First Read

You Can’t Rain On Our Parade: Cboe’s Big 2017 Includes Bitcoin Futures. Can It Overcome Regulatory, Margin and Volatility Headwinds?
Jim Kharouf – John Lothian News

To hear Cboe Global Markets Chairman and CEO Ed Tilly tell it, his exchange group is firing on all cylinders and adding new ones to the engine. The exchange boasts the top US equity options market and has a lock on volatility products with the VIX futures and options and related exchange traded products. Cboe now has the top pan-European equity market and the second ranked US stock market, as well as a burgeoning FX business. As the migration of its exchanges onto the Bats trading platform continues, with Cboe Futures Exchange due up next month, its technology is taking a major step forward.

Oh yeah, and it launched the first Bitcoin futures contract in December, a move that shook the trading world. The industry was rocked further by the CME Group’s own Bitcoin contract launch a week later.

Read more HERE


Hits & Takes
JLN Staff

For the record, I was wrong. The first question at the Cboe Chicago press lunch was not about bitcoin. The second question and many others were, but my prediction was still wrong.~JJL

CME Group traded a record 3089 bitcoin futures yesterday, beating the previous record of 2649 set on December 22, 2018. I can’t figure out what the record for the Cboe is for bitcoin volume, which may have also been a record yesterday.~JJL

Money Laundering is also the world’s third largest industry by value”.~JJL

“As a 1993 UN Report noted: The basic characteristics of the laundering of the proceeds of crime, which to a large extent also mark the operations of organised and transnational crime, are its global nature, the flexibility and adaptability of its operations, the use of the latest technological means and professional assistance, the ingenuity of its operators and the vast resources at their disposal”.~JJL

Money.Net today launched a new set of cryptocurrency modules. You can now track real time prices, news and fundamentals for over 500 cryptocurrencies on Money.Net.~JJL


NYSE to launch new NYSE National exchange in second quarter
New York Stock Exchange parent Intercontinental Exchange Inc (ICE.N) (ICE) plans to launch its fourth U.S. stock market, NYSE National, in the second quarter, according to a recent regulatory filing. NYSE National will be the 13th U.S. stock exchange and will differ from the NYSE, NYSE Arca, and NYSE American in that it will only be a trading venue and not a listing market, NYSE said in the Jan. 12 filing with the U.S. Securities and Exchange Commission.

***** At yesterday’s Cboe press lunch I asked Ed Tilly if they would be establishing a new floor based exchange following BOX’s new trading floor in the CBOT Building, and he said: NO!~JJL


Diamond Trade Turns to Technology That Keeps Bitcoin Anonymous
Thomas Biesheuvel – Bloomberg
The world’s biggest diamond producer is turning to the technology behind bitcoin to track gems from mine to retailer.
De Beers is running a pilot scheme using blockchain to create a virtual ledger of diamond sales. The technology made famous by the cryptocurrency is also seen as having the potential to reshape industries from finance to retailing. It will enable De Beers to show transactions to all participants while keeping their identities and the value of the sales hidden.

***** Nothing says I love you like an anonymous diamond.~JJL


Tuesday’s Top Three
Everyone wants to know what Don Wilson is up to at DRW. The FT’s story was the top piece of the day by a long shot in, Filings reveal DRW’s climb into top rank of trading firms. Second went to the New York Times article, BlackRock’s Message: Contribute to Society, or Risk Losing Our Support. Third went to Business Insider’s An investing platform founded by a 25-year-old went free — and now it’s facing a backlash from its rivals



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Lead Stories

Hudson River to acquire Sun Trading as HFT continues to contract; Latest acquisition follows spate of similar deals in HFT space beset by costs and volatility woes.
John Brazier – The Trade
Multi-asset quant trading firm Hudson River Trading (HRT) is to acquire market-making firm Sun Trading as high-frequency trading (HFT) continues to shrink in the face of low market volatility and increasing costs.

What Could Kill the Bitcoin Boom; Digital money has a very human vulnerability: psychology.
Matthew Leising and Rob Urban – Bloomberg
If you bought a Bitcoin in early 2017, when one cost less than $900, you could have a profit of more than 1,200 percent now. But you almost certainly didn’t do that. Perhaps you dipped in a toe in November or December, as the price hit headline-grabbing records—$10,000, then $15,000, then higher. If you were very unlucky and bought at the peak of about $20,000 on Dec. 17, you’d have lost more than 40 percent of your money as of Jan. 16, when the price was $11,200. More than $2,000 of that decline came in about 24 hours, after South Korean Finance Minister Kim Dong-yeon indicated the country may crack down on cryptocurrency trading to discourage speculation. It’s not every asset that can feel like it’s in a bubble and a crash at the same time.

BitConnect Closes Exchange as States Warn of Unregulated Sales
By Olga Kharif – Bloomberg
BitConnect said it’s closing the company’s cryptocurrency exchange and lending operation after receiving two cease-and-desist letters from state authorities for the unauthorized sale of securities and suffering from denial-of-service attacks.

High-frequency traders combine as industry revenues fall; Hudson River Trading says Sun Trading deal will create more diverse firm
Nicole Bullock and Joe Rennison in New York – FT
Hudson River Trading has agreed to buy Sun Trading, a rival high-speed trader, in the latest example of the industry consolidating in the face of historically low volatility and rising costs.

Banks are on the hunt for tech veterans; Institutions are changing to attract talent
Patricia Nilsson – FT
When Ron Knapp joined Citigroup’s fintech unit as head of technology, he sent a note to his new managers with a suggestion: “Given what we’re trying to achieve I think I should come in wearing my boots and jeans.”

Online Gold Coin Sales Jumped 400% as Bitcoin Plunged
Eddie Van Der Walt – Bloomberg
Company sold about 30kg of gold Tuesday, worth more than $1m; Bitcoin grazes $10,000 on Wednesday for first time since Dec.
24 carat Britannia gold coins Photographer: Simon Dawson/Bloomberg
Gold coin sales jumped fivefold on Tuesday at one of Europe’s largest online dealers as Bitcoin suffered its biggest selloff since December.

Bitcoin Adds to Slump That Shook Global Cryptocurrency Market
Eric Lam – Bloomberg
Rivals ripple, ethereum also fluctuate between gains, losses; Speculators await series of potential new regulations
Bitcoin slowed its decline on Wednesday in the wake of a 23 percent plunge that rocked the global market for digital assets and sparked deeper questions about its future.

Investors face barriers trying to turn bitcoin profits into pounds; High fees and suspicious banks hinder cryptocurrency transactions
Kate Beioley – FT
British investors who want to cash out of cryptocurrencies into pounds face the hurdles of having to make international money transfers, being charged high fees and drawing the suspicion of banks.

Head of FX operations at Barclays charged over front-running scheme; Robert Bogucki will appear in court today over allegations of volatility price manipulation and wire fraud.
Hayley McDowell – The Trade
The former head of foreign exchange trading operations at Barclays in New York has been charged for orchestrating a multi-million front-running scheme.

A Wall Street Giant Makes a $75 Million Bet on Academic Philosophy
Jennifer Schuessler – NY Times
The quants and their algorithms may have taken over Wall Street. But one investment legend is making a big bet on a more old-fashioned mode of analysis: philosophy.

Exchanges, OTC and Clearing

Euronext Brussels Awards 2017
Euronext Brussels awarded the best performing listed companies and members during its New Year’s reception. This year’s winners are:

Common Report Engine (CRE) infrastructure upgrade
To provide additional storage capacity for future usage and for the implementation of additional security measures, Deutsche Börse is upgrading the Common Report Engine (CRE) infrastructure.

First IR-specific solution to provide comprehensive passive index investment data
Globe Newswire
Nasdaq Corporate Solutions, a business of Nasdaq, Inc. (Nasdaq:NDAQ), today announced the launch of passiveIQ, a new analytics tool designed to provide investor relations (IR) professionals with comprehensive and actionable insights into passive index investment data from mutual funds and ETFs. passiveIQ is available as a supplementary service to Nasdaq IR Insight®.

TSE Clinches “Best ETF Stock Exchange” in Industry Journal’s “2018 Best of the Best Awards”
On January 16, Tokyo Stock Exchange, Inc. (TSE) clinched the “Best ETF Stock Exchange” in the “2018 Best of the Best Awards” given out by Asia Asset Management, a Hong Kong-based trade journal for the asset management industry in the Asia Pacific region.


New Cyberattack on Cryptocurrency Investors Came From North Korea, Report Says; The hacking offensive’s malware is similar to that used in Pyongyang’s attack on Sony Pictures Entertainment and WannaCry ransomware assault, according to cybersecurity researchers.
Jonathan Cheng – WSJ
A new hacking offensive against cryptocurrency investors uses malware similar to that deployed in North Korea’s attack on Sony Pictures Entertainment and its WannaCry ransomware assault, cybersecurity researchers said, providing further evidence of Pyongyang’s involvement in crypto heists.

How a 22-Year-Old Discovered the Worst Chip Flaws in History
Jeremy Kahn, Alex Webb, and Mara Bernath – Bloomberg
Horn stumbled on problems while reading lengthy Intel manuals; Google researcher has ‘outstanding mind,’ dogged determination
In 2013, a teenager named Jann Horn attended a reception in Berlin hosted by Chancellor Angela Merkel. He and 64 other young Germans had done well in a government-run competition designed to encourage students to pursue scientific research.

De Beers turns to blockchain to guarantee diamond purity
Barbara Lewis – Reuters
Anglo American’s (AAL.L) diamond unit De Beers aims to launch the first industry-wide blockchain this year to track gems each time they change hands starting from the moment they are dug from the ground, its chief executive said on Tuesday.

Sorry, Bitcoin Fans. Digital Currency Is Still a Dream; I’ve been waiting for decades for someone to invent a currency for online purchases. And still am.
By Joe Nocera – Bloomberg
Bitcoin breaks my heart. Not because I missed the great run-up (though I did) and not because I fear that the Bitcoin bubble will end badly (it will, but that’s not my problem). Rather, it is because I have been waiting for decades for someone to invent a purely digital currency, a currency for online purchases that wasn’t linked to a credit card. It was the killer app (as we used to say) that no one ever figured out.

Crypto Junkies’ Favorite Messaging App Is Planning the Biggest ICO Ever
By Camila Russo – Bloomberg
Encrypted messaging service Telegram Inc. is planning the largest, and by some measures most ambitious, initial coin offering ever.


Flurry of Lawsuits Filed to Fight Repeal of Net Neutrality
Cecilia Kang – NY Times
The legal fight against the Federal Communications Commission’s recent repeal of so-called net neutrality regulations began on Tuesday, with a flurry of lawsuits filed to block the agency’s action.

As Trump heads to Davos, survey points to rising risk of war
Noah Barkin – Reuters
The risk of political and economic confrontations between major powers, including outright military conflicts, has risen sharply, according to a survey released by the World Economic Forum (WEF) days before its annual gathering in Davos.

A Year After Trump, Davos Elite Fear Cyberattacks and War
Stephen Morris – Bloomberg
‘Cyber-dependency’ now more worrying than social polarization; 93% of global leaders expect more political, economic clashes
The threat of large-scale cyberattacks and a “deteriorating geopolitical landscape” since the election of U.S. President Donald Trump have jumped to the top of the global elite’s list of concerns, the World Economic Forum said ahead of its annual meeting in Davos, Switzerland.


Third Barclays FX Trader Faces U.S. Charges in Global Scandal
By Marcus Wright and Suzi Ring – Bloomberg
DOJ alleges Bogucki tried to rig options at expense of HP; Faces first court appearance in New York later Wednesday
The former head of New York foreign exchange trading at Barclays Plc’s investment bank became the lender’s third trader to face U.S. charges related to market manipulation, as prosecutors pursue officials responsible for misconduct that has led to $10 billion in fines.

Monthly Disciplinary Actions January 2018

Investing and Trading

Is the Stock Market Too Quiet for Its Own Good?
Conrad De Aenlle – NY Times
A rare calm has settled over the stock market. Whether it turns out to be the one before the storm is a compelling question after a year of conditions so placid that investing has begun to look deceptively simple.

Bitcoin Extends Rout, Dipping Below $10,000; Drop spreads to other cryptocurrencies, such as Ether and Litecoin
Paul Vigna and Gregor Stuart Hunter – WSJ
Bitcoin prices fell below $10,000 on Wednesday, marking a drop of about 50% from their December record and illustrating the degree to which the cryptocurrency remains a highly illiquid and volatile investment.

Trafigura signs 15-year accord with US LNG group; First long-term flexible deal by an independent commodities trader and a US producer
Emiko Terazono in London – FT
Trafigura signed a 15-year agreement with US liquefied natural gas group Cheniere Energy on Tuesday to buy 1m tonnes a year of the super-cooled fuel, in the first long-term flexible deal between an independent commodities trader and a US producer.

Crypto-crash: Digital currencies still under pressure after broad rout
Adam Samson – FT
Cryptocurrencies faced further pressure on Wednesday after one of the most severe routs of the past few years, underlining regulators’ warnings over intense tumult in the nascent digital currencies market and sparking pockets of concern among enthusiasts.

Larry Fink’s Warning to CEOs Rings Hollow; The BlackRock founder wants companies to make the world a better place. It’s going to take more than a strongly-worded letter to create change.
Matt Levine – Bloomberg
There is a theory, once popular in certain circles, that the way you build a big profitable company is by providing some valuable good or service to the rest of society. If you build a billion iPhones and sell them for $500, and a billion people get more pleasure out of an iPhone than they do out of $500, then those billion people will be better off for your efforts, and you will have $500 billion. This straightforward theory — it is sometimes called “capitalism” — runs into some complications with rents (if you build a lifesaving pill for $1, patent it, and sell it for $100,000, the person who buys it will be better off in a sense, but you might still be a jerk) and externalities (if you build a delightful social network, sell lots of ads for it, and it happens to undermine democracy and civil society, then you might be subtracting value even as people are happy to buy your ads), but like I said it used to have a certain popularity.


Einhorn’s hedge fund gained only 1.6% last year
Carleton English – NY Post
David Einhorn’s investors aren’t the only ones upset by his hedge fund’s lagging performance — the hedgie himself is also frustrated.

Citigroup Earnings Wiped Out by Tax Charge; Bank reports its largest quarterly loss ever after taking a $22 billion charge on the new tax law
Christina Rexrode – WSJ
The tax law wiped out Citigroup Inc.’s C 0.35% fourth-quarter earnings and then some, with the bank taking a $22 billion charge that caused it to post a loss of $18.3 billion—its biggest loss ever for a single quarter.

Goldman Sachs Posts First Quarterly Loss in Six Years; A quiet trading environment and a one-time tax hit dent results
Liz Hoffman – WSJ
Goldman Sachs Group Inc. GS 0.56% reported lower revenue for its fourth quarter, as quiet trading and a one-time tax hit pushed the firm to its first quarterly loss in six years.

Bank of America posts a $2.4bn profit despite tax charge
Alistair Gray – FT
Bank of America has provided further evidence it is recovering from its protracted post-crisis malaise after it brushed aside a $2.9bn tax-related charge and a $292m loss suspected to be from the Steinhoff scandal to generate $2.4bn in quarterly profits.

BofA Has Ways to Go to Meet $53 Billion Expense Goal by Year-End
Laura J Keller – Bloomberg
Bank of America Corp. once excited investors by pledging steep cost cuts by the end of this year. It still has a ways to go.

Here’s Where Banks Rank on Blockchain Patents; The financial-services industry has a greater share than technology companies
Jennifer Surane and Susan Decker – Bloomberg
While almost 60 percent of all blockchain-related patents filed in the U.S. belong to blockchain-specific companies, financial services have become more aggressive with a greater share than traditional technology firms. Bank of America Corp. has applied for or received more patents than any other major bank or tech company, according to EnvisionIP. Its study of publicly-issued patents and applications uncovered 43 from the bank, which says it has 48 total.

Barclays to Merge Treasury and Investor Relations Units
Stephen Morris and Trista Kelley – Bloomberg
16-year veteran McLeland takes over Dan Hodge’s treasury role; Hodge looking for a new job within bank, people familiar say
Barclays Plc named Kathryn McLeland to run a newly combined treasury and investor relations unit as part of an internal reshuffle, according to people with knowledge of the moves.

BofA’s $292 Million Charge Said to Be Tied to Steinhoff Turmoil
Laura J Keller – Bloomberg
Bank of America Corp. just joined a roster of big U.S. lenders suffering multimillion-dollar burns on their dealings linked to Steinhoff International Holdings NV.

Goldman’s Commodity Revenue Drops 75% to Lowest on Record
By Jack Farchy, Javier Blas, and Dakin Campbell – Bloomberg
Weak result put bank behind long-time rival Morgan Stanley; But had good start to 2018 in commodities on U.S. cold spell
Goldman Sachs Group Inc. suffered the worst annual commodities performance in its history as a public company as a drop of about 75 percent in net revenue in 2017 put it behind long-time rival Morgan Stanley, according to people familiar with the matter.

Banks Are Big Winners From Tax Cut
The nation’s banks are finding a lot to love about the Trump administration’s tax cuts.


China Official Says Crackdown on Murky Conglomerates Isn’t Over
Bloomberg News
CBRC chairman vows action on groups as part of banking reform; Guo has launched campaign to root out malpractice in banks
China’s banking regulator vowed to take action against those who built large financial conglomerates through complex ownership structures and fraudulent capital injections, signaling last year’s government crackdown on such entities is poised to continue.

This Ex-Goldman Banker Quit to Take Over an Empire in Myanmar
Livia Yap and Sterling Wong -Bloomberg
Melvyn Pun left Goldman after 12 years to run Yoma Strategic; Pun’s ex-boss convinced him to join the family business
When Melvyn Pun agreed to take his former boss to Myanmar in 2012, little did he know that the trip would cause him to quit his high-profile job at Goldman Sachs Group Inc.

Interserve under government watch over financial health fears; Collapse of Carillion puts focus on UK outsourcing industry
Jim Pickard, Robert Smith and Gill Plimmer – FT
The UK Cabinet Office has set up a team of officials to monitor Interserve following concern over the financial health of the FTSE 250 contractor, which employs 80,000 staff worldwide and has an annual turnover of about £3bn.


Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole
Joost Akkermans – Bloomberg
Hoekstra says split will hurt some countries more than others; Netherlands is concerned about impact of Brexit on EU budget
Dutch Finance Minister Wopke Hoekstra said European Union countries that are set to suffer the most from Brexit shouldn’t also have to help plug the hole it will tear in the bloc’s budget.

The EU Should Let the City Thrive; Despite Brexit, there’s room for a deal on financial services.
The Editors – Bloomberg
Last week, the U.K. government asked German business leaders for help in securing a good deal with the European Union on financial services. The request deserves to be taken seriously. Europe’s businesses have much to gain from keeping London as a thriving financial center.

U.K.’s Boris Johnson Asked About Second Referendum on Brexit
By Nick Wadhams – Bloomberg
U.K. Foreign Secretary Boris Johnson speaks to reporters about chatter of a second referendum on Brexit ahead of a summit on North Korea in Vancouver.


Half of Americans want to regulate news on social media; Report shows public is concerned about fake stories and political polarisation
Shannon Bond in New York – FT
Nearly half of Americans favour regulating how websites such as Facebook and Google select what news stories they show to readers, according to a new report from Gallup and the Knight Foundation, in the latest sign of growing public concern over big tech.

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