Breaking News

ICO regulation inconsistent as cryptocurrency bubble fears grow; CFTC Chief Works to Tweak, Not Decimate, Obama-Era Rules

First Read

Hits & Takes
By JLN Staff

To those who celebrated Thanksgiving yesterday, get outside and stretch your legs today, the deals for Black Friday can wait. ~JJL

Chuck Mackie of Maven Wave has recapped the CME Group‘s GFLC in a blog post. ~JJL

On Tuesday, November 28, the OCC’s Caroline Gillard is moderating a luncheon sponsored by FCS Chicago focusing on marketing to women. The lunch panel includes Jessica Titlebaum Darmoni, Jennifer Bennethum Burns and Allison Engel, and is the organization’s final luncheon topic for 2017. This will be the first time the FCS has hosted one of events on this topic in Chicago.
When: Nov. 28, 11:30 a.m. – 1:30 p.m.
Where: Union League Club of Chicago (Business Casual Dress Code)
You can find more information and register HERE. ~SR

ICE is changing the margin requirements for some of its energy contracts effective from the close of business on Wednesday, November 29, 2017 and reflected in margin calls made on Thursday, November 30, 2017. Firms carrying accounts with positions in the contracts should be collecting margin using the updated SPAN margin parameters.
The press release and list of contracts can be found HERE. ~SR

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The Uncertain Future of Bitcoin Futures; Not even Jamie Dimon knows how this saga will end.
Matt Levine – Bloomberg
I want you to imagine a time, in the not-too-distant future, where the following things have happened (in this order):
/goo.gl/hie1f6

***** Matt Levine being Matt Levine ~JJL

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Wall Street’s 2017 Market Predictions: Pathetically Wrong; Forecasting is difficult, but this year showed exactly how pointless it can be:
James Mackintosh – WSJ
We all like to remember our successes and forget our failures, and finance is no different. As investors’ inboxes once again become clogged with annual outlooks from Wall Street’s scribblers, there is little admission of the nearly universal failure to predict what happened this year—even though the things the analysts missed are much more interesting than their forecasts.
/goo.gl/idys79

***** Add me to this list. ~JJL

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The Changing Face of the Corporate Bond Market; European Commission to launch public consultation on ways to improve market functioning
Christopher Whittall – WSJ
The European Commission wants answers to an intriguing question: Why is it becoming harder for people to trade corporate bonds, even though companies are issuing more of them?
/goo.gl/7qxUYF

***** I blame it on Chaos! ~JJL

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Wednesday’s Top Three
Our top story Wednesday, by quite a bit(coin?), was The New York Times’ Warning Signs About Another Giant Bitcoin Exchange. Next up was
John Lothian News’ Why ISPs Are About To Spoil Your Thanksgiving Dinners: Food For Thought on Net Neutrality Repeal, and in third was Bloomberg’s Wealth Managers Are Being Inundated With Calls About Bitcoin

 

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Lead Stories

ICO regulation inconsistent as cryptocurrency bubble fears grow; US scrutiny of cryptocurrency offerings could mean criminal penalties are looming
Caroline Binham in London – FT
When celebrities known more for reality shows than financial prowess start endorsing a particular investment strategy, it is fair to assume a bubble exists.
/goo.gl/BN78S3

CFTC Chief Works to Tweak, Not Decimate, Obama-Era Rules; Republican J. Christopher Giancarlo leans on his history at the regulator, ability to reach out to Democrats as he reviews postcrisis regulations
Gabriel T. Rubin – WSJ
J. Christopher Giancarlo moved to the top job at the Commodity Futures Trading Commission this year from a minority commissioner’s role, giving him a chance to push for changes on Obama-era derivatives regulations that he has criticized.
/goo.gl/dFwjHa

Banks agree to support Libor until 2021 phase-out; All 20 banks submitting to Libor give their support to the controversial rate until 2021.
The Trade Team
The Financial Conduct Authority (FCA) has confirmed that 20 banks have agreed to continue making submission to the Libor benchmark until 2021.
/goo.gl/g8WwhS

At Top Swaps Watchdog, Wall Street Fines Have Fallen Off a Cliff
By Matt Robinson – Bloomberg
CFTC penalties plunged 68 percent in 2017 to $413 million; Penalties also declined at the SEC in first year under Trump
The U.S.’s top swaps watchdog appears to be losing its bark and its bite.
The Commodity Futures Trading Commission sought $413 million of penalties from Wall Street banks and other firms in the 12 months that ended in September, down 68 percent from $1.3 billion in 2016, the regulator said in a Wednesday statement. The drop is even more stark when compared with the record $3.2 billion of sanctions the agency imposed on firms in 2015.
/goo.gl/XnSzTk

CFTC Reports Steep Drop in Enforcement Actions and Fines; Large bank settlements inflated previous year’s totals but critics pan new lighter-touch enforcement policies
By Gabriel T. Rubin – WSJ
The Commodity Futures Trading Commission’s enforcement actions and fines plunged in the first year of the Trump administration from a year earlier, when the figures were lifted by big settlements with banks.
/goo.gl/8NkSJg

LSE boardroom bust-up has gone too far to blow over; Activist investor Christopher Hohn’s intervention likely to produce more heat than light
Neil Collins – FT
Activist investor Christopher Hohn is cross. Well, not so much cross as spitting tacks at Donald Brydon, the chairman of the London Stock Exchange. His latest letter, warning that Mr Brydon could be exposed personally to a claim for damages, and demanding that the governor of the Bank of England (no less) intervenes, reads like that first, furious draft that you’re grateful the next morning you didn’t send.
/goo.gl/KDsEJ6

Stock Exchange lines up new boss in case Rolet walks as City grandees rush to defend chairman
Daily Mail
The London Stock Exchange is lining up an emergency stand-in boss in case the vicious spat at the top of the firm forces the current chief to walk out.
/goo.gl/xQSJHS

TCI calls for regulators to intervene at LSE; Activist investor wants Bank of England and FCA to appoint new chairman
Philip Stafford – FT
Activist investor The Children’s Investment Fund has called for the UK financial regulators to intervene at the London Stock Exchange Group by appointing a new chairman to end its corporate governance crisis.
/goo.gl/zEuG8T

LME’s cobalt inquiry highlights ethical issues for industry; Child labour concerns cloud supply chain of key battery metal used in electric cars
Henry Sanderson – FT
The London Metal Exchange’s decision to investigate cobalt traded on its exchange highlights the problem of properly sourcing the battery metal at a time of rapidly rising demand from electric vehicles and consumer products.
/goo.gl/DLMiTa

Exchanges, OTC and Clearing

Deutsche Börse Breakfast Briefing “Securities Lending CCP – one year on”
Eurex
On Wednesday, 22 November 2017, Deutsche Börse hosted the Global Funding & Financing Breakfast Briefing on Securities Lending in London with over 40 leading market participants attending a session to hear about the progress and innovation that has materialised over the past twelve months for Eurex Clearing’s Lending CCP.
/goo.gl/bYWVGp

HKEX Markets Break Shenzhen Connect, Structured Product and Derivatives Records
HKEX
Hong Kong Exchanges and Clearing Limited’s (HKEX) markets set several records this week amidst strong market momentum. The following data are provided in response to media enquiries.
/goo.gl/oxnzo4

HKEX’s Long-Dated Contract Months for Futures and Options to be Rolled Out in Q1 2018
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) announced today (Friday) to revise the roll-out plan for its long-dated contract months in Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HHI) Futures and Options, with maturities up to 5.5 years, to the first quarter of 2018 instead of early December 2017. The new arrangement will allow more time for Exchange Participants (EPs) and their system vendors to check and test EPs’ systems to ensure they are ready for the launch.
/goo.gl/LhqthS

SGX welcomes MindChamps PreSchool Limited to Mainboard
SGX
Singapore Exchange (SGX) today welcomed MindChamps PreSchool Limited to Mainboard under the stock code “CNE”.
/goo.gl/s5XT4o

SGX named Exchange of the Year Asia by Energy Risk
SGX
Singapore Exchange (SGX) has been named Exchange of the Year by Energy Risk at its annual Asia awards held in Singapore last night. The awards recognise excellence across Asian commodities markets, and this is the second year that SGX has been given this title.
/goo.gl/3gVzPo

Fintech

Bitcoin goes institutional: First European mutual fund launches to try to attract big investors to the cryptocurrency
Jasper Jolly – City AM
Tobam claims it will manage operational risk around bitcoin (Source: Getty)
Bitcoin took another step towards mainstream financial acceptance today as a French firm launched the first European mutual fund offering exposure to the cryptocurrency.
/goo.gl/MTwSQo

CEO of cryptocurrency firm that disappeared with $375,000 of investor money lied about his employment
Arjun Kharpal – CNBC
Cryptocurrency start-up Confido raised nearly $375,000 via an initial coin offering
Its social media and website went dark following the fund raise; Joost van Doorn, Confido’s alleged CEO, wrote on its now-deleted website that he worked at eBay, PepsiCo and Zalando; Both PepsiCo and Zalando said they can find no record of him; eBay has not yet responded to CNBC’s request for comment
The CEO of a cryptocurrency start-up that raised nearly $375,000 through an initial coin offering (ICO) and then disappeared, lied about his employment history on the company’s website, CNBC has learned.
/goo.gl/arBMAB

Bitcoin Exchange Globitex Granted European Electronic Money License
Bitcoin Magazine
Globitex, a new bitcoin exchange co-founded by former Bitcoin Foundation Executive Director Jon Matonis, is announcing that its parent Globitex Holding (Latvia) group company NexPay UAB has been granted an Electronic Money Institution (EMI) license by the Bank of Lithuania, a regulatory authority in the European Union, to carry out payment services and e-money issuance in the EU.
/goo.gl/pSyDm7

Hottest Stock on the Nasdaq Is a Chinese Company With Its Own Cryptocurrency
Jun Luo, Jacob Gu and Ludi Wang – Bloomberg
Xunlei best performing stock in Nasdaq Composite since Oct. 12; Shares rally on launch of Wanke cryptocurrency project
A little bitcoin fairy dust is making a relatively obscure Chinese internet company the hottest stock in the Nasdaq Composite Index.
/goo.gl/hSVppZ

Politics

Political Bankruptcy in India
Andy Mukherjee – Bloomberg
It took just 24 hours for politics and optics to trump economics and common sense. On Thursday, I suggested that India was striking the right balance by preventing only “willful” defaulters from bidding for their own assets in bankruptcies. Since with most of the country’s $207 billion of impaired loans, there’s no proof of malfeasance by the controlling shareholders — or promoters as they’re known in India — they would be allowed to make an offer to creditors, just like buyout firms, vulture funds and other interested parties.
/goo.gl/cva7zy

Donald Trump running the most dishonest White House ever, says historian; ‘This is the kind of thing you see when you’re dealing with a malignant narcissist’
Lydia Smith – Independent
Donald Trump’s lies have created an administration “comfortable with corruption”, a historian who studies past presidencies has said.
/goo.gl/pUC4P1

Regulation

The definitive list of asset managers that will pay for research; Pictet becomes the latest fund house to absorb research costs under Mifid II
Attracta Mooney – FT
/goo.gl/Kdvwwv

Who Wins, Who Loses From MiFID II Shakeup?: QuickTake Scorecard
Suzy Waite, Sarah Jones and Trista Kelley – Bloomberg
The impact of new market rules sweeping across Europe has been likened to motorists suddenly being told they must drive on the other side of the road. While the aim is to force unprecedented transparency and curb conflicts of interest, the regulation is upending security markets. From cuts to research and commissions to new reporting requirements and limits on so-called dark trading, the effects of MiFID II reach deep into an industry scrambling to comply by Jan. 3. While the shakeout could take years, here are some early guesses on who may benefit from the overhaul and who may not.
/goo.gl/szd4eb

MiFID II research tax bill to hit £40m a year in the UK; Documents released by the Office for Budget Responsibility (OBR) claim the UK government could collect £40m a year from VAT on research payments.
The TRADE team
Tax bills for research under MiFID II are expected to hit £40 million a year, according to documents released by the Office for Budget Responsibility (OBR).
/goo.gl/iC5HmD

ASIC accepts enforceable undertaking from Foster Stockbroking following ASIC investigation into conflicts of interests
ASIC
ASIC has today accepted an enforceable undertaking (EU) from Foster Stockbroking Pty Limited (FSB) over the stockbroker’s capital markets and research businesses, following an ASIC investigation into conflicts of interest.
/goo.gl/v12nbu

Dubai and Australia seal agreement on fintech cooperation
ASIC
The Dubai Financial Services Authority (‘DFSA’) and ASIC today signed a Cooperation Agreement which provides a framework for cooperation to support and understand financial innovation in each jurisdiction.
/goo.gl/T71YWM

ASIC takes action against unlicensed financial services companies
ASIC
ASIC has acted to stop two Queensland-based financial services companies from selling insurance products and providing financial services without being licensed.
/goo.gl/qwumKA

ESMA registers NEX Abide Trade Repository AB as a trade repository
ESMA
The European Securities and Markets Authority (ESMA), the EU supervisor of trade repositories (TRs), has registered NEX Abide Trade Repository AB as a TR under the European Market Infrastructure Regulation (EMIR), with effect from 24 November 2017. NEX Abide Trade Repository AB is based in Sweden and covers the following derivative asset classes: commodities, credit, foreign exchange, equities and interest rates.
/goo.gl/mNtHXS

Investing and Trading

$1 Trillion Investor Says Now Isn’t Time to Cut Real Estate
Sveinung Sleire – Bloomberg
There may be worrying developments in some property markets, but the world’s biggest sovereign wealth fund says it has no intention of pulling back from real estate.
/goo.gl/dsB2wC

Commodities: A Deeper Dive Into the Five Potential Sources of Return
Marya Alsati – Indexology
In a prior post, we listed five components of returns that commodities futures can provide. In this post, we will delve deeper into each component.
/goo.gl/SPPM1f

Now You Can Invest in Bitcoin Without the Volatility, Apparently
Todd White – Bloomberg
Swissquote launches ETP that switches between bitcoin, dollars; Product will use algorithm to forecast market direction
Swissquote Bank SA upped its cryptocurrency game with the release of an exchange-traded product that will attempt to curb volatility by switching holdings between bitcoin and dollars.
/goo.gl/Q21cSF

Saying Bye to Buybacks; Companies in the S&P 500 are on pace to spend the least on buybacks since 2012
Ben Eisen and Chris Dieterich – WSJ
Large companies are repurchasing their shares at the slowest pace in five years, as record U.S. stock indexes and an expanding economy propel more money out of flush corporate coffers into capital spending and mergers.
/goo.gl/PcE5Uo

The S&P 500 Record Run No One Saw Coming; Torrid pace of gains has pushed index to highs unimaginable earlier this year, and analysts are putting lofty targets on where index will go next year
Michael Wursthorn – WSJ
U.S. stocks are on the verge of a level few thought they would see this year: 2600 on the S&P 500.
/goo.gl/9qPFqz

Is Your Stockpicker Lucky or Good?; Investors pick active funds based on performance, but the long-term success of those managers is no more dependable than a coin flip
Spencer Jakab – WSJ
Is it luck or skill? Picking a fund manager who can beat the index is tough, but picking one who beats it through actual ability is far more difficult.
/goo.gl/WCKi3t

Hedge fund performance is being driven by not-so-complicated strategies
Julia La Roche – Yahoo Finance
Hedge fund investors pay huge fees to gain access to premium investment opportunities that can come in the form of obscure asset classes, no-name stocks, and complicated structured trades.
/goo.gl/poS2af

Institutions

British Banks Brace for Grades in Toughest Stress Tests Yet
Stephen Morris and John Glover – Bloomberg
Scenarios include pound plunge, consumer-credit losses; RBS relatively weaker as multibillion-dollar U.S. fines loom
U.K. banks are bracing themselves for their grades in the toughest round of stress tests yet, with the fate of their dividends and strategies at stake as the Bank of England models how the seven largest British lenders will cope in another crisis.
/goo.gl/j1kbzV

UBS Seeks to Expand Workforce in Artificial Intelligence
Ksenia Galouchko – Bloomberg
Future lies in ‘cognitive’ bank, head of innovation says; Financial firms say scarcity of AI talent is big challenge
UBS Group AG is expanding its workforce in one of the few areas in banking where demand for talent is growing.
/goo.gl/hcrM9P

Inside the Race for the Top Job on Wall Street
Kate Kelly – NY Times
In the early 1980s, Harvey M. Schwartz was working weekends in the cold room of a kosher butcher shop in New Jersey, shaping beef into hamburger patties.
/goo.gl/t5nGn3

Regions

Swiss Current Account Surplus Not Due to Mercantilism, SNB Says
Catherine Bosley – Bloomberg
U.S. Treasury currency watch list has featured Swiss since ’16; SNB uses neg. rates, interventions to stem pressure on franc
The Swiss National Bank is not keeping the franc artificially low to give exporters an edge, President Thomas Jordan said, an indirect rebuff of the U.S. which has reprimanded Switzerland for its foreign exchange market interventions.
/goo.gl/4m1Tck

Central Banks Are Right When They Say No One Understands Them; Study shows Britons’ knowledge of the Bank of England is sparse
Carolynn Look – Bloomberg
Central banks have been talking a lot about the need for clear communication with the public lately, and they may have a point about how that could improve their standing.
/goo.gl/kryNPp

Investors Have Gotten Too Complacent on China Debt; China’s financial vulnerability to a real-estate downturn remains high
Nathaniel Taplin – WSJ
It is well known that Chinese history is circular—dynasties rise and dynasties fall. So is commentary on the country’s economy.
/goo.gl/SHBeVw

MiFID Got You Down? There’s Work in China; It’s not hard to see why international investment banks are taking a closer look.
Shuli Ren and Nisha Gopalan – Bloomberg
Fancy a stint in Shanghai, or a spell in Shenzhen? As the European Union’s revised Markets in Financial Instruments Directive threatens analyst jobs from London to New York, demand for research on Chinese companies is growing at a fast clip.
/goo.gl/RoA6vw

China stocks suffer worst one-day sell-off in 17 months; Rising bond yields and tougher credit rules pressure domestic shares
Gabriel Wildau and Yizhen Jia in Shanghai – FT
China’s blue-chip index suffered its worst one-day fall in 17 months on Thursday, as investors cited rising bond yields and tough new regulations targeting corporate debt for scaling back their exposure to equities after a strong performance this year.
/goo.gl/85x9Tz

Brexit

What Investment Flows Can Teach You About Brexit; These Bloomberg functions provide a window into how money is moving across borders in M&A deals, portfolio investments, and ETFs.
Owen Minde and Stephen Jonathan – Bloomberg
Flows can provide powerful insights into economic and market trends. Both long-term foreign direct investment and ­shorter-term portfolio flows can be viewed as the business and investing communities’ judgment on policymakers’ economic and regulatory decisions. Buying a stake in a company or shares of an ­exchange-traded fund, for instance, could imply a vote of confidence.
/goo.gl/1NqPbQ

Score One for the Experts as Brexit Costs Grow; The vote to leave the EU is taking an economic toll on Britons, before the separation even begins.
Therese Raphael – Bloomberg
In the run-up to the U.K.’s 2016 referendum on leaving the European Union, and immediately after it, the “remain” campaign was much derided for fear-mongering. People are sick and tired of experts warning about doomsday scenarios, said Conservative politician and lead-Brexiter Michael Gove. Those warning that Brexit would cost the economy were dubbed “remoaners”; Chancellor of the Exchequer Philip Hammond was compared to Eeyore for his caution.
/goo.gl/cnUzJz

Frankfurt prepares for Brexit: ‘It has put extra wind into our sails’; Recently praised by the chief of Goldman Sachs, Germany’s financial capital is in pole position to gain banking jobs from the UK
Philip Oltermann – The Guardian
Peter Ferres, founder-headteacher of Frankfurt’s Metropolitan school, knows a thing or two about London bankers: he used to be one. For seven years, Ferres worked as a managing director for Credit Suisse in the City, marshalling billion-dollar stock market flotations of emerging market companies.
/goo.gl/7oKihq

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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.