Wall Street banks ramp up research into quantum finance; U.K. Examines if Cyberattack Triggered London Stock Exchange Outage

Jan 6, 2020

First Read

Hits & Takes
By JLN Staff

A friend at the ASX shared information on where to send financial assistance to help those impacted by the disastrous fires there. Here are three organizations to send help for people, to help fight the fires and to impact the effect on indigenous wildlife:

Red Cross Australia is undertaking the relief efforts for those immediately
Impacted by the fires (www.redcross.org.au).~JJL

NSW Rural Fire Service (www.rfs.nsw.gov.au) is the state based volunteer firefighting organizations in New South Wales, Victoria and South Australia.~JJL

WIRES (www.wires.org.au) is dealing with the devastating impact on indigenous wildlife.~JJL

Stay tuned for additional organizations and efforts to help.~JJL

There is a fascinating story in the Washington Post about how Iranian agents once plotted to kill the Saudi ambassador in D.C. They planned to execute the plan at a restaurant I have been at several times, Cafe Milano.~JJL

Episode 7 of the CryptoMarketsWiki Podcast is up! This time, JLN Editor Thom Thompson and I discussed the biggest cryptocurrency stories of 2019. You can listen to it here.~MR

Gareth Roberts will be joining the Institutional Sales team at ED&F Man Capital Markets as head of clearing strategy.~JJL

The NFA is looking for a few good people. Here are the jobs open at the NFA.~JJL

ICE is looking for a public relations communications associate for New York.~JJL

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‘It’s an Atomic Bomb’: Australia Deploys Military as Fires Spread; With more than a month still to go in the fire season, the government announced a large-scale use of military assets, a deployment not seen since World War II.
Livia Albeck-Ripka, Isabella Kwai, Thomas Fuller and Jamie Tarabay – NY Times
The evacuees walked down the gangway of the giant naval vessel to the dock, each carrying just a few items of luggage. Some held infants and others their dogs, whose legs were still shaky from the 20-hour voyage down the coast of Australia. They were weary, and their clothes smelled of smoke, but the terrible infernos were finally behind them.
/jlne.ws/35rhATh

*****This is a real problem that needs global attention and help.~JJL

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High demand prompts launch of Europe’s first cannabis ETF; Similar products in North America have proved popular despite a poor year for the sector
Owen Walker – FT
European savers will soon be offered their first opportunity to invest in an exchange traded fund focused on the fast-growing legal marijuana industry. Canadian fund group Purpose Investments plans to launch the Medical Cannabis and Wellness ETF from January 13, which will be Europe’s first such product. The fund will be listed in Germany and made available to investors in the UK, Italy and Ireland.
/jlne.ws/2MZ4MgA

*****Not strong demand, or unexpected demand, but “high” demand for cannabis. Somewhere some headline writer has the giggles and perhaps the munchies too.~JJL

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Campaign for shorter market hours gathers momentum in Europe; Exchanges examine options after lobby groups argued for truncated trading day
Philip Stafford- FT
Banks and fund managers across Europe are confident they are building the momentum to force the region’s stock exchanges to reduce their opening times. During the past few months traders have argued that the standard eight-and-a-half-hour days do nothing to help them easily buy and sell shares without affecting the market price. Such long hours are also bad for mental health and for work-life balances, they say.
/jlne.ws/2SWwjmB

***** Are the computers complaining too?~JJL

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The Death of Brokerage Fees Was 50 Years in the Making; How Wall Street went from minimum commissions to free trading.
Stephen Mihm – Bloomberg
It looks as if 2019 will be remembered as the year when stock brokerage fees, having declined for years, finally disappeared altogether. Led by the free stock-trading startup Robinhood Markets Inc., a host of big names have eliminated fees: E*Trade Financial Corp., Charles Schwab Corp., TD Ameritrade Holding Corp. and many others.
/jlne.ws/37H4aEh

*****My former employer Tom Price had a saying from his father that went something like this: “Make up in popcorn what you are losing in peanuts.” Do you know the cost of your popcorn?~JJL

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Friday’s Top Three
Our top story Friday was the Financial Times’ Ten people set to shape Wall Street in 2020 – which includes the head of Goldman Sachs as well as the man at the Department of Justice who is overseeing an investigation of the bank’s involvement in the Malaysian 1MDB corruption scandal. Second was The Wall Street Journal’s Sprawling Insider-Trading Case Heads to Trial, about a case in which insiders at investment banks and public companies allegedly passed information to middlemen and traders, often in exchange for cash and luxury items. Third was from John Lothian News – Matt Raebel’s Options markets to get liquidity boost, about the proposed SA-CCR rule.

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Lead Stories

Wall Street banks ramp up research into quantum finance; Goldman Sachs, JPMorgan and Citigroup eye potentially revolutionary technology
Richard Waters – FT
Some of Wall Street’s biggest banks have stepped up their research into quantum computing, signalling growing confidence that recent breakthroughs in the field have laid the foundation for the first practical applications of the revolutionary new computing technology.
/jlne.ws/2unH0o5

U.K. Examines if Cyberattack Triggered London Stock Exchange Outage; Government officials look at computer code that may have played a role; the LSE says the incident was related to a software glitch
Anna Isaac – WSJ
U.K. government agencies are examining whether a trading outage blamed on a software hiccup at the London Stock Exchange LSE -1.20% in August may actually have been caused by a cyberattack aimed at disrupting markets, according to people familiar with the matter. A British intelligence agency has contacted the LSE in the past two months requesting additional information about the Aug. 16 outage, according to people familiar with the matter. The U.K.’s Treasury is also involved in the probe.
/jlne.ws/39Ftzjs

Few Bank Failures Could Be a Warning Sign for U.S. Financial System; Hidden risks may be masked by a strong economy, some analysts say
Andrew Ackerman – WSJ
Times are good for U.S. banks. The industry is highly profitable, lending is up and the number of problem institutions—those found to have deficiencies in their businesses—is the lowest since early 2007, according to the Federal Deposit Insurance Corp.
/jlne.ws/2sHHKUH

Cocoa Cartel Stirs Up Global Chocolate Market; Ivory Coast and Ghana, which combined produce more than 60% of the world’s cocoa, join forces
Alexandra Wexler – WSJ
An international cartel is coming for your daily chocolate fix. The West African nations of Ivory Coast and Ghana, which combined produce more than 60% of the world’s cocoa, have banded together to form their own chocolate-coated version of the Organization of the Petroleum Exporting Countries.
/jlne.ws/2N2XYP8

Fed focuses on repo market exit strategy after avoiding year-end crunch
Jonnelle Marte, Karen Brettell – Reuters
Wall Street’s worst fears of a year-end funding squeeze never materialized thanks in large part to the quarter-trillion dollars the Federal Reserve stuffed into the market to ensure nothing became gummed up.
/jlne.ws/2MUH2dx

The only game in town; Following the removal of Swiss equivalence in the European Union in July last year, Hayley McDowell examines the fallout of the political development and finds buy-side traders are benefitting from the substantial shift in market structure.
Hayley McDowell – The Trade
In 2019, SIX Swiss Exchange overtook Euronext Paris to become the third-largest primary exchange in Europe. Behind only the London Stock Exchange and Germany’s Deutsche Börse, the paradigms of the European equities landscape drastically shifted during the summer months following a spat between the European Union and Switzerland.
/jlne.ws/2QtDqkX

A Forgotten Investment Worth Considering: Exchange-Traded Bonds; While not widely known, individual investors can invest in corporate bonds as easily as they can buy stocks, through exchange-traded debt
Eric Uhlfelder – WSJ
With most Treasurys yielding under 2% and savings accounts yielding even less, individual investors are hard-pressed to figure out what to do with money they don’t want exposed to material market risk.
/jlne.ws/2SUmeGG

Operational risk ‘increasing’ due to rise in City watchdogs; Lobby group says budgets hit as overlapping requests create higher compliance costs
Caroline Binham – FT
The proliferation of regulation of the City of London since the banking crisis has proven counterproductive because it has increased systemic risk, the lobby group for the financial services sector has warned. Banks and other financial institutions regularly receive overlapping requests and have to deal with simultaneous initiatives from different watchdogs with no overarching strategy, according to UK Finance. It said the resulting higher compliance costs were hitting budgets.
/jlne.ws/2ulng4l

SocGen: making the case for European bank champions; EU politicians are warming to cross-border mergers. The French lender wants to be at the forefront
Stephen Morris and David Keohane – FT
Even by the high standards of the École Polytechnique in Paris, founded to educate the country’s future business and engineering elite, the class of 1984 plays a remarkable role in European banking.
/jlne.ws/37Ezof9

Brainard Says Fed Faces ‘Large Challenge’ to Become More Diverse
Rich Miller – Bloomberg
Central bank governor: ‘eye-opening’ to hear from black women; Diversity more than nice, it promotes good decision-making
Federal Reserve Governor Lael Brainard said she’d been taken aback to hear of the difficulties black female employees face at the central bank, and that the monetary authority faces formidable difficulties in increasing their representation.
/jlne.ws/2ZUBO6I

Bank of England to investigate Wall Street giants over their financial reporting
Emma Dunkley – The Times
The Bank of England has opened an investigation into Wall Street banking giants, including Goldman Sachs and Morgan Stanley, over their financial reporting.
/jlne.ws/36pzjvR

And Finally…
Colin Lambert – Profit & Loss
Welcome to 2020 and may I wish you all a healthy and prosperous new year – if we’re looking in purely market terms I suppose that means some volatility.There were a few things that caught my eye over the holiday period, all of which I will, hopefully, get to in the next week, but let’s kick off with the totally irrelevant result of one of our Irrational awards and the news that these beauties won the 2019 P&L Socks contest, beating out the “on-message” P&L socks; my thanks to those of you who voted.
/jlne.ws/37zHpSy

Exchanges, OTC and Clearing

Was London Stock Exchange hit by cyberattack?
Anna Isaac – MarketWatch
U.K. government agencies are examining whether a trading outage blamed on a software hiccup at the London Stock Exchange in August may actually have been caused by a cyberattack aimed at disrupting markets, according to people familiar with the matter.
/jlne.ws/2QOyR3A

Tokyo Financial Exchange: Trading Volume In December 2019 And Year 2019
MondoVisione
(1) FX Daily Futures contracts(Click 365)-The total trading volume of FX Daily Futures contracts (Click 365) was 1,669,741 ( +15.0% MoM / -30.8% YoY ) and its average daily trading volume was 75,897. See the TABLE 1 for the composition of the trading volume.
/jlne.ws/37GKv7u

DGCX Breaks Numerous Records in 2019 to achieve best year since launch
DGCX Press Release
The Dubai Gold & Commodities Exchange (DGCX) today announced that it broke its annual volumes and Average Open Interest (AOI) records last year, making 2019 its most successful year since launch. The Exchange traded 23.06 million contracts in 2019 ? beating its previous record of 22.26 million contracts traded in 2018 ? with DGCX’s wholly-owned clearing house, the Dubai Commodities Clearing Corporation (DCCC) clearing over USD 866 billion in notional value.
/bit.ly/2QJV8zs

Swiss Stock Exchange: Growth And Records In 2019
MondoVisione Seven companies joined the Swiss Stock Exchange in a year that saw trading turnover grow by 8.5% to reach almost CHF 1’500 billion.
/jlne.ws/37DLipv

Jamaica Central Securities Depository Goes Live With Newly Integrated DEPEND
MondoVisione
The Jamaica Central Securities Depository, JCSD, successfully launched their newly integrated CSD solution on 2nd of December 2019 in parallel with the launch of a new trading platform for the Jamaica Stock Exchange, JSE. This represents the successful conclusion of the JSE’s project to replace their trading platform which started with the selection of the new platform in October, 2018.
/jlne.ws/2MZvzct

HKFE Announces Revised Margins For Futures Contract
MondoVisione
Please be advised that pursuant to Exchange Rule 617(d) and HKCC Rule 402, the Exchange and the Clearing House have determined that with effect from the commencement of trading on Tuesday, 7 January 2020, (including the mandatory intra-day variation adjustment and margin call, if applicable), the margin levels of the following Futures Contracts shall be as follows:
/jlne.ws/2SWBKSx

OCC sees securities lending activity fall in 2019
Securities Lending Times
The Options Clearing Corporation (OCC) saw its securities lending central counterparty activity fall by 5.27 percent over 2019, compared to the year before. The Chicago-based equity derivatives clearinghouse chalked up 1.3 million new loan transactions in 2019.
/jlne.ws/2sHLhlV

New Year’s Message from Group CEO Kiyota
JPX
Greetings to everyone for the New Year. As JPX Group CEO, I wish everyone health and prosperity for the year ahead. For my New Year’s message, first I would like to take a look back over how last year was for the markets.
/jlne.ws/2QSOPcL

Unscheduled adjustment in SDAX; Comdirect Bank AG leaves the index, Vossloh AG is included
Deutsche Börse AG
STOXX Ltd., Qontigo’s global index provider, announced an unscheduled adjustment to the SDAX index on Friday.
/jlne.ws/2SYrt8k

Eurex Exchange Readiness Newsflash | Updates January 2020
Eurex
With this Newsflash, we would like to draw your attention to the upcoming publications, events and necessary actions for the ongoing initiatives:
/jlne.ws/35yxuLS

Athens Stock Exchange Main Market Stock Liquidity Class Assessment Results, Effective As Of January 07, 2020
Mondovisione
Athens Stock Exchange announces the Main Market stock liquidity class assessment results, effective as of January 07, 2020 (Table 1, Table 2, Table 3).
/jlne.ws/2FpaCDN

Fintech

Use AI for Picking Stocks? Not So Fast; AI investing strategies, when put into practice, don’t produce particularly unique portfolios, a new study finds
Mark Hulbert – WSJ
Artificial intelligence burst onto Wall Street several years ago, to fanfare and hope. Unfortunately, AI-based investing strategies have struggled to live up to some of the more inflated expectations for their performance.
/jlne.ws/37E3hfz

Artificial intelligence needs global ground rules; It is easier to set limits while only a few players can afford the needed technology
Diane Coyle – FT
In 1986, the nanotechnologist Eric Drexler invented the concept of grey goo. It was the idea that a nano-replicator, a minuscule machine, could make an infinite number of copies of itself at exponential pace, covering the earth and obliterating life. “Dangerous replicators could easily be too tough, small and rapidly spreading to stop,” he wrote
/jlne.ws/37CR8ri

How the fintech revolution is transforming your financial adviser
Morey Stettner – MarketWatch
Financial advisers are constantly pelted with offers to try new “fintech” products. These tools promise to help planners with everything from assessing risk to educating clients to rebalancing portfolios. Some come with hefty price tags or steep learning curves; others are inexpensive and easy to use with plug-and-play accessibility. The challenge is sifting through all the offerings to determine which ones merit serious consideration.
/jlne.ws/2ZTflal

Silicon Valley’s Newest Rival: The Banks of the Hudson; Amazon, Apple, Facebook and Google will soon have 20,000 workers in New York City, many in offices on the West Side.
Matthew Haag – NY Times
When Facebook was searching for another New York office, one big enough to fit as many as 6,000 workers, more than double the number it currently employs in the city, it had one major demand: It needed the space urgently.
/jlne.ws/36tv7er

Cryptocurrencies

Winklevoss twins on crypto’s allure for the ETF world; Founders of digital currency exchange are confident about bitcoin ETF despite two SEC rebuffs
Owen Walker – FT
Before entering Gemini’s Manhattan offices, visitors are required to sign a non-disclosure agreement. Such heavy-handed security is rare outside Silicon Valley, but paranoia over leaked corporate secrets is perhaps understandable given the experiences of the two men I have come to meet.
/jlne.ws/2QNuK7O

Bitcoin should be listed directly on Korea Exchange, says a government committee
Yogita Khatri – The Block
The Presidential Committee on the Fourth Industrial Revolution, a group set up by the South Korean government, has recommended that bitcoin should be listed directly on Korea Exchange (KRX), the country’s sole securities exchange operator.
/jlne.ws/2twF4sU

Binance Futures launches XRP perpetual contract, with up to 75x leverage
Yogita Khatri – The Block
Binance Futures, the cryptocurrency exchange’s futures trading platform, has rolled out a perpetual contract for the XRP cryptocurrency.
/jlne.ws/2Fr9pMk

Qatar bans crypto trading – report
Yogita Khatri – The Block
Qatar, the Middle East country with a population of over 2.5 million, is said to have banned cryptocurrency trading. According to a recent report from the news outlet International Investment, the Qatar Financial Centre (QFC) Regulatory Authority has said that “Virtual Asset Services may not be conducted in or from the QFC at this time.”
/jlne.ws/35p31zz

We Still Don’t Know Bitcoin’s Real Volume
Galen Moore – Coindesk
Fake volume became one of crypto assets’ leading narratives of 2019, as a U.S. regulatory application for an exchange-traded product (ETP) followed the work of earlier researchers in showing how as much as 95 percent of lit markets’ reported bitcoin trading volume might be fake. That’s resulted in conservative estimates of bitcoin volume that are probably far too low, and a condition of uncertainty as to how much bitcoin is actually being traded.
/jlne.ws/36vdrin

‘I am firmly opposed to layoffs,’ says Bitmain’s ousted co-founder Micree Zhan
Yogita Khatri – The Block
Ousted Bitmain co-founder Micree Zhan Ketuan has said that he is “firmly opposed” to layoffs. In an open letter to Bitmain’s employees, published today on his Weibo social media account, Zhan said that he read the news of Bitmain’s planned layoffs and thinks it is “unreasonable.” “Bitmain’s cash flow is healthy, and there are huge amounts of virtual currency assets,” said Zhan, adding that it is “ridiculous” to cut staff by 50% ahead of bitcoin halving (expected to occur in May).
/jlne.ws/2SUv8UC

China’s digital currency ‘progressing smoothly,’ says central bank
Yogita Khatri – The Block
The People’s Bank of China (PBoC), the country’s central bank, has said that its digital currency is “progressing smoothly.” The development was announced by the central bank at its annual work conference held in Beijing last week. The PBoC, however, did not announce the launch date yet. “We will continue to steadily advance the development of legal digital currencies” in 2020, said the central bank.
/jlne.ws/2N0r1Tv

Bitcoin Mining Power Hits Fresh All-Time High
Paddy Baker – Coindesk
Bitcoin’s hash rate reached record highs this week, amid rising prices and anticipation of the miner reward halving later this year. Based on a seven-day average, the hash rate has risen sharply from approximately 93 exahashes per second (EH/s) on Dec. 30 to more than 106 EH/s on Sunday. The best day overall was Jan. 1 when the hashing power exceeded 119 EH/s, surpassing the previous record of 114 EH/s set back in October.
/jlne.ws/37E2hbq

Longfin CEO agrees to settle SEC fraud action for $400,000
Celia Wan – The Block
Cryptocurrency firm Longfin Corp. CEO has agreed to settle with the Securities and Exchange Commission (SEC) over the charges of fraudulent public offering and falsifying revenues. Per an SEC statement dated Jan. 3, Venkata Meenavalii has agreed to pay $400,000 in disgorgement and penalties, although the settlement still awaits court approval. If approved, Meenavalii will disgorge the $159,000 he received as Longfin CEO, as well as pay $9,000 in prejudgement interest and $232,000 in civil penalties. The settlement money may be distributed back to harmed investors, according to the regulator.
/jlne.ws/2FpT2Q2

Jihan Wu is no longer Bitmain’s legal representative, public records show
Yilun Cheng – The Block
Bitmain co-founder Jihan Wu is no longer the firm’s official legal representative, public registration documents show.
/jlne.ws/39L8MuY

Politics

Democracies are ill-suited to deal with climate change; It is tempting to say the problem is too abstract but the focus should be on the economy
Edward Luce – FT
Around my parents’ home on England’s south coast, global warming is proceeding so benignly that French champagne houses are buying up tracts of local hillsides. Trends like this have helped to temper the global north’s response to climate change over the last 30 years. “Global warming is a terrible thing,” we tell ourselves. “But its main victims will tragically be in the poorer countries. Canadian mangoes anyone?”
/jlne.ws/2SWb4Bt

Pelosi seeks to curb Trump’s ability to strike Iran; Democrat lawmaker moves to force president to consult Congress before acting militarily
James Politi – FT
Nancy Pelosi, Speaker of the US House of Representatives, has moved to limit Donald Trump’s ability to launch further military action against Iran, as tensions escalated between congressional Democrats and the White House over the Middle Eastern crisis.
/jlne.ws/2MZnCE6

Flouting War Powers Act, Trump claims his tweets are sufficient notice to Congress that U.S. may strike Iran
Felicia Sonmez – Washington Post
President Trump claimed Sunday that his tweets are sufficient notice to Congress of any possible U.S. military strike on Iran, in an apparent dismissal of his obligations under the War Powers Act of 1973.
/jlne.ws/2SXVipu

Soleimani Killing Leaves Trump’s Mideast Strategy in Tatters
Nick Wadhams and David Wainer – Bloomberg
Iraq calls for U.S. troops to leave while strike unites Iran; Trump has sent more than 17,000 new troops to region since May
U.S. President Donald Trump and his top aides spent the weekend arguing that the killing of Iranian General Qassem Soleimani would deter future attacks and make the Middle East safer.
/jlne.ws/2QMhErs

Morgan Stanley Says Economy Can’t Promise Trump Re-Election
Chris Anstey – Bloomberg
Investors should be careful about assuming that strong U.S. economic conditions guarantee that President Donald Trump will win another term in November, Morgan Stanley strategists warned.
/jlne.ws/2QQMaAA

Georgia’s new GOP senator enters politics amid impeachment
Ben Nadler – Associated PressA wealthy Republican businesswoman set to be sworn in as Georgia’s next U.S. senator will enter the chamber with a unique distinction: Her first vote could be on whether to remove the president. Kelly Loeffler is scheduled to be sworn in at 5 p.m. Monday during a short ceremony on the Senate floor in Washington.
/jlne.ws/37PW7Fp

Trade War Threatens U.S. States’ Exports to China and Europe
Zoe Schneeweiss – Bloomberg
The U.S. Chamber of Commerce is warning that American businesses and consumers are bearing the brunt of the trade war and is calling on the administration to change course. Crunching Commerce Department data, it concludes that more than half of U.S. states are facing retaliatory tariffs on at least 25% of their exports to the European Union and China.
/jlne.ws/2sFoaIF

Iran’s Currency Feels the Squeeze as Trump Intensifies Rhetoric
Paul Wallace – Bloomberg
Rial weakens to lowest in more than six months on black market; Drop may worsen problems of economy crippled by U.S. sanctions
Iran’s currency is feeling the pain of rising tension with the U.S. The rial weakened to its lowest level in more than six months on the black market following the killing of Qassem Soleimani, one of Iran’s most senior commanders, by the U.S.
/jlne.ws/2tuorOx

Iran Challenges Trump, Announcing End of Nuclear Restrictions; President Trump thought the nuclear deal was flawed because restrictions on Iran would end after 15 years. Now, responding to a U.S. strike, Iran has declared the limits over after less than five.
David E. Sanger and William J. Broad – NY Times
When President Trump withdrew the United States from the Iran nuclear deal in May 2018, he justified his unilateral action by saying the accord was flawed, in part because the major restrictions on Iran ended after 15 years, when Tehran would be free to produce as much nuclear fuel as it wanted.
/jlne.ws/36zLOoI

Trump Threat to Attack Iran’s Cultural Treasures Spurs Backlash
Arsalan Shahla – Bloomberg
Few things can rally Iranians around their flag like a threat to destroy venerated remnants of their ancient heritage. President Donald Trump tweeted on Saturday that he had included Iranian cultural sites in his list of 52 targets for attack should Tehran retaliate against the U.S.’s assassination of Iran’s top military commander, Qassem Soleimani.
/jlne.ws/2rXXJNQ

Regulation

Next FCA chief should be an outsider, say City bosses; An outsider should succeed Andrew Bailey to shake up the embattled City regulator, according to finance heavyweights
David Wighton and Shruti Chopra -Financial News
City heavyweights have called on the Treasury to appoint an outsider to succeed Andrew Bailey as the Financial Conduct Authority’s chief executive to shake up the embattled regulator.
/jlne.ws/2sQUBUu

Fugitive financier Jho Low denies being ‘mastermind’ behind 1MDB
Reuters
Fugitive Malaysian financier Low Taek Jho has said he only acted as an intermediary for deals involving 1MDB, denying in an interview published on Monday that he had set the stage for the theft of billions of dollars from the Malaysian state fund.
/jlne.ws/2sHMKbV

SEC derivatives rule may lead to new products Proposed VAR limit is expected to benefit risk parity and defined outcome strategies
Noah Zuss – Risk.net
A newly proposed rule on derivatives use by US mutual funds will require asset managers to overhaul their risk management practices, but it could also make it easier for them offer new products that aim to balance risk or provide a buffer against losses.
/jlne.ws/2SWCAyF

Statement of Division of Swap Dealer and Intermediary Oversight on Annual Compliance Report Requirements
CFTC
On December 4, 2019, the Division of Swap Dealer and Intermediary Oversight (DSIO) issued an advisory regarding annual compliance report requirements for swap dealers, futures commission merchants, and major swap participants (Advisory).[1] The Advisory clarifies annual compliance reporting requirements for those categories of registered firms and provides additional recommendations to those firms regarding the manner in which they prepare their reports. DSIO intends the Advisory to help registrants improve the quality and usefulness of their reports in accordance with their existing obligations under CFTC Regulation 3.3.[2]
/jlne.ws/2uplNtZ

Longfin CEO Settles Fraud Action
SEC
The Securities and Exchange Commission today announced that Longfin Corp. CEO Venkata S. Meenavalli has agreed to pay $400,000 in disgorgement and penalties to resolve the SEC’s fraud action against him. The settlement, which remains subject to court approval, concludes the SEC’s actions against Longfin, its CEO, and three other individuals in which the SEC has secured over $26 million of ill-gotten gains. The SEC intends to establish a Fair Fund to distribute money received from the defendants to harmed investors.
/jlne.ws/2N1v7ui

ASIC bans Perth SMSF adviser
ASIC
ASIC has banned Perth-based adviser Wayne Blazejczyk from providing financial services for five years for failure to meet best interests obligations when providing advice on self-managed super funds (SMSFs).
/jlne.ws/2QSfKpc

Former Gold Coast businessman Anthony Silver charged with fraud
ASIC
Following an ASIC investigation, Mr Anthony Keith Silver (also known as Tony Silver) of Tasmania, has today appeared before the Southport Magistrates Court charged with five counts of fraud to the value of $1.815 million.
/jlne.ws/39GWvri

Regulators Ask Banks About Preparations for Libor’s Demise; Banks must show how they are managing risks stemming from the planned end of the benchmark rate next year
Kristin Broughton – WSJ
Financial regulators are asking banks to show they have plans in place to manage the risks stemming from the planned demise of a key benchmark interest rate. Regulators, which for months have urged banks and other financial services firms to prepare for the likely end of the London interbank offered rate in 2021, have recently begun asking for evidence of their preparations.
/jlne.ws/2QNYXnq

Investing and Trading

Millennials’ ESG Investing Will Transform Markets, DeVere Group Says
Karen DeMasters – Financial Advisor
Millennials are prioritizing “green investing,” and in doing so they will transform the investing landscape in the coming decade, according to the deVere Group, a global financial services and advisory firm.
/jlne.ws/39FxnkK

Margarita Louis-Dreyfus Mortgaged Her Company to Secure $1 Billion Loan
Jack Farchy – Bloomberg
Margarita Louis-Dreyfus, the billionaire at the helm of the eponymous agricultural trading house, pledged her controlling stake as security for a $1.03 billion loan from Credit Suisse Group AG in early 2019.
/jlne.ws/39AT0Th

What Investors Should Expect for ETFs in 2020; Regulatory changes could mean more funds to choose from
Ari I. Weinberg – WSJ
This year promises to be a fiercely competitive one for the exchange-traded-fund market.
/jlne.ws/37E3rDH

It’s White-Knuckle Time for Buyers of Riskier Corporate Loans; Investors are backing away from companies whose finances appear strained
Paul J. Davies – WSJ
The market for low-rated corporate loans has suffered sharp declines in recent months, a sign of growing aversion to earnings shortfalls or other strains at indebted companies.
/jlne.ws/2ugpBNU

The Dollar Is Even More Important Than You Know; Some official financial statistics don’t account for the use of foreign-exchange derivatives to create synthetic greenbacks
Mike Bird – WSJ
The share of the Japanese yen in global currency reserves hit a multidecade high last year. Paradoxically, that may be a symptom of the world’s ravenous appetite for U.S. dollars.
/jlne.ws/39IXnvK

The Debate Over Share Buybacks, Explained
WSJ
Companies on the S&P 500 have poured more than $5.3 trillion into repurchasing their own shares since 2010. WSJ explains how stock buybacks work, and why there’s debate over whether or not they’re good for the economy.
/jlne.ws/2SUlO34

The Decade in Investing: Take Our Quiz; What do you remember about the ‘flash crash’? Or Blockbuster? Or the best-selling personal-finance books? Time to find out
Chris Kornelis – WSJ
Now that the decade has been in the rearview for almost a week, how much of it do you remember? Take this quiz to see what you absorbed about some of the company, market and money moves that defined the 2010-19 decade. (Spoiler alert: We’re not asking a question about whether the decade actually ends at the end of 2020. That is for others to fixate on.)
/jlne.ws/39MXczA

Passive investing boom reaches Europe as assets hit $1tn; Investors ploughed record amount of money into exchange traded funds last year
Chris Flood – FT
Europe has rushed to join the passive investing boom, with the assets held in exchange traded funds surging beyond the $1tn mark for the first time as disenchantment with stockpickers grows.
/jlne.ws/2uphSNN

ISS downgrades knock 1% off market value for US companies; Groups criticised over governance practices suffer investor flight
Attracta Mooney – FT
Investors flee public companies when Institutional Shareholder Services mark them down on governance grounds, according to new academic research that underlines the influence of the world’s largest proxy advisers.
/jlne.ws/2QPpFvF

Borden Becomes Second Big U.S. Milk Producer to File for Bankruptcy
Shannon D Harrington – Bloomberg
Borden Dairy Co. filed for bankruptcy late Sunday, becoming the second major U.S. milk producer to do so in recent months as rising milk prices and other challenges made its debt load unsustainable.
/jlne.ws/2rUVUkG

Low Rates Could Get Even Lower, Senior Central Bankers Warn
Rich Miller and Christopher Condon – Bloomberg
The already low level of interest rates in the U.S. and the rest of the industrial world could fall further, three senior central bankers said on Sunday.
/jlne.ws/39J6GMc

U.S. farmers see another bleak year despite Phase 1 trade deal
Karl Plume, P.J. Huffstutter – Reuters
Across snow-covered North Dakota, U.S. farmers are stuck with fields full of weather-damaged corn – a crop they planted after the U.S.-China trade war killed their soybean market. Many don’t know yet what crops they’ll plant next season among a host of dicey options.
/jlne.ws/35m6L4Y

Institutions

Citadel Securities head of European FICC sales departs; Brian Oliver joined Citadel Securities in 2015 from JP Morgan to lead FICC sales and relationship management in Europe.
Hayley McDowell – The Trade
The head of fixed income, currencies and commodities (FICC) sales and relationship management for Europe and Asia at Citadel Securities has departed after four years with the US-based market maker.
/jlne.ws/2ZTy5q4

As Negative Yields Ebb, Making Money in Bonds Is Still a Slog; European investors are anticipating a tough year for bond markets, driven by a drop in monetary-policy action in 2020
Anna Hirtenstein – WSJ
European bond investors suffering the burden of negative yields came out all right in 2019, thanks to a global surge of central-bank rate cutting. The worry is, that source of returns isn’t shaping up to be nearly as promising for 2020.
/jlne.ws/2SXzv1u

Goldman and Morgan Stanley targeted in BoE review; ‘Section 166’ reports commissioned in wake of wider concern over governance
Kate Beioley – FT
Goldman Sachs and Morgan Stanley are among international banks facing probes by the Bank of England over the quality of their regulatory reporting in the wake of wider concern over bank governance and reporting issues.
/jlne.ws/39Jqyyz

Private equity managers scoop bigger pay and bonus awards; Fund launches create competition for experienced staff
Chris Flood – FT
Salary and bonus payments are a jealously guarded secret within private equity, where the rapid profusion of fund launches is fuelling demand for experienced staff, particularly senior executives.
/jlne.ws/39LzsLS

Hedge fund manager Bill Ackman delivers 58.1% return for investors in 2019
Julia La Roche- Yahoo Finance
Activist investor Bill Ackman, the billionaire CEO of hedge fund Pershing Square Capital, made a huge comeback in 2019.
/jlne.ws/2Qw5RPj

Regions

Why Hong Kong Is Becoming a Tech Hub; More Chinese technology listings in Hong Kong could boost the sector as well as the city’s stock exchange
Jacky Wong – WSJ
More Chinese technology companies might follow in Alibaba’s footsteps and list in Hong Kong, likely boosting the sector as well as the city’s stock exchange.
/jlne.ws/2SSqEhs

Shareholders demand British bosses increase ‘skin in the game’; Pressure builds for chief executives to top up their company shares pot
Attracta Mooney – FT
The bosses of British public businesses will face intense pressure to invest their own money in the companies they run in 2020, as big investors increasingly demand chief executives have “skin in the game”.
/jlne.ws/39KYhry

‘Lithium fever’ grips Portugal as mining project raises hackles; Protesters clash with developer over whether plan will hurt or help the environment
Peter Wise – FT
High in the hills of northern Portugal close to the border with Spain, the remote village of Covas do Barroso is in the grip of what local media call “lithium fever” — and a clash between two conflicting visions of how to protect the environment.
/jlne.ws/2QQOnfm

China tech start-ups go bust in 2019 ‘capital winter’; Cash burn and cautious investors lead to spate of expensive collapses
Ryan McMorrow – FT
Hundreds of Chinese tech start-ups — including several unicorns — failed in 2019, with many more limping into the new year, as companies burned through cash in the face of growing financial headwinds.
/jlne.ws/2N1g3gj

HSBC’s fortunes are more tied to Hong Kong than ever; The bank’s reliance on greater China is proving risky in light of recent political upheaval
Patrick Jenkins – FT
Not so long ago, HSBC was the world’s biggest bank by market value. Even after a decade of trimming, it is still vast, with $2.7tn of assets and a presence in 65 countries. Think of globalisation and you think of HSBC.
/jlne.ws/37BVWxd

No 2020 Returns for Danish Savers as Deposit Rates Head for Zero
Nick Rigillo – Bloomberg
Danes are no longer getting much of a return on their bank accounts — and that’s even before negative interest rates have had time to hit savers in full. According to Denmark’s central bank, the average interest rate on ordinary deposits — excluding loan-related deposits — was projected to have fallen to 0.02% in November 2019, compared with an average rate of 0.08% a year earlier.
/jlne.ws/2N1Z6SZ

China’s War on Shadow Banking Can’t Last Forever; Beijing has been willing to stomach defaults in the private sector. Now even state-linked firms are looking vulnerable.
Shuli Ren – Bloomberg
Cause and effect. Action, reaction. As China cracks down on shadow finance, private companies and state giants alike are learning that the karmic wheel of money can come to a screeching halt.
/jlne.ws/36slBbj

Wildfire-Weary Australians See No End to Unprecedented Calamity
Jason Scott – Bloomberg
Thousands forced into makeshift camps at recreation grounds; Toxic smoke shrouds much of southeast including Canberra
Exhausted firefighters welcomed cooler weather and patchy rain in blaze-ravaged southeastern Australia Monday after a calamitous few days, even as authorities warn of a return to dangerous conditions later this week.
/jlne.ws/35uVJu2

Canada’s supply management system: lessons from Britain’s Corn Laws; Though the political and economic architecture is different, both feature concentrated benefits for producers and dispersed costs, writes Gordon Bannerman
London School of Economics and Political Science
The recent controversy over Canada’s ‘supply management system’ of agricultural protection during the regional US-Mexico-Canada Trade Agreement (USMCA) negotiations was a timely reminder of the entrenched protectionism in nations that retain a theoretical commitment to international ‘free trade’. It also indicates that deviations from free trade in many guises thrive in market economies where benefits are concentrated, and costs are dispersed.
/jlne.ws/36vjbsq

It Was a Lost Decade for China’s Stock Market, but Investors Bet on Better Times Ahead; Optimists point to modest valuations and growing role of institutional capital
Steven Russolillo – WSJ
As Chinese stocks close out a lost decade, many global investors say the future looks brighter. The flagship Shanghai Composite Index dropped 6.9% from Dec. 31, 2009 through Tuesday’s close, making it one of the rare indexes that finished the 2010s in the red. Meanwhile, the S&P 500 nearly tripled, Japan’s Nikkei 225 more than doubled and Europe’s Stoxx 600 jumped by 64%. The figures don’t include dividend payments.
/jlne.ws/2QtNryz

Brexit

Jess Phillips suggests she might seek to rejoin EU if Brexit fails
George Parker – FT
Jess Phillips, a contender for the leadership of the UK’s main opposition Labour party, has ignited the contest to succeed Jeremy Corbyn by suggesting she might try to take Britain back into the EU if Brexit turns out to be an economic and political failure. The comments from the backbench MP came as Labour’s ruling National Executive Committee prepared to meet on Monday to set the timetable and rules for the contest, which takes place in the shadow of the party’s worst electoral defeat since 1935.
/jlne.ws/2ZWmKph

UK economy being helped by ‘greater Brexit clarity’
Pan Pylas – Associated Press
The British economy appears to set to pick up in the early months of 2020 as more clarity over Brexit emerged in the wake of the convincing election win by Boris Johnson’s Conservatives, a closely watched survey showed Monday. In their monthly gauge of business conditions, financial information firm IHS Markit and the Chartered Institute of Procurement & Supply found that the services sector stabilized in December as order books picked up and optimism rose to its highest level in 15 months. The services sector is particularly important as it accounts for around 80% of the British economy.
/jlne.ws/2SYqjdc

Sterling losses snowball as dire data highlights Brexit toll
Sujata Rao – Reuters
Sterling extended its losses against the dollar on Friday, testing one-week lows after downbeat data on construction and consumer demand and heightening worries for an economy showing no sign of emerging from Brexit-linked gloom.
/jlne.ws/39CblPM

Miscellaneous

Bloomberg profits from conference business in China; Media owner and presidential candidate has positive view of Beijing at time of trade war
Anna Nicolaou – FT
As the US wages trade war with China, the media company of presidential candidate Michael Bloomberg is making the most of its conference revenues from a Davos-style event in Beijing.
/jlne.ws/2MZpsF3

Increasing the skills of workers (young and old) must be a top priority
Natalie Ceeney – The Times
A report by the Office for National Statistics published last week shone a spotlight on some of the key workforce trends of the past decade. They included a fall by two thirds in the number of typists and telephonists, with a corresponding rise of more than 200 per cent in the number of “finance officers”, and almost 300 per cent in “project management professionals”. Separately, an analysis by the Royal Society of the Arts showed a loss during the last decade of 289,000 jobs on the high street.
/jlne.ws/2SU7GqJ

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