Breaking News

Bitcoin-Futures Regulator Defends Oversight as Critics See Risks; DBOT ATS LLC Inc Announces the Official Launch of Blockchain-Powered Crowd Funding and Secondary Market

First Read

Hits & Takes
By JLN Staff

The newest edition of CME’s Off the Chart’s Podcast covers Bitcoin: Supply Growth, Mining Difficulty and Prospects in 2018. In a nutshell, it’s getting harder to mine bitcoin as it reaches its cap, which means supply will grow by less than 5 percent. ~SD

Yesterday’s JLN Options covered rising popularity of risk premia strategies, SKEW vs. VIX, bitcoin options potential, the Intel chip flaws and more. ~SD

VIX traded in the 8 handle yesterday. When’s the last time that happened? Oh, yeah, Thanksgiving. ~SD

The weather phenomenon hitting the east coast right now is a “bomb cyclone” which develops due to a process called bombogenesis. Also, did you know that a snow eater, aka a Chinook, is a type of Foehn wind? ~SD

Jeremy Grant shared a story with me yesterday from the Edinburgh Evening News titled “The curious crimes of Lothian convicts transported to Australia.” I am not sure if it is the Lothian or the crimes that made him think of me, but the story was interesting. The final story included a bit about a guy convicted of stealing a handkerchief who was disguised as a kangaroo. I have never dressed up as a kangaroo. A big bird, yes. Buddha, yes. Kangaroo, no. ~JJL

Ian Dudden has a new position as global content director, metals & agriculture at S&P Global Platts, which adds metals to his previous position with the firm.. ~JJL

The Union League Club of Chicago has published a nice promotional video about the club, its history and current role. I have been a member since 2004. ~JJL


CFTC’s Market Risk Advisory Committee to Meet on January 31, 2018 to Discuss the Self-Certification Process for New Product Listings and Related Matters
The U.S. Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC) will hold a public meeting on January 31, 2018 at the CFTC’s Washington, DC headquarters. CFTC Commissioner Rostin Behnam is the sponsor of MRAC.

***** Two weeks of regulatory look at crypto in DC. Getting in and out should be an adventure this winter. I am going in on January 22 for the TAC meeting on Jan. 23. ~JJL


Warren Buffett on the Secrets to Growing Wealth in America
Warren Buffett – Time
I have good news. First, most American children are going to live far better than their parents did. Second, large gains in the living standards of Americans will continue for many generations to come. Some years back, people generally agreed with my optimism. Today, however, pollsters find that most Americans are pessimistic about their children’s future. Politicians, business leaders and the press constantly tell us that our economic machine is sputtering. Their evidence: GDP growth of only 2% or so in recent years.

***** No clickbait headline here.~JJL


Blizzard Triggers a 60-Fold Surge in Prices for U.S. Natural Gas
Naureen S Malik – Bloomberg
$175 is what you’ll pay for gas that’s less than $3 elsewhere; Pipeline constraints triggering cold-weather supply scramble
Natural gas surged to 60 times the going rate as howling blizzard conditions stoked demand for the furnace fuel across the U.S. Northeast.

***** This makes bitcoin look like a piker. ~JJL


BTS Profiles: Trevor Colvin
Blue Trading Systems
Blue Trading Systems is a family of traders, technologists, innovators and committed professionals. The women and men that work here want to build something that not only meets demand but advances the industry. We are sharp, loyal and strategic.

***** They had me at “family.” ~JJL


Thursday’s Top Three
Our first two most read stories yesterday go hand-in-hand. First was The New York Times story, Researchers Discover Two Major Flaws in the World’s Computers. Second, from MarketWatch, was Intel CEO sold millions in stock after company was informed of vulnerability, before disclosure. Third is from Bloomberg, How a Secretive Conclave Decides When U.S. Recessions Happen


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Lead Stories

Bitcoin-Futures Regulator Defends Oversight as Critics See Risks
Benjamin Bain – Bloomberg
CFTC chief says regulatory strategy has been ‘responsible’; Brokers raised concerns about futures in December letter
A U.S. regulator is defending its approach to policing cryptocurrencies after some derivatives brokerages complained that two of the world’s biggest exchanges rushed bitcoin futures to market last month without properly evaluating the risks.

DBOT ATS LLC Inc Announces the Official Launch of Blockchain-Powered Crowd Funding and Secondary Market; The blockchain-powered platform is the first-of-its-kind alternative trading system (ATS) focused on over-the-counter securities to support cryptographic tokens for SEC registered securities.
DBOT ATS LLC makes capital raising and trading simple with an all-in-one system that supports a multi-tenant issuing portal, secondary trading and a blockchain ledger. The first to market solution reduces transaction cost and settlement time compared to current portals for crowd funded equities issued under Regulation A+.

Meltdown and Spectre chip flaws leave Bitcoin exchanges open to heists, experts warn
Margi Murphy – Telegraph
Millions of pounds worth of cryptocurrency could be at risk following the disclosure of a major chip flaw which could leave the passwords and private keys that are used to secure online transactions open to thieves.

U.S. derivatives regulator announces meetings to review futures based on cryptocurrencies
Pete Schroeder, Michelle Price – Reuters
The U.S. derivatives regulator will hold two meetings to discuss the procedure and operational controls for listing and trading digital currency futures, it said on Thursday, amid rising concerns over the risks bitcoin poses to the financial system.

Getting into the Bitcoin weeds at CFTC Talks
Brad Rosen – Jim Hamilton’s World of Securities Regulation
Episode 24 of the CFTC Talks podcast featured Peter Van Valkenburgh, the research director at Coin Center, a leading Washington D.C. based non-profit research and advocacy center focused on the public policy issues surrounding cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Coin Center seeks to educate policymakers and the media about cryptocurrency technology, engage in policy research to develop smart regulatory approaches to questions raised by the technology, and advocate for solutions to keep cryptocurrency networks open, decentralized, and permissionless. The podcast interview was moderated by CFTC Chief Market Intelligence Officer Andrew Busch.

CFTC Moves to Address Industry Concerns Over Virtual Currencies; Two advisory committees will meet in late January to address issues related to policing activity on virtual-currency exchanges
Gabriel T. Rubin – WSJ
The top U.S. derivatives regulator is moving to address financial-industry concerns over its oversight responsibilities for virtual currencies and related futures products.

Why the MoneyGram Merger Was a Threat; Consumer data, increasingly, is a national-security concern.
Christopher Balding – Bloomberg
There’s been a lot of hand-wringing over Ant Financial’s failed acquisition of MoneyGram International Inc. this week. But the decision by U.S. officials to effectively block the deal isn’t an indication of souring U.S.-China ties or of Trumpian protectionism. Instead, it’s simply an acknowledgement of a new reality: In the information age, consumer data is a national-security interest.

Looming Dark-Pool Caps Mean MiFID Has Yet to Hit Stock Markets
Will Hadfield – Bloomberg
Regulator limits on dark-pool trades don’t start until Jan. 12; More than 70 percent of European stocks will be suspended
The first trading day under MiFID II may have been relatively subdued, but the law’s limits on dark pools, which aren’t due to kick in until next week, may prove more disruptive.

SEC warns bitcoin, cryptocurrency investors at risk
Reuters Staff
The U.S. Securities and Exchange Commission warned Thursday that investors should “exercise caution” with cryptocurrencies like bitcoin, noting state and federal regulators may not be able to recoup any lost investments from illegal actors.

Citigroup Fined Over Failure to Fix Money-Laundering Safeguards
Jesse Hamilton – Bloomberg
Bank pays $70 million after OCC faults its compliance efforts; Regulator had sought improvements in 2012 enforcement action
Citigroup Inc. agreed to pay $70 million to settle a regulator’s finding that the bank failed to fix problems cited six years ago in a complaint over its money-laundering safeguards.

Experts say software patches may remedy Meltdown flaw; Cyber security team that had suggested replacing hardware shifts its recommendation
Richard Waters and Hannah Kuchler in San Francisco – FT
A US government-sponsored cyber security team has stepped back from its drastic warning about the impact of a computer security problem that affects nearly all computers and smartphones.

China becomes world’s No.2 LNG importer in 2017, behind Japan
Henning Gloystein – Reuters
China will become the world’s second-biggest importer of liquefied natural gas (LNG) this year as it overtakes South Korea, shipping data in Thomson Reuters Eikon showed.

Exchanges, OTC and Clearing

Euronext Announces Volumes for December 2017
Businesswire via Markets Insider
Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX), the leading pan-European exchange in the Eurozone, today announced trading volumes for December 2017.

Thailand Futures Exchange hits 79 million contracts in 2017
Valentina Kirilova – LeapRate
Thailand Futures Exchange PCL’s (TFEX) 2017 derivatives trading volume continued to increase to 79 million contracts, or an average of 324,217 contracts per day, a 13.7 percent increase from the previous year, while investor trading accounts rose by 17,275. For 2018, TFEX focuses on improving quality of products and services and developing channels to serve investor needs and boosting trading liquidity.

Cboe Global Markets Reports Trading Volume for December and Full Year 2017
PR Newswire
Options ADV up 11%, Futures ADV up 23%, Global FX ADNV up 10% over 2016; Total Index Options, SPX Options, VIX Options and VIX Futures Set Annual Volume Records
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today reported December and full-year 2017 trading statistics at

Euronext announces volumes for December 2017
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for December 2017.

Cross Currency Haircuts: Adjustments as of the end-of-day batch run on 9 January 2018
Please find attached a specification of Eurex Clearing’s Cross Currency Haircuts effective with the end-of-day batch run on 9 January 2018.

Intercontinental Exchange Reports December and Full Year Statistics; 2017 Futures & Options ADV +10% y/y, OI +11% y/y; Record Energy ADV +8% y/y; Interest Rate ADV +28% y/y; 21st Consecutive Annual Record ADV in ICE Brent Crude
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported December 2017 trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at in the Monthly Statistics Tracking spreadsheet.


The CPU catastrophe will hit hardest in the cloud
Russell Brandom – The Verge
This week, two disastrous new processor vulnerabilities spilled out into the open — and the tech world is still coming to terms with the damage. The vulnerabilities, dubbed Meltdown and Spectre, affect nearly every processor made in the last 20 years. Meltdown is the immediate threat, with proof-of-concept exploits already available, but Spectre is much deeper and harder to patch, potentially leading to generations of more subtle exploits in the years to come. The result has left nearly every major technology company scrambling to protect themselves and their customers.

The Ripple effect
Izabella Kaminska – FT
The term XRP or Ripple may have involuntarily entered your consciousness of late. You probably know it’s got something to do with crypto and/or blockchain but unless you’re a diehard crypto obsessive chances are the Ripple phenomenon has passed you by.

Big Data Works Only for Those Who Hype It; The EU’s antitrust watchdog is launching a new crusade. It’s a bit premature.
Leonid Bershidsky – Bloomberg
Margrethe Vestager, the European Union’s competition commissioner challenging tech giants on several fronts, has opened another: “big data.”

The next phase of artificial intelligence will replace inventors;
If it was 100 years ago, would Thomas Edison be out of a job?
AMIR HUSAIN – MarketWatch
This is the century of artificial intelligence. The scientists and engineers driving artificial intelligence forward will undoubtedly have a greater role in shaping the world of our future than the politicians you will see on TV tonight.

This Cryptocurrency Inventor Has Suddenly Become One of the World’s Richest Men
Paul Schrodt – Time
Cryptocurrency has a new king. His name is Chris Larsen, and he’s the co-founder and former CEO of Ripple, which created the digital token known as XRP. He’s now one of the world’s richest billionaires, thanks to XRP’s incredible hot streak.

Apple admits its devices are affected by Meltdown and Spectre chip bugs
Jeremy C. Owens – MarketWatch
Apple Inc. AAPL, +0.29% published information Thursday evening confirming that all devices running its mobile and personal-computer operating systems are affected by two massive vulnerabilities publicly disclosed Wednesday.

London was top destination for tech funding in 2017: PitchBook
Paul Sandle – Reuters
London was the top city in Europe for technology investment last year, with more funding going into companies in the British capital than into firms based in Paris, Berlin and the next seven cities combined, data showed on Friday.


Trump administration aims to open nearly all U.S. offshore to oil drilling
Valerie Volcovici – Reuters
The Trump administration on Thursday proposed opening nearly all U.S. offshore waters to oil and gas drilling, a move aimed at boosting domestic energy production that sparked protests from coastal states, environmentalists and the tourism industry.

Trump’s Assault on the First Amendment; The president is challenging what James Madison called “the only effectual guardian of every other right.”
Cass R. Sunstein – Bloomberg
Above all else, the First Amendment is a barrier to “prior restraints” – injunctions and licensing requirements aimed at preventing speech from entering the public domain at all.

Ghost of Weimar Looms Over German Politics; The failures of the 1930s suggest Angela Merkel’s struggle to form a coalition will end sooner or later.
Patrick Donahue – Bloomberg
Across the cobbled square in the city of Weimar where Germany’s national assembly met in 1919, plans to mark that first, stumbling attempt at a democratic government have taken on greater significance in recent weeks.

Republicans Will Impeach Trump If They’re ‘wiped Out’ In Midterms, Gop Strategist Says
Grace Guarnieri – Newsweek
If Republicans lose out “big league” in the 2018 midterm elections, they could turn on President Donald Trump and might even make moves to impeach him, GOP strategist and Senator Ted Cruz’s former presidential campaign spokesperson said Thursday.

Trump Administration Proposes Massive Expansion of Oil Drilling; Plan would open 90% of offshore areas for drilling starting in 2019
Timothy Puko and Lynn Cook – WSJ
The Trump administration on Thursday proposed opening up nearly all the country’s offshore areas for oil and gas drilling, a move that would touch every coastal state, some that have been off limits to drillers for decades.

Justice Department Rescinds Obama-Era Relaxation of Marijuana Prosecution; Decision by Attorney General Jeff Sessions comes days after California became the latest state to permit sale of the drug for recreational use
Del Quentin Wilber and Dan Frosch – WSJ
Attorney General Jeff Sessions on Thursday rescinded Obama-era policies that took a largely hands-off approach to enforcing federal marijuana laws in states that have legalized the drug for medical or recreational purposes.

Breitbart Owners Debate Ousting Bannon Amid Trump Feud; Former White House strategist’s longtime benefactors, billionaires Robert Mercer and his daughter Rebekah, are distancing themselves from him
Julie Bykowicz, Janet Hook and Rebecca Ballhaus – WSJ
President Donald Trump’s growing feud with Steve Bannon is threatening the former White House strategist’s leadership of the conservative Breitbart News website and upending Mr. Bannon’s plans to wage “war” on party incumbents he deemed insufficiently loyal to the White House agenda.

Trump Attempts To Reassure The Press With Hostage-style Video; The White House tried to stamp out rumors of chaos with a Wizard of Oz routine.
Bess Levin – Vanity Fair
By all accounts, the White House was fully aware that journalist Michael Wolff’s upcoming book, Fire and Fury: Inside the Trump White House would not be flattering. But it seems the administration was not prepared for the volume and severity of the anecdotes Wolff had gathered, which depicted Donald Trump and his administration as, in the alleged opinion of Chief Economic Adviser Gary Cohn, “an idiot surrounded by clowns.”

The case for Donald Trump’s mental fitness
Chris Cillizza – CNN
In the wake of three days of erratic behavior and amid the controversy caused by a book suggesting he is forgetful and dismissed by many who work for him, questions of President Donald Trump’s mental competence are everywhere.

Trump lawsuit over White House book ‘nonstarter,’ legal experts say
Jan Wolfe – Reuters
Any lawsuits by President Donald Trump against former chief strategist Steve Bannon or the author and publisher of a book depicting a chaotic White House and Trump as out of his depth would almost certainly fail and could lead to more damaging disclosures, legal experts said.

Forget Treason. Money Laundering Is Serious; Steve Bannon’s charge against Trump’s son isn’t the worst thing he’s saying about the president’s inner circle.
Timothy L. O’Brien – Bloomberg
Trump watchers have been treated to a world-class cage match over the last couple of days between President Donald Trump and one of his political svengalis, Steve Bannon.


Chairman Giancarlo Statement on Virtual Currencies
Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo issued the following statement on virtual currencies today. Additionally the CFTC has released a backgrounder on its oversight of and approach to virtual currency futures markets.

Citi Fined for Failing to Fix Money-Laundering Controls; OCC says bank hasn’t fully complied with a 2012 order, issues $70 million penalty
Christina Rexrode – WSJ
A U.S. regulator said Thursday that Citigroup Inc. C 1.23% hasn’t lived up to its promises to beef up anti-money-laundering procedures.

The MiFID-Driven Boom Seen in Europe ETFs Has One Major Flaw
William Canny and Viren Vaghela – Bloomberg
Lack of ‘consolidated tape’ in scattered ETF market an issue; Majority of Europe ETF market is traded outside of exchanges
Europe’s new MiFID II law is seen as a game changer for the region’s ETF market, but one thing is missing that could really help it take off.

Weighing the risks of cryptocurrencies
David Nelson – Yahoo Finance
2018 will likely be a defining year for cryptocurrencies. Since the introduction of bitcoin in 2009 by a seemingly mythical Satoshi Nakamoto the debate has raged between bulls and bears armed with both fact and fiction. Was blockchain technology and the cryptocurrencies it spawned a modern day alternative to sovereign fiat currencies or a digital fad whose mania would eventually bankrupt believers except for those quick enough to get out in time?

Steven Maijoor, European regulator who became Mr Mifid; European Securities and Markets Authority has been driving force behind capital markets reform
Philip Stafford – FT
Shortly before Christmas, Steven Maijoor, chair of the European Securities and Markets Authority, was invited to a dinner hosted by Michael Bloomberg for Emmanuel Macron.

Federal Reserve seeks to clarify big bank risk management expectations
Reuters Staff
The Federal Reserve proposed new guidance Thursday that would clarify the regulator’s expectations for how senior managers at large banks handle risk at their respective institutions.

Sexual Harassment Explains a Lot About Why Women Get Paid Less
Rebecca Greenfield and Laura Colby – Bloomberg
Workplace abuse pushes women out of higher-paying fields, jobs; Study: 80% of harassment victims left positions in two years
American women don’t earn as much as men do, a persistent phenomenon that can’t be explained by disparities in education, opportunity or child-bearing. But a growing body of research points to a new and compelling cause: Women make less because of the sexual harassment they face at work.

Swedish regulator joins late reprieves for Mifid futures reforms
Philip Stafford – FT
Sweden’s financial regulator has followed its peers in Germany, the UK and France in dishing out a late reprieve to Nasdaq, its main futures exchange, from applying key parts of the new Mifid II legislation.

MiFID II/MiFIR data now available
The European Securities and Markets Authority (ESMA), in cooperation with national competent authorities (NCAs) in the European Economic Area (EEA), has overseen the launch of the Markets in Financial Instruments Directive II (MiFID II) and the Markets in Financial Instruments Regulation (MIFIR) on Wednesday 3 January.

FINRA Foundation and Partners Discuss Plans for 2018
Watch to see how the FINRA Foundation partners with other organizations—including George Washington University’s Global Financial Literacy Excellence Center, the AARP Foundation and the National White Collar Crime Center—to improve the financial capability of Americans and prevent financial fraud.

Podcast: CFTC Talks EP025: CFTC Andy Busch Chief Market Intelligence Officer
This week on CFTC Talks, we discuss CFTC’s 1st ever 2018 Q1 Market Review and Outlook research. What will this report…

Swap Dealer Examinations Webinar
NFA is currently in its fourth year of performing onsite swap dealer (SD) examinations. To date, NFA has delivered a number of workshops to help SDs prepare for examinations. As part of NFA’s continued SD education, NFA is holding a webinar on Thursday, January 18 at 10 a.m. CT/11 a.m. ET, to further help SDs understand the examination process, best practices and common deficiencies.

Investing and Trading

Key Oil Market Indicator Shows Market Tightest in Three Years
Alex Longley – Bloomberg
WTI prompt most backwardated since 2014 as Cushing stocks drop; Not much inventory overhang left, according to Energy Aspects
One of the key gauges of oil market strength hasn’t looked this good for bulls since 2014.

Long-Time Stock Market Bear Gives In, as Rally Leads Famous Minds to Rethink – MoneyBeat
Chris Dieterich – WSJ
Flummoxed by relentless gains in the stock market, one closely watched bear now says that the U.S. market could soar for two more years.
Jeremy Grantham, a skeptic of the U.S. stock rally, said this week that investors ought to brace for explosive short-term stock gains he dubbed a “melt-up,” or climactic late-rally leg higher that might push prices up another 50% over the next six months to two years.

****SD: Grantham’s full letter here.

Don’t Trust Dow 25000. The Economic Cycle Is Broken; Markets and economic indicators offer differing signals on where the U.S. economy is poised
James Mackintosh – WSJ
The economic cycle has been turned upside down. Depending where you look, there is strong evidence that the U.S. is in the first stage of recovery, in a long mid-cycle, or even approaching the final stages before rolling over.

Investors pour money into funds that protect against inflation; Longest streak of inflows in a year as global growth hopes ignite
Joe Rennison in New York – FT
Investors are pouring money into funds that help protect their portfolios against higher inflation as they position themselves for a period of faster global growth.

Palladium Nears Record as Shortage Starts to Squeeze Carmakers
Eddie Van Der Walt – Bloomberg
Gold investors eye U.S. payroll data for pointers on economy; Yellow metal set for longest run of weekly gains since June
Palladium is within touching distance of a record high amid a looming shortage of the metal used to curb harmful emissions from gasoline-fueled vehicles.

Spotify’s Non-IPO Really Is Novel;= Also Fannie and Freddie, bitcoin suitability, digital currency, bribery and customer service.
Matt Levine – Bloomberg
Spotify AB has filed confidentially with the Securities and Exchange Commission to go public via a direct listing, in which it won’t sell shares in an initial public offering but will instead just one day declare that it is public and let anyone who wants to trade its shares. We have talked a few times about this plan — it’s weird — and each time I write about it someone emails to say “you forgot to mention that Google did something similar in 2004.” That is … not true?

Stock Traders Blow Off Bombogenesis and Send Volume Soaring
Lu Wang – Bloomberg
While blinding snow shut schools and governments across much of the U.S. Northeast, animal spirits are running high in the red-hot equity market.

Ethereum Rises Above $1,000 for the First Time as Ripple Soars
Lucinda Shen – Fortune
Even as the arguable star of 2017 Bitcoin stalls thousands below its all-time high, the third largest cryptocurrency by market value, Ethereum, is soaring to new records Thursday.

Stock Investors Will Benefit Most From Corporate Tax Overhaul; Inequality will worsen because the wealthy are by far the largest owners of equities.
Ben Carlson – Bloomberg
One of the worries about the large tax cuts for corporations is that stock-market investors will benefit more than working-class wages. There is a growing concern that much of the savings will be used for dividends or share repurchases, which would potentially boost the returns for those invested in the stock market. This is likely to accelerate U.S. inequality because the wealthy are now by far the largest owners of equities.

Bitcoin is the new gold — and why everyone wants a piece of it
Josiah Fernandez – The Hill
In the same way gold gained universal value by being rare, interchangeable, and divisible, bitcoin is gaining universal value by being the most secure rare, interchangeable, and divisible digital asset. It is available to buy and sell with over 50 traditional currencies and in hundreds of major metropolitan markets across the world.

The Latest Dow Record Happened in Record Time; Dow’s move to 25000 from 24000 happened in 23 trading days
Amrith Ramkumar – WSJ
Sure, 1,000 points on the Dow Jones Industrial Average ain’t what it used to be. But the most recent 1,000-point rally for the blue-chip index was still a notable run.

Rise of Bitcoin Competitor Ripple Creates Wealth to Rival Zuckerberg
Nathaniel Popper – NY Times
The virtual currency boom has gotten so heated that it is throwing the list of the world’s richest people into disarray. Consider what has happened to the founders of an upstart virtual currency known as Ripple, which has seen its value skyrocket in recent weeks.

Ripple Slides After Coinbase Says Not Adding New Crypto Coins
Lily Katz – Bloomberg
Ripple, the white-hot crypto currency that more than doubled in the past week, plunged as much as 20 percent after Coinbase said it’s not adding any new coins to its exchange at this time.

Investors Are Seeing Something Unfamiliar in 2018: Sweet Yields
Dani Burger – Bloomberg
Risk free rates look more attractive as stock dividends fall; Strategists say market pain could end the bond proxy trade
The hunt for yield may soon target the safest prey. For the first time in this bull market, investors can practically stay in cash without giving up a whole lot of income. Yields on two-year Treasury notes are nearly 2 percent, exceeding dividends in the S&P 500 Index by the most since 2008


Banks rake in record fees to beat trading blues
Jamie McGeever – Reuters
By one measure, 2017 was the most lucrative year in history for investment banks.
The fees they charged companies and other financial firms for advising on mergers and acquisitions, arranging loans, and underwriting sales of bonds and stocks reached $104 billion, according to Reuters data.

Credit Suisse Plans to Vacate London Office Building
Jack Sidders – Bloomberg
Credit Suisse Group AG plans to vacate one of its offices in London’s Canary Wharf financial district following staff cuts and a program to reduce costs, according to two people with knowledge of the matter.

Morgan Stanley to Take $1.25 Billion Hit for U.S. Tax Revamp
Ambereen Choudhury – Bloomberg
Charge of about $1.4 billion mostly from deferred tax assets; Citigroup, JPMorgan have warned of similar blows to earnings
Morgan Stanley said it will take a roughly $1.25 billion hit to earnings in the fourth quarter, becoming the latest bank to detail how profit will be hurt in the near term by the U.S. tax overhaul driven by President Donald Trump.

A Moore Money Manager Is Starting a Macro Fund With Backing From Louis Bacon
Katia Porzecanski – Bloomberg
Hassim Dhoda was London trader for Moore’s European business; New fund to begin with as much as $1 billion in assets
Hassim Dhoda, a senior money manager at Louis Bacon’s Moore Capital Management, has left to start a hedge fund with the billionaire’s backing.

Brevan Howard’s Hedge Fund Suffers Biggest Annual Loss in 2017
Nishant Kumar – Bloomberg
Brevan Howard Asset Management’s flagship macro hedge fund lost 5.4 percent last year, recording its worst annual performance since starting in 2003, according to an investor letter.

Vanguard retains title as world’s fastest-growing asset manager; Fund house’s assets pass $5tn milestone, closing gap on arch rival BlackRock
Chris Flood in London – FT
Vanguard has broken its own record as the world’s fastest-growing asset manager for a sixth successive year after pulling in more than $1bn in new business every day during 2017.

Merged Sumitomo Mitsui brokerage unit starts operations
The Japan Times
A new Japanese securities company created through the merger of two Sumitomo Mitsui Financial Group Inc. units kicked off operations on Thursday.

No Bitcoin for You! Merrill Bans Bitcoin Fund, Futures
By Crystal Kim – Barron’s
Merrill Lynch barred clients and financial advisers trading on their behalf from buying bitcoin or any bitcoin-related investments including futures and the Bitcoin Investment Trust (GBTC).

Deutsche Bank: Income Inequality Could Play Big Role in Stock Market
By John Kimelman – Barrons’s
Deutsche Bank is proving that charts can say a thousand words about one of the most important stories of our time — income inequality.

Cryptocurrency Hedge Fund BlockTower Raises $140 Million
Michael McDonald – Bloomberg
Union Square, Andreessen said they are backing BlockTower; Firm started by money managers from Goldman, Chicago endowment
BlockTower Capital, a digital currency hedge fund launched in August, raised $140 million and hired a former vice president at Goldman Sachs Group Inc., expanding its team to eight people, according to people familiar with the matter.


Radical reform needed to shake Japan Inc out of its complacency; Groups must detail publicly how strategic shareholders vote on each resolution
Leo Lewis – Ft
After a tempestuous year of fraud, data-tampering, bid-rigging and other industrial scandals, the chairman of Japan’s Keidanren business federation, Sadayuki Sakakibara, maintained a recent tradition and began 2018 promising a push for better corporate governance.

Top Norway Fund Delivers 25% Return by Shunning Fish Stocks
Jonas Cho Walsgard – Bloomberg
Fund also underweights oil producers in bet on oil services; Fund’s biggest holdings are Atea and fertilizer maker Yara
Avoiding the fish farmers was a winning bet for Norway’s top performing fund last year.

Gold Imports Said to Rebound Amid Signs India’s Tax Woes Fading
Shruti Srivastava and Vrishti Beniwal – Bloomberg
Purchases said to have surged 37% in Dec., snaps 3-month drop; Global gold prices have risen for four straight weeks
Gold imports by India, the world’s second-biggest market after China, surged 37 percent in December after falling for three straight months, according to a person familiar with the data.

Israel proposes ban on trading shares of cryptocurrency companies
Steven Scheer – Reuters
Israel may ban from trading on the Tel Aviv Stock Exchange companies whose main business revolves around bitcoin and other cryptocurrencies, the Israel Securities Authority (ISA), the country’s markets regulator, said on Thursday.

Crypto Stock Fever Misses China as Investors Sour on Small Caps
Bloomberg News
Chinese stock investors don’t seem to share the global enthusiasm for companies jumping on the cryptocurrency bandwagon.


Frankfurt expecting rapid influx of Brexit bankers
There are more and more indications that London-based banks are planning to move their trading operations to Germany’s financial hub. And they’re likely to arrive sooner rather than later.


Global Warming Is Starving the World’s Reefs Faster Than Ever
By Kanika Sood – Bloomberg
Rising water temperatures are increasing the rate of bleaching; Even safe pockets could disappear by mid-century, study says
The risks to coral reefs are accelerating largely due to human activity, with rising water temperatures meaning they now have about 80 percent less recovery time between bleaching episodes than just three decades ago, according to a report in the journal Science.

The yin and yang of satellite imagery shows the zen of storm formation
Molly Rubin – Quartz
Weather satellites have been producing stunning images of the powerful bomb cyclone as it barrels across the northeast US

Using Forests to Fight Climate Change; California is again leading the way.
Editorial Board – Bloomberg
Forests give us shade, quiet and one of the harder challenges in the fight against climate change. Even as we humans count on forests to soak up a good share of the carbon dioxide we produce, we are threatening their ability to do so. The climate change we are hastening could one day leave us with forests that emit more carbon than they absorb.

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About Author

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