UK letter officially puts Brexit in motion | Bipartisan work aims for Freddie, Fannie solution | Stress tests of EU company pensions to be held in May
29 March 2017
CFA Institute: Financial NewsBrief
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LSEG-Deutsche Boerse merger blocked by EU
The European Commission has blocked the merger of London Stock Exchange Group and Deutsche Boerse, a move expected after LSEG refused to sell its stake in Italian trading venue MTS. "The divestment of MTS, a comparatively small asset compared to the parties' combined revenues and market value, would have been a clear-cut remedy," according to the commission.
Reuters (29 Mar.),  Bloomberg (29 Mar.),  The Wall Street Journal (tiered subscription model) (29 Mar.),  Financial Times (tiered subscription model) (29 Mar.) 
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UK letter officially puts Brexit in motion
UK letter officially puts Brexit in motion
May (Christopher Furlong/Getty Images)
UK Prime Minister Theresa May has signed a letter that officially notifies the EU of Britain's withdrawal. The letter will be hand-delivered Wednesday to European Council President Donald Tusk and signal the start of negotiations on the terms of Brexit.
Reuters (28 Mar.),  BBC (29 Mar.),  Financial Times (tiered subscription model) (29 Mar.) 
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Bipartisan work aims for Freddie, Fannie solution
US Sens. Bob Corker, a Republican, and Mark Warner, a Democrat, are working to unwind government support for mortgage-finance giants Fannie Mae and Freddie Mac. The companies are prohibited from retaining capital starting next year, increasing the likelihood they will require further government aid.
Bloomberg (28 Mar.) 
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Stress tests of EU company pensions to be held in May
Stress testing to determine how well EU corporate pension plans would stand up under "adverse market scenarios" will be held in mid-May, said Gabriel Bernardino, chairman of the European Insurance and Occupational Pension Authority. The review will also look at the extent to which pension plans' responses to market stress spread to the broader economy, he said.
Investment & Pensions Europe magazine online (free registration) (28 Mar.),  Politico Pro (subscription required) (28 Mar.) 
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Bloomberg sees drop in terminal subscriptions
Bloomberg maintained its 33.4% market share in financial-market data in 2016; however, demand for its terminals dropped nearly 1% from 2015. The financial industry spent a record $27.5 billion on market data last year, a 3% increase from 2015, according to research by Burton-Taylor International Consulting.
City A.M. (London) (28 Mar.),  Financial Times (tiered subscription model) (28 Mar.) 
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Online portals offer new securities research options
Online research services are encroaching on major investment banks' dominance of the securities research industry, with online portals' share of the global market predicted to rise to 15% by 2020, from 1% at the end of last year. These changes have been prompted by Europe's revised Markets in Financial Instruments Directive, which will require banks to charge specific fees for research when it takes effect in January and will replace the current practice of bundling them into commission charges.
Reuters (28 Mar.) 
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Italian bank raises bailout concerns with €1.9B loss
Banca Popolare di Vicenza's 2016 figures show a €1.9 billion loss, sparking concerns that its application for a state bailout may be deemed unviable by European Central Bank regulators because the lender's core capital has fallen below the minimum threshold of 10.25%. Rival banks Monte dei Paschi di Siena and Veneto Banca are also requesting bailout aid from the Italian government.
Reuters (28 Mar.) 
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Which global industries stand to benefit from Brexit?
With the UK potentially striking free-trade deals with the US, Australia and India as part of its exit strategy from the EU, we analyzed the exposure of industries and companies in the S&P UK BMI index to North America and Asia in order to assess potential benefit. Read more here.
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Market Activity
Brexit launch leaves Asian-Pacific markets mixed
Asian-Pacific stock markets were mixed Wednesday as the UK moved closer to withdrawal from the EU. Japan's Nikkei 225 edged up 0.1%; Hong Kong's Hang Seng Index and South Korea's Kospi each rose 0.2%; Australia's S&P/ASX 200 gained 0.9%; China's Shanghai Composite fell 0.4%; and India's Sensex was up 0.4%.
CNBC (29 Mar.),  The Economic Times (India) (29 Mar.) 
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China's Tencent makes $1.78B investment in Tesla
China's Tencent makes $1.78B investment in Tesla
(Justin Sullivan/Getty Images)
China's Tencent Holdings has paid $1.78 billion for a 5% equity stake in US electric carmaker Tesla, the latest deal in which a Chinese tech firm invests in a company developing electric and self-driving vehicles. Tesla's share price rose 2.7% after the transaction was made public in a US regulatory filing.
Reuters (28 Mar.),  Recode (28 Mar.) 
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A New Industry Standard
How well do your technology, operations, and marketing colleagues understand the investment management industry? The CFA Institute Investment Foundations Program can help them gain the benefits of clarity, communication, and confidence. Bulk registrations are available online. Learn more.
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Economics
China urges insurers to invest in manufacturing
China's central bank, along with insurance and securities regulators, is encouraging insurance companies to invest in manufacturing, saying that the low-cost, stable funding they offer is needed to upgrade and transform the industry. As long as the proper assessments are made, the investments can be structured as equity, debt or asset-backed deals, according to a statement from the central bank.
South China Morning Post (Hong Kong) (28 Mar.),  Reuters (28 Mar.) 
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German companies expect hit from Brexit
German firms anticipate that the UK's withdrawal from the EU will "seriously damage" their business with Britain, a survey by the Association of German Chambers of Commerce and Industry found. Among German companies active in the UK market, 9% are getting ready to shift their investments out of the UK, either to Germany or other EU member states, the survey found.
Deutsche Welle (Germany)/Agence France-Presse/DIHK (28 Mar.) 
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Russia's Gazprom reportedly to slash workforce in Germany
Russian natural gas provider Gazprom is set to cut staffing in Germany, sources said. The company refused to comment on the impending layoffs but confirmed restructuring of its operations in Europe.
Handelsblatt (Germany) (28 Mar.) 
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Survey: Consumers with advisers more ready for retirement
Americans working with financial advisers are significantly more ready for retirement than those who haven't sought help, a survey sponsored by the Million Dollar Round Table found. Among US consumers without advisers, about 50% have a retirement plan or an emergency fund, but only 19% have a long-term financial plan.
PlanAdviser.com (28 Mar.) 
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Ethical Decision-Making Webinar Part II: Exploring Additional Case Studies (12:00 - 1:00 p.m. ET, 12 April 2017)
Ethical Decision-Making Webinar Part I: Introduction to Ethical Decision Making (scheduled to accommodate Asia Pacific Time Zone audience) (12:00 - 1:00 p.m. HKT, 14 June 2017)
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Geopolitical/Regulatory
Senators ask Mnuchin to review SIFI process
Senators task Mnuchin with SIFI process review
Mnuchin (Thomas Niedermueller/Getty Images)
Ten Republican senators have called on Treasury Secretary Steven Mnuchin, who heads the Financial Stability Oversight Council, to review the designation of nonbanks as systemically important financial institutions. The process "lacks transparency and accountability" and unnecessarily burdens firms deemed "too big to fail," the senators say.
Bloomberg (28 Mar.),  Reuters (28 Mar.),  Risk.net (subscription required) (28 Mar.) 
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IRS aligns excise tax with Labor's fiduciary policy
The IRS has issued guidance to bring excise tax on prohibited transactions by fiduciaries into conformity with the Labor Department's temporary enforcement policy for its fiduciary rule. Without the IRS guidance, financial professionals could have been hit with excise tax on transactions allowed under the Labor Department's policy.
ThinkAdvisor (free registration) (28 Mar.) 
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CFTC's Bowen open to compromise on automated trading rules
Sharon Bowen of the Commodity Futures Trading Commission said she and acting Chairman J. Christopher Giancarlo could reach agreement and end a standoff that has prevented the commission from adopting rules for automated trading. Giancarlo has opposed a provision giving the CFTC "unchecked power" to obtain the source code used by automated traders.
MLex (subscription required) (27 Mar.) 
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ECB seeks power to regulate branches of foreign banks
The European Central Bank wants legislation enacted that would give it oversight of foreign banks and nonbank lenders doing business in the eurozone. The ECB currently directly regulates 126 of the biggest banking companies in the eurozone but not branches or nonbanks that provide financial services.
Bloomberg (27 Mar.),  MLex (subscription required) (27 Mar.) 
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UK regulator clarifies guidance on internal ratings models
The UK's Prudential Regulation Authority introduced proposed revised guidance on what it expects from banks that seek to rely on internal-ratings-based models to determine capital requirements. In the consultation paper, the authority suggested that when establishing the probability of residential mortgage defaults, financial firms can supplement internal models with data from prior experience.
Law360.com (subscription required) (28 Mar.),  Politico Pro (subscription required) (28 Mar.) 
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A Comprehensive Guide to Exchange-Traded Funds (ETFs)
Joanne M. Hill, Dave Nadig, and Matt Hougan

ETFs provide a liquid and transparent way to access a variety of investment strategies.
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Financial Products
Franklin Templeton readies 2 muni-bond ETFs
Franklin Templeton has filed with the Securities and Exchange Commission for two actively managed exchange-traded funds. The Franklin Liberty Intermediate Municipal Opportunities ETF would buy nontaxable bonds with three- to 10-year average maturities, while the Franklin Liberty Municipal Bond EFT would invest in taxable and nontaxable municipal debt with maturities of five to 15 years.
ETF.com (28 Mar.) 
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SEC turns down second bitcoin listing request
The Securities and Exchange Commission has rejected an application to list the SolidX Bitcoin Trust as an exchange-traded product on the New York Stock Exchange's Arca, having refused a similar bitcoin application earlier this month. The SEC reiterated its previous concern that the bitcoin market is not sufficiently regulated to allow the application.
Reuters (28 Mar.),  The Wall Street Journal (tiered subscription model) (28 Mar.) 
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