Breaking News

John Lothian Newsletter: LSE taps Morgan Stanley’s Ross to run Curve; ‘Flash Boys’ trading venue application triggers backlash; High-frequency trader warns of potential market ‘catastrophe’

First Read

ICE chief calls IEX speed bump plan ‘un-American’
Gregory Meyer and Nicole Bullock in New York – FT
IEX, the upstart stock-dealing venue, is taking an “un-American” approach to slowing down high-speed traders, the owner of the New York Stock Exchange has charged in comments that will further inflame debate over markets.
goo.gl/743Bge
****Katsuyama is very un-American. He’s Canadian.

JJL**** He is North American, it is just like American, but colder.

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Typhon Capital Bets Big on Biofuels
By TIM PUKO – WSJ
Look for drivers – but not oil – to help steer a turnaround in commodities, according to Typhon Capital Management. The eight-year-old firm — famous for advocating for a group of clients hurt by MF Global Holdings Ltd — is making a big bet on biofuels, its leaders are telling investors at Context Summits, a conference in Miami. Governments around the world are pushing for cleaner energy, and that’s likely to lead to major recoveries for corn, sugar and grains as new laws mandate more biofuels to replace crude-based gasoline and diesel, said Cy Monley, portfolio manager.
goo.gl/wVtprf

***** Nice to see James Koutoulas get some positive press.

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Investor Group to Acquire Chicago Stock Exchange
Business Wire
The Chicago Stock Exchange, Inc. (CHX) is pleased to announce that it has entered into a definitive agreement to be acquired by an investor group led by Chongqing Casin Enterprise Group (the “Casin Group”). The Board of Directors of CHX has unanimously approved the transaction, which is subject to regulatory approvals. The acquisition is expected to close in the second half of 2016. Terms of the transaction have not been disclosed.
jlne.ws/20wBJTV

***DA: The future of CHX has been a source of internal debate in our office. Some see it as a throwback to the regional stock exchange model whose best days are behind it. Others see an opportunity to try new things, such as their SNAP Auctions, that will serve the 21st Century market structure well. One thing is sure – today’s announcement will serve to breathe new life into the organization and at least buy some time to implement the plan.

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Sponsored Content
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High Rate of Problem Drinking Reported Among Lawyers
By ELIZABETH OLSON – NY Times
Lawyers struggle with substance abuse, particularly drinking, and with depression and anxiety more commonly than some other professionals, according to a new study conducted by the American Bar Association together with the Hazelden Betty Ford Foundation.
goo.gl/1Ynjrr

***** I always wondered why I got so much free legal advice in taverns.

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Dodd-Frank, Clearing And $99 Android “Turrets” Boost Voice Trading
Tom Groenfeldt – Forbes
Contrary to predictions that new regulation would eliminate voice trading, a combination of factors has revived it. Algorithmic trading has pushed the average transaction on the NYSE to 100 shares, so large institutions are using dark pools or phones to trade large blocks. Regulation has pushed OTC trades into clearing, which opens the business to small shops. And OTC is no longer restricted to large banks with ISDA counterparty agreements.
jlne.ws/20wwWC1

****A contrarian technology that is winning.

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Navinder Sarao sent millions of trade messages ahead of flash crash, prosecutors say
By BERNARD GOYDER – MarketWatch
The Hounslow trader accused of helping trigger the flash crash of 2010 sent 7.4 million “trade modification” messages – sometimes seen as a sign of abusive trading – on a single day, according to prosecutors seeking to extradite him to the U.S.
goo.gl/fAfCUw

***** That is a lot of price information.

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Utility Player: FIS’ John Avery Sees the Derivatives Utility as a Driver of Innovation

JohnLothianNews.com

In June of 2015, SunGard, now part of FIS Global, launched its post-trade derivatives utility, which aims to standardize back and middle office operations and technology, with Barclays as its first customer. According to FIS’ John Avery, it is not about commoditization so much as specialization. In other words, banks and futures commission merchants should concentrate on differentiation through service, cost, and other customer touch points, and leave standardized, replicated functions in the hands of a vendor. This will allow the bank or FCM to innovate from the business level, and allow the vendor to innovate at the fintech level.

Watch the video »

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Yesterday’s Top Three
Doug Ashburn – JLN

Clickbait wins again. The top clicked story, by far, was the Orange Capital closure story from Business Insider, A hedge fund has laid out why it is closing — and it is enough to set alarm bells ringing. It received a lot more than a similar story from WSJ, but with a less in-your-face title. Go figure.

Second place went to the WSJ story, Why Mike Bloomberg Can Win. Third place went to the Bloomberg story The Secretive Hedge Fund That’s Generating Huge Profits for Yale

I think we should change the motto of the John Lothian Newsletter to “You won’t BELIEVE what this irreverent but never irrelevant team just published!”

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Lead Stories

LSE taps Morgan Stanley’s Ross to run Curve
Futures & Options World
The London Stock Exchange Group is to hire Morgan Stanley’s European head of swap clearing Andrew Ross as chief executive of its new rates futures exchange Curve Global, according to sources. Ross, who has been with Morgan Stanley for 16 years, is set to assume the vacant position of Curve chief executive in the coming months after resigning on Friday from his position as the US bank’s European head of over-the-counter clearing this week.
jlne.ws/20wA9l0

‘Flash Boys’ trading venue application triggers backlash
Robin Wigglesworth in New York – FT
The Investors’ Exchange, a trading venue made famous by Michael Lewis’ Flash Boys book on high-frequency trading, has applied for full stock market status. But the application has triggered a deluge of responses and fanned the debate about the very nature of the US equity markets.
goo.gl/b6tuN9

High-frequency trader warns of potential market ‘catastrophe’
Robin Wigglesworth in New York – FT
The head of one of the biggest high-frequency trading companies has warned that there are several faultlines in the structure of increasingly electronic, automated financial markets that could lead to a “catastrophe” in the long run.
goo.gl/P7cveY

Citadel Pushes SEC to Fix Fractured Credit-Default Swaps Market
Sridhar Natarajan – Bloomberg
Ken Griffin’s Citadel is urging the U.S. Securities and Exchange Commission to finish writing rules that mandate central clearing of credit-default swaps — a move it says would help revive a shrinking portion of the $13 trillion market.
goo.gl/jA6AHx

Obama proposes $10 per barrel oil tax
Barney Jopson in Washington – FT
The White House is proposing a bold $10 per barrel tax on oil in a move that immediately sparked a backlash from an energy industry buckling under the pressure of low prices.
goo.gl/q4WMS3

Traders slam exchange dividend boosts
Futures & Options World
The London-based proprietary trading community has reacted angrily to the news that the Chicago Mercantile Exchange Group and the Intercontinental Exchange have raised dividends after announcing new fees for clients. CME Group declared on Thursday a first quarter dividend of $0.60 per share, up a fifth on the former $0.50 per share rate, payable on March 28 2016.
While generally accepted that trading and data fees make up an important proportion of exchange revenue, the news of the increased dividends coming just a month after the Merc upped trading fees across a number of products has not been welcomed.
jlne.ws/1R6zktb

Virtu Financial to launch ‘velvet rope’ agency trading service
BY JOHN MCCRANK – Reuters
Feb 4 Virtu Financial plans to launch later this year a “velvet rope” service in which it will execute trades for select institutional investors, Doug Cifu, head of the automated trading firm, said on Thursday.
goo.gl/GJubEs

What’s Next for Sweden a Year After Adopting Negative Rates?; Central bank meets Feb. 11 and is considering new bold moves to stimulate the economy
By CHARLES DUXBRY – WSJ
A year after cutting its main interest rate below zero percent for the first time ever, the board of Sweden’s central bank is considering further bold moves to keep a buoyant national currency in check and jolt desperately moribund inflation.
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Rate Expectations: Not So Fast, Fed; Wall Street is increasingly skeptical about the pace of Federal Reserve interest-rate increases this year
By KATY BURNE and MIN ZENG – WSJ
Wall Street is increasingly skeptical about the pace of Federal Reserve interest-rate increases this year, the latest blow to the central bank’s yearslong efforts to unwind its easy-money policies and return the economy to a normal footing.
goo.gl/gKze8A

How Much Global Oil Output Halted Due to Low Prices? Just 0.1%
Javier Blas – Bloomberg
Wood Mackenzie says global output down 100,000 barrels a day; Oil consultant expects producers to continue pumping at a loss
After a year of low oil prices, only 0.1 percent of global production has been curtailed because it’s unprofitable, according to a report from consultants Wood Mackenzie Ltd. that highlights the industry’s resilience.
goo.gl/QKnIQG

Government bond yields send recession signal
Elaine Moore, Robin Wigglesworth, Leo Lewis – FT
Universe of negative yielding debt grows beyond $5tn as central banks indicate further easing
If major government bond markets are right, the global economy is sliding towards recession and central bank easing policies will pull borrowing rates deeper into negative territory.
goo.gl/0NYHtw

BlackRock’s Larry Fink May Be Stepping Up his Play for Treasury Secretary
by Stephen Gandel – Fortune
Much has been made about Larry Fink’s recent call to ditch giving out quarterly guidance to shareholders and instead focus on the long-term. In a letter this week to the CEOs of the S&P 500 and a number of large European companies, the BlackRock chief executive implored executives to focus more on the long-term and ignore activist shareholders and others looking for a quick boost to shares.
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The Hottest Idea in Finance: Capital Controls Are Good; Long shunned by economists, controls gain support as a way to cope with destabilizing investment flows
By MIKE BIRD – WSJ
The response to turbulent financial markets might be a dose of unorthodox thinking.
goo.gl/MNe6Ij

Credit Suisse Pays Price for 16-Year-Old Misstep; Donaldson, Lufkin & Jenrette on Thursday became an expensive footnote in a dreary day for its Swiss parent
By JUSTIN BAER and MICHAEL RAPOPORT – WSJ
Storied brokerage Donaldson, Lufkin & Jenrette hasn’t received much attention since being folded into Credit Suisse AG 16 years ago. But it resurfaced Thursday as an expensive footnote in a dreary day for its Swiss parent.
goo.gl/f9W8GN

Julius Baer to Pay $547 Million in U.S. Tax Case; Two former client advisers, who surrendered this week to U.S. authorities, also pleaded guilty
By MARIA ARMENTAL – WSJ
Swiss bank Julius Baer Group AG on Thursday admitted to helping U.S. taxpayers hide billions of dollars in offshore accounts and agreed to pay $547 million.
goo.gl/PsiqIk

Regulatory

UK Treasury wants tweaks, not a bonfire of EU regulation
By Mark Cobley – Financial News
The UK Treasury has handed EU authorities a shopping list of around 50 technical alterations to regulations impacting the City of London – but there has been no resumption of past battles over bonuses and banker-bashing.
goo.gl/XqDNVU

Commissioner J. Christopher Giancarlo Releases Podcast About 6 Mega-Trends Facing 21st Century Financial Markets
CFTC
Commissioner J. Christopher Giancarlo released a Podcast about 6 “mega-trends” facing 21st century financial markets. The podcast released today closely follows the guest lecture he provided on December 1, 2015, at Harvard Law School as part of the Fidelity Guest Lecture Series on International Finance.
jlne.ws/1S3CLlE

Speech of Commissioner Sharon Y. Bowen at George Washington Law, 2016 Manuel F. Cohen Lecture
CFTC
I’d like to talk about the focus of this symposium which is to answer a question that is of utmost importance to the American people: as far as the derivatives markets are concerned, are we safer today than we were before the 2008 crisis? It’s a fair question. After all, the purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act3 was to make the economy safer by reforming Wall Street and protecting consumers. Has Wall Street been reformed? Are consumers better protected? I will answer those two questions in my remarks today.
jlne.ws/1S3Csat

Algo traders added to FCA accountability rules; FCA widens scope of new conduct rules to cover algorithmic trading and client dealing functions.
By John Bakie – The Trade News
Algo trading and client-dealing functions will fall under the Financial Conduct Authority’s (FCA) certification regime to improve accountability in banking, the regulator has announced.
goo.gl/LK29N8

FCA extends accountability regime to high-frequency traders
Caroline Binham, Financial Regulation Correspondent – FT
Algorithmic and high-frequency traders will be captured by an accountability regime as part of a push by the UK financial watchdog to extend rules across wholesale markets.
goo.gl/iprkSq

Bill Seeks to Limit Use of Arbitration to Avoid Courts
By JESSICA SILVER-GREENBERG and MICHAEL CORKERY – NY Times
Two leading Senate Democrats introduced a bill Thursday that would strictly limit the use of arbitration, a process used to resolve legal disputes that is often stacked against consumers.
goo.gl/KFH5Jx

Platt’s BlueCrest Said to Be Probed by SEC Over Employee Fund
Matt Robinson, Saijel Kishan – Bloomberg
U.S. regulator said to have opened investigation in mid-2015
SEC review said to focus on potential conflicts of interest
Billionaire Michael Platt’s BlueCrest Capital Management is being investigated by a U.S. regulator over possible conflicts posed by an internal fund that manages money for the firm’s partners, according to people with knowledge of the matter.
goo.gl/piLO3P

Self-Regulatory Organization (SRO) Rulemaking and National Market System (NMS) Plans
SEC

    • DTC: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Discontinuance of the Facsimile and Hardcopy Delivery Methods of Security Position Reports (Release No. 34-77043; File No. SR-DTC-2016-002; February 3, 2016); see also Exhibit 5
    • NYSE: Notice of Withdrawal of Proposed Rule Changes Amending the NYSE Trades Market Data and NYSE MKT Trades Market Data Product Offerings (“Release No. 34-77047; File Nos. SR-NYSE-2015-31, SR-NYSEMKT-2015-56; February 3, 2016”)
    • NYSE Arca: Order Approving a Proposed Rule Change Relating to the Index Underlying the WisdomTree Put Write Strategy Fund (Release No. 34-77045; File No. SR-NYSEArca-2015-113; February 3, 2016)
    • NYSE Arca: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to List and Trade Binary Return Derivatives (Release No. 34-77044; File No. SR-NYSEArca-2016-16; February 3, 2016); see also Exhibit 5
    • OCC: Order Approving the Adoption of a Charter of a New Committee of The Options Clearing Corporations Board of Directors, the Technology Committee (“Release No. 34-77042; File No. SR-OCC-2015-018; February 3, 2016”)
    • OCC: Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Revise The Options Clearing Corporations Schedule of Fees (Release No. 34-77041; File No. SR-OCC-2016-001; February 3, 2016); see also Exhibit 5

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ESMA PUBLISHES TRANSLATIONS OF ITS GUIDELINES ON COMPLEX DEBT INSTRUMENTS AND STRUCTURED DEPOSITS
ESMA
The European Securities and Markets Authority (ESMA) has published translations of its Guidelines on complex debt instruments and structured deposits.
/goo.gl/lH8Ltu

Exchanges & Trading Facilities

CME Group Announces Record Open Interest
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it set a total open interest record of 110.1 million on February 3. The new record surpassed the previous open interest record of 108.9 million contracts set on November 13, 2014.
goo.gl/SyH4wp

CME Group beats profit and sales expectations
MarketWatch
CME Group Inc. said its fourth-quarter profit declined as the world’s biggest futures-market operator generated less revenue from transaction and clearing fees amid lower trading volume. Still, results exceeded Wall Street’s expectations.
jlne.ws/20wzsbl

Thomson Reuters, CME Group to develop silver benchmark further
Reuters
Thomson Reuters and CME Group introduced a package of measures on Thursday to further develop the silver benchmark, including the option of suspending the process if administrators believe its integrity is threatened. The benchmark’s oversight committee has held two extraordinary meetings since last Thursday, when the LBMA silver benchmark settled more than 80 cents below the spot price.
jlne.ws/20wzwb4

Intercontinental Exchange’s earnings beat
MarketWatch
Intercontinental Exchange Inc.’s fourth-quarter earnings easily topped expectations as the exchange operator saw data-service revenue jump and benefited from busier energy markets. The Atlanta-based owner of the New York Stock Exchange has recently announced a string of acquisitions, including its $5.2 billion purchase of Interactive Data Corp. and a $650 million tie-up with London-based energy-trading venue Trayport. Through the IDC deal ICE acquired hard-to-get pricing data on corporate bonds and the Trayport tie-up comes as energy markets remain volatile and garner increasing attention.
jlne.ws/20wzJeh

Nasdaq January 2016 Volumes
GlobeNewswire
Nasdaq (NDAQ) today reported monthly volumes for January 2016, on its investor relations website.
goo.gl/2DJBST

SGX urges caution when dealing in Zhongmin Baihui Retail Group Limited shares
SGX
Singapore Exchange (SGX) urges investors and potential investors to exercise caution when dealing in the shares of Zhongmin Baihui Retail Group Limited (ZMBH).
goo.gl/d07zq1

European salesman Fisher leaves SGX in London
Futures & Options World
Singapore Exchange is to part company with London-based salesman Mark Fisher less than nine months after he joined the firm. Fisher is set to leave the firm in the coming weeks, according to sources, and SGX has already started looking for a replacement.
jlne.ws/20wAyUs

Politics

Questions on Speeches to Goldman Sachs Vex Hillary Clinton
By ALAN RAPPEPORT- NY Times
The millions of dollars that Hillary Clinton earned by giving paid speeches across corporate America may have turned out to be more trouble than they were worth.
goo.gl/pmZcV7

U.S. House approves limits on investigating banks for fraud ties
Reuters
The U.S. House of Representatives passed legislation on Thursday that would curb a Justice Department initiative aimed at cutting off perpetrators of fraud from the banking system. Since 2012 the department, with the help of regulatory agencies, has investigated banks and third-party processors in the United States that do business with companies they believe run a higher risk of fraud. The goal of the program, frequently called “Operation Choke Point,” has been to hold banks accountable while sniffing out law breakers, according to the department.
goo.gl/gZR4jc

Tale of the Tape: Clinton Takes the Fight to Sanders in Debate
Justin Sink – Bloomberg
Clinton accuses rival of `artful smear’ over Wall Street ties; Sanders leads polls ahead of New Hampshire Democratic primary
Hillary Clinton came looking for a fight. She accused rival Bernie Sanders of a “very artful smear” with his criticism of her ties to Wall Street and of using innuendo about her acceptance of high-dollar speaking fees. “Enough is enough,” she told Sanders during Thursday’s Democratic presidential debate in New Hampshire. “If you’ve got something to say, say it directly.”
goo.gl/CnXvoc

Clinton’s Wall Street Hypocrisy
By Editorial Board – Bloomberg
It’s nice work if you can get it: In 2013, after stepping down as secretary of state, Hillary Clinton earned $9.7 million in speaking fees — a lot of it from banks and investment firms, including $675,000 for three speeches to Goldman Sachs.
goo.gl/wS1fBZ

Hillary Clinton Is Again Put on the Defensive Over Perceived Ties to Wall Street
By AMY CHOZICK – NY Times
Hillary Clinton appeared frustrated. Dozens of prominent economists and academic experts have endorsed her plans to regulate the financial sector. Her policies would “try to prevent the problems of the future,” she explained in Thursday’s debate, in addition to reining in “the excesses of Wall Street.”
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Hedge Funds & Managed Futures

El-Erian: Markets front-run Fed in tightening financial conditions
BY JENNIFER ABLAN – Reuters
Mohamed El-Erian, the chief economic adviser at Allianz SE (ALVG.DE), said on Thursday that with volatility rising, the markets effectively have served as front-runners to the Federal Reserve in tightening global financial conditions.
goo.gl/ypmntl

Deal Shows Investors Are Willing to Make a Blind Bet on Uber
By LESLIE PICKER and PETER EAVIS – NY Times
A deal about to close on Wall Street illustrates just how much some investors are willing to give up to gain a piece of the hottest start-up.
goo.gl/08vNl0

Bill Gross Investors Aren’t the Only Ones Pulling Pimco Money
John Gittelsohn – Bloomberg
All Authority fund assets fell 76%, more than Total Return; `This is a very tough time’ for value strategy, Arnott says
When Bill Gross left Pacific Investment Management Co. in 2014, it wasn’t surprising that investors bolted. But now customers are deserting another Pimco star manager who’s still in his seat.
goo.gl/yJnMSq

Sports Authority to Take Steps Toward a Bankruptcy Filing
Jodi Xu Klein – Bloomberg
Sports Authority Inc. is preparing to file for bankruptcy as it faces a debt payment due in 10 days, according to people with knowledge of the matter.
goo.gl/ROSu0U

SNB’s FX Reserves Increase to Record Amid Depreciating Franc
Catherine Bosley – Bloomberg
Switzerland’s foreign currency reserves increased 3 percent to an all-time high in January, boosted by the franc dropping against the euro and the dollar.
goo.gl/Zi1YOp

Banks & Brokers

Morgan Stanley’s new president cements role as enforcer-in-chief
BY OLIVIA ORAN – Reuters
Colm Kelleher is a stickler for discipline, even when it comes to the office dress code. In an internal risk meeting during the summer of 2010, the then head of trading at Morgan Stanley chastised colleagues for rolling up their shirt sleeves and dispensing with their jackets in the New York heat, according to a former executive. Even in the dog days of summer with no clients present, Kelleher held those around him to a high standard.
goo.gl/eFZf8N

MOVES-BNY Mellon clearing unit Pershing names new CEO
Reuters
Pershing LLC, a clearing firm unit of Bank of New York Mellon Corp, said Lisa Dolly would succeed Ron DeCicco as its chief executive, effective Feb. 16.
goo.gl/PbQpfv

Credit Suisse’s Painful Turnaround Is Falling Short
Breakingviews
By DOMINIC ELLIOTT – NY Times
Credit Suisse’s turnaround is proving more painful than it could have been.
The Swiss bank’s fourth-quarter results were riddled with the kind of exceptional items and restructuring costs that were par for the course for a European investment bank rethinking its strategy. But even after stripping these out, and ignoring the bits that Credit Suisse is winding down, the bank would have failed to turn a profit.
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Clearing & Settlement

“We Aren’t Obsolete,” Says DTCC White Paper
AllAboutAlpha
The Depository Trust and Clearing Corporation has issued a new white paper on block chains and their significance in the context of the post-trade landscape. Block chains, also known as distributed ledgers, are a hot new technology, made so in large part by the cryptocurrency Bitcoin and by the publicity it has long received. But aside from the particulars of Bitcoin or of analogous currency schemes: here’s a Q-and-A.
jlne.ws/20wxhET

Clearing contradictions in derivatives regulation
Banking Technology
There’s one challenge that regulators seem unable to address, and that is regulation itself. Today’s evolving regulatory environment seems to be beset by a range of internal contradictions. One such contradiction affects those banks acting as clearing providers for derivatives businesses, writes Stephen Ingle. associate principal, financial services, eClerx
jlne.ws/20wxnMw

Costs affecting IRS clearing decision, says TABB
Securities Lending Times news
Costs are playing a major role in where buy-side firms are choosing to clear their interest rate swaps, according to a new report. TABB Group’s report, Global Clearing: Navigating Liquidity and Pricing Pools, reviews the shifts that major clearinghouses are seeing in market share and how cost analysis on clearing has become a major factor.
jlne.ws/20wxyaR

Performance Bond Requirements: Energy, Agriculture, Interest Rates, FX, Metals, Environmental and New Product Margins – Effective 02/05/16
CME Group
goo.gl/NSxMuZ

Indexes & Products

The Next Frontier in Smart Beta: Fixed Income
Wealth Management
Fixed income is one of the untapped corners of the smart beta market, and we should expect to see more fixed income strategies launched in the space, according to a panel at TD Ameritrade Institutional’s National LINC conference on Thursday.
jlne.ws/20wyoUY

Investors using index funds to try to beat the market
The Salt Lake Tribune
The adage got pounded for years into investors, and many began to live by it. After seeing so many investments fail to keep up with the Standard & Poor’s 500 index, investors put their money instead into low-cost index funds. They were happy to get returns that were the same as the market. Now, though, a growing number of funds are pitching themselves as ways to get better — or more stable — returns than the market. But instead of hiring stock pickers to get there, these mutual funds and exchange-traded funds track different kinds of indexes.
jlne.ws/20wys7e

Why Exchange-Traded Notes Face a Popularity Problem; New issuance of ETNs has been curtailed amid regulatory scrutiny of banks’ financial strength
By DAISY MAXEY and BEN EISEN – WSJ
Asset managers keep rolling out scads of new exchange-traded funds based on slicing and dicing the investment universe. But companies haven’t been introducing many of the ETF cousins known as exchange-traded notes, or ETNs.
goo.gl/JXBXQp

In search of stability, Wall Street eyes return of stock buybacks
USA Today
Given the rocky start to 2016, Wall Street is hoping Corporate America – a big buyer of U.S. stocks in recent years – will resume purchasing their own stock as the quarterly earnings season winds down and the regulatory-driven share-repurchase “blackout” is lifted.
jlne.ws/20wywnv

Does Smart Beta Offer a Better Mousetrap?
Indexology – S&P Dow Jones Indices
How are financial advisors applying smart beta strategies to manage risk and potentially enhance returns? S&P Capital IQ’s Sam Stovall and S&P DJI’s Shaun Wurzbach discuss what to expect at the February 24 FA Forum, “Where Can Smart Beta Take You?”
jlne.ws/20wyGLr

Technology

Deutsche Bank: Banks Must Partner with Fintech and Digital Currency Businesses or Risk Disappearing Altogether
Bitcoin Magazine
The number of banks experimenting with blockchain technology and looking at their own digital currencies is growing by leaps and bounds, so it’s no surprise that Deutsche Bank is well on its way to having its own blockchain technology. In a recent statement, the bank was quoted as saying: “Banks must partner with fintech and digital currency businesses or risk disappearing altogether.”
jlne.ws/20wyVWV

What VCs are looking for in fintech
Upstart
The fintech industry has experienced tremendous growth in the past five years, largely fueled by venture capital investment. Fintech venture investment grew from less than $1 billion in 2010 to more than $14 billion over 12 months in 2015, according to venture capital research firm CB Insights.
jlne.ws/20wyY53

IBM Buys Into Digital Asset Holdings, a Blockchain Tech Company
Today, the trading of securities relies on a central authority that coordinates the transfer of cash for traded shares. DAH wants to link all participants to the same database of transactions, which would allow almost real-time asset movement.
jlne.ws/20wzbFr

Enforcement

Federal Court in Florida Orders Restitution, a Civil Monetary Penalty, and Permanent Injunction against Robert Tripode for Engaging in Fraud in Connection with Forex
CFTC
The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court in Fort Lauderdale, Florida, issued a Consent Order against Defendant Robert Tripode of Boynton Beach, Florida, in connection with his fraudulent activities as an employee and agent of Forex Monthly Income Fund (FMIF), a commodity pool based in Miami, Florida. The Order requires Tripode to pay a civil monetary penalty totaling $170,716.01 and restitution of the same amount. The Order also imposes permanent trading and registration bans on Tripode and prohibits him from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.
jlne.ws/1S3BJ8Y

Federal Court Orders Florida-Based Worth Group Inc. and Its Principals, Andrew Wilshire and Eugenia Mildner, to Pay $2.5 Million in Sanctions for Illegal Off-Exchange Precious Metals Scheme
CFTC
The U.S. Commodity Futures Trading Commission (CFTC) announced today that the U.S. District Court for the Southern District of Florida entered a Consent Order of Permanent Injunction against Defendants Worth Group Inc. (Worth) of Jupiter, Florida, and its owner and operator, Andrew Wilshire of Jupiter, Florida, and Wilshire’s sister, Eugenia Mildner also of Jupiter, Florida, who served as Worth’s sole officer and director prior to February 2012. The Order requires the three Defendants to immediately comply with the law governing their financed precious metals transactions and to pay restitution of $1,250,000. Defendants Worth and Wilshire are also required to pay a civil monetary penalty $1,250,000.
jlne.ws/1S3CjUl

SEC: Miami Firm Broke Anti-Money Laundering Protocols
SEC.gov
During SEC examinations of E.S. Financial Services, which is now named Brickell Global Markets, the firm twice failed to provide required books and records identifying certain foreign customers whom they were soliciting directly and providing investment advice. Federal law requires all financial institutions to maintain an adequate customer identification program (CIP) to ensure financial institutions know their customers and do not become a conduit for money laundering or terrorist financing. An ensuing SEC investigation found that E.S. Financial’s CIP failed to obtain and maintain documentation to verify the identities of certain non-U.S. customers who traded through a brokerage account opened by a Central American bank affiliated with the firm.
jlne.ws/1S3C9wl

Julius Baer advisers admit helping Americans dodge taxes
Ben McLannahan and Kara Scannell in New York – FT
Two client advisers at Julius Baer, the Swiss private bank, pleaded guilty in a New York court on Thursday to helping Americans dodge taxes, as their employer paid $547m to end a long-running probe by the US Department of Justice.
goo.gl/L9UxkC

Rajat Gupta’s Insider-Trading Conviction to Get a New Review
Chris Dolmetsch, Patricia Hurtado – Bloomberg
Gupta is highest-profile executive convicted in crackdown; Former Goldman director was released from prison in January
The highest-profile executive found guilty in a crackdown on insider trading convinced an appeals panel to review his conviction for passing tips to a billionaire hedge fund manager, the latest case to be scrutinized in the wake of a U.S. Supreme Court decision to clarify insider-trading laws.
goo.gl/Skauvd

Environmental & Energy

Big Oil Opts for Payouts Over Debt Rating; As cheap oil siphons cash, companies borrow to pay dividends, threatening credit standing
By SARAH KENT and BRADLEY OLSON – WSJ
The world’s biggest energy companies have a tough decision to make amid languishing oil prices: Do they keep their coveted investment-grade credit ratings or maintain century-old practices of paying shareholders annual dividends worth billions in cash?
goo.gl/auhr42

Citi: Why we should fear ‘Oilmageddon’; Risk of global recession
Natalie Kenway – InvestmentWeek
Analysts at Citigroup have warned financial markets are currently in a “death-spiral” as tumbling commodity prices are making it difficult for central banks to fight disinflationary forces, with repercussions felt far and wide.
goo.gl/P4owqL

Those Days You Work From Home May End Up Wrecking the Planet
Jessica Shankleman – Bloomberg
Higher energy use seen from those who work outside the office; Only those living far from office help lower pollution
Next time your boss tries to convince you of the benefits of working from home, spare a thought for how that could contribute to wrecking the planet.
goo.gl/HwLOq6

Obama $10-Per-Barrel Oil Tax Lands With Thud in Congress
Justin Sink – Bloomberg
President says he will propose tax in his 2017 budget plan; Proceeds would fund transportation needs, climate research
President Barack Obama will propose a $10 per barrel tax on oil in his fiscal 2017 budget plan, an idea that received a chilly reception in the Republican-controlled Congress that oversees spending.
goo.gl/zCq7bW

There’s No Such Thing as Normal in California Water
By Justin Fox – Bloomberg
Ninety percent of California’s annual precipitation usually falls between Oct. 1 and April 30, half of it from December through February. That means the next few weeks may be make-or-break for the state’s hopes of emerging from its four-year drought.
goo.gl/iT6nHm

U.K. Coal Plants Killed Off One by One as Profit Declines: Chart
Rob Verdonck, Rachel Morison – Bloomberg
Coal’s days in U.K. power are numbered. By the end of March, SSE Plc will probably have closed almost all its coal generation in the U.K. after the clean-dark spread, a measure of the profitability of burning the fuel, turned negative. Margins were hit by a 25 percent drop in power prices in the past year and an 88 percent increase in April in a carbon tax to help fight global warming. The government plans to close all stations burning coal by 2025.
goo.gl/MGhQVB

Chinese Cities Ban Lunar New Year Fireworks as Smog Precaution
Bloomberg News
Shanghai and several other Chinese cities have banned the popular custom of lighting fireworks on the Lunar New Year to cut down on smoke and help improve the air quality over the week-long holiday.
goo.gl/aohXu3

A South African gold mine has collapsed, trapping more than 100 people
Reuters
Nearly 80 rescued miners were brought to the surface on Friday, police said, after about 115 were trapped underground following a collapse at a gold mine in northeastern South Africa earlier in the day.
goo.gl/2DmTNh

Asia-Pacific

Citic Securities Says Seven Executives Involved in Probes Have Returned
By JAMES T. AREDDY – WSjJ
Chinese brokerage firm Citic Securities Co. said that it has re-established contact with seven senior executives who had been under suspicion of insider trading and other offenses following China’s mid-2015 stock-market meltdown, though the group didn’t include the firm’s former president.
goo.gl/Q8N5UK

U.S. Panel Says Yuan Will Erode, Not Challenge, Dollar Dominance
Bloomberg News – Bloomberg
China’s yuan, which earned reserve status from the International Monetary Fund last year, enjoys growing prominence as an international currency that will diminish the dollar’s role in trade and transactions over time, according to a U.S. congressional panel.
goo.gl/9lUlQw

China Confirms Probe of Three Missing Hong Kong Booksellers
Regina Tan, David Tweed – Bloomberg
Men under investigation for `illegal activities,’ police say
Men linked to store that sells books critical of China’s elite
Three missing men linked to a Hong Kong store that sells books critical of China’s Communist Party elite are under investigation by Chinese police for “illegal activities.”
goo.gl/QsFB4D

China Outstrips Germany in Solar Capacity After Record Additions
Bloomberg News
Country added 15.1 gigawatts of solar capacity last year; Solar power capacity has surged almost 13-fold since 2011
China, the world’s largest consumer of energy, surpassed Germany as the country with the most installed solar capacity after record additions last year.
goo.gl/AcFhuV

Asia’s Investment Banks Face Year of Living Cautiously; Bonuses, perks and even some jobs are on the line as banks prepare for a difficult year
By JULIE STEINBERG – WSJ
Global investment banks are battening down the hatches in Asia: pruning ranks, eliminating units and holding down bonuses as they weather a choppy past few months and brace for a potentially tough year.
goo.gl/WUfuHB

Frontier Markets

General insurers look at risk modelling for natural catastrophe covers; Insurers consider these steps as losses through catastrophes have risen in the past two years
M Saraswathy – Business Standard
General insurance companies are now looking at risk modelling and analytics for the natural catastrophe segment. This is being done through solutions provided by experts to ensure that that they are adequately prepared to deal with these risks.
goo.gl/VklYNk

Indian Central Bank Calls for Joint Action to Calm Markets
Vrishti Beniwal – Bloomberg
Volatility in developing-nation currencies has risen in 2016; `Emerging nations can’t be ignored,’ says deputy governor
India’s central bank is calling for coordinated action by monetary authorities to address the turbulence that’s roiling foreign-exchange markets this year.
goo.gl/iHDFjL

BlackRock Finds Value in Battered State-Owned Indian Banks
Rajhkumar K Shaaw – FT
Bad-loan concerns priced into share values, CIO Naganath says; State Bank, Bank of Baroda trade below their net assets
BlackRock Inc. has turned more bullish on India’s state-owned lenders after concern over bad loans sent their valuations to a record low.
goo.gl/Sg72LC

India’s GDP numbers are so dodgy that its central bank is now doing its own math
Devjyot Ghoshal – Quartz
The scepticism arrived soon after India’s Central Statistical Office (CSO) put out revised GDP numbers last January.
goo.gl/gKnssW

Miscellaneous

A Harvard psychologist reveals the best way to fake it till you make it
Business Insider
Harvard psychologist Amy Cuddy, author of “Presence,” talks about the best way to fake it till you make it in life.
goo.gl/z0X59r

CMC Markets goes public with £691m value; Spread-betting firm set up by Peter Cruddas has floated at the lower end of its price range
Marion Dakers – Telegraph
CMC Markets has joined the stock market at the lower end of its expected market value, and the shares have dipped as they debuted on a choppy day at the London Stock Exchange.
goo.gl/TOChjh

Ponzi schemer Bernie Madoff smirks through 150-year prison sentence in ABC miniseries starring Richard Dreyfuss
By DAILYMAIL.COM REPORTER
In Madoff, a two-part dramatic recreation of the biggest financial scam in history, the crooked money-man is seen in a beige jumpsuit still smirking behind bars despite the lives he ruined in his $65 billion Ponzi scheme.
goo.gl/30phvb

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About Author

Doug Ashburn is a former editor-at-large of John Lothian News. He left in late 2016 and is now the managing editor of T3 Custom.