalled risk management to match. At its peak in mid-2007, it was bringing in a return on equity above 30 per cent.
/jlne.ws/2DCUFc9

Incoming Nomura boss warns of ‘sense of crisis’; Kentaro Okuda to replace banker who led Japan group’s lengthy turnround effort
Leo Lewis – FT
The incoming chief executive of Nomura said he would take charge with a “sense of crisis” as adverse demographics, a shifting global environment and digitalisation batter Japan’s biggest brokerage
/jlne.ws/2ODsU9H

Goldman to avoid setting strict financial targets at investor day; Chief executive David Solomon risks disappointing shareholders with ‘through the cycle’ goals
Laura Noonan and Patrick Jenkins and David Crow – FT
Goldman Sachs will avoid setting strict profitability targets at its upcoming investor day, according to people familiar with the plans, leaving executives with more room to manoeuvre in an economic downturn but risking disappointment among shareholders.
/jlne.ws/2DD8cR4

Billionaire Hohn Warns Companies to Step Up on Climate Change
Lucca De Paoli and Suzy Waite – Bloomberg
Activist investor seeks better emissions disclosure from firms; TCI will evaluate divestment if they fail to act on warnings
TCI Fund Management Ltd., the firm run by billionaire hedge fund manager Christopher Hohn, warned companies in its portfolio to step up their climate-change action or risk divestment.
/jlne.ws/2qbxdzD

The Billionaire Hedge Fund Manager With Quantum Ambitions; Michael Hintze made his fortune on judgment calls, but he has an eye on a new technology just around the corner.
Nishant Kumar – Bloomberg
Every morning at 11:30, hedge fund manager Michael Hintze rallies his troops at the office of CQS in London. Portfolio managers and analysts stand at a podium to offer their assessment of whether they’ll make or lose money because of unfolding global events. Traders in New York and Hong Kong are linked up, and the meeting is broadcast around the firm. More serious matters are handled behind the podium, in CQS’s “situation room.” The walls here are crowded with charts, and screens display anything from a real-time cyberattack unfolding somewhere in the world to Gulf shipping to various Twitter feeds. Another wall has TV channels featuring Al Jazeera, China’s CCTV, and other networks.
/jlne.ws/2DCROAc

RBS searches for future growth in digital start-ups; Lender looks for improved efficiency and hopes launch of Bó will see off app-based rivals
Nicholas Megaw – FT
As Royal Bank of Scotland publicly launched its new app-based bank Bó this week, the lender was quietly approaching another milestone. The same day, in a WeWork office less than a kilometre away, its business lending start-up Esme passed £100m in loans issued.
/jlne.ws/2rPND0V

Regions

‘Tourists’ help fuel risky emerging market bond sales; Low yields in developed world prompt investors to search further afield
Tommy Stubbington – FT
Angola is limping out of a four-year recession. Its debt burden has soared to about 100 per cent of its annual economic output as its currency, the kwanza, tumbles in value. The government is propped up by a $3.7bn IMF credit facility, the largest ever for an African country.
/jlne.ws/33LTOkg

How Bond Defaults Are Changing China’s Markets
Tracy Alloway and Joe Weisenthal – Bloomberg
Every week, hosts Joe Weisenthal and Tracy Alloway take you on a not-so-random walk through hot topics in markets, finance and economics.
/jlne.ws/34SLy2U

Italian Pasta Increasingly Is Made of Wheat From the U.S. and Canada
Megan Durisin, Ashley Robinson, and Michael Hirtzer – Bloomberg
Adverse EU weather foils plan to limit Canada, U.S. supplies; ‘The big question’ is will the trans-Atlantic trade continue?
Italy, the world’s biggest pasta consumer, can’t abandon the North American wheat used to make spaghetti and macaroni after smaller plantings and foul weather curbed output in the European Union.
/jlne.ws/2rH5DL3

Top Palm Oil Buyer Considers Restricting Imports to Help Local Farmers
Shruti Srivastava and Pratik Parija – Bloomberg
December 2, 2019, 3:37 AM CST
Government may set standard import unit at 5-liter containers; Move may help government fulfill aim to double farmer incomes
India is considering imposing new restrictions on refined palm oil imports to curb purchases and boost the local edible oil industry, according to a person with direct knowledge of the matter.
/jlne.ws/33HbnBV

French-Fry Squeeze Hits North America After Poor Potato Harvest
Ashley Robinson – Bloomberg
Wet, cold weather damaged crops in Idaho, Manitoba, Alberta; Prices are likely to rise on tight supply, Rabobank says
Potato processors are rushing to buy supplies and ship them across North America in order to keep French fries on the menu after cold, wet weather damaged crops in key producers in the U.S. and Canada.
/jlne.ws/2DALZTw

Repeated Defaults by China Industrial Firm Spark Contagion Fears
Bloomberg News
Xiwang juggles $1.4b debt load amid yuan bond default in Oct; Shandong’s private firms see bonds plummet on default news
The latest bond default by a Chinese industrial group at the epicenter of a regional debt storm is escalating concerns about a cluster of private firms entangled in risky financing. Shandong-based Xiwang Group Co., which failed to make good on a delayed repayment on a local bond, is scrambling to refinance and avoid deeper trouble after triggering cross-default clauses on other bonds.
/jlne.ws/2qb2DGm

China Plans to Merge Coal-Power Assets and Slash Capacity, Reuters Reports
Alfred Cang and Dan Murtaugh – Bloomberg
Five power firms had $156 billion of coal-power liabilities; Trial program to be focused on five northwestern regions
China is pursuing a three-year pilot program, led by five of its biggest utilities, to integrate and cut some coal-fired power capacity to help the debt-saddled industry, state media reported.
/jlne.ws/2DEiIYa

The Way Out for a World Economy Hooked On Debt? More Debt
Enda Curran – Bloomberg
Cheap borrowing costs have sent global debt to another record; Options to revive economic growth require even more borrowing
Zombie companies in China. Crippling student bills in America. Sky-high mortgages in Australia. Another default scare in Argentina.
/jlne.ws/34SYyWg

Brexit

How an Anti-Brexit London District Could Help Boris Johnson Triumph
Benjamin Mueller – The New York Times
The Labour Party canvassers gathered after dark outside a tube station in Pimlico, a pocket of central London that, by all appearances, should be fertile terrain. Nearly three-quarters of the surrounding district voted to stay in the European Union, among the strongest “Remain” votes in Britain, putting the pro-Brexit Conservatives at risk in a seat they had held since the district lines were drawn in 1950.
/jlne.ws/2DAV5zP

Boris Johnson promises to give state aid to UK companies to stop them collapsing after Brexit
Thomas Colson and Adam Bienkov – Business Insider
Boris Johnson announces the UK will scrap state aid rules to prevent businesses from collapsing after Brexit. The government is currently forbidden from intervening to prop up uncompetitive UK-based companies. The proposal comes as Johnson insists he will negotiate a new trade deal with the EU by the end of 2020, or leave without a deal. Failure to secure a deal would leave the UK trading on World Trade Organisation terms with its closest trading partners.
/jlne.ws/33C1w0d

General election 2019: Parties clash over Brexit in TV debate
BBC News
Leading figures from the UK’s political parties have clashed on Brexit, the NHS and terror legislation in the latest televised general election debate. Labour’s Richard Burgon declined to say during the ITV programme which way he would vote in the EU referendum his party is promising, if it wins power. Tory Rishi Sunak was pushed to rule out a no-deal Brexit if the Conservatives won, but did not give a direct answer. The UK goes to the polls on 12 December.
/jlne.ws/2r5cgXB

Miscellaneous

The Wolf of Wall Street Gets Woke and All I Got Was a Sticker
Sam Potter – Bloomberg
Jordan Belfort memoir becomes an immersive theater show; London production de-fangs the wolf for a 2019 audience
Jordan Belfort puts his hand on my shoulder. His eyes are wild. He’s wearing cocaine like cologne. “Do we have an understanding?” he asks me.
/jlne.ws/34MMwhu

David Boies, a Star Lawyer, Faces Fresh Questions Over Ethics
NY Times
David Boies is under an ethical cloud. Again.
The prominent lawyer David Boies is facing new questions about his role working for several accusers of Jeffrey Epstein.
/jlne.ws/2YdMIDN

The Hidden Power of Poetry to Make Better Entrepreneurs; Studying verse can help build creative thinking that is crucial for founders, educator says
Judith Crown – WSJ
Does Robert Frost hold the secret to entrepreneurship? It’s an idea that Clare Morgan has spent nearly two decades pursuing. Dr. Morgan, director of the graduate creative-writing program at the University of Oxford, thinks there’s a relationship between analyzing poetry and honing skills that are crucial to running businesses—flexible thinking and the ability to see deeper and more
/jlne.ws/2Y6RoeJ

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