Week InReview
Friday | May 16, 2019
Game Changer

"The Wild West of cryptocurrency trading is getting something typically associated with the safest of savings accounts: FDIC protection.

"SFOX, a prime dealer and trading system in the $208 billion crypto market, is partnering with New York-based M.Y. Safra Bank to offer its traders deposit accounts backed by the Federal Deposit Insurance Corp. — the same federal agency that protects bank customers up to $250,000 per financial institution.

"It’s the first time FDIC-insured accounts will be linked to a crypto prime dealer, according to SFOX, and allows traders to keep funds in accounts under their own names. Most banks don’t allow their customers’ accounts to be linked to cryptocurrency trading. The FDIC insurance protects the cash leg of a crypto trade and doesn’t apply to the Bitcoin, Ether or other digital assets SFOX users buy on the exchange." 

in case you missed it...
U.S. companies have been buying back their own shares at a blistering pace for more than a year. The roughly 86% of firms in the S&P 500 that have reported results for the first quarter repurchased $188 billion worth of their own stock during that time, according to S&P Dow Jones Indices, on pace to be the second-highest amount on record based on data going back to 1998. While data isn’t yet available for the second quarter, companies ramped up buying during the two previous market pullbacks. (The Wall Street Journal | May 16)

The latest effort to impose restrictions on Wall Street bonuses is advancing as key regulators review a draft of new limits, according to Joseph Otting, head of the Office of the Comptroller of the Currency. The OCC and the Securities and Exchange Commission are two of the agencies that must sign off on a rule, required by the Dodd-Frank Act of 2010, to restrict pay practices with the aim of curbing excessive speculation by executives. (Bloomberg Markets | May 16)

A futures exchange is set to blunt the advantages of ultrafast traders by imposing a split-second delay on some trades. Intercontinental Exchange Inc., known as ICE, can launch the first “speed bump” in US futures markets after the Commodity Futures Trading Commission didn’t block the proposal. But two of the CFTC’s five commissioners disagreed with the decision, saying ICE’s speed bump would unfairly punish firms that focused on speedy trading strategies. (The Wall Street Journal | May 15)

The first wave of testing for the consolidated audit trail will take place this year, and broker-dealers should prepare by familiarizing themselves with specifications that will govern their reporting, said Financial Industry Regulatory Authority CEO Robert Cook. (ThinkAdvisor | May 15)

The Financial Industry Regulatory Authority has laid out its Digital Experience Transformation program, a multiple-stage project to improve how firms interact digitally with the regulator. The project will ultimately yield a centralized task-management platform with a simplified user experience and notifications to warn of potential compliance issues, FINRA said. (InvestmentNews | May 14)
Treasury has held meetings on recapitalizing Fannie, Freddie
(May 16) — The U.S. Treasury has held working sessions on the potential recapitalization of GSEs such as Fannie Mae and Freddie Mac, according to Craig Phillips, a department counselor.

  • Officials have also met to discuss FHFA Director Mark Calabria’s plan to rework “the footprint of the GSEs,” Phillips said at an event in Arlington, Virginia
  • Phillips added the nation’s affordable housing problem can’t be addressed with lending
  • He also urged a wide regulatory approach to leveraged lending
  • On May 9, Bloomberg Intelligence said uniform MBS will likely play a key role in an upcoming Treasury plan to release FNMA, FMCC to private shareholders
  • On May 8, Calabria said Fannie-Freddie may be freed without Congress
  • SEE ALSO Treasury's point man on GSE reform stepping down
the cyber cafe
G7 nations plan financial cyberattack simulation
The Group of Seven nations will hold a three-day exercise in June involving central banks, market authorities and finance ministries. The exercise will simulate a cross-border malware attack on the financial sector.

A million computers still under threat after WannaCry, NotPetya
Two years after the WannaCry ransomware developed with tools created by the National Security Agency that were published online wormed its way across computer systems worldwide, a million computers are still at risk, Shodan data indicate. However, that number only includes computers connected to the internet, not the network of devices connected to those servers that are still at risk.

Cybercrooks targeting C-level execs: Verizon
Senior executives, particularly those at the C-level suite, are now a dozen times more likely to be targeted for social events and nine times more likely to be the focus of social breaches than was the case in years past, the 2019 Verizon Data Breach Investigations Report states.
binge reading disorder
Bond bubble lessons from the Russian Revolution
When talking government bond defaults, plenty of people think of Argentina and Greece. But the biggest sovereign debt default of all time was arguably Russia’s repudiation of debt in 1918, after the Bolshevik revolution.

Can we live longer but stay younger?
Aging, like bankruptcy in Hemingway’s description, happens two ways, slowly and then all at once. With greater longevity, the quest to avoid the infirmities of aging is more urgent than ever.

As the world fractures, asset allocators are doing... nothing. Are they insane?
The current global environment as “the most dangerous it’s been in decades,” according to geopolitical advisory firm Eurasia Group. Here's a peek inside the psyche of today’s most important investors.