Making the Johannesburg Stock Exchange a Global Player
“The JSE, for eight years in a row now, was rated number one, two or three in the world by the World Economic Forum for the quality of financial market regulation.”
The Johannesburg Stock Exchange is in the process of adjusting much of its infrastructure. It already transitioned from T+5 settlement to T+3 settlement (with no failed trades thus far); the derivatives trading technology is being replatformed; Cinnober is supplying a new clearing system that will be live at the start of 2018; and London Stock Exchange Group’s MTS is playing a role in revamping bond trading on JSE.
Looking ahead, CEO Nicky Newton-King said there are three general goals she has for the exchange. One, she wants to help lift the general sophistication of market participants by sharing information and building necessary financial skillsets. Two, JSE is focused on providing access to its capital markets to top African issuers. There shouldn’t be a need to go to London to raise capital when they can stay on the continent. And third, she sees potential for people to use their existing connectivity to JSE to route orders to other local markets.
CFTC’s Giancarlo Sails Through Confirmation Hearing; Acting chairman moves a step closer to making position permanent
Gabriel T. Rubin – WSJ
The nominee to serve as the top U.S. derivatives regulator breezed through his confirmation hearing Thursday, presenting himself as a nonideological deal maker who would focus on upgrading his agency’s capabilities to regulate and monitor increasingly complex markets.
***** Nice work, Mr. Chairman.
High-Speed Trader to Pay $101 Million in Landmark China Case
Two Yishidun executives, one brokerage official convicted; First criminal case in China against a high-speed trading firm
China handed down a $101 million penalty and two suspended prison sentences in its first criminal case against a high-speed trading firm.
The ARRC Selects a Broad Repo Rate as its Preferred Alternative Reference Rate
New York Fed
At its meeting today, the Alternative Reference Rates Committee (ARRC) identified a broad Treasuries repo financing rate, which the Federal Reserve Bank of New York has proposed publishing in cooperation with the Office of Financial Research, as the rate that, in its consensus view, represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.
***** Stay tuned.
CFTC Denies Asking Renaissance For Code
Mark Melin – Value Walk
When the New York Post first reported that Renaissance Technologies was asked by the CFTC to provide access to their trading algorithms, it sent shivers up the collective spines of trading lobbying groups as well as the broader technology development world. For a regulator to demand a review what amounts to the secret formula to a business innovation was “precedent-setting,” with concerns for the source code leaking a very real possibility. But does the CFTC even have the authority to investigate methods of placing orders on an electronic exchange? And what about the issue if it were to involve a market destabilizing flash crash with potential national security implications? The lines are murky at best – meet Regulation AT.
***** They did ask for the key to the bathroom, which evidently is code-related.
Thursday’s Top Three
Our runaway winner yesterday was A Kansas Investment Firm Spurring Change on Wall Street. Second and third places went to two articles about the same cattle futures regulatory story. The FT’s Cattle futures trades were bull, regulator alleges was second and Reuters’CFTC fines U.S. cattle futures traders $5 million was third.
103,082,986 pages viewed; 22,567 pages; 206,669 edits
Frankfurt Emerges as Biggest Banking Winner After Brexit
Gavin Finch and Steven Arons – Bloomberg
Morgan Stanley, StanChart, Citigroup eye city for EU hub; Firms planning for worst even as hopes for soft Brexit grow
Frankfurt is emerging as the biggest winner from last year’s Brexit vote, with many of the world’s biggest banks choosing to base their new European Union headquarters in the German city.
State Street Exits Its Dark Pool, Selling BlockCross to Instinet
Annie Massa – Bloomberg
Pool caters to big investors seeking to trade with each other; Deal expected to close in July or August; no terms disclosed
Instinet LLC is adding another dark pool to its business, buying State Street Corp.’s private trading venue.
U.K.’s Euro Clearing Business at Risk as ECB Requests More Powers; Brexit raises questions about whether big U.K.-based clearing houses should move elsewhere within the EU
Tom Fairless – WSJ
The European Central Bank lodged a formal request for greater powers to supervise euro-denominated clearing, stepping up a tug of war between European Union authorities and Britain over the future of the lucrative business line after Brexit.
Intercontinental Exchange Executives to Testify Before Congress on Central Clearing and Equity Market Structure
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that Chief Financial Officer Scott Hill will appear before the House Agriculture Committee on June 27 to discuss central clearing and systemic risk, and NYSE President Thomas W. Farley will appear before the House
Instinet buys block trading ATS from State Street; BlockCross ATS will help Instinet’s clients in the pursuit of best execution.
Hayley McDowell – The Trade
Instinet has entered into a definitive agreement to purchase the BlockCross alternative trading system (ATS) from State Street.
ECB seeks greater power over clearing supervision
The European Central Bank has requested enhanced powers to supervise clearing activities, it said on Friday, a move to shore up its authority over London-based euro clearing once Britain leaves the European Union.
Fed’s Stress Tests Bolster Case for Easing Bank Rules; Results give ammunition to Trump administration for scaling back postcrisis rules
Ryan Tracy and Telis Demos – WSJ
The largest U.S. banks survived a hypothetical “stress test” and could continue lending even during a deep recession, the Federal Reserve said, a strong report card that could bolster the industry’s case for cutting back regulation.
Hong Kong’s Stock Market Tells the Story of China’s Growing Dominance
Eric Lam and Yue Qiu – Bloomberg
To see how China’s influence has grown since the British handover of Hong Kong, look at the Hang Seng Index, which debuted in 1969 and is the city’s main equity benchmark, tracking the largest, most liquid companies.
Machines Won’t Push Humans Out of Finance, Billionaire Gundlach Says
Amanda L Gordon and John Gittelsohn – Bloomberg
Billionaire interviewed at Fixed Income Analysts Society event; DoubleLine’s CEO and Dana Emery of Dodge & Cox are honorees
In the financial industry’s battle of humans versus machines, billionaire bond fund manager Jeffrey Gundlach is betting people will prevail.
EU Says It’s Dazed and Confused by Theresa May’s Brexit Bumbling
Ian Wishart, Jonathan Stearns and Christian Wienberg – Bloomberg
European Union governments say Theresa May’s got a lot of explaining to do.
After the British Prime Minister’s calamitous decision to call a snap general election ended with her Conservative Party losing its majority in parliament, her EU counterparts are pressing her to clarify how the U.K. envisages its relationship after Brexit.
Divergence in CTA Strategies Weighs On Index
Barclay CTA Index Gains 0.06% in May
Managed futures traders gained 0.06% in May according to the Barclay CTA Index compiled by BarclayHedge. Year to date, the Index has lost 0.67%.
Exchanges, OTC and Clearing
Lending CCP: View from the lenders
Mark Dugdale talks to executives from BNY Mellon, BlackRock and Deutsche Bank ASL to discuss their utilisation of a CCP for their securities lending business
Eurex Clearing’s Securities Lending Central Counterparty (CCP) service continues to establish itself as an innovative and strategically important infrastructure provider to the securities lending marketplace.
HKEX to Introduce CNH- and US$-traded Gold Futures on 10 July
Hong Kong’s first pair of physically settled commodity futures; Contracts comprise Spot Month and next 11 calendar months; Trading Fee and Commission Levy waived for the first six months of trading
Hong Kong Exchanges and Clearing Limited (HKEX) will introduce its planned Offshore Renminbi (CNH) and US dollar (US$) Gold Futures on Monday, 10 July 2017.
TORA opts for LSE’s reporting ahead of MiFID II; TORA has joined UnaVista to enable its clients to meet reporting requirements under MiFID II.
Hayley McDowell – The Trade
Order and execution management system provider TORA has joined the London Stock Exchange’s (LSE) UnaVista in a bid to ensure its clients meet reporting requirements under MiFID II.
Exclusive: London Metal Exchange to cut fees, see if volumes can be lured back – sources
Pratima Desai – Reuters
The London Metal Exchange is expected to cut trading fees within months after two years of complaints but might only do so for a trial period of up to six months to see if volumes that moved to over-the-counter markets return to the exchange, sources said.
ECB seeks to regulate euro clearing with change to statute
Katie Martin – FT
The European Central Bank has recommended changing its statute so that it can take on stronger oversight of euro clearing – a key battleground in Brexit negotiations with the UK, where much of this business is currently conducted.
Bursa Malaysia Revamps Participantship Structure For Bursa Malaysia Derivatives Clearing BHD
Bursa Malaysia Berhad (“Bursa Malaysia”) today announced it has made amendments to the Rules of Bursa Malaysia Derivatives Berhad (“BMD”) and the Rules of Bursa Malaysia Derivatives Clearing Berhad (“BMDC”) in relation to the revamp of the participantship structure for BMDC. This is to enhance the attractiveness and competitiveness of the Malaysian derivatives market and to facilitate market development.
Aberdeen Says Cryptocurrency Bubble Will Burst Even If Coins Change Finance
Camila Russo – Bloomberg
Venture capital head still sees value in blockchain assets; Price gains driven by ‘gold-rush mentality,’ Denious says
Peter Denious, head of global venture capital at Aberdeen Asset Management Plc, said we’re in the midst of a virtual currency bubble, and like all bubbles, it will eventually burst.
A Cyberattack ‘the World Isn’t Ready For’
Nicole Perlroth – NY Times
And he is determined to track down whoever did it. “I don’t pursue every attacker, just the ones that piss me off,” Mr. Ben-Oni told me recently over lentils in his office, which was strewn with empty Red Bull cans. “This pissed me off and, more importantly, it pissed my wife off, which is the real litmus test.”
Civic sells $33 million in digital currency tokens in public sale
Gertrude Chavez-Dreyfuss – Reuters
U.S. startup Civic has sold $33 million in digital currency tokens for its identity verification project in a public sale, the company’s co-founder and Chief Executive Vinny Lingham told Reuters.
How to bet on bitcoin, without the crazy volatility? Here’s one idea
Barbara Kollmeyer – MarketWatch
Yep, the returns for cryptocurrencies have been eye-popping lately.
Amid what appears to be widespread fatigue among traditional investors, excitement is booming in the wild, wild west of cybercurrencies right now.
Tower Trading Group selects OptionsCity for trading software and risk management services
OptionsCity Software, a provider of futures and options trading software, has announced that Tower Trading Group, headquartered in London and supporting over 200 active traders, has selected the Metro platform as its preferred platform for options trading and market-making.
EOS Blockchain Operating System Unveils Year-Long Token Distribution
EOS, the first blockchain operating system designed to support commercial decentralized applications, today announced further details for its digital token distribution to open on Monday, June 26. EOS’s token distribution follows a groundbreaking participation model that will take place over the course of one year creating the fairest token distribution project launched on Ethereum to date.
Trump Sued For Allegedly Violating Presidential Records Act
Two government watchdog groups, Citizens for Responsibility and Ethics in Washington and the National Security Archive, filed a lawsuit Thursday against President Trump and the Executive Office of the President.
U.S. House Dems reject Deutsche Bank privacy claim in Trump query
U.S. House Democrats rejected an assertion by Deutsche Bank that privacy laws prevent it from sharing information about President Donald Trump’s finances, as they investigate possible collusion between his campaign team and Russia. In a letter to the bank’s lawyers made public on Thursday, five Democrats who have been seeking financial information about Trump argued U.S. federal laws protecting banking customers’ confidentiality did not apply to requests from Congress.
SIFMA Fixed-Income Market Close Recommendations for the U.S. Independence Day Holiday in the U.S., UK and Japan
SIFMA has confirmed its previous holiday recommendations for the trading of U.S. dollar-denominated fixed-income securities in the U.S., UK and Japan in observance of the U.S. Independence Day Holiday.
ESMA seeks new members for post-trade working group; New group will provide informal advice to European regulator.
Jonathan Watkins – The Trade
The European Securities and Markets Authority (ESMA) is calling on the post-trade industry to contribute to a new working group to help advise on regulatory policies.
Additional Charges Announced in Case Involving Pre-Released ADRs
The Securities and Exchange Commission today announced additional charges in an enforcement investigation involving the improper handling of American Depositary Receipts (ADRs) by a Wall Street firm’s securities lending desk.
CFTC Charges New Jersey Resident Michael S. Wright and New York Firm Wright Time Capital Group LLC (d/b/a Global FX Club) with Solicitation Fraud and Misappropriation in Connection with a Pooled Investment in Foreign Currency Derivatives Trading
The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil enforcement action in the U.S. District Court for the Southern District of New York against Defendants Michael S. Wright, of Jersey City, New Jersey, and his firm Wright Time Capital Group LLC, d/b/a Global FX Club (WTCG), a New York limited liability company, charging them with fraud, misappropriation, and issuing false account statements in connection with a pooled investment in foreign currency derivatives (forex) trading. The CFTC Complaint also charges WTCG with failing to register with the CFTC as a commodity pool operator (CPO), as required, and engaging in activities prohibited for a CPO, including commingling pool funds with Defendants’ funds.
Statement of J. Christopher Giancarlo Acting Chairman, U.S. Commodity Futures Trading Commission before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry
Thank you Chairman Roberts, Ranking Member Stabenow and members of the Committee.
Sebi proposes strict rules for investment products; Fees charged for each service must also be clearly separated
The Securities and Exchange Board of India (Sebi) on Thursday proposed to more clearly segregate entities advising on investment products from those selling them in an effort to prevent conflicts of interest.
Online gambling groups face penalties as watchdog takes action; CMA has found punters can be blocked from withdrawing winnings
Murad Ahmed, Leisure Correspondent – FT
Online betting companies face heavy fines or risk losing their gambling licences after the UK’s competition watchdog launched an “enforcement action” against firms that draw in new players with attractive offers while making it difficult to gain payouts.
Exclusive: Fake online stores reveal gamblers’ shadow banking system
By Alasdair Pal – Reuters
A network of dummy online stores offering household goods has been used as a front for internet gambling payments, a Reuters examination has found.
A 10% leverage ratio does not justify waiving the Volcker rule; Former Fed manager Christopher Laursen warns against prop trading, even for well-capitalised banks
Christopher Laursen – Risk.net
In the US Treasury’s recently released financial regulatory reform report, several changes to the Volcker rule trading requirements are recommended. Although several of these recommendations would reasonably reduce the burden without adding significant risk to the system, particularly on smaller firms, the idea that “well-capitalised” banks could opt out of the rule altogether is a step too far.
SC introduces clearing as a new regulated activity
The Securities Commission (SC) has introduced amendments to its regulatory framework to include clearing for securities and derivatives as a new regulated activity.
Investing and Trading
Madoff Clients Fighting for Fortunes Get Help – From the Con Man
Erik Larson – Bloomberg
Will the word of a Wall Street’s biggest liar be persuasive?; Madoff said in 3-day deposition he regrets not standing trial
Dozens of Bernard Madoff’s early investors are getting help from an unlikely source in a fight to keep their profits: the con man himself.
Opinion: John Bogle’s enduring wisdom and the trouble with mutual funds
By Mitch Tuchman – MarketWatch
Back in the 1980s, stock picking gurus such as Peter Lynch at Fidelity offered small investors a strikingly simple mantra: “Invest in what you know.”
An Index-Fund Evangelist Is Straying From His Gospel
James B. Stewart – NY Times
In his classic 1973 book “A Random Walk Down Wall Street,” Burton Malkiel, a Princeton economics professor, made an assertion that was startling at the time: that “a blindfolded monkey throwing darts at the stock listings could select a portfolio that would do just as well as one selected by the experts.”
Forget euro zone breakup, sterling now deemed riskier
Patrick Graham – Reuters
For years the options market that companies and investors use to hedge against big swings in currencies viewed the euro as a bigger political and structural risk than Britain’s pound. No more.
Nomura and Daiwa choose Frankfurt as post-Brexit EU base; Japanese banks’ decisions boost German city’s goal to be Europe’s main financial city
Leo Lewis and Laura Noonan – FT
Nomura and Daiwa, the Japanese banks, have chosen Frankfurt as their new EU hubs after Brexit, bolstering the German city’s bid to become Europe’s pre-eminent financial city.
Biggest Banks Clear Their First Hurdle in Fed’s Stress Tests
Jesse Hamilton, Dakin Campbell and Yalman Onaran – Bloomberg
Outcome of Dodd-Frank exams released, key part comes next week; Morgan Stanley trails other big banks in hypothetical crisis
Thirty-four of the largest banks operating in the U.S. cleared a Federal Reserve stress test of their ability to withstand economic shocks, showing firms are getting the hang of the once-dreaded reviews — a trend that may continue if the Trump administration dials them back.
Venezuela Lawmaker Asks SEC to Probe Goldman’s ‘Hunger Bonds’ Deal
By Jose Enrique Arrioja and Christine Jenkins – Bloomberg
Cites alleged violations of Foreign Corrupt Practices Act; $150 million are missing, lists ‘number of irregularities’
The head of Venezuela’s National Assembly asked U.S. authorities to investigate a $2.9 billion bond deal involving Goldman Sachs Group Inc. and Nomura Securities Co., saying the transaction fleeced the country for the benefit of political elites.
Canada’s CIBC completes $5 billion PrivateBancorp acquisition
Canadian Imperial Bank of Commerce (CM.TO) said on Friday that it had completed the $5 billion acquisition of Chicago-based PrivateBancorp PVTB.O in a deal which will help it diversify from its domestic market.
A New Risk for Goldman, Morgan Stanley in Stress Tests; New leverage limits could constrain capital payouts by Goldman Sachs and Morgan Stanley
By Aaron Back – WSJ
This year’s bank stress tests turned up an unpleasant surprise for Goldman Sachs GS -1.22% and Morgan Stanley . MS -0.67%
Big China companies targeted over ‘systemic risk’; Regulator asks banks to probe their exposure to Dalian Wanda, Fosun, HNA and Anbang
Lucy Hornby, Yuan Yang and Gabriel Wildau – FT
China’s bank regulator ordered domestic lenders to check the “systemic risk” presented by “some large enterprises” involved in overseas buying sprees, sending stock prices of some of the country’s most acquisitive private-sector companies sharply lower.
May Vows to Safeguard EU Citizens’ Rights in U.K. as Leaders Await Full Offer
By Robert Hutton and Ian Wishart – Bloomberg
Three million will get path to ‘settled status’ in Britain; EU leaders waiting to get full proposal from May on Monday
Prime Minister Theresa May’s proposal to safeguard residency rights of European Union citizens currently living in the U.K. met a tepid reception both in Europe and at home, with EU counterparts and London Mayor Sadiq Khan stressing that many issues remain unresolved.
Hard or soft Brexit? The six scenarios for Britain; On the first anniversary of the referendum vote, the FT looks at where the UK is heading
Chris Giles and Alex Barker – FT
Just a few weeks ago, Britain’s road to Brexit seemed relatively clear.
Brexit draws Luxembourg into competition for business; Officials say country will not engage in public beauty parade for finance companies
Jim Brunsden in Brussels – FT
For Robert Scharfe, chief executive of the Luxembourg Stock Exchange, the lesson of his county’s development as a financial centre is never to be complacent. “We do not take anything for granted,” he says. “We are asking ourselves constantly ‘what next?'”
Wall Street Journal Scrutinizes Hundreds of Articles by Fired Reporter
Sydney Ember and Gardiner Harris – NY Times
The Wall Street Journal is conducting a review of hundreds of articles by Jay Solomon, who was the paper’s chief foreign affairs correspondent. He was fired on Wednesday after evidence emerged that he had possibly become entangled in the commercial dealings of an Iranian-born aviation titan who was a key source for some of his stories.