Hits & Takes
Today we announced in a Special Report to the readers of this newsletter that John J. Lothian & Company, Inc. has begun work on a microwiki site named CryptoMarketsWiki.com. Click HERE to see the release.~JJL
Seismic Foundry closed its second investment on Monday with a regulation technology start-up called Enforcd, which provides a regulatory database for institutions. The platform includes news, analysis and statistics that help firms identify and manage regulatory risk. Seismic partner Brendan Bradley said the firm has identified and begun to carve out a niche in the regulation technology by pulling research on enforcement actions, identifying common compliance errors and adopting effective practices for clients. The practical information database, which covers both the US and European Union regulation, will eventually include other regulatory jurisdictions. Pages of regulatory documents can be searched quickly by staff to help manage and mitigate risk.~JK (Full disclosure: Jim Kharouf is affiliated with Seismic Foundry).
Hehmeyer Trading + Investments Launches Cryptocurrency Index Fund Commodity Pool
Hehmeyer Trading + Investments announced the launch of the Hehmeyer Cryptocurrency Index Fund, a new product that will provide certain qualified investors access to the cryptocurrency market by investing in a fund that aims to track the performance of the proprietary Hehmeyer Cryptocurrency Index (“HCI”).
***** You have to love derivatives!~JJL
Monday’s Top Three
On a day when one of the most powerful men in banking and finance is moving on, our top story on Monday was about the Ceres statue atop the Chicago Board of Trade building in Up Close and Personal with the Goddess of Grain… from Classic Chicago Magazine. Second was (not Lloyd Blankfein)… the Huff Post’s piece Don’t Spend A Cent On Bitcoin Until You See John Oliver’s Cryptocurrency Warning. Finally, viewership returned to the real world and one of the biggest stories of the year – (not Lloyd Blankfein), the tax overhaul. The New York Times’ piece G.O.P. Rushed to Pass Tax Overhaul. Now It May Need to Be Altered was third. Sorry Lloyd.
121,959,869 pages viewed; 23,039 pages; 212,060 edits
Central Banks Urged to Study Digital Currency Risks and Rewards
Jana Random – Bloomberg
BIS warns of destabilizing effect if used by general public; Regulating crypto currencies to be topic at next week’s G-20
Digital currencies are a revolutionary tool that central banks should consider, but they remain far too risky to be used as legal tender any time soon, according to the Bank for International Settlements.
BIS says volatility funds ‘amplified’ equity turmoil in February; Increase in Vix exceeded historical relationship with S&P 500, says central bankers’ bank
Robin Wigglesworth – FT
Volatility-linked funds aggravated the stock market turmoil of early February, highlighting how complex strategies can “create and amplify” outsized slumps across financial markets, according to the Bank for International Settlements.
Hong Kong Exchange, MSCI Are Said to Plan New Asian Futures
Kana Nishizawa and Benjamin Robertson – Bloomberg
Hong Kong Exchanges & Clearing Ltd. is working with index compiler MSCI Inc. to create futures contracts that would track hundreds of Asian companies, a broadening of the bourse’s offerings as it looks to build its derivatives business.
CQG Connects to INE, New Energy Exchange in Shanghai; Gives Market Participants Outside China Opportunity to Trade Highly Anticipated INE Markets; Enables Chinese Buyers to Lock in Oil Prices in Local Currency
CQG, a leading global provider of high-performance trading, market data, and technical analysis tools, announced today that the soon-to-be-launched, highly anticipated Shanghai International Energy Exchange (INE), a unit of the Shanghai Futures Exchange, will be the first Chinese market available on CQG. The company made the announcement at the annual FIA International Futures Industry Conference in Boca Raton.
Thomson Reuters launches bitcoin sentiment gauge for crypto traders
Thomson Reuters Corp is to track and analyze chatter about bitcoin on hundreds of news and social media websites to help investors looking for an edge in trading the world’s biggest cryptocurrency, the company said on Monday.
Bond Market’s Most Feared Traders Threaten Treasuries Once Again
Liz McCormick – Bloomberg
The vigilantes are poised to return after years in abeyance; Expansionary fiscal policy, resurgent inflation spur revival
E. Craig Coats Jr. never set out to be a bond vigilante.As the former head of Salomon Brothers’ Treasuries desk, the last thing on his mind running the world’s biggest debt trader in the 1970s and 80s was fighting Washington’s fiscal largesse. He had a much simpler agenda: survive.
What Solomon’s Ascent Signals About Goldman’s Future
Dakin Campbell – Bloomberg
Analysts see investment bankers rising if he takes the helm; A new leader may bring ‘fresh perspective’ as trading drags
When Goldman Sachs Group Inc.’s leaders unveiled their strategy six months ago to reshape the Wall Street powerhouse into a more traditional bank, it was trading veteran Harvey Schwartz who led the presentation.
Harvey M. Schwartz To Retire From Goldman Sachs, David M. Solomon To Serve as Sole President and Chief Operating Officer
The Goldman Sachs Group, Inc. (NYSE: GS) today announced that Harvey Schwartz, the firm’s President and Co-Chief Operating Officer, has decided to retire effective April 20, 2018. David Solomon will serve as sole President and Chief Operating Officer of the firm upon Harvey’s retirement.
The Evolving Middle Office: A Seal of Approval
Tom Lehrkinder – Tabb Forum
The middle-office technology supporting the futures industry finally is evolving after years of underdevelopment. Buy-side clients are demanding their FCMs provide new and improved tools to enable near-real-time processing and reconciliation of trades. TABB Group reached out to C-level operations and business executives to discuss the state of middle-office technology. Download a complimentary copy of the results below.
Lawsuit claims Wall Street’s ‘fear gauge’ was ‘manipulated’
Nathaniel Meyersohn – CNN
Wall Street’s so-called fear gauge was “manipulated,” a new federal class action lawsuit alleges.
Hacked Japanese Cryptocurrency Exchange Pays Back Customers; Coincheck spends $435 million to compensate customers who kept a digital currency called NEM at Coincheck
Takashi Mochizuki – WSJ
Coincheck Inc., a Japanese cryptocurrency trading platform operator that was hacked in January, said Tuesday that it has completed compensating customers affected by the hacking and resumed some exchange services.
Exchanges, OTC and Clearing
trueEX plans launch of cryptocurrency marketplace; trueEX has established new ‘trueDigital’ business to offer non-deliverable forwards for Bitcoin on new marketplace.
Hayley McDowell – The Trade
trueEX has confirmed plans to roll out a regulated derivatives marketplace for digital assets in a bid to win business from institutional investors looking to enter the cryptocurrency market.
TP ICAP 2017 cost savings higher than indicated at £27m
Philip Stafford – FT
TP ICAP, the world’s largest interdealer broker, said on Tuesday its cost-cutting programme had gone deeper and further than it had previously indicated to the market.
CCP Release 14.5: Production launch on 26 March 2018
As already announced in Eurex Clearing circular 134/17, the launch of CCP Release 14.5 is scheduled to take place on 26 March 2018.
Deutsche Börse and Eintracht Frankfurt support Frankfurt children’s project Arche; Action for the Rhine-Main derby on 17 March
Deutsche Börse Group
As part of its corporate citizenship activities, Deutsche Börse Group and Eintracht Frankfurt will support the children’s project Arche eV in Frankfurt with a special promotion around the 27th matchday. The market infrastructure provider waives its sponsorship rights on 17 March and returns them, including the sleeve logo, to the ark to introduce the club to a wider public. Deutsche Börse has long been involved with this local club, which is very actively fighting child poverty in Germany.
London Stock Exchange Group strengthens partnership with Kenya
London Stock Exchange Group
London Stock Exchange Group (LSEG) is in Nairobi to build on the strong economic partnership between the UK and Kenya and discuss how best to encourage greater capital markets collaboration, in particular around equity & debt dual-listings.
SGX proposes to refine members’ Derivatives Clearing Fund requirements
Singapore Exchange (SGX) is proposing refinements to enhance the robustness of the SGX-Derivatives Clearing (SGX-DC) Clearing Fund. These will result in each member contributing to the Clearing Fund an amount that more accurately reflects the risk it poses to SGX-DC.
Coincheck refunds investors and resumes trading after heist; Japanese cryptocurrency exchange stages comeback despite doubts it had the funds
Emma Dunkley in Hong Kong and Robin Harding in Tokyo – FT
Japanese cryptocurrency exchange Coincheck has paid nearly $435m to investors and has resumed limited trading after being targeted in one of the world’s biggest heists.
Cboe Periodic Auctions Hits New One-Day Record of EUR582 Million Traded on March 12
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today reported that Cboe Europe’s Periodic Auctions book set a new one-day record of EUR582.8 million traded on Monday, 12 March 2018. The previous one-day record was EUR488 million set on 6 February 2018.
JCCH volume report for February 2018 (Japanese commodity market)
Fidessa develops block trading tool for placing multiple orders; BlockShadow service provides users with the chance to interact with multiple block trading venues.
Hayley McDowell – The Trade
Fidessa has launched a new service aimed at allowing institutional investors to place multiple conditional block trade orders across the various venues that have emerged under MiFID II.
Rookie crypto investors look past risks, flock to London show
Tommy Wilkes – Reuters
Dozens of stallholders, pitching anything from a happy retirement to commercial property to the future of electronics, set up shop in central London last weekend to pitch their wares.
Rosenthal Collins Group Signs with Eventus Systems for Trade Surveillance; Cloud Version of Validus Platform Brings RCG New Efficiencies, Flexibility
Eventus Systems, Inc., a provider of innovative regtech software solutions for the capital markets, announced today that Rosenthal Collins Group LLC (RCG®), a leading independent futures brokerage and clearing firm, has deployed its Validus platform for RCG’s trade surveillance needs.
Ripple Loses Bid to Keep Its Cryptocurrency Fight in California
Christie Smythe – Bloomberg
Ripple CEO Brad Garlinghouse discusses the future of XRP and other cryptocurrencies.
Blockchain developer Ripple Labs Inc. lost its shot at a home-court advantage in a dispute with rival R3 Holdco over ownership of cryptocurrency XRP that was once worth more than $16 billion.
Bitcoin not the answer to a cashless society; Digital token reveals the weakness of our current payment systems
Benoît Cœuré and Jacqueline Loh – FT
Next week, finance ministers and central bankers from the group of G20 countries will discuss bitcoin and other blockchain-based digital tokens. Such cryptocurrencies are poor imitations of money. Almost nobody prices goods in bitcoin, few use them for payments, and, as a store of value, they are no better than gambling in a casino. Policymakers are rightly worried about consumer and investor abuses, as well as illicit use.
Bitcoin not the answer to a cashless society
European Central Bank
Opinion piece by Benoît Cœuré, Member of the Executive Board of the ECB and Chair of the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI), co-authored by Jacqueline Loh, chair of the BIS Markets Committee, published in the Financial Times on 13 March 2018
Bitcoin start-ups in Asia take aim at remittances market
Marius Zaharia, Dahee Kim – Reuters
Bitcoin, battered by warnings about volatility and bubble-like appreciation, may have found a way to play a niche role in a big market: overseas money transfers.
FIX Trading Community Announces Release Candidate 3 Of FIX Orchestra – The Open Standard For Machine Readable Rules Of Engagement For All Financial Protocols
FIX Trading Community, the non-profit, industry-driven standards body at the heart of global financial trading, today announced the publication of Release Candidate 3 for FIX Orchestra for public review, to help the industry move further towards standardisation and automation of rules of engagement and deliver major efficiencies to the counterparty onboarding process. This enables firms to define their service offerings in an entirely systematic way, allowing them to certify their flows faster and with greater accuracy, while significantly reducing the need for manual intervention.
China’s Communist Party Centralizes Power Over Finance and Pollution Control
Keith Bradsher And Chris Buckley – NY Times
The Chinese government said on Tuesday that it planned to overhaul supervision of the country’s debt-ridden financial sector, its environmental regulators and other essential government agencies in a broad move intended to further consolidate the Communist Party’s hold on official levers of power.
Trump tariffs pose threat to global economic revival, OECD warns; Rosy world outlook clouded by threat of retaliatory trade barriers
Chris Giles in London – FT
Tit-for-tat trade barriers in response to the Trump administration’s tariffs on steel and aluminium threaten to pull the rug from under a strengthening global economy, the Organisation for Economic Co-operation and Development said on Tuesday.
Trump blocks Broadcom’s $142bn hostile bid for Qualcomm; President cites national security concerns in taking unprecedented action against deal
Richard Waters in San Francisco and Eric Platt in New York – FT
US president Donald Trump has blocked Broadcom’s $142bn hostile bid for rival chip company Qualcomm, saying he was acting to protect national security.
No One’s Sure Who Qualifies for This $415 Billion U.S. Tax Deduction
Ben Steverman – Bloomberg
IRS guidance on pass-through break could miss June deadline; Veterinarians, massage therapists among those in cross hairs
Congressional Republicans created a juicy new tax break for business owners when they rewrote the U.S. tax code late last year. Three months later, hundreds of thousands of U.S. employers still don’t know if they qualify.
U.S. Posts Biggest Budget Deficit Since 2012
Sarah McGregor – Bloomberg
Revenue fell 9%, spending rose 2% in February: Treasury data; Wider gap could fuel concerns about tax cut-driven debt load
The U.S. recorded a $215 billion budget deficit in February — its biggest in six years — as revenue declined.
***** This is not supposed to happen when the economy is humming and unemployment is low. This is bad tax policy and economics that will make the policy choices for when things turn down that much more difficult.~JJL
Larry Kudlow Emerges as Trump Favorite to Replace Cohn, Sources Say
Jennifer Jacobs, Toluse Olorunnipa – Bloomberg
CNBC personality is already informal adviser to the president; Trump hasn’t made final decision and could change his mind
CNBC personality Larry Kudlow has emerged as President Donald Trump’s favorite to replace Gary Cohn, the outgoing director of the White House National Economic Council, two people familiar with the matter said.
***** And speaking about bad economics.~JJL
The world’s first blockchain-powered elections just happened in Sierra Leone; People queue to cast their vote at a polling station during Sierra Leone’s presidential election in Freetown, Sierra Leone March 7, 2018.
Yomi Kazeem – Quartz Africa
On Mar. 7, elections in Sierra Leone marked a global landmark: the world’s first ever blockchain-powered presidential elections.
Central banks told to think twice before boarding Bitcoin bandwagon
Huw Jones – Reuters
Central banks should think hard about potential risks and spillovers before issuing their own cryptocurrency, the Bank for International Settlements (BIS) said in a report on Monday.
Cryptocurrency scammers run off with more than $2 million after ditching their investors
Arjun Kharpal – CNBC
Scammers appear to have made off with more than $2 million in cryptocurrency after carrying out an apparent fake initial coin offering (ICO), and the individuals linked to the incident may be connected to another recent theft, CNBC has learned. A bad actor or actors used a fake LinkedIn profile and copied pictures from another user’s Instagram to create a false persona — and successfully drew more than 1,000 investors into the ICO project, which was called Giza.
Central Bank Cryptocurrencies Promising As Use Of Cash Disappears, Says Global Regulator Group
Ted Knutson – Forbes
Potential cryptocurrencies and other forms of digital currencies issued by central banks show promise as the use of cash is “rapidly disappearing,” a report issued today by a consortium of global regulators, the Bank for International Settlements.
South Korea: ICO and Cryptocurrency Trading Policy Under Consideration
Eli Meixler – Fortune
South Korea is preparing a policy plan for ICOs, or initial coin offerings, opening the door for Korean companies to raise funds on the crypto-crazed market despite the government’s prior reservations, The Korea Times reports.
Minutes of Euro Risk Free Working Group 1st Meeting now available
The European Central Bank has published the minutes of the first meeting of the Euro Risk Free Rates Working Group held on 26 February 2018, including concluding remarks from ESMA’s Chair.
U.S. Libor trader loses UK appeal against conviction
A U.S. former Barclays trader, who alleged his London Libor rate-rigging trial was unfair because a key prosecution witness lacked credibility, on Tuesday lost an appeal against his conviction.
FCA to limit rule changes in Brexit run-up
Damian Fantato – FT Adviser
The Financial Conduct Authority has agreed to limit the number of rule changes it will make in the run-up to Brexit because of the risks this would involve.
Whistleblowers deserve our thanks — and protection, too; Many remain sceptical about people willing to turn in their colleagues
Brooke Masters – FT
Jeffrey Wertkin had a problem. After six years of handling fraud cases for the US Department of Justice, he had landed a $450,000-a-year job as a defence attorney at Akin Gump, a prestigious law firm. At last, he would be able to provide his wife and two young children with a new house in a better neighbourhood and private school.
Investing and Trading
Investors urge US to introduce new Treasury bill; Two-month T-bill could help government tap demand for shorter-dated debt and help fund the deficit
Joe Rennison in New York – FT
Bond investors are pushing the US to introduce a new Treasury bill in a move that would allow the government to tap demand for shorter-dated debt and fund the country’s growing deficit.
Havens Just Aren’t Safe Any More, Goldman Says
Eric Lam – Bloomberg
No traditional havens had positive beta to VIX lately: Goldman; Derivative hedges will become more important, strategists say
Traditional safe havens haven’t been working out for investors in the latest ructions in financial markets, strategists at Goldman Sachs Inc. warned.
This Commodity Cowboy Is Hoarding the World’s Cobalt Supply; Backed by a Russian billionaire, Anthony Milewski started stockpiling the metal in 2015.
Mark Burton – Bloomberg
Anthony Milewski was among the first investors to realize that if electric-vehicle sales take off the way automakers expect, the world is going to need a lot more cobalt—an essential ingredient in lithium-ion batteries.
The Fed Must Teach Markets a Lesson on Inflation; Officials keep saying they will let inflation veer above 2 percent. Investors don’t believe them.
Conor Sen – Bloomberg
Like a parent whose toddler thinks “no” means “maybe,” the Fed must eventually prove that it means what it says.
New York financier Lynn Tilton puts Zohar funds into bankruptcy
Tom Hals, Jonathan Stempel – Reuters
Colorful New York financier Lynn Tilton has put her Zohar investment funds, a key element of her distressed-debt empire and the subject of several legal battles, into Chapter 11 bankruptcy, with a goal of selling assets or refinancing debt.
R.J. O’Brien hires LME sales head to bolster clearing and execution business; Elena Patimova joins R.J. O’Brien from the London Metal Exchange where she was head of financial markets sales.
Hayley McDowell – The Trade
R.J. O’Brien has poached the London Metal Exchange’s (LME) head of financial markets sales to grow its electronic sales, clearing and voice execution business.
The Next Goldman Chief Could Be a Banker Who Moonlights as a D.J.
Kate Kelly – NY Times
As bake-offs go it was pretty unusual: a part-time disc jockey and a karate black belt vying to be the next leader of arguably the world’s most influential bank.
Bank of America Proxy Shows CEO Made 250 Times More Than Median Employee; This year, U.S. publicly traded firms required for first time to divulge median CEO,
Rachel Louise Ensign – WSJ
Bank of America Corp. BAC 0.37% on Monday became the first big U.S. bank to unveil how much more its CEO makes than its typical employee.
Hedge Funds That Use AI Just Had Their Worst Month Ever
Dani Burger – Bloomberg
Machine-learning funds ‘played big role’ in correction; Correlation between AI funds, CTAs has risen in past year
Chalk one up for the humans. Hedge funds that use artificial intelligence and machine learning in their trading process posted the worst month on record in February, according to a Eurekahedge index that’s tracked the industry from 2011. The first equity correction in two years upended their strategies as once-reliable cross-asset correlations shifted.
Deutsche Bank Asset-Management IPO Pricing Values Unit at Up to $8.9 Billion; Japan’s Nippon Life will be cornerstone investor in DWS Group with 5% stake
Jenny Strasburg – WSJ
Deutsche Bank AG DB -0.06% on Sunday said the share pricing for the coming partial float of its asset-management unit values the business at EUR6 billion to EUR7.2 billion ($7.4 billion to $8.9 billion), and announced a “cornerstone” investor in the offering, Japan’s Nippon Life Insurance Co.
Goldman Sachs Puts David Solomon in Line to Be Next CEO; Solomon’s status rises at firm after fellow president, Harvey Schwartz, announces plans to retire in April
Liz Hoffman – WSJ
David Solomon became the heir apparent at Goldman Sachs GS 0.96% Group Inc. Monday after his main rival for the top job abruptly resigned, moves that show the Wall Street powerhouse is continuing to move beyond its trading roots.
How an Australian bank laundered money for Hong Kong drug gangs; The Drop; A billion-dollar money laundering scandal at an Australian bank has revealed ties to the drug gangs of Hong Kong.
Jamie Smyth and Ben Bland – FT
Like many backpackers, Yeuk Tung Kong travelled to Australia from Hong Kong in search of adventure and to learn English.
Indonesia eyes fintech regulation to avoid ‘loan shark-like’ practices
Indonesia’s financial regulator said it was considering setting a cap on interest rates and the size of loans offered by fintech firms, in a move aimed at minimizing the risk of defaults.
Qatar Stocks Surge Amid Steps to Raise Foreign Ownership Limit
Filipe Pacheo – Bloomberg
QNB, Industries Qatar to raise foreign ownership limit to 49%; Increase could lead to inflows by investors tracking EM gauges
Qatar’s main index posted its best two-day performance since December 2014 as two benchmark heavyweights prepare to raise the limit foreigners can own of their stock, a step that could lead to millions of dollars in inflows from investors tracking emerging markets equities.
$103 Billion Quant Firm Piles Into China as Foreigners Welcomed
Ben Bartenstein – Bloomberg
Acadian Asset Management says it’s starting A-Share strategy; Russian, Turkish stocks rallied after consolidation of power
The world’s No. 2 stock market is ripe for a quantitative style of investing, according to a $103 billion money manager that lists a cement maker, pharmaceutical brand and bank as its top picks in China.
How Blackstone Turned India Into Its Most Profitable Market
George Smith Alexander and Anto Antony – Bloomberg
PE firm shifts strategy to concentrate on bigger buyouts; Focus on select industries follows losses on early India deals
Blackstone Group LP says it’s found the formula for making money in India, which has become its top-performing market globally after the firm began focusing on bigger buyout deals.
Saudis Said to Use Coercion and Abuse to Seize Billions
Ben Hubbard, David D. Kirkpatrick, Kate Kelly And Mark Mazzetti – NY Times
Businessmen once considered giants of the Saudi economy now wear ankle bracelets that track their movements. Princes who led military forces and appeared in glossy magazines are monitored by guards they do not command. Families who flew on private jets cannot gain access to their bank accounts. Even wives and children have been forbidden to travel.
Many Financial Firms Still Aren’t Prepared for Brexit, Irish Regulator Says
Peter Flanagan, Dara Doyle – Bloomberg
Many firms remain unprepared for U.K. exit from the EU; Regulator sees ‘significant step up’ in Brexit-based inquiries
Irish Central Bank Deputy Governor Ed Sibley warned that many financial firms remain unprepared for Britain’s exit from the European Union as the two sides remain at odds on their future relationship.
Brexit threatens to undo Mifid II dark pool rules; London and Brussels cannot look to the EU-Swiss deal for comfort
Philip Stafford – FT
European stock trading has entered a new era with the introduction of caps on the volume of business that can be traded in private venues known as dark pools. Yet this regime may be shortlived and possibly a waste of time and resources.
EU and UK prepare to open talks on post-Brexit trade ties; A Free Trade Area is likely to increase barriers between Britain and its largest market
Chris Giles and Gemma Tetlow in London – FT
In just a few weeks, Britain will begin what could be the country’s most momentous negotiations since joining the EU in the 1970s: talks on how it will trade with Europe for decades to come.