Wanna Bet? The Market Has a View on the 2020 Election

Jan 13, 2020

First Read

Hits & Takes
By JLN Staff

Cboe’s Jacqueline Stewart was the recipient of the Cboe’s “Outstanding Community Service Award” for 2019. Congratulations to Jacqueline on her outstanding work.~JJL

The CME Group’s E-mini S&P 500 ESG Index futures have already established $500M worth of open interest in the first seven weeks of trading.~JJL

The SEC tweeted out a warning first published in 2014 about how some aggressively promoted penny stocks may in fact be stocks of dormant shell companies. They offered what you can do to help protect your portfolio from manipulation schemes.~JJL

Just for fun, here are the most frequently checked-out books in the history of the New York Public Library.~JJL

Larry Tabb of the TABB Group interviewed Lee Bressler, Microsoft’s head of capital markets, in a 15-minute video that you can see here. Bressler discusses how firms involved in the capital markets will be dealing with the implementation of the Consolidated Audit Trail and the transition away from Libor.~MR

The payment system developer Fnality is the latest firm to join the Enterprise Ethereum Alliance, according to a press release published earlier today.~MR

Matthew Winkler, editor-in-chief emeritus of Bloomberg News, writes in an op-ed that American companies embracing green technology outperformed the rest of the stock market last year, delivering a greater return than all but two (Russia and Greece) of the world’s 94 leading equity indexes.~SR

Despite the NBA threatening to ban him over it, Spencer Dinwiddie of the Brooklyn Nets announced last week that his tokenized investment vehicle DREAM Fan Shares will launch today.~MR

Nasdaq is looking for a summer intern in Stockholm to work in the digital assets area.~JJL

Diane Saucier has accepted an appointment to the University of South Florida FinTech.Advisory Board.~JJL

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…in with the new
JohnLothianNews.com

This week on The Spread – the OCC and CME report cause to celebrate, bitcoin options products abound, and the options markets react to retaliation from Iran.

Watch the video »

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TMX chief retires early after harassment allegations surface; Lou Eccleston will retire early following reports of harassment and misconduct allegations, despite the board finding no evidence following an investigation.
Hayley McDowell – The Trade
Canada’s Toronto-based stock exchange, TMX, has confirmed its chief executive Lou Eccleston will retire earlier than anticipated, after the group became aware of historical allegations of sexual harassment.
bit.ly/35LXcfW

*****Like I said, retiring early is a good thing.~JJL

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‘If We Stayed Outside We Would Have Died’: Australia’s Fires Devour Farms and Forests; Australia’s wildfires have burned roughly 10 times the area devastated by California’s fires in 2018, and they aren’t slowing down
Jon Emont, James Glynn and David Winning, Photographs by David Maurice Smith for The Wall Street Journal
Neil Hamilton spent New Year’s Eve shooting his sheep in the head. He had begun the morning sipping coffee and eating smoked salmon with guests, when flames erupted from a forested ridge outside his farmhouse in this rainy highlands town midway between Sydney and Melbourne.
/on.wsj.com/30gJP62

*****How would you react to a catastrophe like this?~JJL

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Examination Priorities; Slow Down, You Move Too Fast; Disruptive Trading
Gary DeWaal – Bridging the Week
It was not part of the recently concluded Golden Globes ceremony, but last week both the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations and the Financial Industry Regulatory Authority issued their top inspection priorities for 2020. Separately, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight somewhat rolled back the immediate urgency for futures commission merchants and swap dealers to address all the recommendations of DSIO in its December 2019 Advisory regarding Chief Compliance Officer Annual Reports.
bit.ly/3889hxD

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Friday’s Top Three
Our most-read story on Friday was the Financial Times’ Traders across Europe face up to the cost of failure, about new European rules that will impose tougher standards on trades that fail to settle on time. Second was the press release from TMX, Lou Eccleston to Retire From TMX Group. Third was Reuters’ Former Barclays banker ordered out of bed after 2008 heart attack to help save bank.

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Lead Stories

Wanna Bet? The Market Has a View on the 2020 Election; Futures markets, and betting books, for the U.S. presidential race are in full swing
Theo Francis – WSJ
Odds are that Bernie Sanders wins Iowa, Joe Biden wins the Democratic nomination and Donald Trump wins the presidency—but loses the popular vote (again).
/on.wsj.com/2TkRi2O

LSE set to send $27bn Refinitiv tie-up to EU regulators; All-share deal would transform London bourse and more than triple its revenues
Javier Espinoza and Philip Stafford – FT
The London Stock Exchange Group is set to file its $27bn deal to buy Refinitiv, the data and trading group, with EU antitrust authorities within weeks following protracted discussions with Brussels over the scope of its investigation into the merger.
/on.ft.com/2sjEUVw

The Hidden Dangers of the Great Index Fund Takeover; The Big Three—BlackRock, Vanguard, and State Street—are the most important players in corporate America. Whether they like it or not.
David McLaughlin, Annie Massa – Bloomberg
If you hold a stock market index fund, congratulations. The S&P 500’s total return was a thumping 31.5% in 2019, and a fund that passively tracks that benchmark delivered almost all those gains, minus a tiny fee—perhaps just 0.04% of assets. Now here’s something you probably weren’t thinking about when you clicked on the box to choose an index fund in your 401(k) or IRA: You were also part of one of the biggest shifts in corporate power in a generation.
/bloom.bg/2tZnoWX

Wall Street Chases Silicon Valley Wealth in Battle With Upstarts
Sophie Alexander and Cristiane Lucchesi – Bloomberg
Citi, JPMorgan, BofA among banks adding advisers in California; ‘Old guard’ banks often at odds with tech culture, VC says
Tracey Warson left New York on a mission. The head of Citigroup Inc.’s private bank in North America moved cross-country to San Francisco last year to court the Bay Area’s growing pool of wealthy entrepreneurs and newly minted tech millionaires.
/bloom.bg/36RwMKX

‘Green is good.’ Is Wall Street’s new motto sustainable?
Chris Taylor – Reuters
If you have gone to Goldman Sachs Group Inc’s internet home page since mid-December, it would be reasonable to wonder if you had stumbled into some kind of parallel universe.
/reut.rs/30gjMMo

The End of the Bonus Culture Is Coming to Wall Street
Katie Linsell and Lananh Nguyen – Bloomberg
Bankers are switching skills to stay relevant amid automation; Analysts expect thousands of jobs will be replaced by tech
Chris Purves has been at the cutting edge of markets for more than a decade – from algorithmic trading to machine learning.
/bloom.bg/2FHe5O6

Heading for the close; As volumes seemingly continue to migrate towards the end of the trading day, Hayley McDowell investigates the rise of closing auctions in Europe and its impact on continuous trading for asset managers.
Hayley McDowell – The Trade
As 2019, and indeed the decade, draws to a close, buy-side traders and market operators across Europe have been adapting to a recent trend which has made the final phase of the trading day the most crucial by far. In what is often referred to as a ‘unique liquidity event’, national stock exchanges conduct a five-minute closing auction session after continuous trading has ended, during which the fundamental process of establishing fair closing prices on securities is carried out.
bit.ly/35JVn2R

Investigation into ‘rebates’ for brokers is much needed; US regulators are right to question this obscure and profitable payment system
Jonathan Macey – FT
High trading volumes translate into more money for stock exchanges, so in the US they routinely provide financial incentives to people who send orders their way. But critics contend that the payments distort the shape of the market and make it harder for investors to receive the best prices for securities.
/on.ft.com/35JTaEB

U.S. SEC proposes governance changes for stock market data feeds
John McCrank – Reuters
The U.S. Securities and Exchange Commission on Wednesday took the first step in potentially changing how essential stock market data is governed following years of complaints by brokers that the exchanges that control the data are conflicted in their role.
/reut.rs/3a7jtYM

Goldman Readies a Hiring Spree and Capital to Meet Its China Ambitions
Cathy Chan – Bloomberg
Five-year plan calls for doubling staff in China to 600 people; There’s a ‘gigantic’ opportunity to tend wealth, Waldron says
The news swept through Goldman’s offices around China, changing everything. On a Friday afternoon in late 2017, an official in Beijing announced that the world’s most populous nation would let Wall Street banks expand across its markets. Goldman had spent more than a decade waiting in frustration for that chance. Regional bosses including James Paradise and Todd Leland urgently worked the phones, pinning down details to inform headquarters in New York.
/bloom.bg/36L0SzI

The World’s Most Precious Metal Leaves Everything Else in the Dust
Elena Mazneva – Bloomberg
Rhodium extends multiyear surge, jumping 32% so far this month; Stricter emissions rules have boosted demand from auto sector
Palladium’s great start to the year pales in comparison to its lesser known, but much more expensive sister metal, rhodium.
/bloom.bg/2QMVAOI

Private-equity firms are awash in cash. Now what? Local middle-market shops pull off billion-dollar funds for the first time.
Lynne Marek – Crain’s Chicago Business
Money has been flowing into the private-equity market in a big way, and local firms are grabbing their share, with many raising billion-dollar-plus funds for the first time.
bit.ly/2QPtJNZ

How the Oil Market Learned to Live With a Middle East in Flames
Catherine Ngai, Grant Smith, Javier Blas, Dan Murtaugh, and Anthony Dipaola – Bloomberg
A dramatic U.S. drone strike kills Iran’s most important general. Tehran vows retribution and oil prices jump almost 5% as traders rush to cover the risk of a Middle East war. Then the selling starts.
/bloom.bg/36ZXwsZ

Social media influencers named as stock market listing risk factor; Mattress-maker Casper warns public investors of their power to make or break brands
Ortenca Aliaj – FT
Casper has highlighted the growing power of social-media influencers to make or break brands, naming its own online advocates as one of the risk factors facing its initial public offering.
/on.ft.com/36NCBcg

Exchanges, OTC and Clearing

LuxSE Enters New Market In Macau
MondoVisione
The Luxembourg Stock Exchange (LuxSE) today signed a Memorandum of Understanding with Chongwa (Macao) Financial Asset Exchange Co., Ltd. (MOX) in Macau. The agreement marks the beginning of a fruitful cooperation between the two parties, with a specific focus on promoting cross-border investment and liquidity for offshore RMB-denominated financial products.
bit.ly/30iVYr7

ASX donates $500,000 to bushfire relief and recovery effort
ASX
bit.ly/3837F8k

Eurex Improve: Simulation exercise and amendment of Contract Specifications
Eurex
On 20 January 2020, Eurex will conduct a dedicated Eurex Improve simulation exercise to prepare for the launch of Eurex Improve on 3 February 2020. The exercise will be carried out from 10:00 to 11:00 CET and from 17:00 to 18:00CET.
bit.ly/2tQgqnf

Equity Index Derivatives: Introduction of Futures on the STOXX® USA 500 ESG-X Index
Eurex Circular
The Management Board of Eurex Deutschland took the following decisions with effect from
10 February 2020:
bit.ly/2tTk2Vx

IBERCLEAR Renews its Mandate as Manager of Renade
Bolsas y Mercados Españoles
The contract obtained by the BME subsidiary runs until 2022; Iberclear has managed the National Registry for Greenhouse Gas Emission Allowances (RENADE) since 2004
Iberclear, the Spanish Central Securities Depository and a BME subsidiary, has been awarded the tender to continue performing its functions of support for the National Administrator of the Spanish section of the European Union Registry in relation to the EU’s Trading Scheme of Greenhouse Gas Emission Allowances, the Kyoto Protocol and the Paris agreement, for the period 2020-2022. The mandate can be extended until 2024.
(No Link)

Forum: SGX move enhances S’pore’s global financial standing
Straits Times
The Singapore Exchange’s (SGX) move is timely (SGX eases reporting rules for firms, but adds safeguards; and Experts welcome move by SGX to ease reporting rules, both Jan 10).
bit.ly/2FHvc2t

Fintech

CloudMargin Promotes Armando Hernandez to Newly Created Role: Executive Director, Head of North America
CloudMargin
CloudMargin, creator of the world’s first and only collateral and margin management solution native to the cloud, today announced the promotion of Armando Hernandez to the newly established role of Executive Director, Head of North America for the London-based global firm.
bit.ly/2R8A9Xg

Thai Tycoon Who Owns Fortune Magazine Plots Fintech Acquisitions
Anuchit Nguyen – Bloomberg
A financial technology startup co-founded by the owner of Fortune magazine plans to widen the reach of its Southeast Asian remittance platform through acquisitions.
Lightnet, which describes its blockchain-based service as quicker and cheaper compared with traditional banks, may raise fresh capital to pour into purchases, said Chairman Chatchaval Jiaravanon. The company announced a $31 million funding round last week.
/bloom.bg/2TiD16H

Hong Kong hits major fintech milestone as half the city’s population signs up for HKMA’s Faster Payment System
Enoch Yiu – South China Morning Post
Hong Kong residents can expect to benefit from cheaper and better banking services with the launch of more virtual banks this year, according to high-profile speakers at the Asian Financial Forum.
bit.ly/2TqgZia

For Daura – The Swiss Stock Exchange’s Latest Fintech Investment – It’s All About The Ecosystem
Ben Jessel – Forbes
Financial institutions and sovereign governments across the world have been piloting a move to a new and more efficient way of issuing, trading and settling stocks and bonds by digitizing them on a shared distributed ledger.
Here in the United States, there have been a number of major developments in this area such as; the states of Delaware and Wyoming enacting “digital asset” friendly legislation as well the announcement in October 2019 by the Securities Exchange Commission to allow blockchain provider Paxos (via a no action letter) to pilot transaction settlement using their private blockchain.
bit.ly/2RfgFA7

Why Big Tech Is Getting Into Finance
WSJ
In 2019, many large tech firms announced plans to offer financial products and services. WSJ’s Liz Hoffman explains why Google, Apple, and others are offering products that might someday replace your wallet.
/on.wsj.com/2slZXa7

Cryptocurrencies

Bitcoin Offshoots Surge After Would-Be Satoshi Nakamoto Filing
Olga Kharif – Bloomberg
Bitcoin SV has rallied by about 30%; Bitcoin Cash jumped 10%; Analyst raises caution about possible price manipulation
Two Bitcoin offshoots surged amid optimism that Craig Wright, who claims to have invented the cryptocurrency under the pseudonym Satoshi Nakamoto, may own huge swaths of the coins.
/bloom.bg/36L1Rjo

Gemini’s Head of Risk on How Crypto Beats Traditional Finance
Daniel Kuhn – Coindesk
This post is part of CoinDesk’s 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world.
bit.ly/36N4rFK

‘Digital Currency for Cadres’: A Communist Textbook Proves to Be a Hit
Bloomberg News
China’s Communist Party is working to keep its cadres up to speed as it embraces cutting-edge technologies from artificial intelligence to blockchain, with a latest step being a textbook guide to digital currencies.
/bloom.bg/36QQJl3

As Bitcoin Struggles, This Minor Cryptocurrency Is Up Almost 500% Over The Past 12 Months
Billy Bambrough – Forbes
Bitcoin has had a mixed start to the new year. The price has climbed, most likely for potentially controversial reasons—but, meanwhile, at least one minor cryptocurrency is going from strength to strength. The bitcoin price has climbed over the first few days of 2020 but has failed to make meaningful gains and breakout of its long-running malaise, leaving many cryptocurrency traders and investors disappointed.
bit.ly/2NlBXes

JPMorgan Sees ‘High Anticipation’ for CME Bitcoin Options Launch
Joanna Ossinger – Bloomberg
Institutional interest in Bitcoin-related contracts appears to be building and market measures indicate high anticipation of the launch of CME Group Inc. options on Jan. 13, according to JPMorgan Chase & Co. While a consortium known as Bakkt, which includes New York Stock Exchange parent Intercontinental Exchange Inc., began offering options last month, volumes and open interest have been “rather small,” strategists led by Nikolaos Panigirtzoglou wrote in a note Jan. 10. Given the dominance of CME in trading Bitcoin futures on regulated exchanges, this new offering may change things, they said.
/bloom.bg/3814QV5

12 percent of America’s 100 biggest charity organizations accept bitcoin
Mike McSweeney – The Block
Relatively few of the United States’ biggest charities currently accept bitcoin, new research data shows. The Block’s research team found that 12% of America’s top 100 charities of 2019 accept bitcoin donations. And many of those donations are being routed through a popular payment processor, BitPay.
bit.ly/36TtYgo

Binance-backed derivatives exchange FTX launches bitcoin options
Yogita Khatri – The Block
Cryptocurrency derivatives exchange FTX, in which Binance acquired an equity stake recently, has launched bitcoin options.
bit.ly/2TiZGQf

Bitcoin’s intrinsic value remains below market price, ‘suggesting some downside risk’ – JPMorgan
Yogita Khatri – The Block
Bitcoin’s intrinsic value (an estimate of the actual true value) is still below market price, according to JPMorgan.
bit.ly/2uLeX23

SEC Produces Evidence That Telegram Kept Selling Tokens After $1.7B ICO
Anna Baydakova – Coindesk
At least two entities invoiced Telegram for commissions from selling the company’s tokens in the summer of 2018, months after the company’s initial coin offering (ICO), newly released documents show. The U.S. Securities and Exchange Commission (SEC), which filed the documents Friday in its ongoing court case against Telegram, said the evidence of post-ICO sales undercuts the company’s argument that the offering was exempt from registration requirements.
bit.ly/2QPrJVV

Ethereum Classic Successfully Completes ‘Agharta’ Hard Fork
William Foxley – Coindesk
Ethereum Classic successfully completed the “Agharta” hard fork at block number 9,573,000 at 06:26 UTC on Sunday, according to etcnodes.org. Similar to the network’s last backwards-incompatible upgrade in September, Atlantis, Agharta makes ethereum classic more interoperable with sister-chain ethereum. As part of the hard fork, the Constantinople and St. Petersburg upgrades deployed in tandem on the ethereum network last February will be enabled under Ethereum Classic Improvement Proposal (ECIP) 1056.
bit.ly/2QOeQvf

Market manipulation lawsuit against Bitfinex, Tether has been revised and refiled
Yogita Khatri – The Block
A revised lawsuit has been filed against Bitfinex, Tether and their parent firm iFinex, for allegedly manipulating the bitcoin market. Karen Lerner of Kirby McInerney LLP, one of the attorneys involved in the case, told The Block on Friday that the case has been refiled in the Southern District of New York court (see the revised lawsuit below). The original case was filed at the federal court in the U.S. state of Washington.
bit.ly/2NndGEH

LedgerX Names Former Chief Tech Officer as New CEO
Nikhilesh De – Coindesk
LedgerX announced Friday co-founder and former chief technology officer Zach Dexter has been named the new chief executive of the bitcoin derivatives company. The company suspended CEO Paul Chou and COO/CRO Juthica Chou last month, with no explanation. The two were also co-founders of the company. Depository Trust and Clearing Corporation vice chairman Larry Thompson was named interim CEO and lead director of Ledger Holdings.
bit.ly/35Sq5a1

Asset manager WisdomTree plans to launch its own regulated stablecoin in the US
Yogita Khatri – The Block
Traditional asset management firm WisdomTree Investments, with over $60 billion in client assets, plans to launch its own regulated stablecoin in the U.S. The stablecoin will be pegged to a basket of assets, such as gold, fiat currencies or government debt, according to a report from Financial News London on Monday. WisdomTree wants the Securities and Exchange Commission (SEC) to approve and regulate its upcoming stablecoin. It is not clear if the firm has initiated talks with the regulator; it declined to comment to the news source.
bit.ly/2tYeyIZ

Politics

Trump administration nears decision on LNG shipping by train; Move would offer US natural gas producers an alternative to congested pipelines
Gregory Meyer – FT
The US’s rich supply of natural gas may soon be transported by train, enabling energy shippers to sidestep congested pipelines in parts of the country.
/on.ft.com/35U3RVv

U.S. coal-fired power plants closing fast despite Trump’s pledge of support for industry
Scott DiSavino – Reuters
U.S. coal-fired power plants shut down at the second-fastest pace on record in 2019, despite President Donald Trump’s efforts to prop up the industry, according to data from the federal government and Thomson Reuters.
/reut.rs/2Nn8PTZ

Australian prime minister’s approval rating goes up in flames
Sonali Paul – Reuters
Public support for Prime Minister Scott Morrison has slumped to its lowest levels amid widespread anger over his government’s handling of Australia’s bushfire crisis, according to a survey released by Newspoll on Monday.
/reut.rs/36Q0XSS

Trump’s Impeachment Trial Gives Upper Hand to McConnell, GOP
Billy House – Bloomberg
Pelosi to meet with Democrats on sending articles to Senate; Battle over witnesses moves to more consequential phase
Democrats set the rules for their impeachment of Donald Trump, but once House Speaker Nancy Pelosi kicks the process over to the Senate for a trial the advantage and leverage will be with the president and Republicans.
/bloom.bg/2sotCPY

Bloomberg Urges Re-Ordered Primary Calendar: Campaign Update
Mark Niquette – Bloomberg
Michael Bloomberg says Democrats should change the order of state presidential nominating contests in future elections to put more diverse battleground states ahead of Iowa and New Hampshire and better position the party’s nominee to win in the general election.
bit.ly/2sjNAey

Plight of Newspapers Generates Uncommon Bipartisan Unity; Lawmakers from both parties blame companies like Facebook and Google for the struggles of local newspapers.
Cecilia Kang – NY Times
When a sport utility vehicle swerved out of its lane several weeks ago, slamming into a pickup truck and killing a teenager, a reporter from The Northeast Georgian raced to the scene. Within hours, the paper had posted the news on Facebook and updated it twice. It was shared by hundreds of people on the social network.
/nyti.ms/30iEJ9K

Iraq Could Risk Dollar Access, Oil Marketing if U.S. Troops Out
Khalid Al Ansary – Bloomberg
Lawmaker says central bank, top officials spoke this week; Baghdad maintains key account at New York Federal Reserve
Iraq’s government could lose access to its dollar account at the Federal Reserve if the Trump administration imposes sanctions, as President Donald Trump has threatened, said Majida Al-Tamimi, a lawmaker on the Iraqi parliament’s financial committee.
/bloom.bg/35LBvwf

Can you win an election without digital skulduggery? Gillian Tett reports on the Democrats’ dilemma over using personal data in the fight against Trump
Gillian Tett – FT
Three long years ago, on a glorious summer day in 2016, I went to Brooklyn to meet the team running Hillary Clinton’s presidential campaign. They were based in a hipsterish office space, in a room crammed with brightly coloured posters and T-shirt-wearing millennials.
/on.ft.com/36LeISG

Regulation

SEC Proposes Rule Changes Applicable to BDCs’ Use of Derivatives and Other Transactions
Stephen Bier, James Curtis, Philip Hinkle, Audrey Wagner – Dechert LLP via JD Supra
The U.S. Securities and Exchange Commission on November 25, 2019 unanimously approved for publication a rule proposal related to the use of derivatives and certain other transactions by companies that have elected to be treated as business development companies under the Investment Company Act of 1940 and certain registered investment companies (collectively, funds).1 This OnPoint addresses the SEC proposal from the perspective of BDCs. For a more complete discussion of the proposal, please refer to Dechert OnPoint, Analysis of SEC’s Proposal to Update the Regulation of Funds’ Use of Derivatives and Other Transactions.
bit.ly/36POFtx

Intention to consult on updates to the FCA lists of multilateral development banks
UK FCA
In the forthcoming Quarterly Consultation Paper (QCP) the FCA intends to consult on changes to the Glossary terms for multilateral development bank and designated multilateral development bank.
bit.ly/2QNRyp9

CFTC Commissioner Stump Announces Members of the Global Markets Advisory Committee’s New Subcommittee on Margin Requirements for Non-Cleared Swaps
CFTC
U.S. Commodity Futures Trading Commission Commissioner Dawn D. Stump today announced the members of the Subcommittee on Margin Requirements for Non-Cleared Swaps (Margin Subcommittee), a new subcommittee of the CFTC’s Global Markets Advisory Committee (GMAC).
bit.ly/37ZeFmu

CFTC Obtains $2.5 Million Judgment for Fraudulent Solicitation and Misappropriation of Funds From Commodity Pool Participants
CFTC
The U.S. Commodity Futures Trading Commission today announced the U.S. District Court for the Northern District of Illinois entered a Consent Order for Permanent Injunction on January 8th against defendant Richard D. Carter of Illinois in connection with a $1.76 million commodity pool fraud operated by Blue Guru, LLC.
bit.ly/2FMlzQ0

CFTC Charges US Coin Bullion LLC and its Owners with $7.9 Million Precious Metals Fraud
CFTC
The U.S. Commodity Futures Trading Commission today announced it filed a civil enforcement action on January 8th in the U.S. District Court for the Middle District of Florida, charging US Coin Bullion LLC, Salvatore Esposito, and Joseph Esposito with misappropriating over $7.9 million of customer funds, as well as engaging in fraudulent solicitations in connection with the purported purchase of precious metals.
bit.ly/36PMZjJ

City watchdog readies crackdown on fund supervisors in wake of Woodford meltdown
Michael O’Dwyer – Telegraph
The City watchdog has launched an industry-wide probe into the firms charged with supervising investment funds in the wake of the scandal over the collapse of stock picker Neil Woodford’s investment empire.
bit.ly/2QS0t9n

SEC Proposes Amendments to Governance of Market Data Plans
Steven Lofchie – TABB Forum
The SEC is seeking to improve governance of NMS plans over public consolidated equity market data and trade and quote data. But a new market system is not going to change the reality that the exchanges and the broker-dealers have interests that are fundamentally averse to one another. The SEC proposed an Order to improve governance of National Market System (“NMS”) plans over public consolidated equity market data and trade and quote data.
bit.ly/2Tqkbua

SEC Names Mark D. Reinhold as Deputy Chief Human Capital Officer in the Office of Human Resources
SEC
The Securities and Exchange Commission today announced that Mark D. Reinhold has been named Deputy Director of the agency’s Office of Human Resources (OHR). Mr. Reinhold will help to manage programs and policies in areas such as leadership and employee development, recruitment and retention, performance management, compensation and benefits, and labor relations. Mr. Reinhold began his new position at the SEC on Jan. 6, 2020.
bit.ly/3a4TT6S

Investing and Trading

Less Research Is No Problem for Investors; Changes in regulations mean some stocks are covered by analysts in less depth, or not at all
Average number of analysts covering a company, 2015-20
Julie Steinberg and Paul J. Davies – WSJ
Hedge funds are cashing in on an unintended consequence of European financial regulations on investment research: Less information about some stocks.
/on.wsj.com/2QNOidj

Passive strategies continue to overwhelm asset managers as market hits $11 trillion; The seismic shift from active to passive management spells significant implications for traditional investment managers.
Joe Parsons – The Trade
Assets in global passive investment funds have surpassed the $10 trillion mark as investors continue to transition away from costly, actively managed funds.
bit.ly/35LXzHm

ETF providers end 2019 on high with record assets; Investors ploughed $570bn into products, bringing global total to $6.3tn
Chris Flood – FT
The race to win new business among index fund providers in 2019 climaxed with a sprint finish in December when investors ploughed $93.5bn into exchange traded funds and products.
/on.ft.com/36PYFTK

Half UK universities commit to divesting from fossil fuels; Student and academic protests force hands of endowment investment committees
Attracta Mooney – FT
Half the UK’s universities have pledged to sell their shares in fossil fuel companies after a years-long campaign involving protests, hunger strikes and petitions by students worried about climate change.
/on.ft.com/36TnMFa

Investors Are Learning That Clean Tech Pays; The stock performance of green companies shows that climate change is also a business opportunity.
Matthew A. Winkler – Bloomberg
The American companies most reliant on embracing green technology are outperforming every broad measure of the stock market, delivering a greater return last year than all but two (Russia and Greece) of the world’s 94 leading equity indexes.
/bloom.bg/2tTijja

The way audits work is about to change
Michael Rapoport – Quartz
When WeWork filed to go public in August, lots of people quickly flagged problems at the company. But the firm that’s supposed to watchdog WeWork’s finances wasn’t one of them.
bit.ly/35UyBpm

U.S. Had 14 Weather Disasters Costing $1 Billion or More in 2019
Brian K Sullivan – Bloomberg
Flooding in central U.S. accounted for nearly 45% of costs; Contiguous U.S. also had its second wettest year on record
The U.S. had 14 weather disasters costing $1 billion or more last year, with Midwest flooding accounting for almost half of the total, according to the National Oceanic and Atmospheric Administration.
/bloom.bg/35P1RxA

Investors Are Finally Banking on Big Banks; After consistently beating glum expectations last year, lenders now have higher hurdles to clear
Telis Demos – WSJ
Bank Earnings that merely aren’t bad might not be good enough anymore. There were many things working against U.S. lenders in the second half of last year: falling interest rates, sticky deposit pricing, tepid loan growth, uncertain changes in capital rules and choppy capital markets. It was all too easy to expect their performance to reflect that.
/on.wsj.com/2soxZdQ

Americans lose $17 billion annually by getting bad advice. Here’s how to avoid mistakes
Lorie Konish – CNBC
Finding someone to turn to for financial advice should be as easy as finding a doctor. But it turns out the credentials which financial professionals use to represent themselves are often not clear.
/cnb.cx/2FHfsfQ

Many millennials are worse off than their parents — a first in American history
Tami Luhby, CNN
On paper, it looks like Scott Larsen is doing better than his father was at the same age. At 29, Larsen has a college degree and earns more money, but he doesn’t feel he’s moving up in the world.
/cnn.it/36QMwhc

Institutions

2020s will not be kind to active fund managers; Focus on giving clients what they want will sort investment industry winners from losers
Pauline Skypala – FT
The start of a new decade calls for crystal ball gazing, so what do the next 10 years hold for asset managers? Probably much the same as the past 10 years. Revenues will go down, costs will go up, margins will be squeezed, and the biggest players will get bigger.
/on.ft.com/2siWU2g

Creativity will pay for the next generation of asset managers; As more money pools in passive funds, ‘high-conviction’ managers must sharpen up
Anneka Treon – FT
Active versus passive investment has become a familiar topic. But eyebrows were raised a few months ago when passively managed equity assets in the US exceeded those managed by humans, according to Morningstar, the fund-ratings firm. The industry has never seen this magnitude of disruption.
/on.ft.com/30fpGgV

Voya’s investment chief on ‘overlooked’ female fund managers; Despite overseeing $224bn, Christine Hurtsellers admits feeling excluded from industry
Chris Flood – FT
Energetic gym workouts and calming meditation sessions are essentials for Christine Hurtsellers. The chief executive of the $224bn investment management arm of Voya Financial, the New York-listed provider of pensions and insurance products, even has a mindfulness coach.
/on.ft.com/30mqeBB

Hedge fund trader Chris Rokos pips former firm Brevan Howard; Star of global macro trading chalked up a gain of 9.3% last year
Laurence Fletcher and Lindsay Fortado – FT
Former Brevan Howard Asset Management star trader Chris Rokos has narrowly beaten the performance of his old firm, in a strong year for hedge funds that bet on bonds and currencies.
/on.ft.com/36QHUI7

Regions

Finnish court rejects Rotenberg’s suit against Nordic banks
Reuters
Boris Rotenberg, a Russian businessman under U.S. sanctions over the Ukraine conflict due to his close ties with President Vladimir Putin, on Monday lost a discrimination lawsuit he filed in a Finnish court against four Nordic banks.
/reut.rs/2RamFug

Danske Offers 2,000 Bankers Option to Quit Amid Mounting Costs
Hanna Hoikkala, Rafaela Lindeberg, and Frances Schwartzkopff – Bloomberg
Bank’s CEO in Sweden says compliance costs are still mounting; Danske under investigation in $222 billion Estonian scandal
Danske Bank A/S is offering 2,000 of its employees in Denmark the option of stepping down as the cost of adapting to a world with stricter regulations and negative interest rates just keeps growing.
/bloom.bg/36PWC20

Norway’s Arctic Oil Vision Suffers Another Blow From Lundin
Mikael Holter – Bloomberg
Lundin Petroleum cuts resource estimate of the Alta discovery; Company unlikely to develop Alta, Gohta fields independently
Norway’s vision of establishing a new major oil province off its northern tip has suffered another blow. Lundin Petroleum AB, one of the most active explorers in the Norwegian Arctic, cut resource estimates for its Alta discovery in the Barents Sea and won’t develop the project independently, the company said on Monday. The field and the nearby Gohta find represented one of the hottest candidates for new projects in the Barents, an area estimated to hold two-thirds of the country’s undiscovered oil and gas.
/bloom.bg/2FJan6F

China State Firm’s $6 Billion Loss Is Among Nation’s Worst Ever
Bloomberg News
Qinghai Salt is undergoing a rare court-led debt restructuring; Company is an important test case as defaults in China rise
A distressed Chinese fertilizer company said it may report one of the nation’s biggest-ever annual losses, sparking a slump in its shares and underscoring the challenges faced by some pockets of corporate China as the economy slows.
/bloom.bg/36SRbiE

A Russian Billionaire Is Threatening Nordic Banks’ Dollar Access
Kati Pohjanpalo – Bloomberg
Billionaire Rotenberg sued four banks in 2018 over payments; Helsinki court set to issue a ruling in the dispute on Monday
Should banks be forced to accept a client who could be on the wrong side of the law? A court in Finland is about to decide the answer to that question, and its verdict may have far-reaching implications.
/bloom.bg/2sm0d95

‘Twiggy’ and Nicola Forrest make $70 million pledge to national bushfire relief; Celebrities and notable figures have been pouring in donations to help fight the bushfires burning in Australia.
Sarah McPhee – news.com.au
Billionaire Australian businessman Andrew “Twiggy” Forrest has announced a $70 million bushfire recovery package. The WA mining magnate and his wife, Nicola, will spend $50 million on a “national blueprint” for fire and disaster resilience to develop new approaches to fight the threat of bushfires.
bit.ly/35OYXJc

Lebanon Eyes Voluntary Swap of March Eurobond Into New Debt
Dana Khraiche – Bloomberg
Central bank’s Salameh said the plan would need banks’ consent; It may pave the way for a similar measure involving foreigners
Lebanon’s central bank wants local holders of a $1.2 billion Eurobond maturing in March to swap into new notes as part of an effort to manage its debt crisis.
/bloom.bg/30e690k

Brexit

$170 Billion and Counting: The Cost of Brexit for the U.K.
Fergal O’Brien – Bloomberg
Bloomberg Economics calculates impact on U.K. growth vs G-7; Government still has to negotiate post-Brexit deal with the EU
U.K. Prime Minister Boris Johnson wants to “unleash Britain’s potential.” First the economy has to catch back up with the rest of the world.
/bloom.bg/30itn5C

The City of London Wants To Have Its Brexit Cake and Eat It Too; Mark Carney and other financiers seem to think London can do business as usual without playing by the EU’s rules. This is confidence bordering on complacency.
Lionel Laurent – Bloomberg
The Bank of England’s outgoing boss, Mark Carney, has long come under fire from pro-Brexit politicians for his grim predictions for the British economy outside the European Union, including the possibility of a recession. It got to the point that it looked like one of the biggest tasks for his successor, Andrew Bailey, would be to un-ruffle feathers.
/bloom.bg/2TiYfRO

Brexit cost for UK will soar to $260 billion this year: study
Ben Winck – Markets Insider
The UK’s December brought new certainty around the nation’s Brexit plans, but the UK-EU split will only grow more expensive in 2020, according to new research from Bloomberg Economics. Brexit has already cost the UK roughly 130 billion pounds ($170 billion), UK economist Dan Hanson wrote. Prime Minister Boris Johnson’s expedited exit from the EU will add another 70 billion pounds ($91 billion) to the total in 2020. The 2020 estimate is the highest yearly cost estimate from Bloomberg Economics since the June 2016 referendum. A small boost to UK growth in 2020 will lift the nation in the short-term, Hanson wrote, but lasting trade woes and lost efficiencies will plague economic recovery for years to come.
bit.ly/2FNnZxU

EU Readies Itself to Run Down the Brexit Clock
Pierre Briançon – Barron’s
But nothing has been solved and, for some time, nothing will change. Come February 1, the U.K. will be faced with the same reality it confronted last year: the EU is a tough nut to crack. Britain will remain in the EU, for all practical purposes, until December. In this so-called transition period, it will have the same rights and will be subjected to the same laws and regulations as the other 27 member states, except that it won’t have any say in EU decisions.
bit.ly/2Tf3Pom

Miscellaneous

Middle Age Misery Peaks at Age of 47.2, Economist Says
Simon Kennedy – Bloomberg
New study says ‘happiness curve’ exists around the world; Research has relevance because of focus on mental health
Middle age is miserable, according to a new economic study which pinpoints 47.2 years old as the moment of peak unhappiness in the developed world. Dartmouth College Professor David Blanchflower, a former Bank of England policy maker, studied data across 132 countries to measure the relationship between wellbeing and age.
/bloom.bg/35N43ph

American Deaths of Despair Aren’t the Whole Story; The image of the U.S. as a fraying society overlooks ways the country is starting to heal itself.
Noah Smith – Bloomberg
At the American Economic Association’s big annual conference last week, one of the most-attended sessions was a panel entitled “Deaths of Despair and the Future of Capitalism.” The panelists included economists Anne Case and Angus Deaton — the co-authors of a recent book with the same title as the panel — as well as sociologist Robert Putnam and economists Raghuram Rajan and Kenneth Rogoff. Together, they painted a bleak picture of a fraying society. But this picture ignores the ways in which American culture has begun healing itself in recent years.
/bloom.bg/2spKlT2

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First Read Hits & Takes By John Lothian and JLN Staff How about a good news story to start the newsletter? John Mormando is an RJ O'Brien broker in New York who contracted the coronavirus on March 1. The 53-year old was just released from Valley Hospital in...

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