The Wall Street Journal - 17.08.2019 - 18.08.2019

B12| Saturday/Sunday, August 17 - 18, 2019 ** THE WALL STREET JOURNAL.**

WASHINGTON—An update

of the Volcker rule expected

next week will deliver a vic-

tory to large banks that have

fought regulators’ efforts to

clarify trading definitions,

said people familiar with the

matter.

The regulators are set to

unveil a final rule in the com-

ing week stripped of a mea-

sure that could have expanded

the types of assets covered by

the rule’s limits on bank trad-

ing, the people said.

Banks including JPMorgan

Chase &Co., Bank of America

Corp. and Citigroup Inc. had

sharply criticized the pro-

posal.

While it is unclear whether

the changes will result in

banks significantly increasing

their trading, it will make it

easier for them to engage in

certain transactions by reduc-

ing uncertainty about whether

they are permitted.

“It’s a question of whether

you have a sharp line or a big

fuzzy twilight zone,” said Ran-

dall Guynn, a partner at law

firm Davis Polk.

The Volcker rule stands as

one of the more complicated

restrictions imposed on banks

after the 2008 financial crisis.

It bans them from making

speculative trades with their

own funds, but includes a

complicated set of exemptions

allowing firms to engage in

“market-making,” or buying

and selling securities for their

customers, facilitating market

liquidity.

The rule was finalized in

2013 after years of negotia-

tions between the five regula-

tors that implement it: the

Federal Reserve, Federal De-

posit Insurance Corp., Office

of the Comptroller of the Cur-

rency, Securities and Ex-

change Commission and Com-

modity Futures Trading

Commission.

All five regulators will have

to separately approve the final

changes.

“There is unity among the

regulatory agencies now on

this issue,” Comptroller of the

Currency Joseph Otting said

in an interview earlier this

month.

As part of a broader review

and rollback of the financial

rulebook, regulators led by

the Fed last year tried to clar-

ify a provision in the rule long

reviled by the industry.

The “intent prong” gener-

ally restricts banks from hold-

ing a trading position for

fewer than 60 days unless

they can prove they didn’t in-

tend to turn a profit from the

transaction.

Regulators sought to create

a simpler “bright-line” test in-

stead based on accounting

definitions. But banks sharply

criticized the change, saying it

would make things worse and

hamper trading in asset

classes not currently covered

under the rule.

In the final rule, regulators

will drop the original provi-

sion restricting short-term

trades for big banks, accord-

ing to the people.

Those banks will still be

subject to other trading re-

strictions, and the provision

will continue applying to

smaller banks under the rule,

the people said.

Separately, the rule will

overall relax compliance for

smaller banks, giving the ben-

efit of the doubt for firms

with less than $1 billion in

trading assets and liabilities

that they are not speculating

with their own funds, accord-

ing to the people.

The regulators are also set

to approve changes making it

easier for banks to invest in

hedge funds or private-equity

funds to underwrite securities

or trade them on behalf of cli-

ents, according to the people.

The FDIC is set to vote on

the final rule Tuesday. The

other regulators will also have

to approve the rule separately.

BYLALITACLOZEL

Volcker

Update

To Be Win

For Banks

Regulatory change

won’t include an

expansion of limits

on bank trading.

BUSINESS & FINANCE NEWS

$2.20 a million British thermal

units, but rose 3.8% for the

week.

“Increasing heat this week-

end and into early next

week...however, this heat will

be short-lived,” said BAMWX,

a weather-consulting firm

based in Greenwood, Ind.

There’s “confidence increasing

on a notable blast of cooler air

to close [next week].”

Despite Friday’s drop, gas

prices are in the midst of a re-

bound. Prices have come up

after hitting a more-than

three-year low earlier this

month, as worries eased of

there being too much supply

in the market.

On Thursday, futures con-

tracts had jumped 4.2%, the

biggest one-day gain so far

this month, after the Energy

Information Administration

noted in a weekly report that

gas in storage increased by 49

billion cubic feet—well below

forecasts for a 61-billion-cubic-

foot rise.

“Sweltering temperatures

in parts of the Lower-48 drove

weekly power generation to

the highest level on record

and forced gas out of storage

caverns in the South Central

region,” said analysts at Tudor

Pickering.

Now, traders are wagering

whether a late-summer

cooldown could reduce de-

mand for gas-powered elec-

tricity, as homes and busi-

nesses turn off air-

conditioners.

Elsewhere in energy mar-

kets, oil prices edged higher as

investors weighed a monthly

report from the Organization

of the Petroleum Exporting

Countries. West Texas Inter-

mediate—the U.S. benchmark

price—climbed 0.7% to $54.87

a barrel, while Brent, the

global reference price, added

0.7% to $58.64.

Citing an economic slow-

down, OPEC lowered its fore-

cast for growth in oil demand

for 2019 to 1.1 million barrels a

day, from an earlier estimate

of 1.14 million.

“The latest fall in prices

was driven by sentiment to-

wards global growth, some-

thing OPEC has little influence

over, rather than oil market

fundamentals,” according to a

report by Capital Economics.

Oil prices are little changed

for the week, after posting

wild one-day moves. Factors

such as concerns of rising U.S.

crude stockpiles, weak data

from major global economies,

and threats in the U.S.-China

trade war have seesawed the

oil market, with prices rising

as much as 4% on Tuesday,

and falling 3% on Wednesday.

Natural-Gas Prices Rise for Week

Supply concerns ease,

lifting futures off their

lowest levels in more

than three years

Natural-gas prices slid on

Friday, while capping their

biggest weekly gain in more

than a month,

as weather

forecasts

pointed to cooler tempera-

tures ahead.

Futures contracts for Sep-

tember delivery fell 1.4% to

BYINYOUNGHWANG

ANDDANMOLINSKI

COMMODITIES

from other major oil bodies,

surprise increases in U.S. oil

inventories, and broader mar-

ket convulsions sparked by

trade tensions and recession-

ary signals such as yield-curve

inversions.

OPEC also reduced its sup-

ply-growth forecasts for 2019

and 2020 for non-OPEC na-

tions. Heavy production out of

the U.S., now an energy ex-

porter, had raised concerns of

a supply glut, and investors

may take the lower supply and

demand growth forecasts as a

sign of weakening consump-

tion as stocks fill up.

“Large uncertainties re-

main” in the global economy,

the report said. “While the

growth forecast currently as-

sumes no further risks until

they actually materialize, and,

in particular, that trade-re-

lated issues do not escalate

further, the downside risk to

world economic growth is pre-

dominant.”

While the report cited lower-

than-expected U.S. production

in cutting its forecast for sup-

ply growth, it added that it ex-

pects the U.S., along with Brazil

and China among others, to be

key drivers of growth.

Oil prices have suffered

wild swings so far this month,

with both the Energy Informa-

tion Administration and the

American Petroleum Institute

signaling unseasonable builds

in inventories amid what is

typically the summer driving

season.

Building supply and con-

cerns about U.S.-Chinese trade

have driven prices down in re-

cent weeks, despite elevated

geopolitical risk in the Strait

of Hormuz.

Recent selloffs in oil mar-

kets have led to remarks out

of Saudi Arabia, OPEC’s most

influential constituent, that

the regime was considering

further action to stabilize

markets, even after the bloc

and its allies agreed last

month to extend output cuts

into their fourth year in an ef-

fort to support prices.

While OPEC’s report didn’t

provide an official total pro-

duction change for its own

constituents, figures on indi-

vidual nations showed Saudi

Arabia’s output falling by

202,000 barrels a day in July,

after a small rise in June, with

Angolan and Venezuelan daily

production dropping by

159,000 barrels and 141,000

barrels, respectively.

The only major production

rise from OPEC nations came

from Nigeria, where produc-

tion rose by 146,000 barrels a

day in July. The cartel has al-

lowed certain nations—often

in the grip of economic or po-

litical strife—de facto exemp-

tions from production cuts,

and Nigeria has typically been

one of those nations.

Even with reduced output

from Iran, under U.S. sanc-

tions, and Venezuela, some an-

alysts have suggested that

OPEC will need to either more

strictly enforce or deepen its

agreed cuts to support prices.

LONDON—OPEC lowered its

2019 forecast for growth in oil

demand for the second time in

three months and cut its projec-

tions for global economic

growth, pointing to uncertain-

ties stemming from the trade

war between the U.S. and China.

In its closely scrutinized

monthly oil market report re-

leased Friday, the Organiza-

tion of the Petroleum Export-

ing Countries said it expected

a deceleration in the rise of

global oil demand this year,

trimming its estimate to 1.1

million barrels a day.

That figure equates to a cut

in forecast demand of only

40,000 barrels a day, but it

comes after similar reductions

BYDAVIDHODARI

OPEC Sees Oil-Demand Growth Slowing

The Organization of the Petroleum Exporting Countries said U.S.-China trade tensions are damping global demand for oil. A tanker berths at a Chinese port.

AGENCE FRANCE-PRESSE/GETTY IMAGES

platform—a bitcoin futures

contract—in November 2018.

Futures are financial tools that

firms can use to protect them-

selves against swings in

prices—in this case, against

changes in the bitcoin dollar-

exchange rate.

The approval will also allow

Bakkt to launch physically de-

livered bitcoin futures con-

tracts. Physically delivered

contracts mean firms trading

ICE’s futures would settle

gains or losses by accepting

bitcoins or delivering them to

Bakkt’s “warehouse”—essen-

tially, a secure digital vault for

the storage of crypto-assets.

“With the comprehensive

regulatory review and ap-

proval of Bakkt Trust Com-

pany complete, we are pleased

to serve as a qualified custo-

dian of bitcoin for physically

delivered futures,” Adam

White, the operating chief for

Bakkt said in a statement.

The New York State Depart-

ment of Financial Services has

approved 22 charters or li-

censes for companies in the

virtual currency marketplace,

the agency said. “As the finan-

cial services industry rapidly

evolves, DFS will be at the

forefront of fostering a sound,

regulatory environment that

continues to uphold New York

as the premier place to do

business, while protecting

consumers and markets,” fi-

nancial-services superintend-

ent Linda Lacewell said.

Last October, San Fran-

cisco-based Coinbase Inc. won

a similar trust-company li-

cense. The process of getting

that approval took Coinbase

about half a year, The Wall

Street Journal has reported.

New York state regulators

approved a key license for

Bakkt, a venture designed to

make it easier for consumers

to store bitcoins and pay for

purchases in the cryptocur-

rency.

The New York State Depart-

ment of Financial Services

said Friday it granted a char-

ter allowing Bakkt to become a

limited trust company. Bakkt

had filed with the agency to

become a trust company back

in March.

The move allows Bakkt to

hold bitcoin and other crypto-

currencies on customers’ be-

half while abiding by regula-

tions aimed at ensuring

investors’ assets are kept safe.

Bakkt is being spearheaded by

Atlanta-based Intercontinental

Exchange Inc., best known for

owning the New York Stock

Exchange.

ICE said last year that it

aimed to launch the first

building block of the Bakkt

BYPATRICKTHOMAS

A Bitcoin Venture Backed by

NYSE Owner Scores Approval

Bakkt is designed to

make it easier for

consumers to store

the cryptocurrency.

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