Baltic Dry Index. 1230 -136 Brent Crude 66.59
“Once
the principle is admitted that it is the duty of the government to protect the
individual against his own foolishness, no serious objections can be advanced
against further encroachments.”
Ludwig
von Mises
Today, MiFID (Markets in Financial Instruments Directive) commences in the EUSSR. But
will it work as intended, or will the spivs, Great Vampire Squids, banksters
and stock peddlers merely find new ways to work around it, to continue doing
“God’s work,” of separating fools from their money? Will it disadvantage Europe
from the rest of the world? Or more realistically, how much will it
disadvantage Europe compared to the rest of the world?
MiFID Shake-Up Gets Real as Wary Traders See Volumes Dry Up
By William Canny, Will Hadfield, Lukanyo Mnyanda, and Andrea Tan
2 January 2018, 17:13 GMT Updated
on 3 January 2018, 03:41 GMT
After seven years of preparation, $2 billion in compliance costs and one false start, the biggest shake-up to
European regulation in a decade is finally here. With so much at stake,
investors are likely to sit on their hands for now.Trading volumes slumped ahead of the changes, according to two brokers with knowledge of the matter, with client business at one major brokerage in Europe almost non-existent as the rules were poised to take effect Wednesday.
Follow our TOPLive Blog on Jan. 3 as MiFID II rules take effect
The finance industry is bracing for one of the most seismic regulatory shifts in history, affecting everything from research to dark pools. There’s no official time for flicking the switch to the new rules, and brokerages were still meeting late Tuesday to discuss how to trade under MiFID II as companies race to comply with the law that provides as many opportunities as problems for banks and asset managers.
TP ICAP Plc, the world’s largest interdealer broker, expects trading volume in bonds, swaps and other securities typically traded off-exchange to be lower than usual across the board on Wednesday and across most markets this month, according to a representative at the firm. Another brokerage told clients that it wouldn’t accept swap trade orders from the last trading week in December through Jan. 3, said one of the people, who asked not to be named because the information isn’t public.
Who Wins, Who Loses From MiFID II Shakeup?: QuickTake Scorecard
“Reality is, it’s going to need a lot of refining as we see the market and clients take on the rules,” said Neil McLean, head of execution trading for Asia ex-Japan at Nomura Holdings Inc.’s Instinet Pacific Services in Hong Kong. “We have some challenges with categorizing clients and making sure they receive only what the rules allow.”
His firm expects less business in the short term from Europe as clients get used to the rules, McLean said, adding that trading in Asia was quiet Wednesday with Japan shut for the New Year holiday.
More
No Idea What MiFID Stands For? Here's What You Need to Know
By Sarah Jones, Will Hadfield, and Silla Brush
2
January 2018, 00:00 GMT
Everyone
in European finance has been abuzz over an obscure acronym -- MiFID II -- that’s
about to radically change how assets from stocks to commodities are traded and
investors’ money is managed.
Banks and asset managers across the European Union have spent more than
$2 billion preparing for it. Regulators say it will protect investors, boost
transparency and rebuild trust that was tarnished by the 2008 global crash. The
industry has even spent months finding ways to sidestep parts of it.
But you’d be forgiven for not paying attention: MiFID II is a law
entering into force on Jan. 3 that, according to one count, is already close to
7,000 pages in length with all its addendums. That’s five times longer than
Tolstoy’s War and Peace -- and vastly less readable.
It has taken seven years to get the second iteration of the Markets
in Financial Instruments Directive into shape because of its wide scope.
For starters, it alters how investment research is paid for, how trades are
documented and executed, and how brokers share information, find the best
prices and pay one another.
“It’s all about casting light in areas of the market that were
previously dark, transparency and ultimately treating the investor at all times
in a fair manner,” said Ronan Brennan, Dublin-based chief product officer at
Compliance Solutions Strategies, which is working with firms to help them meet
MiFID’s many demands.
Here’s a look at what MiFID II will mean for European finance.
Here’s a look at what MiFID II will mean for European finance.
1) What’s all the fuss about changes to research?
Fund managers now have to pay for the research they use. They can no longer call up their favorite analyst for free for the lowdown on what stocks are hot or how the latest twist in Brexit negotiations will affect their portfolios. They may not even be able to access the hundreds of research reports that have long inundated their email inboxes daily unless they intend to pay.That’s because MiFID II forces investment banks to charge separately for research and brokerage services to avoid conflicts of interest. Up to now, the cost of research was built into the fees that the likes of Goldman Sachs or Morgan Stanley get paid to execute trades. That worried regulators because it opened the way for commissions to go to banks that offered the best tips and access, rather than the best prices for putting through a client’s trades.
As fund managers get more choosy, it’s widely expected the prices being quoted for access to research will drop in 2018, and some analysts could lose their jobs.
2) How will MiFID make stock markets more transparent?
MiFID II clamps down on so-called dark pools. Unlike public, or “lit” markets, such as the London Stock Exchange, dark pools are private markets that allow investors to buy and sell large blocks of shares without revealing beforehand the size of the orders or the price they paid.Even regulators acknowledge that they serve an important market function. Say a fund manager were to take a huge order for a stock, like two million shares, to a public exchange. On seeing the order, high-frequency traders, who use algorithms to spot block orders, could trade against them almost instantly.
But stock exchanges have complained for years that too much trading takes place on dark pools, depriving investors of the best prices and them of juicy trading fees. So MiFID II imposes limits: only 8 percent of volume in any stock can change hands this way.
More
https://www.bloomberg.com/news/articles/2018-01-02/no-idea-what-mifid-stands-for-here-s-what-you-need-to-knowMiFID Reaches Australia as $140 Billion Money Manager Unbundles
By Matthew BurgessAMP Capital, which oversees about A$179 billion ($140 billion), has told its brokers to unbundle trade execution costs and research, according to David Allen, the firm’s chief investment officer for equities. That’s a key requirement of the European Union’s revised Markets in Financial Instruments Directive that comes into effect on Wednesday.
“The principles of MiFID will be adopted pretty well globally in the next three to five years,” Allen said by phone from London. “We’re trying to get ahead of where the regulatory change is going rather than just complying reluctantly.” The firm expects the terms of its trading deals to improve following the change.
- AMP will absorb the cost of research covered by MiFID rules, but the bill for analysis that doesn’t fall under the regulations will be passed on to customers.
- The company expects its research costs to fall by 30 percent to 50 percent this year compared with 2017, Allen said. AMP’s research costs range from two to six basis points per managed dollar, in line with the average for similar firms.
- A lot of the cost savings come from ceasing to receive services “we didn’t actually get much value from.” While the overall payment to the sell-side is “lower in aggregate,” some providers will do better because “if they’re providing a great service, they’ll be rewarded for it.”
- more
We close with the latest from the “Everything
Bubble Mania.” Haven’t we been here before?
January 3, 2018 / 12:42 AM
Asia stocks flirt with historic highs on global growth cheer
SYDNEY (Reuters) - Asian stocks struck a range of new peaks
on Wednesday as risk appetites were whetted by a feast of upbeat manufacturing
surveys that confirmed a synchronised upturn in the world economy was well
under way.
Activity was especially strong in Europe, lifting bond yields there and driving the euro to within a whisker of its highest in three years against a beleaguered U.S. dollar.
Investors also piled into emerging market trades, delivering a record peak for Philippine stocks .PSI, a 24-year top for Thailand .SETI and a decade-high for Hong Kong .HSI.
MSCI’s index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent, having jumped 1.4 percent on Tuesday in its best performance since last March.
At 579.46 the index is creeping ever closer to the all-time peak of 591.50 reached in late 2007.
Chinese blue chips .CSI300 gained for the fourth session running, while Japan's Nikkei .N225 was closed for holidays.
Wall Street started the new year as it ended the old, scoring another set of record closing peaks. The Dow .DJI rose 0.42 percent, while the S&P 500 .SPX gained 0.83 percent and the Nasdaq .IXIC 1.5 percent. [.N]
The gains in riskier assets came as industry surveys from India to
Germany to Canada showed quickening activity.
“The breadth of the recovery is extraordinary,” said Deutsche Bank macro
strategist Alan Ruskin, noting that of 31 countries covered, only three failed
to show growth while all the largest manufacturing sectors improved.
“The global economy and risky assets are now solidly into a virtuous
cycle, whereby growth is propelling risky assets like equities higher, that are
then supporting growth,” he added.
More
Citigroup’s Chuck Prince wants to keep dancing, and can you really blame him?
July 10, 2007----“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” he said in an interview with the FT in Japan.
"In
economics, hope and faith coexist with great scientific pretension."
John Kenneth
Galbraith.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, just how bad is bad? How many more “Steinhoffs”
are there?
January 2, 2018 / 1:06 PM
Steinhoff says accounting issues stretch back to at least 2015
JOHANNESBURG
(Reuters) - Steinhoff (SNHJ.J)
(SNHG.DE)
will have to restate its 2015 accounts and maybe earlier figures, the South
African retailer said on Tuesday, having already warned on its 2016 numbers.
The owner of more than 40 retail brands including Conforama, Mattress
Firm and Poundland is fighting for survival after flagging accounting
irregularities last month and parting ways with its veteran chief executive,
Markus Jooste.
A review being carried out by accounting firm PwC now suggests that
“accounting irregularities” may stretch beyond 2015, it said.
“Whilst the internal review and investigation into the accounting
irregularities have not yet concluded, the restatement of the financial
statements ... for years prior to 2015 is likely to be required,” Steinhoff
said in a statement.
The company last month postponed its 2017 results until the
investigation is over. Steinhoff said the timeline for the completion of the
investigation remained uncertain.
The company had reported a 1.4 billion euros (£1.24 billion) net profit
in 2016 while its 2015 accounts showed earnings of 959 million euros, according
to Steinhoff’s annual reports.
“The latest information confirms what we’ve suspected all along (about
the reliability of the results for 2015 and beyond),” one hedge fund manager
said, declining to be named. “What we’re eagerly waiting for is the outcome of
the PwC investigation.”
The accounting scandal marks a fall from grace for the retailer which
has grown rapidly via an international M&A spree that began in 2011 with
the acquisition of Conforama, Europe’s second biggest furniture retailer.
It has also tainted the reputation of Steinhoff’s chairman and biggest
shareholder Christo Wiese, considered one of South Africa’s most respected
stewards of shareholder capital.
Shares in Steinhoff, once dubbed Africa’s IKEA, have fallen around 90
percent since news of the accounting irregularities broke in early December,
wiping 185 billion rand ($14.99 billion) off its market value.
It warned then that there was a 2 billion euro ($2.4 billion) hole in
its balance sheet and has since said that some credit facilities have been
suspended or withdrawn as it grapples with more than 10 billion euros in
outstanding debt.
Separately, the company has been under investigation for suspected
accounting fraud in Germany since 2015. It moved its primary share listing from
Johannesburg to Frankfurt late that year.
More
A large Bank [your
favourite dodgy firm here] is exactly
the place where a vain and shallow person in authority, if he be a man of
gravity and method, as such men often are, may do infinite evil in no long
time, and before he is detected. If he is lucky enough to begin at a time of
expansion in trade, he is nearly sure not to be found out till the time of
contraction has arrived, and then very large figures will be required to reckon
the evil he has done.
Walter Bagehot. Lombard Street. 1873
Walter Bagehot. Lombard Street. 1873
Technology Update.
With events happening fast in the
development of solar power and graphene, I’ve added this section. Updates as
they get reported. Is converting sunlight to usable cheap AC or DC energy
mankind’s future from the 21st century onwards?
2 January 2018
India becomes the first country to launch a floating solar power programme
The Indian government has launched an ambitious floating solar power programme in order to boost the development of the niche technology and invest in the next generation of solar power.The Solar Energy Corporation of India (SECI), which operates under the administrative control of the Ministry of New and Renewable Energy of India, has invited expression of interest from eligible renewable energy project developers to install 10,000 megawatts (MW) of floating solar power plants over the next three years.
When the process is completed, the government will have a clearer idea of whether the market capacity is sufficient for such projects and whether the set target is plausible or not.
“As solar PV power plants are land-intensive and in many states there are physical and legal hurdles to aggregate the land for such projects it is proposed to utilise the large water spread areas available in major reservoirs”, the notice reads.
The projects are to be developed in water areas or reservoirs all over the country with SECI buying all the power generated.
The new programme furthers the national goals of achieving 100 GW of solar capacity by 2022. To date, India has completed 750MW of solar power plants.
India is the first country to launch a national programme for the technology with the move being considered particularly ambitious. Not only will it help the nascent technology to mature, but the government’s 10,000 (MW) (GW) target, is bold even for conventional solar installations.
Floating solar power plants broke ground in 2014. The first plant launched in Korea with a capacity of just 465 kilowatts (kW). The current record is held by China after the country commissioned part of the largest floating solar plant in the world, which is set to be 150 MW. India’s largest floating solar plant to date has a mere 500 kW capacity and was commissioned at the beginning of December.
The news is not surprising as the country has shown commitment to solar power over the past few years. One state after another is switching from coal to solar power, due to increasingly evident cost benefits. On January 1st, the northern state of Punjab decommissioned a 460 MW coal-fired plant, in lieu of which local authorities are considering developing a 240 MW solar plant.
More
“All people,
however fanatical they may be in their zeal to disparage and to fight
capitalism, implicitly pay homage to it by passionately clamoring for the
products it turns out”
Ludwig
von Mises.
The monthly Coppock Indicators finished December
DJIA: 24,719 +265 Up. NASDAQ: 6,903 +297 Up. SP500: 2,674 +199 Up.
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