Week InReview

Edgar hack.

Yesterday, the Securities and Exchange Commission "announced charges against nine defendants for participating in a previously disclosed scheme to hack into the SEC's EDGAR [ Electronic Data Gathering, Analysis, and Retrieval] system and extract nonpublic information to use for illegal trading."

The hacker, and some of the traders, were allegedly previously involved in the hacking of newswires to get advance access to press releases.) They allegedly "traded before at least 157 earnings releases from May to October 2016 and generated at least $4.1 million in illegal profits."

Included in the SEC's complaint is the performance table tracking how the traders did with their allegedly stolen information:
The table includes not only the traders' win-loss record when allegedly trading on Edgar hacks, but also, brutally, their win-loss record the rest of the time.

Overall they made money about 77 percent of the time that they traded on stolen press releases, making $4.1 million of profits on their winners but also losing about half a million on their losers.

Friday | Jan 18, 2019
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An international insider trading scheme netted more than $4m from the hack of the Securities and Exchange Commission's corporate filings system in 2016, according to charges filed against nine defendants. The SEC announced the civil charges on Tuesday against Oleksandr Ieremenko, a Ukrainian hacker, and six traders in California, Ukraine and Russia, along with two other entities. (Financial Times | Jan 15)

Wall Street struggles with the bad kind of volatility
Investors' retreat from risk has hurt liquidity in financial markets, leaving automated programs free to fuel wild market swings. Clients' retreat from risk made it particularly hard for Wall Street to make money in fixed-income markets, which include bonds, currencies, and commodities, according to a bank analyst. (The Wall Street Journal | Jan 13)

Markets take the lead when it comes to factoring in recession
Many financial markets are already signaling that the U.S. is more likely than not hurtling toward recession. But will they prove prescient or overly fretful? The prospect of a widespread yield inversion in the Treasury market, which has preceded U.S. downturns for more than half a century, has generated the most alarm and is edging even closer to fruition. (Bloomberg Markets | Jan 13)

ETFs try to lure investors into ever narrower niches
Exchange-traded funds became the next big thing in portfolio management a couple of decades ago by being cheaper and easier to trade than mutual funds. These days, some managers are offering ETFs as tools for specialization at the expense of diversification, carving up the stock market into ever thinner slices for investors eager to find other next big things. (The New York Times | Jan 12)

Government shutdown could delay SEC's Reg BI rollout
Despite much speculation from various industry sources saying that we could have a final Regulation Best Interest rule as early as the first quarter, no one knows when in 2019 to expect the final ruling. The SEC has Reg BI scheduled for the final ruling stage in September of 2019, but Chair Jay Clayton has said that if everything continued accordingly, it would be released sooner than September. (Advisor News | Jan 11)
Binge reading disorder
Hand-curated, chosen with love
What to expect when you're expecting a bear market
If there's a silver lining for Main Street investors in the stock market turmoil of the past few months, it's this: They now have a far more realistic idea of how much risk they're willing to take - and a new appreciation for what portfolio diversification means.

Salesforce's CEO unplugged for two weeks, and had a revelation that could change the tech industry
After a summer vacation, Marc Benioff made the surprising decision to elevate Keith Block to co-CEO, enabling a "divide and conquer strategy" and giving Benioff time to do the things he enjoys. Shares of Salesforce surged 34 percent in 2018, while the broader market had its worst year in a decade.

What a super-secure quantum cable is doing in the Holland Tunnel
Running through the Holland Tunnel between Lower Manhattan and New Jersey is a fiber-optic cable that harnesses the power of quantum mechanics to protect critical banking data from potential spies, as b anks and governments test quantum key distribution technology to guard their closest secrets