Hits & Takes
From today’s Bloomberg piece This $1 Trillion Money Manager Just Joined the Crypto Frenzy, “shares in Taiwan Semiconductor Manufacturing Co., which manufactures chips for Nvidia Corp. and Advanced Micro Devices Inc., have climbed 34 percent since the beginning of 2017 and surged to a record in January.”~JK
JPX reported that in February 2018, total derivatives trading volume was 40,059,157 contracts, a record high for February. Also, trading volume for the night session was 15,786,914 contracts, the third highest on record. The ratio of the night session was 39.4%.~JJL
The Dubai Gold and Commodities Exchange (DGCX) had its best month since inception in February, trading its highest monthly volume of 2,097,739 contracts, valued at USD 47.03 billion, recording 67% year-on-year (Y-o-Y) growth.~SR
Nasdaq pours cold water on the arguments fueling a civil war on Wall Street
Edward S. Knight, Nasdaq
We operate in a world that relies on myriad technological innovations fueled by instantaneous access to a world of data. We rely on modern technology to manage the global airways and complex life-and-death medical procedures; markets should benefit from the same technological advances borne of competition and innovation. We expect competitors to outdo each other and for new entrants to disrupt entire industries. That is certainly what’s happened on Wall Street, to the great benefit of the investing public.
**** I dislike the use of war language to represent competition.~JJL
Irish Stock Exchange declares snow day (and a half)
Philip Stafford in London – FT
Snow on the fibre optic cables? The Irish stock exchange is shutting at midday on Thursday and will be closed all day Friday because of the “extreme weather conditions” that are buffeting Ireland.
*****If you live in an igloo made of snow, what’s the worst thing about global warming? No privacy.~JJL
Ce*sored! China bans letter N (briefly) from internet as Xi Jinping extends grip on power
It is the 14th letter in the English alphabet and, in Scrabble, the springboard for more than 600 8-letter words.
But for the Communist party of China it is also a subversive and intolerable character that was this week banished from the internet as Chinese censors battled to silence criticism of Xi Jinping’s bid to set himself up as ruler for life.
****JB: They also banned the book “Animal Farm.” Banning the letter “N” seems chuckle worthy, but not that last bit where Xi Jingping seeks to be president for life (aka a dictator).
Wednesday’s Top Three
Our top read story on Wednesday was last week’s news about Joseph Kim in Feds charge 24-year-old Chicago trader in first crypto-fraud case, from ABC Channel 7 News. Second went to Bloomberg’s piece, Bitcoin-Futures Regulator Clears Employees to Trade Crypto Coins. Third went to Marketwatch’s story with Bob Fitzsimmons of Wedbush in Bitcoin is just the beginning, says one of the futures market’s biggest players. Incidentally, JLN posted a Q&A February 20th with Fitzsimmons called Wedbush’s Bob Fitzsimmons Says We’re Just Beginning To Build A Market For Bitcoin
|MarketsWiki Statistics Sponsored by Level Trading Field|
Stock exchanges cast wary eye at threat from big tech; Study finds that disruptive forces such as artificial intelligence could be harnessed
Philip Stafford – FT
Stock exchanges and trading venues fear that Amazon, Google and Microsoft are more likely than start-ups to harness artificial intelligence, big data and automation to challenge their role as the providers of the infrastructure for global financial markets.
Cryptocurrency Firms Targeted in SEC Probe; Regulator issues subpoenas to parties engaged in booming market for initial coin offerings
Jean Eaglesham and Paul Vigna – WSJ
The Securities and Exchange Commission has issued dozens of subpoenas and information requests to technology companies and advisers involved in the red-hot market for cryptocurrencies, according to people familiar with the matter.
Exclusive: LJM Partners shutting its doors after ‘vol-mageddon’ losses in U.S. stocks
Trevor Hunnicutt – Reuters
A Chicago-based fund manager that took risky bets on stock-market swings is shutting its doors after the strategy failed during the slump in U.S. equity markets in early February, according to a letter sent to investors on Wednesday.
FCA’s Bailey urges market to examine a ‘synthetic Libor’; Key potential alternatives to the tarnished benchmark are widely seen as impractical
Philip Stafford – FT
The head of the UK markets regulator has called on market participants to look at creating a “synthetic Libor” to resolve a headache created by a potential global market shift away from the key lending benchmark in coming years.
Norway’s $1 Trillion Fund Says It Likes Volatility
Michael Holter, Sveinung Sleeire – Bloomberg
Slynsgstad discusses market volatility and investing for the long term.
Norway’s sovereign wealth fund says a spike in volatility may well help it with a plan to add almost $40 billion in stocks.
‘Expert Networks’ Are Back, Thanks to MiFID II; Money managers are opening their wallets to experts in obscure fields.
Matt Levine – Bloomberg
Here is a story about the return of “expert networks” — companies that connect investors with subject-matter experts for background conversations, for a large fee — that is fascinating on all sorts of levels. For one thing, it is a story of unbundling: The article frames the renewed interest in expert networks (which became less popular after they were involved in a string of insider-trading cases) as a response to new European MiFID II rules that require investment firms to pay for research directly rather than receiving it for “free” from banks and compensating the banks with trading commissions:
Trump Expected to Announce Stiff Steel, Aluminum Tariffs
Jennifer Jacobs, Joe Deaux – Bloomberg
President to announce decision on Thursday, people say; Tariffs could antagonize China and hurt relations with allies
President Donald Trump is set to announce steep tariffs on steel and aluminum imports Thursday, people familiar with the matter said, in what would be one of his toughest actions yet to implement a hawkish trade agenda that risks antagonizing friends and foes alike.
Exchanges, OTC and Clearing
The Big Interview: Stéphane Boujnah
Hayley McDowell – The Trade
CEO of Euronext Stéphane Boujnah sat down with The TRADE to discuss the exchange group’s acquisition activities, how it has prepared for Brexit and the future of clearing in London.
Deutsche Börse is expanding its location in Cork
Deutsche Börse Group plans to expand its presence in Cork by 200 employees to 600 employees in the next two years / The expansion is supported by the growth of Clearstream’s investment fund business; additional product innovation capacity to be created / The company will move into new business premises in the center of Cork in March 2019
Strongest February sales in the cash markets since 2008; Trading volume of 158.5 billion euros / 45 percent increase over the previous year
Deutsche Börse’s cash markets posted sales of 158.5 billion euros in February, making them the highest-selling February since 2008. In February 2017, sales still amounted to 109.0 billion euros.
Stock market segment Scale celebrates its first birthday; Company liquidity up 130 percent / 49 shares listed in the segment
Deutsche Börse draws a positive interim conclusion on the SME segment Scale, which started exactly one year ago today. The number of shares listed in Scale has since increased to 49, of which five companies have been included in the segment via an IPO.
Nasdaq Announces the Board of Directors of its Canadian Exchange
Nasdaq, Inc. (Nasdaq:NDAQ) today announced the full slate of directors of Nasdaq CXC Limited (“Nasdaq Canada”):
Nasdaq and Extraordinary Re Sign Market Technology Agreement
Extraordinary Re will leverage cloud and blockchain technology to power new insurance risk allocation platform
Straits Times Index Series Quarterly Review Q1 2018; No change to the constituents of the STI
FTSE Russell announces that there will be no changes to the constituents of the Straits Times Index (STI), following the March quarterly review.
Trading Overview in February 2018
Japan Exchange Group released Trading Overview in February 2018.
Bitcoin Reaches Major Scaling Milestone as Users Adopt Upgrade
Camila Russo – Bloomberg
Bitcoin has quietly reached a major milestone in its quest to reach the masses. Segregated Witness, or SegWit, the software upgrade designed to speed up Bitcoin transactions, is gaining traction. The number of transactions using the technology doubled to more than 30 percent in just the past three days, according to the SegWit.Party website, which tracks the data. The following chart shows the percentage of transactions using SegWit in the past week.
This $1 Trillion Money Manager Just Joined the Crypto Frenzy
Eric Lam – Bloomberg
Add Wellington Management Co. to the list of mainstream investors getting serious about digital coins. The Boston-based firm with $1 trillion under management is considering including cryptocurrencies in some portfolios, it said in a February report from a team that includes equity research analyst Matthew Lipton and trading technologies principal Lee Saba. The company’s systems were upgraded to enable trading in Bitcoin derivatives, and Wellington has started taking positions in companies related to cryptocurrencies.
Singapore Agrees Blockchain Cooperation with India’s Maharashtra State
The Monetary Authority of Singapore (MAS) on Monday signed an agreement with the Indian state of Maharashtra to explore joint opportunities in the field of blockchain technology and innovation.
Fintech Startups Need Industry Partners to Thrive, Report Says
Julie Verhage – Bloomberg
Financial technology startups are seeing no shortage of venture dollars flowing their way, but there are increasing concerns over whether they can survive without partnering with the industry they’re seeking to disrupt.
Texas Issues Another Cease-and-Desist over Alleged Crypto Fraud
Wolfie Zhao – CoinDesk
A Texas regulator is gunning for yet another cryptocurrency-related company it accuses of promoting unregistered securities targeting the U.S. state’s residents.
According to a document received and reviewed by CoinDesk, the Texas State Securities Board (TSSB) issued a new cease-and-desist order on Feb. 26 to a Panama-based cryptocurrency firm named LeadInvest.net.
Singapore’s Temasek backs fintech startup C2FO’s $100m round
Julie Verhage – Dealstreetasia.com
Financial technology startup C2FO raised $100 million in funding in a new round led by the investing arm of global insurance and asset management giant Allianz SE as well as Abu Dhabi’s Mubadala Investment Co.
Is Bitcoin a Waste of Electricity, or Something Worse?
Binyamin Appelbaum – NY Times
A manufacturing start-up recently announced plans to move into a shuttered aluminum factory in upstate New York, taking advantage of abundant cheap electricity from the St. Lawrence River.
Banks complete 25 million euros securities transaction on blockchain platform
Anna Irrera – Reuters
Credit Suisse Group AG and ING Groep NV have completed a 25 million euros ($30.48 million) securities lending transaction using blockchain-based software, the companies said on Thursday, as more projects involving the nascent technology behind cryptocurrencies get closer to yielding results.
Bitcoin is a ‘disruptive innovation,’ legendary investor Bill Miller says
Legendary hedge fund investor Bill Miller is betting big on cryptocurrency as a “bitcoin observer,” with his firm betting nearly half of its assets in the digital currency.
Monumentally stupid tweet blows up in blockchain company’s face
Jack Morse – Mashable
The blockchain can’t solve for stupid. That painful truth hit the internet-of-things blockchain project Waltonchain hard today, with one Twitter huge [mess-up] leading to the erasure of tens of millions of dollars in the market cap of its associated Walton Coin.
Bitcoin Enters Awkward Adolescence
Last fall, as cryptocurrencies seemed on the brink of a linkage with the traditional financial system, 1 there were predictions of a price explosion along with institutional, regulatory and mainstream acceptance of the currencies. Others predicted disaster or a collapse to zero value. In the end, despite some dramatic price moves, not much happened. Still, liquid crypto derivative trading gives us a lot more insight into what might happen in the remainder of 2018. Derivatives give us greater visibility into Bitcoin price moves. Instead of relying on an opaque, fragmented market for price data, we have clean institutional-quality data on both prices and implied volatilities.
Kushner’s Business Got Loans After White House Meetings
Jesse Drucker, Kate Kelly And Ben Protess – NY Times
Apollo, the private equity firm, and Citigroup made large loans last year to the family real estate business of Jared Kushner, President Trump’s senior adviser.
Why Italian Elections Matter: A New Type of Populism Is Rising; 5 Star Movement is poised to be the country’s largest party after Sunday’s national elections
Giovanni Legorano – WSJ
Last October, Beppe Grillo headlined a protest by the 5 Star Movement, the populist political party he founded. Standing outside the Pantheon he denounced a new electoral law that will limit direct voting for parliamentary candidates and help protect incumbents in national elections on Sunday.
More Than 30 Trump Aides Lose Top-Secret Clearance, Sources Say
Margaret Talev, Jennifer Jacobs – Bloomberg
Officials have been downgraded to lower-level security status; Kelly crackdown comes after Porter domestic abuse revelations
More than 30 aides to President Donald Trump have been stripped of access to top secret intelligence, two people familiar with the move said.
Robert Mueller Is Going Way Beyond Trump’s Red Line; The special counsel is digging deeper into Trump’s business ties to Russia—including how his financial interests might intersect with the origins of his presidential campaign.
Abigail Tracy – Vanity Fair
Last summer, Donald Trump cautioned that Robert Mueller would be crossing a red line if he began digging into his family’s finances. “I think that’s a violation. Look, this is about Russia,” Trump said at the time. Mueller, however, seems to believe that questions surrounding Trump’s business deals and Russian ties are intertwined. The day after Trump issued his ultimatum, reports emerged that the special counsel was, in fact, probing his overseas business transactions. But the president backed down, allowing Mueller to continue his investigation. And Mueller, unbowed, has kept digging.
Britain’s White-Collar Cops Are Getting Too Good at Their Job; In the era of Brexit, not everyone wants the Serious Fraud Office to chase rich wrongdoers out of the country.
Sufi Ring, Franz Wild – Bloomberg
Britain’s top white-collar crime enforcer left his London office one damp evening late last year, hailed a black cab to Canary Wharf, and took a seat in the front row of a wood-paneled auditorium. David Green, the director of the Serious Fraud Office, had come to hear former Prime Minister David Cameron give a speech on corruption and the spread of dirty money. Early in the Q&A portion, Green signaled for a microphone and asked a deceptively straightforward question: What did Cameron think of the anticorruption work of the SFO—an agency set up precisely to investigate and prosecute high-level corporate crime?
ESMA updates EMIR validation rules
The European Securities and Markets Authority (ESMA) has updated today its validation rules regarding the European Markets Infrastructure Regulation (EMIR) with regards to the revised technical standards on reporting under Article 9 of EMIR.
SEC Charges Ameriprise With Overcharging Retirement Account Customers for Mutual Fund Shares
The Securities and Exchange Commission today announced that a Minnesota-based broker-dealer and investment adviser has agreed to settle charges for recommending and selling higher-fee mutual fund shares to retail retirement account customers and for failing to provide sales charge waivers.
CFTC Chairman Giancarlo to Testify before the U.S. House Appropriations Subcommittee Regarding the Commission’s FY 2019 Budget Request
SEC Issues Subpoenas in Hunt for Fraudulent ICOs
Matt Robinson – Bloomberg
Regulator focused on firms it suspects of breaking the law; Agency concerned some ICOs seeking funds for fake businesses
Expanding a broad crackdown on fraudulent initial coin offerings, U.S. regulators have sent a number of subpoenas to firms they suspect might be violating securities laws, said a person with direct knowledge of the matter.
Investing and Trading
Spotify Kicks Off Its Unusual IPO; Shares of the music-streaming service could begin trading publicly by end of March
Maureen Farrell and Anne Steele – WSJ
Music-streaming company Spotify Technology SA cemented plans for its unusual initial public offering while revealing the financial particulars of a fast-growing company that upended the music industry and revolutionized how consumers listen—but spent heavily to do so.
Boom in Share Buybacks Renews Question of Who Wins From Tax Cuts; Large U.S. companies announced over $200 billion in repurchases in past three months
Akane Otani, Richard Rubin and Theo Francis – WSJ
U.S. companies are buying back their shares at an aggressive pace, stirring debates in Washington and on Wall Street about how savings from corporate tax cuts are being used and who benefits most.
It’s 2006 Again for Ex-Millennium Trader Sniffing LBO Excess
Cecile Gutscher – Bloomberg
Ex-Millennium trader set up fund to benefit from rising stress; TDC’s leveraged buyout is echo of similar deal before crisis
For trader Georges Gedeon, it’s just what he’s been waiting for: a debt-laden buyout like he saw on the eve of the global financial crisis.
Harvard Blew $1 Billion in Bet on Tomatoes, Sugar, and Eucalyptus; The university’s highly paid money managers thought they could manage risks other schools avoided.
Michael McDonald, Tatiana Freitas – Bloomberg
Six years ago, Jane Mendillo, then head of Harvard’s endowment, spent a week in Brazil, flying in a turboprop plane to survey some of the university’s growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures: an investment in a sprawling agricultural development in Brazil’s remote and impoverished northeast. There, workers would produce tomato paste, sugar, and ethanol, as well as energy after processing crops. The profits, in theory, could outstrip those of conventional stocks and bonds and keep the world’s richest university a step ahead of its peers.
The Next Warren Buffett Will Be a Woman; Everything that’s made him the world’s most celebrated investor lines up with what we’ve learned about the tendencies of female investors.
Lara Lachapelle – Bloomberg
One big difference between Warren Buffett and many other investors is, in a word, patience.
Why an Unpleasant Inflation Surprise Could Be Coming; There is a plausible, if unlikely, scenario in which inflation marks a new, dangerous trend
By Greg Ip – WSJ
Inflation is going to head up this year—on that there isn’t much debate. The real debate is over whether it will be a nonevent or something more ominous.
Champion of Ethical Investing Owns U.S. Gun Makers; Norway’s sovereign wealth fund has restrictions on tobacco and weapons companies, but gun makers are allowed in
Ken Brown – WSJ
The Norway Government Pension Fund Global, the world’s biggest sovereign-wealth fund, has been a pioneer in shunning investments it deems unethical or immoral. The $1 trillion fund’s stringent standards don’t appear to include U.S. gun makers.
New leader of $6 billion money-management firm looks to podcasts and cryptocurrencies to keep active investing relevant
At 32, Patrick O’Shaughnessy is becoming CEO of a $6 billion asset management firm, 10 years after starting there as an intern.
Wells Fargo Is Accused of Harming Fraud Victims by Closing Accounts
Emily Flitter And Stacy Cowley – NY Times
When signs of fraud appear on a customer’s account, such as a counterfeit check or an unauthorized withdrawal, a bank is required by law to investigate whether criminal activity has occurred. Wells Fargo had a simpler solution, according to a former employee: Close the account and drop the customer.
More Firings at Bank of America Amid Sexual-Misconduct Probe; Two employees were fired in hedge-fund-focused prime-brokerage unit
Rob Copeland and Rachel Louise Ensign – WSJ
Bank of America Corp. BAC -0.71% fired two employees in its hedge-fund-focused prime-brokerage unit as it expands an investigation into potential sexual misconduct in the division, people familiar with the matter said.
New York regulator asks Deutsche, other banks about Kushner loans: source
Karen Freifeld – Reuters
New York’s state banking regulator asked Deutsche Bank AG (DBKGn.DE) and two other lenders for information on their relationships with U.S. President Donald Trump’s son-in-law and White House senior adviser Jared Kushner and his family’s real estate company, a person familiar with the matter told Reuters.
Einhorn’s Greenlight Hedge Fund Down 12% After February Loss
Simone Foxman – Bloomberg
Value-oriented stock picker’s main fund fell 6.2% in month; Manager has said ‘a reversion may finally be coming soon’
David Einhorn’s main hedge fund at Greenlight Capital fell 6.2 percent in February, extending losses to 12.3 percent this year, according to a client update seen by Bloomberg.
BlackRock says outside commentaries on index funds could pose risk
Trevor Hunnicutt – Reuters
BlackRock Inc, the world’s largest asset manager, on Wednesday said that commentary by third parties suggesting possible adverse impacts from the growth in index investing could pose a risk to its business.
Man Group Needs to Feed its Inner Shark; The hedge fund manager needs to keep expanding its range of strategies.
Mark Gilbert – Bloomberg
Hedge funds regained their mojo last year, with Hedge Fund Research’s index of global managers showing positive returns every single month for the first time since at least 2010. And Man Group Plc, the largest publicly-traded hedge fund, is riding the wave of revived investor interest in the industry.
CEFC Chairman Probed by Chinese Authorities, Caixin Reports
CEFC Chairman Ye Jianming is said to have been investigated; Company bought $9 billion stake in Russian oil giant Rosneft
Ye Jianming, the founder and chairman of rapidly expanding Chinese conglomerate CEFC China Energy Co., has been investigated by government authorities, according to people with knowledge of the situation.
Brexit Talks Yield Some Hope With Citizens’ Rights Deal Closer
Tim Ross, Ian Wishart – Bloomberg
U.K. government says EU citizens arriving by end-2020 can stay; Differences still persist, mostly about family reunion
Prospects for a Brexit transition deal improved after the U.K. and the European Union appeared to converge on the thorny issue of citizens’ rights.
Brexit Talks in Peril After May Rejects EU Draft Deal
Tim Ross, Ian Wishart – Bloomberg
PM says EU text would undermine integrity of U.K. economy; EU fall-back option would keep N. Ireland in customs union
U.K. Prime Minister Theresa May vowed she will never accept a draft Brexit agreement published by the European Union on Wednesday, raising the prospect that the negotiations are heading for a breakdown. The pound fell.