B10| Tuesday, July 30, 2019 THE WALL STREET JOURNAL.
Three of China’s state-
backed financial institutions
aretotakestakesinastrug-
gling commercial bank, indi-
cating a different approach by
regulators toward the coun-
try’s small troubled lenders.
TheIndustrial & Commer-
cial Bank of China, the coun-
try’s largest bank by assets,
said one of its units would pay
as much as 3 billion yuan
($435.6 million) for a 10.82%
stake inBank of JinzhouCo.,
which lends mostly to small
and medium-size companies in
a northeastern region of the
country.
ICBC said its investment
was aimed at supporting the
regulators’ goal of channeling
more funding to the private
sector.
Two of China’s largest asset
managers that specialize in
handling distressed debt will
also take minority stakes,
Bank of Jinzhou said.China
Cinda Asset Management’s
stake would represent about
6.49% of its shares. China
Great Wall Asset Manage-
ment’s stake wasn’t disclosed.
The news lifted prices of
Bank of Jinzhou’s U.S. dollarbonds on Monday, according
to traders. The introduction of
state-backed firms could pave
the way for future capital in-
jections into the bank, said
some analysts.
The recent moves had little
impact on the country’s money
markets despite recent inves-
tor concern over the health of
the Chinese banking system.
In May, Chinese regulators
seized control of Baoshang
Bank, once controlled by a
missing tycoon and facing se-
rious credit risks. The authori-
ties said the takeover was an
isolated incident but it led to
spikes in some short-term
lending rates and other mar-
ket dislocations. The regula-
tors took steps to calm the
market by pumping liquidity
into the system and asking fi-
nancial firms to continue to
trade with each other.
The purchase of stakes in
Bank of Jinzhou by state-
owned entities suggests the
bank’s problems are less grave
than Baoshang’s, said Shen
Meng, director of Chanson &
Co., an investment bank in
Beijing.
But problems at the banks
are emblematic of troubles
that have plagued the coun-
try’s smaller commercial lend-
ers, said Xue Hongyan of Sun-
ing internet Finance Research
Institute in Beijing.
Many smaller banks have
weaker deposit bases than
state-owned banks. In the case
of Baoshang and Jinzhou, both
banks also serve less-devel-
oped regions, where local
economies have been saddled
with debt and hindered by in-
efficiencies. In Liaoning prov-
ince, where Jinzhou Bank op-
erates, nonperforming loan
ratios among banks averaged
4.61% at the end of September
2018, much higher than the
1.87% industry average.
Bank of Jinzhou’s Hong
Kong-listed shares have been
suspended since April this
year. On Sunday, the bank said
its businesses were operating
normally and it intends to re-
lease its 2018 annual report by
the end of August.
—Frances Yoon
and Yifan Wang
contributed to this article.BYSTELLAYIFANXIEChinese
Firms Aid
Teetering
Lender
4.61%
Bank nonperforming loan ratio
in China’s Liaoning provinceBANKING & FINANCE
iShCoreS&P500 IVV 303.22 –0.18 20.5
iShCoreS&P MC IJH 197.20 –0.48 18.8
iShCoreS&P SC IJR 78.74 –0.51 13.6
iShS&PTotlUSStkMktITOT 68.46 –0.16 20.6
iShCoreUSAggBd AGG 111.26 0.04 4.5
iShSelectDividend DVY 101.14 –0.13 13.2
iShEdgeMSCIMinEAFEEFAV 72.60 0.32 8.9
iShEdgeMSCIMinUSAUSMV 63.67 0.1421.5
iShEdgeMSCIUSAMomMTUM122.85 –0.15 22.6
iShEdgeMSCIUSAQualQUAL 94.07 –0.03 22.6
iShFloatingRateBd FLOT 50.93 –0.04 1.1
iShGoldTr IAU 13.64 0.6611.0
iShiBoxx$InvGrCpBd LQD 124.26 –0.06 10.1
iShiBoxx$HYCpBd HYG 87.04 –0.15 7.3
iShJPMUSDEmgBd EMB114.11 –0.01 9.8Closing Chg YTD
ETF Symbol Price (%) (%)AlerianMLPETF AMLP 9.85 –1.40 12.8
CnsmrDiscSelSector XLY 122.95 –0.49 24.2
CnsStapleSelSector XLP 60.48 0.1819.1
EnSelectSectorSPDR XLE 62.20 –0.40 8.5
FinSelSectorSPDR XLF 28.47 –0.77 19.5
FT DJ Internet FDN149.33 –1.33 28.0
HealthCareSelSect XLV 92.45 0.41 6.9
IndSelSectorSPDR XLI 78.36 –0.18 21.7
InvscQQQI QQQ194.62 –0.34 26.2
InvscS&P500EW RSP109.70 –0.29 20.0
InvscS&P500LowVol SPLV56.07 0.1820.2
iShCoreMSCIEAFE IEFA 61.41 0.1111.7
iShCoreMSCIEmgMk IEMG51.11 –0.25 8.4
iShCoreMSCITotInt IXUS 58.59 0.0211.5
Closing Chg YTD
ETF Symbol Price (%) (%)
Monday, July 29, 2019 iShMSCI ACWIiShMBSETF MBBACWI107.6774.81 –0.00–0.07 16.62.9
iShMSCIBrazil EWZ 45.49 0.1119.1
iShMSCI EAFE EFA 65.64 0.2111.7
iShMSCI EAFE SC SCZ 57.46 –0.28 10.9
iShMSCIEmgMarkets EEM 42.62 –0.19 9.1
iShMSCIJapan EWJ 54.74 –0.13 8.0
iShNatlMuniBd MUB113.53 –0.01 4.1
iShPfd&Incm PFF 37.41 0.24 9.3
iShRussell1000Gwth IWF163.67 –0.31 25.0
iShRussell1000 IWB167.62 –0.21 20.9
iShRussell1000Val IWD129.90 –0.11 17.0
iShRussell2000Gwth IWO203.27 –0.61 21.0
iShRussell2000 IWM156.15 –0.67 16.6
iShRussell2000Val IWN120.54 –0.63 12.1
iShRussell3000 IWV177.16 –0.21 20.6
iShRussellMid-Cap IWR 57.21 –0.28 23.1
iShRussellMCValue IWS 90.37 –0.30 18.4Closing Chg YTD
ETF Symbol Price (%) (%)
iShS&P500Growth IVW184.61 –0.25 22.5
iShS&P500Value IVE 119.70 –0.08 18.4
iShShortCpBd IGSB 53.40 0.05 3.4
iShShortTreaBd SHV110.61 ... 0.3
iShTIPSBondETF TIP 114.89 –0.09 4.9
iSh1-3YTreasuryBd SHY 84.57 ... 1.1
iSh7-10YTreasuryBd IEF 109.54 0.09 5.1
iSh20+YTreasuryBd TLT 131.51 0.03 8.2
iShRussellMCGrowthIWP147.62 –0.46 29.8
iShUSTreasuryBdETFGOVT 25.71 0.08 4.3
PIMCOEnhShMaturityMINT101.75 ... 0.8
SPDR BlmBarcHYBd JNK 108.76 –0.13 7.9
SPDRBloomBar1-3MTBBIL 91.60 0.02 0.2
SPDR Gold GLD134.53 0.67 11.0
SchwabIntEquity SCHF 31.98 ...12.8
SchwabUS BrdMkt SCHB 72.42 –0.18 20.8
SchwabUS Div SCHD 55.02 –0.04 17.1
SchwabUS LC SCHX 72.15 –0.17 20.9Closing Chg YTD
ETF Symbol Price (%) (%)
SPDR DJIA Tr DIA 272.13 0.1016.7
SPDR S&PMdCpTr MDY359.63 –0.4818.8
SPDR S&P 500 SPY301.46 –0.1820.6
SPDR S&P Div SDY102.72 –0.0114.7
TechSelectSector XLK 82.54 –0.0633.2
UtilitiesSelSector XLU 60.29 0.5213.9
VanEckGoldMiner GDX 27.77 1.8031.7
VangdInfoTech VGT222.93 –0.1633.6
VangdSC Val VBR131.71 –0.3615.5
VangdSC Grwth VBK190.43 –0.7726.5
VangdDivApp VIG 119.43 0.1221.9
VangdFTSEDevMk VEA 41.56 –0.0212.0
VangdFTSE EM VWO 42.61 –0.0211.8
VangdFTSE Europe VGK 54.65 0.1512.4
VangdFTSEAWxUS VEU 50.92 –0.0211.7
VangdGrowth VUG169.65 –0.3626.3
VangdHlthCr VHT173.66 0.38 8.1Closing Chg YTD
ETF Symbol Price (%) (%)
VangdHiDiv VYM 89.21 –0.01 14.4
VangdIntermBd BIV 86.39 0.08 6.3
VangdIntrCorpBd VCIT 89.80 –0.11 8.4
VangdLC VV 138.59 –0.17 20.7
VangdMC VO 170.70 –0.37 23.5
VangdMC Val VOE113.30 –0.19 18.9
VangdMBS VMBS52.93 0.08 2.8
VangdRealEst VNQ 88.53 0.2718.7
VangdS&P500 VOO276.88 –0.18 20.5
VangdST Bond BSV 80.39 0.04 2.3
VangdSTCpBd VCSH80.63 ... 3.5
VangdSC VB 159.03 –0.59 20.5
VangdTotalBd BND 82.92 0.06 4.7
VangdTotIntlBd BNDX57.92 0.16 6.8
VangdTotIntlStk VXUS52.67 0.0411.5
VangdTotalStk VTI 154.04 –0.24 20.7
VangdTotlWrld VT 76.29 –0.09 16.5
VangdValue VTV113.15 –0.02 15.5Closing Chg YTD
ETF Symbol Price (%) (%)Exchange-Traded Portfolios|WSJ.com/ETFresearch
Largest 100 exchange-traded funds, latest sessionnumber of refinancings of Fed-
eral Housing Administration
mortgages, which typically go
to first-time homeowners.
Some wanted to obtain lower
rates, while others desired to
get out of the insurance that is
required on those loans.
He also saw more purchase
business.
“Volume overall is defi-
nitely up from last year, that’s
for sure,” Mr. Hastings said.
Since the financial crisis,
mortgage lending has shifted
away from the big banks and
toward independent lenders,
many with smaller balance
sheets.
Those firms struggled last
year and early this year as
rates increased. A result was a
wave of mergers and job re-
ductions, as well as a handful
of bankruptcies.
That trend reversed as
rates fell.Quicken LoansInc.,
the largest nonbank mortgage
lender, had its best quarter in
its 34-year history from April
to June. The company said
that it closed $32 billion in
mortgages.
The broad housing market
is still showing signs of cool-
ing as high home values price
many out of the market. But
the window of lower rates did
provide an opening for some
who had been wanting to buy.
Laura Poole, a database de-
veloper at an information
technology company, began
looking for a home earlier this
year to benefit from rising
housing values in the Dallas-
Continued from page B1
The industry has consoli-
dated in recent years as mount-
ing costs for technology and
market data have squeezed
profits. Research firm Tabb
Group estimates HFT firms’
revenue from U.S. equities trad-
ing was $1.8 billion last year,
down from $5.7 billion in 2010.
Exact numbers are difficult to
obtain because most HFT firms
are private.
Among the exchanges set to
install their first speed bumps
are the London Metal Ex-
change, which plans to add an
eight-millisecond delay to gold
and silver futures this year.
Chicago-based Cboe Global
MarketsInc. hopes to add a
speed bump on its EDGA stock
exchange in 2020, if it wins
regulatory approval.
LME, Cboe and other mar-
kets adopting speed bumps saythey want to neutralize “la-
tency arbitrage,” a strategy in
which a fast trader takes ad-
vantage of a moving price be-
fore other traders can react.
Suppose an investor has
posted a quote to sell shares of
Ford Motor Co. at $10.00 and
the price is about to tick up to
$10.01. An HFT firm might buy
Ford shares from that investor
just before the price rises, then
immediately sell them, earning
a one-cent-a-share profit. Such
firms use algorithms and fast
data-transmission networks to
forecast small price changes
and act on them quickly.
A speed bump could help
that investor. Cboe’s proposal
would force the HFT firm to
wait four milliseconds before
buying the Ford shares. The
same delay wouldn’t apply if
the investor sent Cboe an elec-tronic message canceling his or
her $10.00 sell order. That gives
the investor a brief window to
avoid being picked off by the
faster trade.
Most of the latest speed-
bump plans have a similar,
“asymmetrical” design, meaning
they don’t apply equally to all
trades. Such speed bumps are
typically meant to favor market
participants that publicly quote
prices on an exchange, rather
than those that try to buy or
sell using those prices.
In many cases, the new
speed bumps cover small,
thinly traded markets, and they
could help exchanges juice
trading volumes by encourag-
ing traders to post more
quotes.
LME’s and Cboe’s planned
speed bumps are asymmetrical.
Atlanta-based exchange com-pany Intercontinental Ex-
changeInc. won approval for
such a speed bump on its U.S.
futures market in May. Eurex,
the derivatives arm of Ger-
many’sDeutsche BörseAG, has
deployed asymmetrical speed
bumps on some markets since
2017, andMoscow Exchange,
in Russia, added such a speed
bump to a dollar-ruble foreign-
exchange market in April.
The proliferation of such
speed bumps is troubling, be-
cause it means investors can’t
be certain of the prices they
see on exchanges, said Jamil
Nazarali, global head of busi-
ness development at electronic-
trading firm Citadel Securities.
“The big risk is that you’re go-
ing to see a lot of phantom li-
quidity, which will harm execu-
tion quality for both retail and
institutional investors,” he said.High-frequency trading
firms are hitting more “speed
bumps” around the world—the
latest blow to a business that
has struggled in recent years.
Exchanges on both sides of
the Atlantic are increasingly
embracing the mechanisms,
which impose a split-second
delay before executing trades.
By 2020, more than a dozen
markets in stocks, futures and
currencies from Toronto to
New York to Moscow will slow
trading via speed bumps or
similar features, if all of the
planned launches are carried
out. Five years ago, only a few
markets had speed bumps.
Supporters say speed bumps
can help thwart ultrafast strate-
gies that hurt investors. Critics,
including many electronic-trad-
ing firms, say they make mar-
kets unnecessarily complex and
unfairly favor certain partici-
pants.
By trying to blunt the im-
pact of ultrafast trading, ex-
changes are defying large high-
speed trading companies that
account for a huge portion of
their volume to appeal to more-
traditional clients. Financial in-
stitutions such as banks and
pension funds have complained
that high-frequency trading
eats into their profits.
“It’s finally boiled to the
point where the exchanges
started paying attention to what
their clients are saying,” said
Roman Ginis, founder ofIntelli-
gentCrossLLC, a startup U.S.
stock-trading platform.
HFT firms make money
through rapid-fire trading of
stocks, futures and other assets.
The industry has received nega-
tive depictions in works such as
Michael Lewis’s “Flash Boys.”
The traders say such portrayals
are unfair and HFT benefits in-
vestors.
BYALEXANDEROSIPOVICH
More Exchanges Add Speed Bumps
Markets defy large
high-speed traders to
appeal to clients that
are more traditional
ParFXEBS
MarketNYSE
AmericanAequitas
NEO-NIEX TSX AlphaRefinitiv
Matching^1Eurex Nasdaq^2 Moscow
Exch.IntelligentCross^3London
Metal
Exch.ICE
Futures
U.S.Cboe
EDGA^42020PLANNEDAveragedailytradingvolume,inbillions^5IEXCboe EDGANYSE AmericanTSX AlphaNasdaq^6Aequitas NEO-N$9.46.90.60.60.40.2EstimatedHFTrevenuesfromU.S.stocktrading
$6024billion’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19^7More than a dozen markets are expected to have speed bumps or similar features by 2020.Speed-bumplaunchesHigh-frequency trading was most profitable in the years right
after the financial crisis, due to volatile markets.Though smaller than its U.S. rivals, IEX is the biggest stock
exchange with a speed bump.PauseButtons
Sources: the companies (launches, trading volume); Tabb Group (revenues)(^1) Formerly Thomson Reuters Matching (^2) Refers to launch of Midpoint Extended Life Orders (^3) Uses periodic matching instead of a classic speed bump
(^4) Awaiting regulatory approval (^5) Reflects year-to-date volumes through July 19 (^6) Volume of Midpoint Extended Life Orders only (^7) 2019 is a projection.
2013 2014 2015 2016 2017 2018 2019
2010
Foreign exchange Equities Futures
1.050
1.200
1.175
1.150
1.125
1.100
1.075
2017 ’18 ’19
6
–2
–1
0
1
2
3
4
5
billion Swiss francs
2017 ’18 ’19
Sources: Refinitiv (sight deposits); Tullett Prebon (exchange rate) Note: 1 billion Swiss francs = $1.01 billion
Scale is inverted to
reflect the strength
of the franc against
the euro
HowmanySwissfrancs
oneeurobuys,weekly
Changeinaverage
sightdepositsatthe
SwissNationalBank,
weekly
The Swiss franc hit what
many analysts see as a key level
last Wednesday, which is 1.10
francs per euro, a level it hasn’t
breached since early July 2017.
At the end of April, one euro
bought 1.14 francs, while in May
last year it was 1.20 francs.
Looser monetary policy in
the U.S. and Europe puts up-
ward pressure on the franc by
making Swiss investments rela-
tively more attractive, or less
unattractive, by shrinking the
difference in interest rates be-
tween the Alpine nation and
elsewhere. Switzerland’s econ-
omy is typically viewed as
strong and stable, making it a
haven for investors.
The European Central Bank
didn’t cut interest rates last
week, but President Mario
Draghi has been preparing the
market for rate cuts and more
bond buying in his recent
speeches. He further emphasized
that message in Thursday’s
monetary-policy statement.
The Swiss franc weakened
after the ECB’s decision but re-
mains high compared with the
recent past, trading late Mon-
day at 1.105 francs per euro.
“Intervention has been a
long time coming, the franc has
been rising in recent months,”
said David Oxley, senior Europe
economist at Capital Economics.
Data on Swiss sight deposits
is publicly available only up to
the middle of last week, so the
central bank’s move came be-
fore the latest round of rate
signals from the ECB.
Mr. Oxley and other analysts
said the franc’s recent fall
looked more market driven
than central-bank driven.
JPMorgan analysts expect the
franc to continue to strengthen,
in part because the Swiss cen-
tral bank wouldn’t want to be
seen intervening and thereby at-
tracting the ire of the U.S.
“President Trump’s ongoing
forays into the FX market will
further incline the SNB to sit
on its hands and leave [the
franc] unrestrained,” they said
in a note.
—Brian Blackstone
and Pat Minczeski
contributed to this article.
The Swiss central bank ap-
pears to have taken its most
significant steps to weaken the
franc in about two years, after
looming interest-rate cuts from
U.S. and European central
banks put upward pressure on
the currency.
The Swiss National Bank be-
gan selling francs into the mar-
ket last week, a move that was
reflected in an uptick in what is
known as sight deposits, which
lenders use to hold reserves at
the central bank. The sight de-
posits, a closely watched indi-
cator of foreign-exchange inter-
vention, grew by 1.7 billion
francs ($1.71 billion), the largest
weekly amount since the sum-
mer of 2017, analysts said.
“This looks like intervention,”
said Thomas Flury, global head
of currency strategy at UBS
Wealth Management. “It is the
highest increase since the French
election period in 2017, when
they were last intervening.”
The Swiss National Bank de-
clined to comment Monday.
BYPAULJ.DAVIES
Swiss Move to Weaken Currency
Fort Worth area, where she
lives. She closed on a three-
bedroom, two-bathroom brick
house in suburban Saginaw,
Texas,inMay.
Ms. Poole ended up with a
rate of 4% on a 30-year fixed
mortgage fromBetter.com,an
online mortgage startup.
Lower rates helped her have
confidence that she would be
able to stay within her budget,
she said.
“I was so scared of being in
a situation where I took on
this house and then right away
was having money worries,”
Ms. Poole said. “So for me my
biggest focus when purchasing
a house was the projected
monthly payment.”
Vishal Garg, founder and
chief executive at Better.com,
said the company made about
$1 billion worth of loans in the
second quarter, more than in
all of 2016 and 2017 combined.
A Fed rate cut could spur
renewed interest in home
loans whose rates rise and fall
with short-term rates.
In a typical adjustable-rate
mortgage, borrowers pay a
fixed rate for five, seven or 10
years, which is typically lower
than the rate on a 30-year
fixed-rate mortgage. After
that, their rate regularly re-
sets.
Banks often favor these
mortgages for high-dollar
home loans made to wealthier
borrowers. They were popular
before the financial crisis but
have mostly failed to regain
popularity since.
Home-equity loans and
lines of credit, which are also
tied to short-term rates, may
also increase in popularity if
short-term rates fall.
“We do expect to see some
uptick next month, assuming
that there is a change in
rates,” said Jon Giles, who
oversees home-equity prod-
ucts at TD Bank.
Mortgage
Market
Gets a Lift