Meet the Robot Who Knows How to Trade Bonds Better Than You Do

First Read

Hits & Takes
JLN Staff

On Sunday I commemorated the end of World War I and Veterans Day in the US by attending a program at Elmhurst College put on by a local VFW group. The Elmhurst College band played, local Boy Scouts participated in the flag ceremony and veterans spoke of their experience. It was a moving program. I enjoyed the historic music played the most. During the ceremony I reflected on the fact that my grandfather, for whom I am named, celebrated his 18th birthday in a trench in France. And last week, my wife’s stepfather, Robert Bergstrom, would have turned 100 years old. He was in the US Navy during World War II, on Admiral Nimitz’s staff, and was present on the battleship the USS Missouri for the signing of the surrender of Japan. Lots of emotions yesterday.~JJL

Jeff Bergstrom of JLN attended the 2018 Global Cyber Security Initiative meeting on Friday. See his recap below.~JJL

You know you’ve made a mark when CFTC Chairman Chris Giancarlo quotes your work from nearly 50 years ago. The chairman referred to Richard Sandor‘s white paper “Preliminary Design for an Electronic Market,” which is included in his newest book Electronic Trading and Blockchain: Yesterday, Today and Tomorrow. Well done Chris. We stand on the shoulders…~JK

Congratulations to Innovate Finance CEO Charlotte Crosswell, who received the Freedom of the City by the Lord Mayor of London last week. Great pic, but what exactly is the Lord Mayor wearing?~JK

B3 posted its Q3 earnings last week, a 16.2 percent jump in earnings to R$776.2 million ($209 million). The company also mentioned it will launch more than 40 products and services by the end of 2019.~JK

The FT has a whole section about Transformation, with many of the stories included in today’s Fintech section.~JJL

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Cyber Security: If You Are Not Compliant, You Are Not Secure
Jeff Bergstrom – John Lothian News
If there is one phrase dreaded by all types of businesses in the US, it has to be “government regulation.” So it was surprising to hear nearly all the speakers at the 2018 Global Cyber Security Initiative meeting last Friday agree that what their industry really needs is more regulation. That almost unbelievable claim does come with a number of caveats, however.
The afternoon session began with Dr. Sujeet Shenoi, F.P. Walter Professor of Computer Science at the University of Tulsa, who scared the crowd with stories of just how vulnerable our cyber-infrastructure is. This point has been made to us before, but it has more weight coming from someone who has personally cracked numerous computer-based systems over the years and telling you how easy it was to do. Not because he is a black hat (aka a cyber bad guy) – rather, he is a white hat who has learned that the best way to protect a system is to learn how to crack that system to understand its vulnerabilities.
/goo.gl/Y6iSQ3

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Why Chicago’s two major dailies are still hungover; The search for new direction, new leadership—and new revenue—rolls on.
Lynne Marek – Crain’s Chicago Business
It’s been 25 years since the digital media revolution began upending the newspaper industry and more than a decade since advertising income started to slump, and yet the two remaining daily newspapers in Chicago’s once-mighty media landscape remain in flux, in search of leadership, direction and revenue.
bit.ly/2qGJGrT

***** Edwin Eisendrath is out at the SunTimes. This and other news about Chicago’s struggling newspapers.~JJL

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Crypto Origin Stories: How’d You Hear About It?

JohnLothianNews.com

No one has been in the cryptocurrency field for all that long, as Satoshi’s famous white paper is only 10 years old.

In this video, Bcause Founder and Chief Marketing Officer Thomas Flake, Coinigy CFO and Director of Business Development Derek Urben, and Hehmeyer Trading + Investments CEO Chris Hehmeyer talk about their first memories of cryptocurrencies.

Watch the video »

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Protect the Rule of Law; The special counsel investigation must not be subverted. Congress and the Department of Justice must act.
Editorial Board – Bloomberg
President Donald Trump’s firing of Attorney General Jeff Sessions has pushed the capital into new and more perilous terrain. What the president desires — protection from the special counsel’s investigation and its consequences — seems clear enough. What’s unknown is whether Congress and the Department of Justice, two pillars of American democracy, will bend to Trump’s will.
/bloom.bg/2qDu8Fg

****** Bloomberg editorial board laying down the line.~JJL

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Journalistic associations from seven Latin American countries form alliance to monitor freedom of expression in the region
Paola Nalvarte – Knight Center
United not only by cultural and geographical similarities, but also by the type of problems that their countries face politically, economically and socially, seven journalistic organizations have formed the Voces del Sur alliance to systematize the monitoring freedom of expression in their countries.
bit.ly/2qJ8FuE

***** Free markets need free press!~JJL

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To Tell the Truth; Smart Contracts; Swaps Trade Execution Requirements
Gary DeWaal – Bridging the Week
A swap dealer was fined US $12 million by the Commodity Futures Trading Commission for a host of purported noncompliance issues. It was also sanctioned for allegedly not disclosing in two annual chief compliance officer annual reports potential regulatory problems of which it was aware. Separately, the Securities and Exchange Commission penalized the founder and developer of an online platform that offered trading in ether and ERC20 digital tokens through an autonomous smart contract that interfaced with the Ethereum blockchain. The SEC claimed that the platform impermissibly operated as a national securities exchange when it did not have the requisite registration or did not transact in accordance with the terms of a valid exemption. Moreover, the SEC said that the founder of the trading platform should have foreseen the likely violation.
bit.ly/2z7kkry

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Friday’s Top Three
Our top read story from Friday illustrates the times we live in – the Bloomberg op/ed piece Trump Press Conference Proves Again He’s Not Fit for Office. Second was Bloomberg’s ‘Fed Is in Denial’: How a $4 Trillion Dilemma Could Get Ugly about the Fed’s reduced holdings in Treasuries and mortgage-backed securities. Third was the JLN piece about Kevin Kennedy Bringing Nasdaq’s Derivatives Franchises Together and taking the reins at the Nasdaq Futures Exchange.

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MarketsWiki Stats
135,229,298 pages viewed; 23,311 pages; 215,452 edits
MarketsWiki Statistics

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Lead Stories

Meet the Robot Who Knows How to Trade Bonds Better Than You Do
Katie Linsell – Bloomberg
Abbie 2.0 now suggests trades to fixed-income fund managers; AllianceBernstein’s bot will learn to spot human errors
The robots have just got a step closer to managing your money. AllianceBernstein Holding LP upgraded its virtual assistant Abbie so she can now suggest the best bonds to buy and sell based on pricing, ease-of-trading and risk. Unlike any human, she can scan millions of data points to filter the universe of outstanding bonds in seconds and identify potential trades to portfolio managers using other electronic tools the firm has built.
/bloom.bg/2qHNhGb

D.E. Shaw Is a Quant King. Its Humans Are Losing Money; Old-fashioned investment strategies, relying on balance-sheet analysis and interviews, took a beating in an October rout
Rachael Levy – WSJ
D.E. Shaw Group is known as one of the most successful quantitative investment funds, using computers to make trading decisions. This year, it is facing challenges replicating its success using human beings.
/on.wsj.com/2qIcxw0

Alternatives to scandal-ridden Libor are slow to catch on; Regulators want traders to switch to new benchmarks like Sonia by 2021
Philip Stafford – FT
Alternatives to Libor underpinned less than 5 per cent of interest-rate derivatives traded last quarter, revealing the size of the challenge facing regulators trying to wean financial markets off the scandal-tainted benchmark.
/on.ft.com/2qKaE1v

SGX and national regulator develop tokenised asset settlement; The Monetary Authority of Singapore and Singapore Exchange developed two Delivery versus Payment capabilities for the settlement of tokenised assets across different blockchain platforms.
Jon Watkins – The Trade
Singapore’s markets regulator and national exchange said they have successfully leveraged blockchain technology for settlement of tokenised assets.
bit.ly/2qDwtA2

Do not assume the EU will give the UK time to rerun Brexit vote; The bloc has good reasons not to extend the March 29 deadline for withdrawal
Wolfgang Münchau – FT
Throughout the Brexit talks, the UK has been plagued by misjudgments over the EU’s negotiating position. Nowhere is the misjudgment bigger — and, potentially, with more tragic consequences — than over whether the EU would extend the Brexit deadline of March 29, a prerequisite for a second referendum. There is no simple yes or no answer. There are specific circumstances in which the EU might choose to extend, but there are many more when it might not.
/on.ft.com/2qIexo0

How’s China’s Opening to the Financial Sector Going?Germany Targets ‘Thousands’ of Brexit Bankers for Frankfurt
Steven Arons and Nicholas Comfort – Bloomberg
Germany will lure thousands of finance jobs to Frankfurt from London after Britain exits the European Union — if the country’s Finance Ministry gets its way.
/bloom.bg/2qH2JCc

How’s China’s Opening to the Financial Sector Going?
Bloomberg News
Last year, China pledged to allow overseas financial firms greater access to the world’s second-largest economy. Then came the trade war with the U.S., raising concerns that President Xi Jinping could retaliate by going back on his vow. Xi now says the opening is steadily widening. But the take-up by foreign companies has been slow.
/bloom.bg/2qJ8WgQ

Germany Targets ‘Thousands’ of Brexit Bankers for Frankfurt
Steven Arons and Nicholas Comfort – Bloomberg
Germany will lure thousands of finance jobs to Frankfurt from London after Britain exits the European Union — if the country’s Finance Ministry gets its way.
/bloom.bg/2qH2JCc

Entrepreneurship Boosts Well-Being By Meeting Key Psychological Needs – Study
Dinah Wisenberg Brin – Forbes
It’s no secret that launching a business can generate stress. A new study suggests, however, that entrepreneurship also enhances well-being by meeting vital psychological needs.
bit.ly/2qGHQY1

Why ‘Free Trading’ on Robinhood Isn’t Really Free; Brokerage takes sizable rebates for directing clients’ orders, offsetting for some investors the benefit of zero commissions
Alexander Osipovich and Lisa Beilfuss – WSJ
In the 1990s, online brokerages like E*Trade Financial Corp. were the hot new way to play the stock market.
/on.wsj.com/2qJeGaI

Wall Street equity traders to get biggest bonuses in 2018: study
Reuters
Equity traders on Wall Street are expected to take home the biggest bonuses this year as a surge in volatility boosted client activity, but 2019 may not be as rosy, compensation firm Johnson Associates Inc said on Monday.
/reut.rs/2FfWrne

Exchanges, OTC and Clearing

MAS and SGX successfully leverage blockchain technology for settlement of tokenised assets
SGX
The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) have successfully developed Delivery versus Payment (DvP) capabilities for the settlement of tokenised assets across different blockchain platforms. This will help simplify post-trade processes and further shorten settlement cycles.
bit.ly/2qKbcEB

Steep increase in the Eurex-LCH basis – what’s going on? Opportunity for fixed receiver swap clients!
Eurex Clearing Board Member Matthias Graulich
In my last blog on euro clearing, I wrote about buy-side execution costs and that execution prices both in terms of bid-offer spread as well as the basis reached the same level as execution prices for LCH cleared euro swaps. While the bid-offer spreads are still extremely competitive (same spread and size quoted for Eurex and LCH euro swaps) we observed a steep increase in the basis for euro swaps between LCH and Eurex Clearing during the last few weeks. But let me point out: I cannot see a fundamental reason for this development. I think the development is encouraging for fixed receiver clients to take advantage of a significantly better price at Eurex.
bit.ly/2qJoT6Y

Euronext publishes Q3 2018 results; Strong Performance Across All Businesses And First Achievements Of 2019 Targets
Euronext
Euronext, the leading pan-European exchange in the Eurozone with 1,300 listed issuers, today announces its results for the third quarter of 2018.
bit.ly/2qIxkPN

Pioneering CCP transparency to maintain safer markets (part 6)
CCP transparency series
Eurex
Eurex Clearing is committed to transparency and the reproducibility of margin figures. New technologies and the expectations of market participants are rapidly changing, and meeting these goals is a continuous process.
bit.ly/2qJkpgC

Fixed Income Highlights – November 2018 edition
Eurex
Volumes in core European rate futures and options increased substantially in light of the recent equity market downturn and continued geopolitical risks. Yields for 10-year German government bond debt moved between 35 and 55 basis points over the past month. While this has led to an increase in implied and realized volatility, we have failed to break out of the 4-6% corridor for any meaningful length of time. Volatility spikes have largely remained short-lived with program sellers fading the move higher in bund volatility.
bit.ly/2qPNPKd

New green bond segment on the Frankfurt Stock Exchange
Deutsche Börse Group
Deutsche Börse has launched a new green bond segment on the Frankfurt Stock Exchange. The fund contains 150 bonds that comply with the International Bond Markets Association’s Green Bond Principles .
bit.ly/2qHr8HV

Inaugural Cboe Risk Management Conference (RMC) Tel Aviv Features Packed Program, Strong Attendance
Matt Moran – Cboe
More than 150 financial professionals, including top traders, strategists and researchers attended the inaugural Cboe Risk Management Conference (RMC) in Tel Aviv, Israel on November 6. A variety of topics related to the management of risk and return in investment portfolios were discussed by 17 speakers at RMC Israel, including the three speakers pictured below: Sheldon Natenberg (left), Andy Lowenthal (center), and David Blitzer (right).
bit.ly/2FiBDLY

Fintech

Dash Financial Technologies Adds James Doherty As Head Of Equity Product
Dash
Dash Financial Technologies, the industry’s leading capital markets technology and execution provider, today announced the addition of James Doherty as Managing Director, Head of Equity Product, the latest demonstration of the firm’s deepening commitment to performance and innovation in the highly-demanded equity vertical.
bit.ly/2PWg6wA

Banks find a use for blockchain: cross border payments; The JPMorgan-led Interbank Information Network is starting to work at scale
Laura Noonan – FT
Finally banks may have found a problem that blockchain is able to solve now and at scale: cross border currency transfers.
/on.ft.com/2qHoWAb

Arizona sandbox gives fintech start-ups a regulatory path to US; Fragmented US rules landscape has put off many early-stage companies
Jemima Kelly – FT
Arizona, often associated with golf-playing pensioners and selfie-taking Grand Canyon visitors, might not seem the most obvious place to look for cutting-edge financial technology.
/on.ft.com/2qH4QG8

Online lending: US fintechs gain from behaving more like banks; Platforms once out to change ‘the entire system’ move away from ‘tech’ — and risk
Ben McLannahan – FT
When Noah Breslow rang the opening bell at the New York Stock Exchange in the week before Christmas 2014, it was a high point — perhaps the high point — for the fledgling online lending industry.
/on.ft.com/2qJfRH4

Fintech: Regulation trips Canada’s stock exchange blockchain test; The legal side, rather than technology, proves the problem for central bank pilot
Joshua Oliver – FT
Stock exchange operators from Shanghai to New York are looking at distributed ledger technology (DLT) in hopes that it can make their computer systems more efficient, reliable, and secure.
/on.ft.com/2qJazLO

Five ways banks are responding to the fintech threat; Acquisitions, partnerships and ‘digital attacker’ approach are among the defences
Martin Arnold – FT
Online banking customers are a third more profitable than traditional bank-based clients, Piyush Gupta, chief executive of Singapore’s biggest bank, DBS, told investors a year ago during a presentation of the bank’s digital strategy. The remark sent DBS shares sharply upwards.
/on.ft.com/2qJauru

Goldman Sachs just bought a one-person startup, and it’s betting it could change the day-to-day lives of its bankers
Dakin Campbell – Business Insider
Goldman Sachs has been searching for years for an investment-banking equivalent to the vaunted risk-management system its traders use. It may have just found it.
/read.bi/2qHhViE

SIX FinTech Ventures Invests In FinTech Companies Vestr And Shift Cryptosecurity
MondoVisione
SIX FinTech Ventures, the CHF 50 million corporate venture fund of SIX, has invested in its first two early stage startups, both of which aim to revolutionize the Swiss Financial Centre.
bit.ly/2FfHLV2

Keith Todd joins Horizon as advisory board member
Horizon Software
Horizon Software (Horizon), the world’s leading provider of electronic trading solutions and algorithmic technology, has announced today the appointment of Keith Todd CBE as a member on its advisory board.
bit.ly/2FrM2EW

Cryptocurrencies

The unholiest of holy wars: “Satoshi” vs “Bitcoin Jesus”; “I AM Satoshi. Have a nice life.”
Jemima Kelly – FT
What is bitcoin? Bitcoin is, in theory, a peer-to-peer digital “currency” invented just over ten years ago by someone — or some group — calling themselves Satoshi Nakamoto. It’s currently trading at around $6,400, and goes by the ticker “BTC”. We can all agree on those basics, right?
bit.ly/2qHMhlp

Winklevoss lawsuit against Charlie Shrem peeled out in top gear, but now may be stuck in neutral
Stephen D. Palley – The Block Crypto
The Winklevoss lawsuit against Charlie Shrem provides some gossipy insights about early bitcoin adopters set against a backdrop of dry Dickensian procedural minutiae and sharp elbows. It’s also a lesson in tactics — if your first salvo in litigation is to shoot your heavy artillery, you better think ahead to what will happen if you miss your target.
bit.ly/2qDtHL8

Execs are fleeing Mike Novogratz’s Galaxy Digital as the firm makes a big pivot towards Wall Street
Frank Chaparro – The Block Crypto
Mike Novogratz’s Galaxy Digital is pivoting to address more institutional business;As part of those efforts, the firm has seen three major execs leave and it is shutting an office
The good ol’ Friday news dump.Galaxy Digital, the merchant bank run by famed trader Mike Novogratz, announced on Friday evening that two major executives are stepping down from their positions as the firm shifts its focus to larger institutions from small ICOs. But no one noticed. “The Company is adapting to the regulatory framework and the opportunities it is currently seeing, and therefore repositioning its Advisory business from focusing on small ICO advisory and blockchain consulting to instead serve larger, more institutional clients in the space,” the firm said. Notably, the firm was known to operate an advisory business as well as one in trading and venture capital. As part of the shift, the firm is shutting its Vancouver office.
bit.ly/2qPGYjX

CFTC Fines Bitcoin Trader $1.1 Million for Crypto Fraud
Yogita Khatri – Coindesk
The U.S. Commodity Futures Trading Commission (CFTC) has jailed a bitcoin trader and fined him over $1 million for running a fraudulent bitcoin and litecoin scheme.
According to a press release issued Friday by the CFTC, the trader, Arizona resident Joseph Kim, admitted to defrauding investors of hundreds of thousands of dollars after misappropriating more than $600,000 of his previous employer’s funds.
bit.ly/2z7lN12

Crypto Token Airdrops Are a Marketing Ploy (and That’s OK)
Michael J Casey – Coindesk
In February 2014, when growing interest in bitcoin spawned the first wave of “altcoins,” the tiny country of Iceland played host to a new idea for achieving mass adoption.
A developer using the pseudonym Baldur Friggjar Odinsson, vowing to help his 330,000 countrymen escape six years of post-crisis capital controls, created auroracoin and promised to distribute 31.8 of them to each person on Iceland’s national registry of citizens.
The idea of the “airdrop” was born.
It was a success. Briefly. Then it was a flop.
bit.ly/2z8Dsp4

Crypto-Friendly Robinhood under the Hood: Payments for Order Flow
CCN
Robinhood is no doubt quite a revolutionary start-up. They have managed to completely rewrite the rulebook when it comes to retail brokerage and trading.
bit.ly/2FfNNoR

Cryptocurrencies Have Failed, And Blockchain Still Has Yet To Be Proven Useful
Yuwa Hedrick-Wong – Forbes
There are two common patterns in technological invention and its subsequent commercialization. The first is a technological breakthrough that sparks interests in commercializing it. The invention of the transistor in the legendary Bell Lab in the 1940s (which later gained the three inventors the Nobel Prize in Physics) fits this pattern. It took a while to work out the commercial applications of the transistor, beginning with the radio, then, in a powerfully transformative way, in computers.
bit.ly/2JXRgH8

Millennials are sticking with cryptocurrency
Gregory Bresiger – NY Post
Millennials have their own thoughts on investing, and a large part of the cohort are still interested in bitcoin. These young people, many of whom have soured on conventional investing, are becoming increasingly interested in cryptocurrency, according to a new study.
/nyp.st/2z6hZgt

He Was a Blockchain Believer. Now He’s a Heretic. But He’s Still Bullish on Bitcoin
Avi Salzman – Barron’s
Bitcoin’s wild price swings have turned off much of Wall Street. But the blockchain technology behind it has caught the eye of major financial companies, which have invested millions in figuring out how it could streamline their operations.
bit.ly/2TbIKc2

Swiss cryptocurrency firm X8 obtains Islamic finance certification
Bernardo Vizcaino – Reuters
Nov 12 (Reuters) – Switzerland-based financial technology firm X8 AG has obtained certification from Islamic scholars for its digital currency, with plans to expand its business in the Middle East, a senior executive said on Monday. Several fintech firms are integrating their technology into the field of Sharia-compliant finance, with regulators and financial exchanges in the Middle East region keen to attract new business and encourage innovation in the sector.
/reut.rs/2FkmCtb

Stellar Lumens (XLM) Rises Significantly Thanks To The Ongoing Massive Airdrop
Uma Johnson – Smartereum
A while ago, the largest airdrop in the history of cryptocurrencies started and XLM was the chosen coin. Blockchain, a cryptocurrency-based wallet provider announced that it is going to host an airdrop for all its customers in partnership with the Stellar Development Foundation. The airdrop, which is going to last for six months, is referred to as the largest airdrop in cryptocurrency history as it will involve XLM tokens worth $125 million.
bit.ly/2Dy7AhJ

Politics

Republican Tolerance for Despotism Keeps Rising; A party of enablers, sycophants, cowards and sellouts.
Albert R. Hunt – Bloomberg
Any other Republican president — Richard Nixon, Ronald Reagan, George Bush — would have campaigned in the final week of the midterm elections on the booming economy, unemployment under 4 percent, rising real wages and a stock market up 25 percent. Donald Trump instead chose to close with racist rants about hordes of terrorists and brown people about to invade the Rio Grande. A man of dark instincts and impulses, he is incapable of uplift and hope; he traffics in fear and hate.
/bloom.bg/2qJl3uy

U.S. on a Course to Spend More on Debt Than Defense; Rising interest costs could crowd out other government spending priorities and rattle markets
Kate Davidson and Daniel Kruger – WSJ
In the past decade, U.S. debt held by the public has risen to $15.9 trillion from $5.1 trillion, but financing all of that debt hasn’t been a problem. Low inflation and strong global demand for safe U.S. Treasury bonds held the government’s interest costs down.
/on.wsj.com/2qJfUCS

Navarro Warns Wall Street to Stay Out of China Trade Talks
Andrew Mayeda and Shawn Donnan – Bloomberg
White House aide calls out Goldman Sachs as Xi meeting nears; China says it’s open to talks but won’t be bullied by the U.S.
White House trade adviser Peter Navarro warned Wall Street bankers and hedge-fund managers to back down from their push for President Donald Trump to strike a quick trade deal with China’s Xi Jinping.
/bloom.bg/2qPIse1

I’m not under political pressure to merge, Deutsche Bank’s CEO says
Reuters
Deutsche Bank’s (DBKGn.DE) Chief Executive Christian Sewing said he was not experiencing pressure from the German government to merge with smaller rival Commerzbank (CBKG.DE), adding that he was comfortable with the progress the troubled lender was making on cost-pruning.
/reut.rs/2Fklu8V

Regulation

Andrew Bailey must pay the price for FCA failures; The financial regulator’s culture and governance do not come up to standard
Alan Miller – FT
It is ironic that the Financial Conduct Authority this year said that “culture and governance is a priority” for the UK regulator. Based on my examples, below, I believe that the FCA’s own culture and governance fails the test on consumer protection, integrity and competition — all statutory objectives.
/on.ft.com/2qJ7X08

ECB’s Guindos Calls for Tighter Oversight of Asset Managers
Piotr Skolimowski – Bloomberg
Regulators need tools to tackle rising risks in shadow banking; Vice president also targeted ETF sector in speech in Frankfurt
The European Central Bank’s vice president warned asset managers that they’ll face tighter scrutiny as regulators try to steer against future financial crises.
/bloom.bg/2qGW233

U.S. Fed to reconsider ‘stress capital buffer’ plan: official
Pete Schroeder, Michelle Price – Reuters
Randal Quarles, head of supervision at the Federal Reserve, said on Friday the central bank would re-propose aspects of a bank capital rule known as the “stress capital buffer” due to industry concerns.
/reut.rs/2qGJXep

U.S. regulator told AIG to improve reinsurance disclosures
Suzanne Barlyn – Reuters
The U.S. Securities and Exchange Commission told American International Group Inc (AIG.N) to improve disclosures about its use of reinsurance to mitigate losses in its property and casualty unit, according to correspondence made public on Friday.
/reut.rs/2qIWLke

A new commissioner at America’s main securities regulator causes a buzz; Hester Peirce has given a series of speeches about the downsides of government intervention
Economist
For all the talk about deregulation under President Donald Trump, when it comes to the financial industry the word used by many is “tailoring”—meaning trimming the loose threads of tangled rules, rather than unpicking them. An exception is Hester Peirce, who in January became one of the five commissioners at the Securities and Exchange Commission (sec), America’s most important financial regulator. Since her appointment she has given a series of speeches with a polite tone and blunt message about the downsides of government intervention.
/econ.st/2qJci3M

ESMA updates its CSDR Q&As
ESMA
The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers (Q&As) regarding the implementation of the Central Securities Depository Regulation (CSDR).
bit.ly/2FklhCF

ESMA Updates Market Abuse Q&A
ESMA
The European Securities and Markets Authority (ESMA) has updated its Questions and Answers (Q&As) document regarding the implementation of the Market Abuse Regulation (MAR).
bit.ly/2FhVOcK

CFTC Orders Former Virtual Currency Trader to Pay More than $1.1 Million for Fraudulent Bitcoin and Litecoin Scheme
CFTC
The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Joseph Kim (Kim), of Phoenix, Arizona, requiring Kim to pay more than $1.1 million for a fraudulent Bitcoin and Litecoin scheme. In the order, Kim admits to orchestrating a fraudulent Bitcoin and Litecoin scheme that led to more than $1 million in losses, of which Kim misappropriated more than $600,000. Also today, Kim was sentenced to 15 months on related criminal charges filed in the United States District Court for the Northern District of Illinois.
bit.ly/2FklmpX

Britain’s financial regulator is slapping down the City’s “bad apples” and won’t let up any time soon
Callum Burroughs – CTPost.com
The Financial Conduct Authority has banned 23 so-called “bad apples” from working in the industry in the past 12 months.
bit.ly/2FfNElj

Investing and Trading

How an Intelligence Expert Helps Wall Street Mavens Think Smarter
Landon Thomas Jr. – NY Times
Shane Parrish was a cybersecurity expert at Canada’s top intelligence agency and an occasional blogger when he noticed something curious about his modest readership six years ago: 80 percent of his followers worked on Wall Street.
/nyti.ms/2qH5pQg

Companies need to reduce the noise for investors; The trend towards more frequent and detailed corporate reporting may have gone too far
Robin Wigglesworth – FT
In 1903 US Steel released the country’s first annual report, a slim and delightfully direct volume where the only padding was 21 pages of photos of smoky factories and sturdy railway cars owned by the corporate giant — which went on to become the first $1bn company in history.
/on.ft.com/2qGWOwZ

Now is the time for stock and credit pickers to shine; Bruised long-short strategies face stern test as investors wean off easy money
Michael Mackenzie – FT
Plenty of investors are still licking their wounds after a grim October, none more so than the hedge fund industry, which has suffered its worst monthly performance in seven years.
/on.ft.com/2qH4gIs

Exclusive: Agribusiness giant ADM made buyout approach to Argentina’s Molinos – sources
Hugh Bronstein, Jonathan Saul – Reuters
Top U.S. grain merchant Archer Daniels Midland Co (ADM.N) has approached Argentine soy crusher Molinos Agro (MOLA.BA) about buying the company’s livestock feed and soyoil manufacturing plant, and talks may continue, three sources said.
/reut.rs/2qFIWDc

An investing strategy that’s withstood the worst stock market crashes since the 1920s is on the verge of a comeback — here’s how you can profit from it
Akin Oyedele – Business Insider
Long-suffering value investors could soon get the resurgence they have been waiting for.
/read.bi/2qIW4Ya

Viola: We’re In A Post-peak Demand Period For Oil
Evan Peterson – Open Markets
When Vincent Viola began his career as a trader in 1982 at the New York Mercantile Exchange, news swirled around a global “supply glut” that might destabilize crude oil prices. When we talked with him late last year, there was news of another oil glut. In both scenarios, U.S. production played a key role. Today’s version, however, is different for the U.S.
bit.ly/2qGrDBZ

Institutions

Banks Have a Solution for Their Identity-Fraud Woes: The DMV; Identity verification, a perennial problem for banks, has taken on greater importance in the digital age
Telis Demos and Emily Glazer – WSJ
Big banks are enlisting the local DMV in their fight against identity fraud. Lenders including JPMorgan Chase & Co., Bank of America Corp. , Wells Fargo & Co. and Citigroup Inc. are looking for ways to link up with databases at state departments of motor vehicles and other government offices to make sure potential customers are who they say they are.
/on.wsj.com/2qGYkPH

HSBC plots return to Brazil as new chief targets growth; Rebuilding plans come three years after bank sold most of its operations in the country
Stephen Morris and David Crow in London – FT
HSBC is planning to rebuild its presence in Brazil three years after selling most operations in the country, as new chief executive John Flint works towards his target of putting Europe’s largest bank back into “growth mode”.
/on.ft.com/2qJlaGw

Avoiding compliance was part of Goldman culture, ex-banker claims; Leissner, after guilty plea over 1MDB, told court he acted to benefit the bank
Kadhim Shubber in Washington – FT
Tim Leissner, the former Goldman Sachs partner who pleaded guilty to crimes in connection to the 1MDB scandal, claimed concealing facts from internal compliance officials was “very much in line” with the culture at the bank.
/on.ft.com/2qKcLCt

Only a Third of Hedge Funds Charge ‘2 and 20’ Fees, Says Expert
Tom Teodorczuk, Financial News
The standard “2 and 20” hedge fund fee model is now used by only 30% of hedge funds, according to an industry expert.
bit.ly/2qJdAM2

Anthony Scaramucci is looking to raise as much as $3 billion for a new fund that invests in low-income neighborhoods
Meghan Morris- Business Insider
SkyBridge cofounder Anthony Scaramucci said in an interview with Business Insider that he’s seeking to raise $2 billion to $3 billion through a nontraded real-estate investment trust.
Anthony Scaramucci’s alternative investment firm, SkyBridge Capital, is creating a new product focused on economically depressed areas, he told Business Insider in an interview on Friday.
/read.bi/2qEOaiA

Credit Suisse escapes criminal action over $2bn Mozambique scandal; UK’s financial watchdog drops probe into loans arranged to fund fishing fleet
Caroline Binham and Patrick Jenkins in London – FT
Credit Suisse has escaped criminal prosecution by the UK’s financial watchdog over the $2bn “tuna bond” scandal in Mozambique, where loans to set up a state fishing fleet vanished.
/on.ft.com/2qIao3q

Regions

China Signals Tougher Yuan Management at Expense of Market Role
Bloomberg News
PBOC drops phrase from monetary report it had used since 2013; Officials no longer comfortable with yuan’s drop, Xia Le says
China signaled tougher management of the yuan, dropping a phrase underlining the importance of market forces from a key policy report for the first time in five years.
/bloom.bg/2qJ7jzK

India’s Volume Of Monthly Digital Transactions Rise Three Fold Since Demonetisation
Shreya Ganguly – Inc42.com
India’s Volume Of Monthly Digital Transactions Rise Three Fold Since Demonetisation
The number of digital payment transactions that took place in August was recorded at 244.81 Cr, a three-fold increase from October 2016, a Ministry of Electronics and Information Technology (MeitY) release showed.
bit.ly/2qGTzWl

Ping An’s hedge against future risks; The world’s largest insurer, carved out of Chinese state entities, has bet on fintech and AI as the way for it to continue to grow. But will it work?
Oliver Ralph and Don Weinland in Shenzhen – FT
Micro-facial recognition for bank loans, AI-powered health clinics and algorithms to assess seaside traffic flows. Given some of the things that it now does it would be easy to mistake Ping An for a tech company. Yet as global technology groups such as Amazon and Facebook, as well as China’s Tencent and Alibaba, push from social media and ecommerce into banking and insurance, Ping An is moving in the opposite direction.
/on.ft.com/2qJiQPO

Peru hopes to join crowded lithium market; Investors are worried about an oversupply of key electric vehicle battery ingredient
Gideon Long in Lima – FT
It has long been known that Latin America’s “lithium triangle” of northern Chile, northern Argentina and southern Bolivia contains some of the biggest deposits of the key electric vehicle battery ingredient on the planet, in the salt flats of the Andes and the Atacama Desert.
/on.ft.com/2qIsty3

India’s shadow banks risk repeating crisis-era mistakes; Non-bank financial companies have become a crucial part of the country’s economy
Patrick Jenkins – FT
Much is sometimes made of the similarities between Indian prime minister Narendra Modi and US president Donald Trump. Both men exhibit populist anti-establishment appeal. Their attitudes to finance bear comparison, too. The attempted interference in central bank independence in the run-up to elections. The rapid expansion of a fragile shadow banking market. The blithe disregard that they are probably fuelling another financial crash.
/on.ft.com/2qDsMdE

Brexit

German minister tries to calm row over post-Brexit derivatives trading
Olaf Storbeck – FT
Germany’s deputy finance minister Jörg Kukies has attempted to placate an EU-US row over Europe’s post-Brexit derivatives trading regulation.
/on.ft.com/2qJ7zyI

Citigroup scouts bigger Paris office as Brexit plans ramp up; Traders sway bank’s decision, lobbying for France partly for its proximity to London
Laura Noonan in New York, Stephen Morris in London and David Keohane in Paris – FT
Citigroup is looking for a bigger office in Paris after boosting the number of trading jobs it plans to relocate to the city as the US bank steps up preparations for Brexit.
/on.ft.com/2qFjLkd

Only ‘preliminary’ analysis done on post-Brexit US trade deal; Trade department turns down information request saying research is not complete
Save to myFT
Jim Pickard in London – FT
Britain’s Department for International Trade has admitted that it has only carried out “preliminary” modelling into a potential US-UK post-brexit trade deal — and has refused to make the information public.
/on.ft.com/2qJl4i8

Nomura’s Ashley Laments Brexit Danger as He Faces European Slump
Donal Griffin , Manus Cranny , and Anna Edwards – Bloomberg
Ashley cites concern about splitting up European finance; Says ‘seperate pools’ for capital, liquidity ‘very dangerous’
Steve Ashley, charged with turning around a slump at Nomura Holdings Inc.’s investment bank, faces one of his biggest challenges thousands of miles away from Japan.
/bloom.bg/2qGbfkP

Brexit Transition Period Is Most Crucial for BOE, Broadbent Says
David Goodman and Lucy Meakin – Bloomberg
BOE deputy governor speaks in interview on CNBC television; Productivity and investment already hit by Brexit, he says
A post-Brexit transition period is the most important part of negotiations for the Bank of England’s outlook, according to Deputy Governor Ben Broadbent.
/bloom.bg/2qJYNRj

JPMorgan Leads $283 Billion Brexit Shift to Frankfurt
Steven Arons – Bloomberg
The major U.S. investment banks are planning to shift about 250 billion euros ($283 billion) of balance-sheet assets to Frankfurt because of Brexit, several people briefed on the matter said.
/bloom.bg/2qKcTSt

Brexit negotiators say draft treaty is close; Two sides aiming for political approval next week
November 9, 2018 8:51 pm by Mehreen Khan in Madrid, Alex Barker and Jim Brunsden in Brussels – FT
EU and UK negotiators are close to a breakthrough on the draft of a Brexit deal but are still struggling with disputes over fishing rights and the how to end “backstop” arrangements for the Irish border, according to EU diplomats.
bit.ly/2qJdSCC

Paris property benefits from Brexit bounce; Relocations from London as well as oil money from the Middle East are driving demand
Hugo Cox – FT
As the UK’s exit from the EU approaches, and many of London’s leading financial institutions look to Paris for their relocation plans, agents in the city are enjoying a Brexit bounce. Currently, 14 major financial services firms — most of them investment banks — have confirmed staff moves to Paris or plans to open a subsidiary, meaning that 2,000 jobs are set to move from London to Paris or be newly created in Paris, according to PwC.
/on.ft.com/2qDtWG2

Theresa May fails to block court case that could allow the UK to reverse Brexit
Thomas Colson – Business Insider
Theresa May could be handed the power to unilaterally reverse Brexit after a court refused an appeal by her government to block a landmark case on the issue being referred to European courts.
/read.bi/2qFwSlg

Brexit stymies inflows into UK-domiciled funds; British investors switch into offshore vehicles amid uncertainty over negotiations
Chris Flood – FT
Uncertainty over the outcome of Brexit negotiations is knocking British investor confidence, with inflows into UK-domiciled funds in the second half of 2018 running at less than half the pace of the same period last year.
/on.ft.com/2qDspjg

Miscellaneous

Fortune Magazine to Be Sold to Thai Businessman for $150 Million; The sale to Chatchaval Jiaravanon gives the business publication a new owner for the second time this year
Jeffrey A. Trachtenberg – WSJ
Meredith Corp. MDP -0.45% said Thai businessman Chatchaval Jiaravanon has agreed to purchase Fortune magazine for $150 million in cash, a sale that gives the storied business publication a new owner for the second time this year.
/on.wsj.com/2FlDPlN

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