Week InReview

Crypto bots .

Is spoofing illegal? Well, sure, yes. There is a  law against spoofing  in U.S. commodity markets. In U.S. equities markets, where there is no explicit law against spoofing, it is still punished as a  variety of fraud . Submitting orders to buy a stock, without intending to buy that stock, in order to push up the price so you can sell it: It sounds dishonest, and there's no particular problem with calling it fraust

But outside of electronic securities and commodities markets, things are a little murkier. A bond investor who gives a dealer the impression he might want to buy some bonds, asks for a two-sided market, and then sells the bonds to the dealer might just be a savvy trader, not a fraudster. Big activist shareholders of public companies sometimes offer to buy those companies, not because they really want to, but to put the companies in play so they can sell to a higher bidder. More broadly, creating an impression of demand for a product so that you can sell more of it is just fine in many businesses. Fashion brands pay influencers to wear their products so they can sell more of them. A mayo company bought some of its own mayo so that stores would order more of it; this was controversial but not obviously illegal.

There is I think no general rule to the effect of "you can't create the impression of demand for something in order to sell more of it." Sometimes you can, and sometimes you can't. 

Friday | Sep 27, 2018
After a  global scandal that cost them $14 billion in fines and settlements, banks are taking no chances -- they're even cracking down on currency traders for offenses as minor as uttering the f-word on the phone. (Bloomberg Investing | Oct 3)

Fed rethinks how to define a big bank
Central bank may change criteria it uses to apply rules for the biggest U.S. lenders; critics worry it would weaken moves to prevent another financial crisis. (The Wall Street Journal | Oct 2)

Institutional investors representing more than $5 trillion in assets - as well as a group of investors, state treasurers, public pension funds, unions, legal experts and ESG advocates - are calling on the Securities and Exchange Commission to require public companies to uniformly disclose environmental, social and governance information. (Pensions & Investments | Oct 2)

Legacy subprime mortgages seen as gift that keeps giving
In the aftermath of the financial crisis, a $60 million slice of subprime mortgage bonds from 2007 traded hands for as little as two cents on the dollar. Now, they're higher than 90 cents. (Bloomberg Markets | Oct 1)

Cryptocurrency: CFTC chair wants thoughtful U.S. approach
Commodity Futures Trading Commission Chair J. Christopher Giancarlo says cryptocurrencies can be investible yet free from manipulation or fraud. Giancarlo says the US is a world leader on initiatives such as bitcoin futures, options, and clearing facilities but calls for "a more thoughtful and intelligent approach, just as the U.S. Congress did 20 years ago in the early days of the internet." (CNBC | Oct 1)
New NAFTA agreement
Banks, asset managers claim victory on data
(Oct 1) -- Securities firms, banks, and asset management companies scored a victory on data storage in a deal that replaces the North American Free Trade Agreement. The new trilateral pact among the U.S., Canada, and Mexico will ban rules requiring data to be stored locally and prohibit restrictions on cross-border data flows for business purposes. The financial services industry has been lobbying for a trade pact provision protecting against data localization requirements by countries that force global banks to keep servers in each country where they do business.
'A bunch of yellow lights' flashing on economy
Boston Fed's Rosengren
(Oct 1) -- Federal Reserve Bank of Boston President Eric Rosengren says the economy and financial markets are offering a number of warnings that could eventually threaten the stability of the U.S. economic expansion.
  • "I don't think there's an alarm going off, but I do think there are a bunch of yellow lights," Rosengren says in response to questions about financial stability following a speech in Boston
  • Says over-valuations in commercial real estate could contribute to the severity of the next recession
    • "I do worry that given a fairly slow population growth, we may be in the process of overbuilding"
  • Says next negative shock could come from abroad; he's concerned about growth in China potentially slowing
  • U.S. and Europe are poorly positioned to handle the next downturn because of low monetary and fiscal policy capacity
  • NOTE: Rosengren votes on policy-making FOMC in 2019
The Cyber Cafe
Cybersecurity news every Friday
China used tiny chip in hack that infiltrated U.S. companies
Chinese spies secretly put backdoors embedded in "a tiny microchip, not much bigger than a grain of rice" into circuitboards assembled in China and used by lots of big U.S. companies and government agencies.

World Wide Web inventor's radical new plan to give users control over data
Tim Berners-Lee, inventor of the World Wide Web, has launched a startup with MIT called Solid, an open-source project that gives users control over their personal data when using the internet. Berners-Lee says he will focus more of his energy on Solid through his company known as Inrupt and will take a sabbatical from MIT and spend less time working with the World Wide Web Consortium.

Big U.S. banks face increase in attempted cyberattacks
Federal officials, including the Treasury Department, stepped up warnings to large banks to be vigilant. Some large U.S. banks have seen an uptick in attempted cyberattacks in recent weeks, at a time when federal officials are stepping up warnings to banks about cyberthreats. 
Binge reading disorder
Hand-curated, chosen with love
Is this the silver bullet that will save active management?
A consortium of academics and investors is calling for active managers to use artificial intelligence techniques called ensemble methods, which it argues can beat both active and passive funds.

Conspiracy theories and the Federal Reserve
Why is the Federal Reserve the subject of so many conspiracy theories? That is one of the favorite research topics of Peter Conti-Brown, a financial historian and legal scholar at the Wharton School of the University of Pennsylvania. He also researches central banking, financial regulation and public finance, with a particular focus on the history and policies of the Federal Reserve System.

Everything you should do before - and after - you lose your phone
The pricey pocket computers we carry around with us at all times are prime targets for thieves - as well as very easy to leave behind in subway cars or on coffee shop tables. Here are the preparations you can take before the worst happens, and what to do if it does.
- Wired