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Worries Grow That the Price of Bitcoin Is Being Propped Up; Deutsche Börse’s new CEO launches housecleaning; EU clearing houses pass second stress test

First Read

Hits & Takes
JLN Staff

Last night’s CAIA packed event on cryptocurrency markets featured David Schulz, director, global client services at Cboe Futures Exchange, Michael Groff, managing member at the GCG Fund and Matt Wolf, partner and CEO at Antonym. It covered some interesting ground, such as: Cboe’s bitcoin futures contract’s ADV and OI is about 5,800 contracts and ICOs are the Wild West indeed.~JK

And have you heard of the top five through 10 cryptocurrencies by market cap? That would be Cardano at $14.6 billion, NEO at $9.7 billion, Litecoin at $9.3 billion, Stellar at $8.9 billion, EOS at $7.7 billion and NEM at $7.2 billion, from

In January, CME reported nine trading days above 20 million contracts, compared with 34 days in all of 2017. ~JK

OCC cleared contract volume increased 42 percent in January with 479,812,469 contracts. This marks the third highest month ever for cleared volume & highest January ever for cleared volume. ~JJL

A couple of CME disciplinary notices hit the tape yesterday pertaining to activity on NYMEX. And yes, of course, there’s a spoofing one in there. Unlike the actions earlier this week that mostly pertained to precious metals, that case involved various gasoline calendar spreads. Another involved pre-hedging of natural gas block trades. The third was a tech issue. Apparently, Merrill Lynch, Pierce, Fenner & Smith, Inc. misrouted someone’s custom algorithmic spread order – unsupported by Merrill – instead of rejecting it. The result of executing the 937-lot order was a 90 tick upswing in the span of 22 milliseconds in the heating oil spread market.~SD

The following words did not come up during President Trump’s 80-minute State of the Union speech, to the NY Times: “Woman” did not come up once. Other words or phrases never mentioned included “peace,” “human rights,” “equality,” “Europe,” “multilateral,” “civil rights” and “alliance.” ~JJL

CME Group is now accepting proposals (due March 9) to present to investors at their Pinnacle Research Symposium in Chicago on June 20 ahead of the Managed Futures Pinnacle Awards (

The panel lineup for #CryptoCon from FinTank and Northwestern University Pritzker School of Law that Chuck Mackie will be moderating on trading opportunities in cryptocurrencies includes Jared Vegosen from DV Trading LLC, Michael Unetich from Trading Technologies, John Lothian from John J. Lothian & Company, Inc., and Brian Walls from Bridge Alternatives.~JJL


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Steve Wynn Fallout Could Rattle Upstart Stock Exchange’s Plans
Alexander Osipovich – The Wall Street Journal
IEX, seeking to challenge NYSE and Nasdaq for listings, was expecting to bring on Wynn Resorts
The sexual-misconduct allegations against Steve Wynn could impact a company that has little to do with casinos: IEX Group Inc., a startup stock exchange that is looking to shake up the business of U.S. corporate listings.

****** Sounds like a Wynn lose situation.~JJL


Crypto Bros Are Actually a Brotherhood; Bitcoin fosters a global community, at least among young men.
Camila Russo and Lily Katz – Bloomberg
The last time Marc Kenigsberg traveled to London, he messaged his cryptocurrency friends on WhatsApp to ask who would be around. One of the guys in the chat offered to pick him up at the airport.

****** The brotherhood of the traveling token.~JJL


There’s Now a Monopoly Made Specifically for Cheating; Hasbro concedes to human nature with a special, new Monopoly Cheater’s Edition
Rachel Tepper Paley – Bloomberg
As Hasbro Inc. passed GO, collected $200, and lapped Mattel Inc. to become the No.1 toymaker in terms of sales, it also threw some gasoline on the smoldering embers of your game night grudges: it’s now OK to cheat at Monopoly.

***** A game for the current times.~JJL


Thursday’s Top Three
Our top read story yesterday was The Wall Street Journal’s Big Banks Accused of Stifling Competition in Stock Lending. I wonder what OCC is thinking now. Second and third went to columns from John Lothian News: Slippery Slope: Let’s Let Markets Decide On New Contracts and Tax Law Change Means All Cash Grain Traders Are Not Equal, Better Bids or Not



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Lead Stories

Worries Grow That the Price of Bitcoin Is Being Propped Up
Nathaniel Popper – NY Times
A growing number of virtual currency investors are worried that the prices of Bitcoin and other digital tokens have been artificially propped up by a widely used exchange called Bitfinex, which has a checkered history of hacks and opaque business practices.

Deutsche Börse’s new CEO launches housecleaning; Theodor Weimer has shut down the “kitchen cabinet” set up by his predecessor in a first move to streamline management at the stock exchange operator.
Andreas Kröner and Darrell Delamaide – Handlesblatt
In the best tradition of a new broom, Deutsche Börse’s new chief executive has begun sweeping clean some of the bureaucracy that has been slowing down Germany’s largest stock exchange operator.

EU clearing houses pass second stress test; ICE Clear Europe and BME Clearing faced minor shortfalls, but overall EU CCPs passed the stress test.
Hayley McDowell – The Trade
Central counterparties (CCPs) have successfully passed the European Securities Markets Authority’s (ESMA) second EU-wide stress test.

Big investors back push for 30% target for female executives; Managers with £10tn of assets add clout to UK drive for greater gender diversity
Sarah Gordon, business editor – FT
Twenty-seven global investors with £10.5tn of assets under management have signed up to an initiative to promote more women to the senior management and boards of British companies in which they invest.

Bit-pop: Bitcoin rout deepens, down over 40% so far this year; Heightened regulation and Facebook move have weighed on sentiment
Adam Samson – FT
Bitcoin is having a bad year, and it’s only February 2. The cryptocurrency has come under further pressure on Friday and deepened its 2018 loss to over 40 per cent.

Derivatives trade group ISDA may challenge new capital rules
Karen Brettell – Reuters
An industry group representing the privately traded derivatives markets may challenge new rules requiring that more capital be used to back the trades, arguing that the requirements place them at a disadvantage to trading futures contracts.

This is the pattern for suppressing bitcoin, says a Chinese crypto exchange’s CEO
Victor Reklaitis – MarketWatch
Bobby Lee, CEO and co-founder of BTCC, is pictured in Shanghai in 2013.
A prominent figure in cryptocurrencies has a prediction for how governments worldwide will crack down on bitcoin: They’ll follow the existing pattern.

Blackstone sees data, not desktop products, as future of Thomson Reuters unit
Blackstone Group LP) President Tony James said on Thursday the future of the Thomson Reuters Financial and Risk business is in data, not in selling terminal desktop products to traders, bankers and investors.

Isda’s O’Malia: back-office costs are ‘killing’ swap dealers
Robert Mackenzie Smith –
“The legacy systems we have today are killing us from a cost standpoint,” Isda’s Scott O’Malia said at an industry conference earlier today (February 1). “Collateral now needs to move on a T+1 basis on an antiquated system of fax machines, excel spreadsheets and Outlook – that’s the cutting edge technology which is managing your back office and moving collateral, whether it’s cleared or uncleared. It’s horrific and it has to change.”

Racial bias persists at Morgan Stanley, new lawsuit claims
Jonathan Stempel – Reuters
Morgan Stanley has reneged on promises to stop discriminating against black employees, according to a lawsuit by a former broker who said he was fired after complaining about racial bias, including in pay and career opportunities.

Eurex Clearing successfully passes EU-wide stress test
Eurex Clearing has successfully passed the second EU-wide stress test conducted by the European Securities and Markets Authority (ESMA). Objective of this exercise is an assessment of central counterparties’ resilience in stressed market conditions. “The stress test is an important contribution to ensuring financial stability in Europe, given the important role of central counterparties”, says Thomas Laux, Chief Risk Officer at Eurex Clearing.

One month after the Mifid II tsunami, the City is keeping its head above water
Lucy White – City AM
This Saturday, City workers will be able to celebrate surviving through one month of a dreaded new regulatory environment.

Was Chicken Libor Manipulated Too?; Also atomic clocks, bond marking, an informal blockchain, crypto and flamethrowers.
Matt Levine – Bloomberg
Chicken Libor! We have talked a few times before about what I like to call “Chicken Libor,” the alleged manipulation of the Georgia Dock index of chicken prices. The Georgia Dock index was a sort of country version of Libor, in which an employee of the Georgia Department of Agriculture — his name is Arty Schronce — would call up chicken producers each week and ask them what the price of chickens was. As with Libor, there was no market check on this data, and so the chicken producers could make up numbers if they wanted. As with Libor, the chicken producers could profit by manipulating the number:

Settlements for 3 Wall Street Banks Hold a Silver Lining
Emily Flitter – NY Times
Three big banks were punished for market manipulation this week — and tucked into the punishment was a single sentence that could pay big dividends for the banking industry.

Exchanges, OTC and Clearing

CME Group Reached Average Daily Volume of 19 Million Contracts in January 2018, up 18 Percent from January 2017
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced January 2018 average daily volume (ADV) reached 19 million contracts, up 18 percent from January 2017, and representing the second-highest monthly ADV ever. During January 2018, there were nine trading days above 20 million contracts, compared with 34 days in all of 2017, and eight in November 2016, which was the highest monthly ADV of all time. January 2018 options ADV reached a record 4.5 million contracts, up 32 percent, with record electronic options ADV of 2.9 million contracts, up 54 percent. Open interest at the end of January was 124 million contracts, up 11 percent from the end of January 2017.

CME Rebuffs Smaller Bitcoin Fans While Cboe Leads in Crypto-Futures
Brian Louis – Bloomberg
Chicago rival Cboe has consistently seen more futures volume; CME CEO says Bitcoin futures contract will be a ‘slow grower’
CME Group Inc. might be the world’s biggest exchange, but it lags behind a rival Chicago exchange in the nascent Bitcoin futures business. That’s partly a design decision.

NYSE’s Record-Breaking January Across IPOs And ETFs Opens 2018
The New York Stock Exchange (NYSE), a wholly owned subsidiary of Intercontinental Exchange, reached three historic milestones in January that amplified its leadership as the world’s premier stock exchange.

BME acquires 10% of Finect
Markets Media
BME, the operator of all stock markets and financial systems in Spain, has acquired 9.7% of Spanish smart data financial firm Finect, which offers investors a specialised social media community, interactive tools to improve decision-making and financial information based on smart data technology, among other services.

NSE Is Said To Seek Singapore Delay On Stock Futures
Andrea Tan and Santanu Chakraborty – Bloomberg
The National Stock Exchange of India Ltd., operator of the country’s biggest bourse, is asking Singapore Exchange Ltd. to delay the planned introduction of single-stock futures that would track some of the subcontinent’s largest companies, according to people familiar with the matter.

SGX Sets New Volume and Open Interest Record for CNH in January 2018
Press Release
SGX USD/CNH futures continued their strong growth momentum through January, with a record volume of 297,011 contracts (US$ 29 billion). This represents an increase of 175% y-o-y and comes at the back of a phenomenal growth of 270% witnessed in 2017 over full year volume in 2016.
We continue to hit new trading records in the contract, with the daily open interest reaching a new high of 31,278 contracts (US$ 3.21 billion) on 26 January.
(press release via email)

All time record in Eurex Single Stock Dividend Futures
January 2018 marked an all-time high in Single Stock Dividend Futures with a total of more than 650,000 traded contracts, meaning an average daily volume (ADV) of more than 27,000 contracts. This follows on from a record year in 2017 with more than 4.1 million traded contracts and ADVs of 17,000 contracts compared to ADVs of 14,500 in 2016.

A trading veteran has joined startup exchange IEX as it goes after the marquee business of NYSE and Nasdaq
Frank Chaparro – Business Insider
A former sales and trading director at Instinet has joined the listings team at upstart stock exchange IEX. Jon Simblist, who started in January, joins the firm at a critical point as it seeks to lure listings from its larger rivals NYSE and Nasdaq.

NYSE’s Record-Breaking January Across IPOs and ETFs Opens 2018
The New York Stock Exchange (NYSE), a wholly owned subsidiary of Intercontinental Exchange (NYSE:ICE), reached three historic milestones in January that amplified its leadership as the world’s premier stock exchange:

OCC Cleared Contract Volume Increased 42 Percent in January;Third highest month ever for cleared volume;Highest January for cleared volume;Securities lending activity percent up 29 percent; Index options volume highest month ever
OCC, the world’s largest equity derivatives clearing organization, announced today that cleared contract volume in January was up 42 percent from January 2017 with 479,812,469 contracts. Average daily volume at OCC is up 35 percent in 2018 with 22,848,213 contracts. OCC cleared futures volume is up 23 percent in January with 11,907,702 contracts. OCC’s stock loan program reported strong volume numbers with 233,482 transactions in January, up 29 percent from January 2017.

Listing Nominating Committee Seeks Listing Committee Candidates
The Listing Nominating Committee of The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), is now seeking applications from individuals interested in serving on the Exchange’s Listing Committee and the Growth Enterprise Market (GEM) Listing Committee1. Appointments will be for a term of approximately 12 months commencing in July 2018. Similar to last year, the Listing Nominating Committee will interview short-listed candidates before appointments are made.

Changes of Designated Securities for Short Selling
The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), announces that with effect from 9 February (Friday), 44 additional securities will be eligible for short selling and 26 existing designated securities will be removed from the list. The total number of designated securities for short selling will be 929 after the revision.

Exchange Publishes Guidance Letters on Pricing Flexibility for IPOs and Placing Tranche Reallocation in IPOs
Listing applicants can use pricing flexibility mechanism to set price of shares in an IPO; Listing applicants can move shares from placing to public subscription tranche under certain conditions other than those in the practice note that has the clawback mechanism
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), published today (Friday) guidance letters (GLs) on: 1) pricing flexibility for initial public offerings (IPOs); and 2) placing tranche reallocation cap in IPOs.

Consultation on changes and amendments of Special Provisions and changes and amendments of other provisions of Eurex Clearing AG
Eurex Clearing plans to introduce clearing and settlement services for OTC FX products (FX Spots, Swaps, and Forwards) and Cross Currency Swaps (XCCY Swaps), together called OTC Currency Products. Certain amendments of the planned offering fall within the scope of Special Provisions and, hence, are subject to a Consultation process.

Boerse Stuttgart Generates Turnover In Excess Of EUR 7.5 Billion In January – Significant Increase In Turnover Across All Asset Classes
According to its order book statistics, Boerse Stuttgart generated turnover in excess of EUR 7.5 billion in January 2018. The trading volume was around 24 percent higher than in the previous month.


What’s Zelle? Banks hope commercials get customers to notice the app
David Henry – Reuters
Big U.S. banks are spending millions of dollars to promote Zelle, their digital payment service, by running commercials on major sports games and entertainment shows, as well as a YouTube campaign painting the app as simple and ubiquitous.

smartTrade Technologies unveils blockchain post-trade service; smartTrade Technologies acknowledges client feedback to explore blockchain technology for post-trade.
Hayley McDowell – The Trade
Multi-asset electronic trading services provider smartTrade Technologies has developed a new blockchain-based solution for post-trade functions.

European Commission launches EU Blockchain Observatory and Forum; US-based software firm ConsenSys selected to support new European blockchain expertise hub.
John Brazier – The Trade
The European Commission (EC) has launched a new initiative to monitor and engage with the development of European-based blockchain projects, in conjunction with the European Parliament.

Blockchain: an explainer; Fans compare its potential to the internet, but the technology is in its infancy
Hannah Murphy and Philip Stafford – FT
The word blockchain has been the equivalent of financial fairy dust in recent weeks, adding tens of millions of dollars to the market value of companies, including former camera pioneer Kodak Eastman, that have announced a project involving the technology or simply added it to their names.

Square Rolls Out Bitcoin Trading to Almost All Cash App Users
Selina Wang – Bloomberg
Users can buy up to $10,000 of the digital currency per week; Support for Bitcoin comes as some other companies shy away
Square Inc. shares climbed after Chief Executive Officer Jack Dorsey said the company is introducing Bitcoin trading for almost all users of its cash payments app, signaling support for the volatile cryptocurrency.

Key KodakCoin exec barred from serving as officer in German companies
Francine McKenna – MarketWatch
A key official for the cryptocurrency venture that has sent shares of Eastman Kodak skyrocketing is barred in Germany from serving as an officer for a public company.

THE BIG ICO SWINDLE; Many cryptocurrency speculators are banking on the theory that someone dumber than them will buy their tokens for more than they paid. That’s a pretty good bet … until it isn’t.
Joi Ito – Wired
Ever since my friends and I set up a Digicash server to sell music and artwork with a digital currency called eCash representing real gold, back in the ’90s, I’ve been waiting for the day when cryptocurrencies—digital currencies that operate independently of central banks by using encryption to generate units and verify transfers of funds—would transform the world. Cryptocurrencies are finally here, but not exactly in the way that I envisioned.

Cryptocurrency: Why Criminals Are Now Focusing Their Attacks On Bitcoin, ICOs, And Many Alt-Cryptos; Here are 11 reasons why criminals are increasingly trying to steal cryptocurrencies rather than data and classic, fiat currencies.
Joseph Steinberg – INC.
Over the past month, criminals have successfully stolen significant amounts of cryptocurrency, making international news headlines on multiple occasions.


EPA chief riles ethanol advocates with call for biofuels policy reform
The head of the U.S. Environmental Protection Agency said on Thursday that the recent bankruptcy of a Pennsylvania oil refiner was evidence the nation’s biofuel policy needs an overhaul in comments that infuriated biofuels advocates.

The Republican Plot Against the F.B.I.
The Editorial Board – New York Times
So this is what a partisan witch hunt really looks like. In a demonstration of unbridled self-interest and bottomless bad faith, the Trump White House and its Republican minions in Congress are on the cusp of releasing a “memo” that purports to document the biggest political scandal since Watergate. To pull it off, they are undermining the credibility of the law enforcement community that Republicans once defended so ardently, on the noble-sounding claim that the American public must know the truth. Don’t fall for it.

Comey Blasts ‘Weasels’ in Tweet Apparently Aimed at GOP Memo
Mike Dorning – Bloomberg
‘All should appreciate the FBI speaking up,’ ex-chief says; He invokes the legacy of Joe McCarthy in scathing message
Former FBI Director James Comey offered his support for the agency’s current leaders as Republican members of Congress criticize it for surveillance of Trump campaign officials during the investigation of Russian meddling in the 2016 election.

Economists warn of Trump deficit’s ‘dark trajectory’; President’s large budget shortfall could push bond yields even higher
Sam Fleming in Washington and Joe Rennison in New York – FT
The US is heading into some of its biggest budget deficits outside of wars and recessions as Congress debates increasing ceilings on federal spending on top of December’s trillion-dollar tax cuts.

White House worried FBI director could quit over Nunes memo release
Dana Bash, Jeff Zeleny and Evan Perez, CNN
Top White House aides are worried FBI Director Christopher Wray could quit if the highly controversial Republican memo alleging the FBI abused its surveillance tools is released, multiple sources with knowledge of the situation tell CNN.

Trump vs. the FBI
Kathleen Hunter – Bloomberg
Donald Trump is upping the ante in the high-stakes partisan warfare over Special Counsel Robert Mueller’s investigation of his administration and the 2016 campaign’s ties to Russia.


Fed outlines yearly ‘stress test’ standards for Wall Street
The Federal Reserve on Thursday outlined standards for its annual ‘stress test’ of the largest banks to see how Wall Street would fare in a future financial crisis.

Federal Reserve Plans Tougher Big-Bank Stress Tests This Year; ‘Severely adverse’ scenario imagines 10% unemployment, severe stress in corporate and real-estate lending markets
Ryan Tracy – WSJ
The Federal Reserve said Thursday that its stress tests for big banks will imagine a more severe economic downturn in 2018 than in last year’s version, as it announced the details of the hypothetical scenario banks must survive to pass the exams.

Remarks Of CFTC Commissioner Brian Quintenz At The DerivCon 2018
Let’s take a trip back in time. It’s the early 1980s. Beverly Hills Cop and Ghostbusters rule the box office. Prince and Tina Turner dominate the airwaves. The torture device known as the rotary telephone is being replaced with a push-button model. Chances are you do not have a personal computer at home; only 8% of U.S. households do. Those computers use floppy disks and run DOS. And IBM and the World Bank enter into a transaction ,which is widely considered to be the first swap.

FINRA Announces Comprehensive Changes to Advisory Committees, Including Creation of Two New Committees; Launches New Online Portal to Facilitate Engagement
The Financial Industry Regulatory Authority (FINRA) today announced a series of changes to its advisory committees – including the addition of two new committees focused on the specialized issues surrounding clearing firms and capital acquisition brokers – as part of a comprehensive effort to improve opportunities for firms to provide input on key issues. The changes, which build on several enhancements to FINRA’s advisory committee structure announced in November, are a response to feedback received through President and CEO Robert W. Cook’s listening tour and comments received through the FINRA360 Special Notice on FINRA’s engagement programs.

2018 Involvement and Election Process Overview
FINRA360 is an effort through which FINRA is conducting a comprehensive self-evaluation and organizational improvement initiative to ensure that FINRA is operating as the most effective self-regulatory organization (SRO) it can be, working to protect investors and promote market integrity in a manner that supports strong and vibrant capital markets. In March 2017, as part of the FINRA360 initiative, FINRA issued a Special Notice requesting feedback on certain of its engagement programs (Engagement Notice). Since that time, FINRA has been processing the feedback received on the Engagement Notice, making changes to its programs and implementing various recommendations in response to that feedback, where appropriate. These changes include issuing this Special Notice, FINRA’s first annual Involvement Notice.

Podcast: CFTC Talks EP029: CFTC Chief Economist Bruce Tuckman
This week on CFTC Talks, we dive into research on the $544 trillion interest rate swaps market. Is it really this big…

ESMA publishes results of the second EU-wide CCP stress test
The European Securities and Markets Authority (ESMA) has published today the results of its second EU-wide stress test exercise regarding Central Counterparties (CCPs) established in the European Union (EU).

Now Available: End-Of-Day and TRACE Security Activity Report (TSAR)
FINRA has launched two new TRACE data products: the End-of-day TRACE Transaction File and the TRACE Security Activity Report.

European Commission Letter on Money Market Fund Regulation
The European Securities and Markets Authority (ESMA) has published a reply received on 19 January from the European Commission (EC).

Regulators raid hacked Tokyo virtual currency exchange; FSA checks Coincheck has sufficient funds to compensate customers
Japanese financial regulators on Friday raided the office of virtual currency exchange Coincheck, which lost 58 billion yen ($530 million) worth of digital currency held by its customers when it was hacked last week.

ASIC removes licence conditions imposed on OpenMarkets Australia Limited
ASIC and OpenMarkets Australia Limited (OpenMarkets) have agreed to the removal of additional licence conditions imposed on OpenMarkets on 10 July 2017 (refer: 17-259MR).

Deutsche Bank Fined $70 Million for Trying to Rig Benchmark Rate
David Scheer – Bloomberg
U.S. regulator says bank staff knew actions were illegal; Deutsche says it cooperated with CFTC, worked to fix issues
Deutsche Bank AG agreed to pay $70 million to settle a U.S. regulator’s claims its traders sought to manipulate a benchmark for interest-rate derivatives and other financial instruments.

CFTC Orders Deutsche Bank Securities Inc. to Pay $70 Million Penalty for Attempted Manipulation of U.S. Dollar ISDAFIX Benchmark Swap Rates
The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Deutsche Bank Securities Inc. (DBSI) for attempted manipulation of the ISDAFIX benchmark and requiring DBSI to pay a $70 million civil monetary penalty.

Federal Reserve Plans Tougher Big-Bank Stress Tests This Year; ‘Severely adverse’ scenario imagines 10% unemployment, severe stress in corporate and real-estate lending markets
Ryan Tracy – WSJ
The Federal Reserve said Thursday that its stress tests for big banks will imagine a more severe economic downturn in 2018 than in last year’s version, as it announced the details of the hypothetical scenario banks must survive to pass the exams.

Japan’s regulator urged Coincheck to fix flaws before $530 million cyber theft
Taiga Uranaka – Reuters
Japan’s financial regulator on Friday swooped on Coincheck Inc with surprise checks of its systems and said it had asked the Tokyo-based cryptocurrency exchange to fix flaws in its computer networks well before hackers stole $530 million of digital money last week.

FCA seeks feedback on non-workplace pensions
The Financial Conduct Authority (FCA) has today published a Discussion Paper to gather views on the market for non-workplace pensions.

US Commodities Regulator Beefs Up Bitcoin Futures Review
Annaliese Milano – Coindesk
The Commodity Futures Trading Commission (CFTC) is developing a “heightened review process” for cryptocurrency futures though it will continue to allow exchanges to self-certify products, Chairman J. Christopher Giancarlo announced last week.

Cryptocurrency ICOs: It’s impossible to police what you can’t see; UK regulators are drafting laws to control ICOs but a legal expert has cast doubt on how they can be enforced.
Charlie Osborne – ZDNet
Initial Coin Offerings (ICOs), commonly connected to cryptocurrency including Bitcoin (BTC) and Ethereum (ETH), are events which investors worldwide have clamored to capitalize on.

Investing and Trading

Forget bitcoin, give me old-fashioned gold as an inflation hedge; It’s pretty, it’s useful and you don’t need a password to access it
Merryn Somerset Webb – FT
Over the past year or so, there has been no overall cut to Japanese domestic productive capacity — except in some thoroughly outdated sectors and a few in which Japan has no hope of ever regaining a competitive advantage, such as coal or textiles.

US bond market sell-off deepens; Ten-year Treasury yield rises to fresh 4-year high at just under 2.8%
FT reporters
The US government bond sell-off entered a second session on Friday as rising optimism over the strength of the global economy fuelled expectations that inflationary pressures are building.

ECB Official Warns Markets Are Unprepared for Inflation Bogeyman
Luke Kawa and Sid Verma – Bloomberg
Markets price in low risk premiums despite global recovery; Reversal in stability of prices seen as threat to global rally
The global market rally is unprepared for one potential killjoy, and the European Central Bank has taken note.

Wall Street Is Taking On More Risk Again
Sridhar Natarajan, Sally Bakewell, and Kiel Porter – Bloomberg
Recent deals show banks taking lax view on lending guidelines; Trump administration indicated plans to dial back regulations
Three words have finally set Wall Street deal-makers loose: President Donald Trump.

Bitcoin Drops Below $8,000 as Cryptocurrency Pain Continues
Eric Lam and Dani Burger – Bloomberg
Biggest digital token takes losses since peak to about 60%; Rival coins including Ripple, Ether and Litecoin tumble
Bitcoin fell below $8,000 as a miserable 2018 continued for cryptocurrencies, with investors confronting a mounting list of concerns about the future of the industry.

Bitcoin Is Falling Fast, Losing More Than Half Its Value in Six Weeks; Selloff triggered by expanding regulatory crackdown on cryptocurrencies
Steven Russolillo and Kenan Machado – WSJ
Bitcoin plunged below $8,000 on Friday, extending its sharp rout since the start of the year in a selloff triggered by a widening regulatory crackdown on cryptocurrencies.

The Short-Volatility Trade Got Crushed in January; Despite a rough month for short-volatility strategies, some investors are still piling in
Gunjan Banerji – WSJ
One of last year’s most-loved trades is off to a rough start in 2018. Strategies that minted money by betting against stock-market turbulence have gotten crushed in January, as volatility finally made an appearance.

Bitcoin Brawl: A New Twist In Tezos’s $232 Million Coin Offering; Frustrated investors try to install new board as fight drags on
Tezos co-founders Arthur and Kathleen Breitman speaking at the Money 20/20
By Paul Vigna – WSJ
Angry investors in a high-profile coin offering stalled by infighting are taking a page out of activists’ playbook—proposing a new board of directors—to get the project back on track.

Hedge Fund Due Diligence And Its Limitations
Mark Melin – Value Walk
In a world where machines learning to create investment strategies is colliding with fundamental portfolio management, today’s algorithmically-minded investment managers go about their jobs in very different ways. One of the methods to mine alpha is to dig deep into niche markets. For a hedge fund allocator, such adventure can involve enhanced risk – particularly with smaller managers with exposure to exotic and sometimes illiquid markets. For many such investors, the reward can be meaningful when the focus is on risk management and ongoing monitoring in addition to manager selection.


Wells Fargo loses big client after dialing up risk in retirement funds
Tim McLaughlin – Reuters
After Wells Fargo & Co (WFC.N) decided to ramp up risk in its flagship age-based retirement funds last year, one of its largest customers decided to call it quits, unhappy with the new investment strategy and how the bank handled the transition.

NordLB spins off asset management to Warburg; The troubled Landesbank is streamlining its operations as it turns over its asset portfolios to a specialized bank.
Darrell Delamaide – Handlesblatt
As it seeks to keep its troubled shipping loans from sinking it, NordLB has thrown out a lifeline to private banking house M.M. Warburg to take over its asset management business. The two will merge their investment operations under Warburg’s control, becoming with EUR34 billion ($42 billion) under management one of the largest asset managers in northern Germany.

European Central Bank official raises spectres of crisis in push for closer union
Jasper Jolly – City AM
The Eurozone’s booming economy will not solve the issues faced by the currency bloc, according to one of the European Central Bank’s top bosses.

Deutsche Bank Is Fine, Apart From the Bank Bit; There’s little sign of John Cryan’s much-promised turnaround.
Lionel Laurent – Bloomberg
The best news Deutsche Bank CEO John Cryan had for shareholders on Friday is that, if you take out the whole banking part, there’s a really good business there.

Deutsche Bank Investors See No Silver Lining After Results Slump
Steven Arons – Bloomberg
Bank to pay one-off bonus to boost investment banking business; Revenue falls to seven year-low; bank posts third annual loss
Deutsche Bank AG investors searching for good news after the bank’s third straight annual loss found little to give them optimism.

Bored With Banking, This Former Citi Trader Went Full Crypto; Arthur Hayes is exploring the risky frontiers of finance—running BitMEX, a Bitcoin futures exchange in Hong Kong.
Edward Robinson and Viren Vaghela – WSJ
In 2013, Arthur Hayes was biding his time as an equities trader for Citigroup Inc. in Hong Kong. His energy—he’s a fitness fanatic and an early riser—was better suited to another era in finance. Six years earlier, as a recent arrival in the former British colony, he’d gotten a taste of what the golden age in banking felt like when he worked in the “snake pit,” the equity derivatives sales desk, at Deutsche Bank AG’s office. The markets were on fire.

Steve Cohen Needs to Prove Himself to Wall Street All Over Again; The hedge fund billionaire is trying to rebuild and show the government he’s squeaky-clean. But he has to show investors he hasn’t lost his touch.
Katherine Burton – Bloomberg
There’s a low-slung glass and brick building in Stamford, Conn., steps from Long Island Sound, that once housed one of the most successful hedge funds ever. Inside, the halls are still adorned with works by Jeff Koons and Jasper Johns. The trading room—where phones blink instead of ring—is still kept at 69F to keep traders awake. And Steve Cohen still sits in the middle of it, watching the tape and making his bets.

Why Illinois Got Out of the Hedges; These funds are hard to understand and have lousy returns.
Marc Levine – WSJ
Can anyone explain why Illinois continues to own this hopelessly complicated bunch of hedge funds? That’s the question I asked the state’s Board of Investment, which oversees $22 billion of pension assets, when I became its chairman two years ago.

Quartet of blockchain ETFs try to cash in on cryptocurrency craze
Anora M. Gaudiano – MarketWatch
Cryptocurrency markets might be cooling off, but the hype around blockchain isn’t abating, judging by the popularity of exchange-traded funds centered on the technology.

Charity Funds Take Off as Tax Law Reshapes Giving; Households open donor-advised investment vehicles to benefit from deductions
Richard Rubin – WSJ
Americans late last year poured money into charitable-giving vehicles known as donor-advised funds, which allow immediate tax deductions but gradual distributions to nonprofits—a sign of ways the new tax law could reshape how Americans donate money for years to come.


China’s Bad Banks Face a Case of Indigestion; Distressed-debt asset managers are helping give Chinese banks’ share prices a boost by buying their soured loans. But just how much can they absorb?
Anjani Trivedi – WSJ
The share prices of China’s big banks are surging. But the institutions tasked with cleaning up their balance sheets are struggling to keep up.

China’s 2015 GDP Was Exaggerated By Fake Data, Analysis Shows
James Mayger – Bloomberg
Growth probably slowed markedly, Bloomberg Economics says; Provinces look to have overstated data between 2011 to 2015
Bloomberg’s Enda Curran discusses the stability of China’s GDP numbers.
China’s growth rate in 2015 was probably overstated by “a couple of percentage points,” according to new data analysis by Bloomberg Economics.

Bitcoin’s huge arbitrage play just vanished as Korea bubble pops
The Star
Bitcoin’s brutal start to the year is proving especially painful in South Korea.


EU lawmaker seeks to soften euro clearing plan as Brexit looms
Huw Jones – Reuters
A tougher test is needed when deciding if clearing of euro denominated assets conducted outside the European Union should be relocated to the bloc, a senior EU lawmaker said on Friday.


The Publisher of Newsweek And The International Business Times Has Been Buying Traffic And Engaging In Ad Fraud
Craig Silverman – BuzzFeed
The publisher of Newsweek and the International Business Times has been engaging in fraudulent online traffic practices that helped it secure a major ad buy from a US government agency, according to a new report released today by independent ad fraud researchers.

Reuters reporters arrested under Myanmar Secrets Act denied bail
Thu Thu Aung, Yimou Lee – Reuters
A court in Myanmar declined to grant bail on Thursday for two Reuters journalists accused of violating the country’s Official Secrets Act, although their defense lawyer said information in documents at the center of the case was publicly available.

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