Wall Street Embraces Weather Risk in New Era of Storms; Hedge Fund Demand Is on Its Way Up, JPMorgan Survey Finds

Apr 1, 2019

First Read

Hits & Takes
JLN Staff

Happy April Fool’s Day. Be careful out there.~JJL

The @JohnLothian Twitter account has reached the 100,000 tweet level, which is a lot of tweets. By comparison, @AllanSchoenberg, who talked me into getting onto Twitter when he was at the CME Group, has 37,200 tweets despite having been on Twitter for two more years.~JJL

Leo Melamed will give a Holocaust survivor talk on April 5 in Sarasota, Florida at 10:30 AM at the Congregation for Humanistic Judaism, at Unity, 3023 Proctor Road. Melamed, a Holocaust survivor, outwitted the Nazis and the KGB, and his odyssey took two years and spanned three continents, six languages and the Trans-Siberian railroad. The program is open to the public. For more information call 941-929-7771 or email CHJSarasota@hotmail.com.~JJL

Note to my mother, Marjorie Lothian. You should go see Leo’s talk in Sarasota.~JJL

FIA SVP of Global Brand Management Charlie Jones was named a Fellow by the best named association of all time: the American Association of Association Executives (ASAE). ~SD

Apologies to Walt Lukkenhe did have Purdue getting to the Elite Eight round of the NCAA basketball championship. However, he had Virginia beating the Boilers, which they did. Walt Lukken’s NCAA brackets roll on.~JJL

Nadex joined the list of delisting bitcoin derivatives exchanges when it submitted a self-certification to delist bitcoin on Friday. After the final settlement of these contracts on March 29, no open positions or working orders will exist in the Nadex Bitcoin market.~JJL

Reuters reports more than 1 million acres of U.S. cropland ravaged by floods in the U.S.~JJL


Crypto Exchange Bithumb Hacked for $13 Million in Suspected Insider Job
Wolfie Zhao – Coindesk
According to a report from CoinDesk Korea, Bithumb may have also lost 20.2 million XRP in the recent breach. The XRP, worth $6.2 million at current prices, was moved from Bithumb’s wallet on March 29 in transactions that can be seen on XRPSCAN. The exchange is not yet confirming or denying the report. The odds of Bithumb managing to retrieve the stolen funds may be small, according to crypto security expert Cosine Yu, co-founder of security firm SlowMist.
*****A fat thumb error no doubt.~JJL


The Spread – A CAT and Three Lizards Walk Into a Bar…
What do an Irish pub, a reptilian derivative product and eurodollar trading have in common? This episode of “The Spread.”
Watch the video and see the stories referenced here »


Bridging the Weeks: March 18 – 29 and April 1, 2019 – Programmer’s Trial; Trade Reporting Headaches; Food Giants Settle Manipulation Enforcement Action
Gary DeWaal – Bridging the Week
Not the spoofer, but the person alleged to have developed the computer program used by the spoofer to conduct his illicit futures transactions goes on trial this week in a criminal action brought by the Department of Justice. Last week, the presiding judge declined a motion by the DoJ to lessen the burden of proof it would require to convict the programmer by rejecting the DoJ’s argument that the programmer could be found guilty if the jury concluded that he likely suspected the program would be used for spoofing (even if he did not definitely know) but deliberately avoided confirming his suspicion. Separately, two food giants agreed to settle the Commodity Futures Trading Commission’s enforcement action against them alleging manipulation, attempted manipulation and fraud-based manipulation in connection with their 2011 end-of-year trading of wheat futures on the Chicago Board of Trade.


On the end of the StreetEYE experiment. And what I learned about the bias/variance tradeoff in news, social, and life.
Druce Vertes, CFA
The StreetEYE mad science experiment came to an end on 3/31/2019. Many thanks for supporting StreetEYE over the years! A few people have asked about alternatives. The closest alternative is Nuzzel. Nuzzel is essentially what Twitter Moments should have been. See the Nuzzel page for TheLinkfest, log in with your own Twitter account, scroll down to ‘news from’.

***** Long live StreetEYE! The @JohnLothian Twitter handled ended up ranked number one for relevance at the end of the site’s life.~JJL


Friday’s Top Three
Our top read story on Friday by a long shot was Bloomberg’s The ETF Tax Dodge: This Loophole Lets Investors Save Big. Second was Bloomberg’s London Banker Fired for Stealing $6.50 Bike Part Sues Mizuho. Third was Juan Carlos Arredondo Brun’s LinkedIn post called An Emissions Trading System for Mexico


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Lead Stories

Wall Street Embraces Weather Risk in New Era of Storms
Brian K Sullivan, Alexandra Semenova and Eric Roston – Bloomberg
Climate change revs up number, intensity of weather disasters; New high priests of finance: Forecasters who keep cash flowing
Every uptick in wind speed along the Gulf of Mexico shoreline is of enormous interest to Mike Eilts. Eilts, senior vice president for weather at DTN, a Minnesota-based analytics firm, knows that an unexpected cold front in Louisiana, nudged southward by a jet stream unsettled by global warming, can push rising winds into the Gulf, putting dozens of floating oil rigs at risk.

Hedge Fund Demand Is on Its Way Up, JPMorgan Survey Finds
Melissa Karsh – Bloomberg
Institutional investors are more likely to boost allocations; Clients are seeking Asia investments, macroeconomic strategies
Institutional investors are flocking to hedge funds this year, even after a turbulent 2018 marked by poor performance and market volatility.

Hedge fund fee model morphs from ‘two and 20’ to ‘one or 30’; Chart of the week: investors drive harder bargains after years of disappointing performance
Chris Flood – FT
The traditional “two and 20” fee model used by hedge fund managers has almost vanished as investors have determined to strike better value agreements after repeated years of disappointing performance.

The World Better Get Used to Negative Rates; They’re the only way to bring down excessive debt levels that have grown too large to be managed.
Satyajit Das – Bloomberg
Today, around $10 trillion of bonds are trading at negative yields, mainly in Europe and Japan. In the next recession, U.S. interest rates, too, may enter negative territory: Short-term rates are currently running around 2.5 percent, and cuts of between 3 percent and 5 percent are commonly needed to restart economic activity. In markets where rates are even lower or already negative, rates will need to go deeply into into the red.

UK financial services regulator cracks down on options trading; FCA says ban will put an end to losses for investors from ‘inherently flawed product’
Cat Rutter Pooley and Philip Stafford – FT
The UK’s markets watchdog will permanently ban trading in a type of derivative known as “binary options” from next week, as it exercises expanded powers to crack down on products it sees as damaging to retail investors.

Too Volatile, or Too Calm, Markets Still Aren’t Just Right for Wall Street Banks
Telis Demos – WSJ
Markets have been calm so far in 2019. That’s bad news for Wall Street trading desks. Early last year, markets were choppy. Investors were unsure about interest rate increases with a new Federal Reserve chairman starting, and stock-trading surged as complex products tied to volatility began moving wildly.

Bakkt introduces new board members as its bitcoin futures launch hangs in the balance
Frank Chaparro – The Block Crypto
Bakkt, the trading platform for cryptocurrency assets backed by Intercontinental Exchange, announced its new board on Friday. The firm, which was supposed to launch its much-awaited physically delivered bitcoin futures earlier this year, now counts executives from Softbank and Goldfinch Partners among its board members. Its board will be led by ICE board member Tom Noonan, a serial entrepreneur in the cybersecurity world.

Special Report: Exchange Traded Funds
Watchdogs are increasingly focused on the risks posed by ETFs. Plus: Bank of Japan’s ETF purchases raise concern; the fast rise and volatility of cannabis funds; bond funds head for $1tn; and dividend ETFs gain popularity

What Are Fat Fingers and Why Don’t They Go Away?
Eric Lam – Bloomberg
A momentary 83 percent plunge and rebound in one of Singapore’s largest stocks, Jardine Matheson Holdings Ltd., left dazed traders wondering whether a “fat finger” had struck again in January. After the dust settled, Singapore Exchange Ltd. decided not to cancel the trades, insisting neither human error nor a computer malfunction was to blame. Still, Goldman Sachs and Morgan Stanley were said to have sought to cancel or amend their trades later, indicating mistakes were made somewhere. The episode serves as a reminder that even the best-designed systems can behave unexpectedly once humans enter the equation.

Digital Payments’ $95 Trillion Tide Undaunted by Cash Holdouts
Jennifer Surane – Bloomberg
Adoption of digital payments is climbing around the world; In the U.S., cash remains the most popular form of payment
A mounting backlash against cashless stores isn’t slowing growth in the $95 trillion payments industry. Even as some U.S. cities seek to protect low-income consumers by barring stores and restaurants from shunning physical currency, digital payments are building acceptance around the world. A Citigroup Inc. index that measures the readiness of 84 countries to adopt electronic payments has increased 5.5 percent in the past five years, the bank said in a report this week.

Are the Bond Vigilantes Really Dead?; And for that matter did they really ever exist?
Cameron Crise – Bloomberg
“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” That was political strategist James Carville back in 1993.

Futures Aren’t Just for Juice. They’re for Truck Routes, Too
When Randolph and Mortimer Duke first explained the commodities market to Billy Ray Valentine in 1983, they laid out five examples: a cup of coffee, a piece of bread, some slices of bacon, a glass of frozen orange juice, and a few bars of gold. “Some of our clients are speculating that the price of gold will rise in the future, and we have other clients who are speculating that the price of gold is going to fall. They place their orders with us, and we buy or sell their gold for them,” Randolph Duke said. Valentine got it right away: “Well, it sounds to me like you guys a couple of bookies.”

Crypto promoter unmasked, accused of fraud in luring investors via YouTube
Robert Gearty – Fox News
Federal investigators have unmasked a cryptocurrency pitchman who dons a Guy Fawkes disguise in his YouTube video, charging him with wire fraud.

Louis Dreyfus boss ousted after Glencore overture; Ramirez quit after trying to start talks with rival commodity groups
Neil Hume and Emiko Terazono – FT
The chief executive of Louis Dreyfus Company, one of the world’s biggest suppliers of agricultural commodities, was ousted after trying to start talks with Glencore and other rivals.

Rusal targets 2021 to roll out carbon-free aluminium; Russian group to tap growing consumer demand for responsibly sourced commodities
Neil Hume – FT
Russian aluminium producer Rusal is targeting 2021 to roll out a carbon-free version of the metal, as it looks to tap into growing consumer demand for responsibly sourced commodities and raw materials.

Exchanges, OTC and Clearing

ICE Benchmark Administration Successfully Completes The Transition of LIBOR Panel Banks to The Waterfall Methodology
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that ICE Benchmark Administration Limited (IBA) has successfully completed the transition of all LIBOR panel banks to the Waterfall Methodology.

Trading Overview in FY2018 & March 2019; Japan Exchange Group released Trading Overview in FY2018 & March 2019.
Cash Equity Market – In FY2018, daily average trading value for the TSE 1st Section reached JPY 2.8550 trillion; In the ETF market, trading value was JPY 50.0575 trillion (daily average: JPY 205.1 billion), the third highest on record.

BME eyes mergers in post-trade
Louisa Chender – Global Investor Group
Spanish exchange is open to mergers in securities, payment services as part of London growth plan

The World Federation Of Exchanges Responds To IOSCO’S GEMC Sustainable Finance Consultation
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today responded to the International Organization of Securities Commissions’ (IOSCO) Growth and Emerging Market Committee (GEMC) consultation on ‘Sustainable Finance in Emerging Markets and the Role of Securities Regulators’.

Publication of JPX Working Paper, Vol.28 “Analysis of Investors’ Behavior through Non-Time Series Analysis of Stock Prices”
Japan Exchange Group, Inc. (JPX) today published JPX Working Paper, Vol.28 “Analysis of Investors’ Behavior through Non-Time Series Analysis of Stock Prices”.

Nasdaq Completes Sale of BWise to SAI Global
Nasdaq, Inc. (Nasdaq:NDAQ) today announced the successful completion of the sale of its BWise enterprise governance, risk and compliance software platform to SAI Global, a recognized leader of integrated risk management solutions.

DTCC To Expand Sponsored Service To Bring Greater Capacity To The Treasury Market
Exchange News Direct
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced its proposal to expand the Sponsored Service of its subsidiary Fixed Income Clearing Corporation (FICC) has been approved by the Securities and Exchange Commission (SEC). DTCC views this as the latest milestone in the transformation of the Treasury market.

Cash markets will turnover EUR 130.3 billion in March; Bayer AG most traded DAX share
Deutsche Boerse
Deutsche Boerse’s cash markets generated sales of EUR 130.3 billion in March (previous year: EUR 165.1 billion). Of this amount, EUR 117.8bn was attributable to Xetra (previous year: EUR 152.2bn), bringing the average Xetra daily turnover to EUR 5.6bn. 2.9 billion euros were transacted at the Frankfurt Stock Exchange (previous year: 3.7 billion euros) and 9.6 billion euros at the Tradegate Exchange (previous year: 9.2 billion euros).

NSE-SGX to get nod to launch trading from Gujarat IFSC in two months
Tarun Sharma – MonyControl.com
The National Stock Exchange (NSE) and the Singapore Exchange (SGX) are expected to get an approval from their country’s respective securities regulator in the next two months to jointly launch financial products from NSE’s IFSC exchange in GIFT City, Gujarat, sources told Moneycontrol.


Women in fintech: fresh perspectives – insight from Kene Partners
Rosie Silk – Fintech Magazine
The financial services industry is well known for being fast paced, competitive and male dominated. In fintech, women are vastly underrepresented, making up just 29% of staff in the sector, despite representing 47% of the UK workforce. But this is also an industry in transition – and growing numbers of companies now recognise the importance of promoting gender neutral pay structures and flexible working policies. As Rosie Silk, R&D Tax Manager at Kene Partners, explains, with the right working policies and role models, concerns about attracting women to the industry should be rapidly consigned to history.

Banks Forge Cloud Agreements to Split Accountability
Banks are trying to split responsibility for their operating environments with the major cloud providers. Regulators are having none of it.

How the Buy-Side Can Boost Trades with Technology
Jeff Mezger, Transaction Network Services – MarketsMedia
To quote a mantra first championed in 2013 by Gartner’s Peter Sondegaard, every business these days is a technology business – or at least, they should be. While the line between “regular business” and “technology business” has been blurring for decades, not every firm has been taking the appropriate steps to get up to speed.

FINOS Debuts FDC3 Version 1.0
After 16 months in development, the Fintech Open Source Foundation has released version 1.0 of its Financial Desktop Connectivity and Collaboration Consortium (FDC3) standard, which aims to bring universal connectivity to the financial industry’s desktop applications.

These CEOs All Work In Blockchain, Now They Want It To Become Invisible
Gina Clarke – Forbes
A few weeks ago, I had the pleasure to attend the Token2049 conference in Hong Kong. I was there to take a look at how some of our European centric fintech firms were expanding, but as I’ve reflected on some of my interviews from the conference, I’ve found there to be one over-arching theme. That blockchain needs to become invisible.

Ideanomics Reports Full Year 2018 Financial Results
Ideanomics announced today its Full Year 2018 operating results for the period ended December 31, 2018.


AlphaPoint Enhances Technology Stack to Service Security Token Issuance and Exchange Customers
AlphaPoint, the leading global provider of asset tokenization software and digital asset trading technology for licensed broker-dealers, ATS, and exchange operators, announced enterprise-grade technology solutions enabling the issuance of asset-backed security tokens, thereby increasing liquidity for high value asset classes. Having provided white-label exchange technology for digital asset and cryptocurrency markets since 2013 to over 100 clients, AlphaPoint’s technology for issuing security token offerings (STOs) also continues to mature, enabling institutions to create, issue, and trade tokenized securities in a secure, private environment.

Coin Center’s Bitcoin Expert Peter Van Valkenburgh Delivers CFTC Excellent Blockchain Breakdown
Bitcoin Exchange Guide
Coin Center, an advocacy group that works to protect open blockchain networks, has gained attention recently due to one of its own testimony before the U.S. Commodity and Futures Trading Commission (“CFTC”). The testimony, made by Peter Van Valkenburgh, was presented during congressional hearings involving cryptocurrencies. There, Congress heard testimony about regulatory bitcoin issues and ICOs.

JPMorgan Is Hiring For More Blockchain Jobs Than Any Other Wall Street Firm
Michael del Castillo – Forbes
The biggest bank in America is continuing on a blockchain rampage by posting more jobs in the industry than any other financial firm. According to results released today by job-hunting site Indeed.com, JPMorgan Chase was the only financial firm in the top ten companies posting jobs with the words “blockchain,” “cryptocurrency,” or “bitcoin” over the past year.

The US SEC Wants to Hire a ‘Crypto Specialist’ Legal Advisor
Yogita Khatri – Coindesk
The U.S. Securities and Exchange Commission (SEC) is seeking to hire a “crypto specialist” attorney advisor. According to a job posting on USAJobs, an official government jobs portal, the SEC’s Division of Trading and Markets plans to hire the new legal expert in order to help develop a “comprehensive plan” to address crypto and digital asset securities.

Brexit delay puts brake on share trading move from London to EU
Huw Jones – Reuters
Cboe and other share trading platforms have put on hold plans to move share trading from London to Amsterdam on Monday as Britain delays Brexit for at least two weeks.

Police Freeze Bank Accounts, Seize Luxury Cars in Probe of $22 Million ICO Promoter Vanbex
Marc Hochstein – Coindesk
Canadian police have frozen assets owned by the founders of blockchain services company Vanbex, as part of a fraud investigation into a 2017 initial coin offering (ICO) that raised $22 million.

Bitcoin Cash, Litecoin Futures Volumes Top $150 Million at Kraken Exchange
Nikhilesh De – Coindesk
It’s not just bitcoin futures products that are becoming popular with investors, at least according to one U.K.-based crypto derivatives provider.

Bitcoin in the Wilderness; On a Canadian oil field, natural gas with nowhere to go powers a bitcoin-mining operation
Stephanie Yang – WSJ
A shipping container in a remote corner of a Canadian oil field is churning out an unlikely byproduct: bitcoin.

Why security tokens are categorically and absolutely not crypto tokens
Jemima Kelly – FT
Last week, Alphaville brought you the news that a failed initial coin offering (ICO) project called Sponsy was trying to flog itself on eBay. In the story, we reported that part of what Sponsy was selling was a “full set of investment documents . . . designed and approved by investment bankers”. We also told you that when Alphaville asked Sponsy’s founder Ivan Komar about this investment bank, we were told that in fact this was a “law firm based in the UK” and then, on further questioning, actually “just some firm that was considering investing in crypto”.

Tron CEO Sun to Give Away Two Teslas After Bungling Promotion
Vildana Hajric – Bloomberg
Two winners chosen after first pick is botched and canceled; Do-over conducted for sake of ‘transparency,’ founder says
Justin Sun, the founder of one of the largest digital tokens, is awarding two Teslas instead of one after a mishandled promotional giveaway caused an uproar in the online cryptosphere.

Two New Bitcoin ETF Proposals Pending as Cryptocurrency Markets Mature
The National Law Review
Two recent proposals for bitcoin exchange-traded funds (“ETFs”) are vying to become the first to receive approval from the U.S. Securities and Exchange Commission (“SEC”) – one filed by CBOE BZX Exchange, Inc. (“CBOE”) and the other by NYSE Arca, Inc. (“NYSE Arca”). The SEC has yet to approve a cryptocurrency ETF, although several applications were filed throughout 2018.

The Bank of Hodlers [sic] (sigh)
Jemima Kelly – FT
Back in the late nineties, free-marketeers reckoned that by opening markets up to the point of total decentralisation, away from the overarching domination of rent-seeking monopolies (especially those supported by governments) and overly powerful middlemen, consumers would be hugely advantaged.

The Ultimate Irony of Crypto Trading
David Weisberger – Coindesk
We have all witnessed armies of “introducers” trolling around LinkedIn and Telegram advertising their access to buyers or sellers of bitcoin, coupled with hundreds of wannabe over-the-counter (OTC) trading desks whose only method of trading is to call wholesale market makers.

Op Ed: Answering 10 Common Questions About Cryptocurrency and Taxes
David Kemmerer – Bitcoin Magazine
Depending on what country you live in, your cryptocurrency will be subject to different tax rules. The questions below address implications within the United States, specifically, but similar issues arise around the world. As always, check with a local tax professional to assess your own particular tax situation.

Bitcoin is about to set another record ó and this might actually be a good one
Aaron Hankin – Bloomberg
Bitcoin has set a number of records over the past year or so, most of them bad, but the most famous digital currency is on the verge of setting a mark that may give crypto pundits something to cheer about.

SEC Drops the Bomb: Approves Bitcoin ETFs, Markets Skyrocket
Rachel McIntosh – Finance Magnates
In a shockingly sudden decision, the United States Securities and Exchange Commission has made the decision to approve not one, but two applications for Bitcoin-based exchange traded funds (ETFs.) Early next month, Bitcoin ETFs will be launched by Bitwise Asset Management and investment management firm VanEck.

***Keep in mind, today is April Fool’s Day.~MR

WFE Response to the Financial Conduct Authority – Guidance on Cryptoassets
The WFE Team
The World Federation of Exchanges (“WFE”) has responded to the UK’s Financial Conduct Authority (FCA) on its Guidance on Cryptoassets.


White House’s Kudlow Urges Half-Point Fed Cut, Echoing Moore
Christopher Condon – Bloomberg
White House chief economic adviser Larry Kudlow called on the Federal Reserve to “immediately” cut interest rates by a half percentage point, escalating the Trump administration’s fight with the central bank and challenging its independence.

New York Budget Set to Charge NYC Congestion Fee, Tax Mansions
Henry Goldman and Keshia Clukey – Bloomberg
Spending plan includes plastic bag ban, mansion tax increase; Plan is unfair to New Jersey drivers, Senator Menendez says
New York lawmakers are moving toward approving a $175.5 billion budget that includes tolls on cars entering midtown Manhattan, increases sales taxes on multimillion-dollar city homes and implements a statewide ban on single-use plastic bags.

U.S. House Continues to Explore Blockchain Regulation
The National Law Review
Following up on their recent introduction of the Token Taxonomy Act, Representatives Darren Soto (D-FL) and Warren Davidson (R-OH) have teamed up again to introduce a new slate of bipartisan bills related to virtual currency. The two new bills, H.R. 922 and H.R. 923, were introduced on January 30, 2019 and are cosponsored by Representatives Ted Budd (R-NC) and Bonnie Watson Coleman (D-NJ).

Opinion: Why a ‘Wall Street tax’ would have little impact on Main Street investors
Michael Edesess – MarketWatch
There is a certain pattern in U.S. political rhetoric in which legislation that would be bad for a small minority of voters is claimed to be bad for the average American.

‘It’s so easy to Google “Creepy Biden”‘
Marc Caputo – Politico
The former Nevada lawmaker who accused Joe Biden of giving her an “awkward kiss” in 2014 said Sunday she decided to go public because she wanted to force Democrats to confront his inappropriate behavior as the former vice president decides to run for the White House.


Claims management companies enter FCA regulation today
The Financial Conduct Authority (FCA) begins regulating the claims management industry from today (1 April). All claims management companies (CMCs) in England, Scotland and Wales will now have to demonstrate they meet and maintain minimum standards set by the FCA. All existing and new CMCs will need to apply to the FCA for authorisation.

The Securities and Exchange Commission and the UK Financial Conduct Authority Sign Updated Supervisory Cooperation Arrangements
The Securities and Exchange Commission and the United Kingdom (UK) Financial Conduct Authority (FCA) have today reaffirmed their commitment to continue close cooperation and information sharing in the event of the UK’s withdrawal from the European Union (EU).

SEC Charges Medical Device Company With FCPA Violations
The Securities and Exchange Commission today announced that Fresenius Medical Care AG & Co KGaA (FMC) has agreed to pay more than $231 million to resolve parallel SEC and U.S. Department of Justice investigations related to its violations of the Foreign Corrupt Practices Act (FCPA) across multiple countries for nearly a decade.

CFTC Staff Issues No-Action Relief to Facilitate Prime Brokerage Activities on SEFs
The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today announced it will provide no-action relief to facilitate prime brokerage activities on swap execution facilities (SEFs).

Investing and Trading

Taleb Was Right. We’re Still Fooled by Randomness; You know you shouldn’t chase “hot hands” in the fund management industry. This study says you really, really shouldn’t.
Mark Gilbert – Bloomberg
In his 2001 book “Fooled by Randomness,” author and fund manager Nassim Nicholas Taleb argued that chance plays a largely unacknowledged role in success, particularly in the finance industry. A new study of the returns generated by fund managers suggests that even the minority able to beat their benchmarks are lucky rather than good ó and maybe not even that lucky.

Crude awakening: commodity traders look beyond oil
David Sheppard, Neil Hume and Anjli Raval – Financial Times
Crude oil has just had its best quarter for a decade, up more than a quarter. But at an FT conference this week on the shores of Lake Geneva, a lot of the talk was of the world’s biggest commodity traders looking elsewhere for profits.

BoJ’s dominance over ETFs raises concern on distorting influence; The central bank’s large holdings in passive funds are being questioned
Andrew Whiffin – FT
The Bank of Japan is now in its tenth year of domestic stock buying through exchange traded funds and is showing little sign of winding the programme down.

Greenwashing purge sees sustainable funds lose share in Europe; Holdings grew 11% but fell behind overall professionally managed assets
Siobhan Riding – FT
Sustainable investment funds have lost market share in Europe as a clampdown on greenwashing forces asset managers to reduce their assets in such strategies.

Investments in bond-based ETFs head for $1tn landmark; The fixed income instrument is finally gaining traction in the market
Chris Flood – FT
Exchange traded funds linked to bond markets are marching inexorably towards the $1tn mark for assets under management, a key milestone in the development of fixed income ETFs.

Impact investment universe grows to $502bn; Surge in interest from the millennial generation drives recent increase
Owen Walker – FT
The global impact investment market is worth more than half a trillion dollars, according to the most comprehensive study to date of one of the fastest-growing areas of asset management, which will be published on Monday.

Fidelity’s alleged ‘pay to play’ fee highlights income dilemma; Platforms worry over revenue streams as low-cost funds grab even more business
Siobhan Riding – FT
This year’s furore around Fidelity’s alleged “pay-to-play” platform fee lifted the lid on a pricing model that had flown under the radar when it was introduced three years ago.

Cambridge fund raises £150m in year’s largest UK tech round;Investors pile into venture vehicle that focuses on fast-growing technology cluster
Clive Cookson – FT
A venture fund set up by the University of Cambridge has raised a further £150m to invest in science and technology companies in and around the city.


Banks keep options open and hold fire on Brexit exodus; FT research shows top lenders have moved fewer than 1,500 jobs since 2016 referendum
Laura Noonan, Stephen Morris and David Crow – FT
The City of London’s biggest international banks have moved fewer than 1,500 jobs from the UK in the run-up to Brexit, after slashing their estimates of the staff they need onshore in the EU after Britain leaves the bloc.

Deutsche Bank executive seeks to calm merger fears; Transaction head Stefan Hoops says clients will not flee after a deal with Commerzbank
Olaf Storbeck and Stephen Morris i- FT
A top Deutsche Bank executive has sought to calm fears that a merger with Commerzbank would harm clients and hurt revenues, addressing one of the big concerns of investors.

Swedbank Criminal Probe Intensifies in Fight Over Documents
Niklas Magnusson – Bloomberg
A criminal probe tied to money laundering allegations engulfing Swedbank AB drew sharp recriminations from both sides over the weekend, and raised serious questions about the role of the board.

U.S. urges Japan to open agriculture, services markets further
Jiji Press
The Office of the U.S. Trade Representative, in a report on foreign trade barriers published Friday, urged Japan to open its agriculture and postal and insurance services markets further.

Jefferies Energy Team Thrives in Pipelines M&A Under New Leader
Kiel Porter – Bloomberg
Pete Bowden has helped firm establish niche in ‘midstream’; He became New York bank’s global head of energy last year
When Blackstone Group LP sought advice buying a Texas pipeline operator last year, it turned to Pete Bowden, Jefferies Financial Group Inc.’s global head of energy investment banking.


Sweden will not investigate Swedbank over Browder complaint
Esha Vaish – Reuters
Sweden’s Economic Crime Authority said it will not investigate Swedbank over a criminal complaint alleging money laundering brought by campaigning investor Bill Browder.

China government bonds make global benchmark debut; Bloomberg flagship index to boost weighting to 6% over next 20 months
Hudson Lockett – FT
Bloomberg has begun including Chinese government bonds and policy bank securities in its Bloomberg Barclays Global Aggregate index, a move expected to attract trillions in foreign inflows and reshape global capital markets.

Swedish Krona Becomes Punch Bag for Nation’s Crisis-Era Policy
Love Liman – Bloomberg
Everyone is lining up to attack Sweden’s currency, from investors to the country’s leaders.


Brexit costs UK £600m per week, says Goldman study; Brexit has knocked UK GDP by 2.4% amid hit to investment, according to bank estimates
Adam Samson – FT
Brexit has cost the UK around £600m every week since the 2016 referendum, according to a report by Goldman Sachs that highlights the economic impact of the uncertainty surrounding Britain’s exit from the EU.

Brexit tests the British constitution; As parliament holds more indicative votes, questions of fundamental principle are hard to avoid
David Allen Green – FT
The constitution of the United Kingdom of Great Britain and Northern Ireland (known generally but inexactly as the “British constitution”) was until recently a dull subject. Textbooks on constitutional law cited few recent cases and whole chapters would discuss cases and statutes that nobody alive would remember.

Brexit Bulletin: The Impossible Choice
Emma Ross-Thomas – Bloomberg
The U.K. Parliament will have another try at finding the Brexit consensus that’s eluded the country for more than two years. If lawmakers succeed, they will present Prime Minister Theresa May with an impossible choice: Break her electoral pledges and split her party, or hold an election that no one wants.

Brexit is wrecking Britain’s business reputation – Siemens UK head
Britain is wrecking its reputation for business stability with political divisions over Brexit and risks leaving the trading bloc with a hugely damaging “no-deal”, the UK head of German industrial giant Siemens has said.

The Brexit Plan B Options Parliament Will Vote on: A Guide
Jess Shankleman
British members of Parliament will once again take control of the Brexit process on Monday, voting on a platter of alternatives to Prime Minister Theresa May’s thrice-defeated deal.

Ignoring Brexit Is Paying Off for This $5.6 Billion Quant Fund
Love Liman – Bloomberg
There’s a Swedish hedge fund that’s decided to ignore Brexit and bet on the pound in a move it hopes will help it keep outperforming its peers.

Brexit And Liquidity Exits
Quantitative Brokers
In the United Kingdom, today was meant to be the long anticipated “Brexit Day”. As we write, it hasn’t happened and now appears to be postponed a little longer. In fact, we can’t really make head nor tail of what is going on with this pro-longed drama!


Capitalism Needs Reform, Not Revolution; Dealing with the trouble spots will work better than starting over.
Noah Smith – Bloomberg
When even leading economists are questioning the very idea of capitalism, you know the system is in trouble. In a recent article, Nobel economics winner Angus Deaton reviewed two books by other distinguished economists — Raghuram Rajan and Paul Collier — that argue that capitalism is fundamentally flawed. Rajan laments the demise of local communities in the face of big government and mass markets, while Collier discusses the tendency of meritocracy to concentrate talent and money. Meanwhile, income and wealth inequality is at the center of the well-known critique of capitalism by economist Thomas Piketty. Some critics of capitalism argue that the problem is monopoly power, while others say that capitalism is the culprit behind climate change.

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