Nasdaq vs. MIAX lawsuit update; SIP reforms on horizon?; Commodities revenue

Sep 6, 2018

Observations & Insight

X_TRADER Transformed The Industry: Now It’s Time To Do It Again
Jim Kharouf – JLN
The announcement that Trading Technologies will be shutting down its X_TRADER platform is not a big surprise. But what that platform has done over its 25-year lifespan certainly is. And what the new TT platform may do in the coming months and years may be equally astounding.
Taking a look back, there’s not a single ISV trading platform that has had a greater impact on the industry than X_TRADER. Launched in 1994, the technology that included patented breakthroughs like the ubiquitous price ladder and autospreader transformed the trading industry with Harris Brumfield’s trader’s eye for functionality and speed. The patents granted on the price ladder put TT at odds with many in the industry, but it also served as a sort of starting gun for the business patent race across financial markets.
/jlne.ws/2wRZonn

****SD: TT CEO Rick Lane on the move here.

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Thursday’s Notes
Spencer Doar – JLN

Four people, including the gunman, are dead after a shooting this morning at the Fifth Third Bank building.

Our MarketsWiki Education video of CME Group’s Tim McCourt is out. It’s a humorous, candid look at how a career can twist and turn.

The VIX has moved above 15 today a couple of times. (The link is to FT market commentary.)

Want an update on the SEC’s tick size experiment? The WSJ has SEC’s Stock Trading Experiment Cost Investors Over $300 Million, Study Finds.

More GFC reflections:
-IMF – Ten Years After Lehman – Lessons Learned and Challenges Ahead by Christine Lagarde
– Financial Times – Lehman insider: why the bank could and should have been saved by Scott Freidheim
-WSJ (VIDEO) – Warren Buffett Explains the 2008 Financial Crisis

 

Lead Stories

Nasdaq patent review dropped, but court clash continues
World Intellectual Property Review
Electronic stock exchange Nasdaq and a competitor have settled a dispute over a trading technology patent, prompting the US Patent and Trademark Office (USPTO) to dismiss a review of US patent number 7,599,875.
/goo.gl/KtN57y

****SD: For some background on the beef, see this piece from NJ Tech Weekly Princeton-based Miami International Holdings Strongly Refutes Nasdaq Lawsuit Claims and the following from Bloomberg Nasdaq Options Trading Patents Challenged by Rival MIAX Exchange.

Nasdaq Floats SIP Reforms
Rob Daly – MarketsMedia
Ahead of the planned market access and market data roundtable hosted by the US Securities and Exchange Commission’s Division of Trading and Markets slated for later this year, Nasdaq has published a three-point white paper that calls for governance and revenue-distribution reforms for the Securities Information Processors as well as rule clarifications.
/jlne.ws/2Nk6ESw

****SD: It’s all about how you reform it and there are multiple opinions on that. Data feeds are a touchy subject. Nasdaq also has had a complicated relationship with the SIP. (The moment I saw this I thought of Dash’s Peter Maragos, as reforming the SIP has been a talking point of his for a while.)

Top banks’ first-half commodities revenue climbs 38 percent: report
Reuters
Commodities-related revenue at the 12 biggest investment banks in the first half gained 38 percent year on year, driven by the energy and base metals sectors, consultancy Coalition said on Thursday.
/jlne.ws/2oKhlzR

What’s The Risk In Holding Stocks Now?
Brad Zigler – Seeking Alpha
Baseball’s Yogi Berra really ripped up a leaf from Robert Frost’s poetry anthology when he said: “When you come to a fork in the road, take it.” Traders watching the market for S&P 500 stocks are now facing a Yogi-like fork in the road and wondering which tine to follow. Specifically, it’s a divergence in the pricing of S&P 500 Index options that has got traders and institutional investors puzzled.
/jlne.ws/2Nourk9

JPMorgan, BlackRock Warn Contagion Hitting Emerging Markets
Ben Bartenstein – BloombergQuint
Every emerging-market currency has fallen in past six months; Dollar strength ‘not a good story’ for EM, JPMorgan says
First came the Argentine selloff. Then Turkey. And before long, assets from South Africa to Brazil and Indonesia were getting hit in a selling stampede across emerging markets.
/goo.gl/hXiKDo

****SD: Also from BloombergQuint – Emerging-Market Rout Is Longest Since 2008 as Confidence Cracks and No Relief in Sight for EM Currency Slump That’s Lasted 155 Days

Volatility spikes underline fragilities and risks to EU securities markets and investors
ESMA
European Union (EU) securities markets, infrastructures and investors face new risks in the form of high volatility, the European Securities and Markets Authority (ESMA) said today in its latest Trends, Risks, and Vulnerabilities (TRV) Report (No 2, 2018). ESMA also re-iterated its concerns about cyber risk and Brexit risks for business operations.
/jlne.ws/2NfBsUz

Exchanges and Clearing

NCDEX plans for commodity derivatives to address NPAs, volatile agri prices NCDEX will propose to the regulator to allow options in more agri commodities
Rajesh Bhayani – Business Standard
Vijay Kumar V, managing director & CEO, National Commodity & Derivatives Exchange Limited (NCDEX), plans to make commodity derivatives, more importantly options, a tool to address non-performing assets (NPA) and volatile agriculture crop prices.
/goo.gl/Ji3ALV

Intercontinental Exchange Reports August 2018 Statistics
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported August 2018 trading volume and related revenue statistics
/jlne.ws/2oKLajB

****SD: Of interest to our readers: NYSE equity options ADV up 33 percent YoY.

Moves

Citi Bulks Up Algo and ETF Teams
John D’Antona – Markets Media
The Citi never sleeps.
The bulge bracket firm has been busy hiring and bulking up its ranks lately. The firm has added a total of thirteen new people to its roster. According to a memo seen by Traders Magazine, the firm said that as it continues to build on the momentum of our Futures, Clearing and Collateral platform globally, it is committed to attracting the industry’s top talent to provide clients with market-leading solutions across products and geographies.
/goo.gl/sR1e9j

****SD: From Bloomberg via Yahoo – Citigroup to Revamp Investment Banking With New Leaders

Morgan Stanley Appoints Francesco Ponti as VP of Equity Derivatives Sales
Celeste Skinner – Finance Magnates
Morgan Stanley, an American multinational investment bank, has managed to secure Francesco Ponti as its Vice President of Equity Derivatives Sales. Ponti will be working from the firm’s office in Paris starting this month, according to information on his LinkedIn.
/jlne.ws/2Nis0Qf

Regulation & Enforcement

SEC Is Back at Full Strength With Five Members
Dave Michaels – WSJ (SUBSCRIPTION)
The Senate confirmed Elad Roisman to join the Securities and Exchange Commission, giving the regulator a fifth and final member as it prepares to impose restrictions on stockbroker advice while loosening the reins on some public companies.
/jlne.ws/2Ngk02f

****SD: Hard to believe the SEC and the CFTC have a full slate of commissioners, right?

Germany, U.K. Said to Drop Brexit Ask, Easing Path to Deal
Birgit Jennen, Ian Wishart and Tim Ross – Bloomberg (SUBSCRIPTION)
The British and German governments have abandoned key Brexit demands, potentially easing the path for the U.K. to strike a deal with the European Union, people familiar with the matter said. The pound rose.
/jlne.ws/2oLYVih

Technology

IHS Markit Overhauls Derivatives ‘Nerve Center’ with TradeServ Launch
Anthony Malakian – WatersTechnology (SUBSCRIPTION)
MarkitSERV executives sat down with WatersTechnology to preview its soon-to-be-launched TradeServ platform, which will be rolled out even as the firm is on the market to be sold.
/jlne.ws/2oSAqQB

****SD: MarkitSERV is an OTC platform but handles all sorts of fun options products like variance options and supports multi-legged strategies. A factsheet on MarketSERV can be found here.

Update on the Consolidated Audit Trail (“CAT”) Reporting Technical Specifications for Industry Members
Nasdaq
Today, CAT NMS, LLC published version 0.6 of the CAT Reporting Technical Specifications (“IM Technical Specifications”) for Industry Member reporting to the CAT. The IM Technical Specifications are available on the CAT NMS Plan website at: IM Technical Specifications. This version of the IM Technical Specifications represents the last draft version that will be published for industry comment before the release of the final IM Technical Specifications, targeted for October 30, 2018.
/jlne.ws/2NlhCY2

Exclusive: SS&C nears deal to buy Intralinks – sources
Liana B. Baker, Greg Roumeliotis – Reuters
Financial software company SS&C Technologies Holdings Inc (SSNC.O) is nearing a deal to buy data-sharing platform Intralinks Inc, in what would be its third major acquisition this year, people familiar with the matter said on Tuesday.
/jlne.ws/2oMXW1k

****SD: Siris acquired Intralinks last year for $1 billion. SS&C will likely pay twice that – pretty good turnaround for Siris.

Strategy

Credit Derivatives Dethroned by ETFs as Managers Fret Downturn
Yakob Peterseil – BloombergQuint
Battle-ready investors on the prowl to hedge a looming reversal in the global debt cycle are embracing weapons familiar to Mom and Pop — and falling out of love with complex derivatives.
/goo.gl/qWJivT

Pot-Stock Frenzy Stokes Canopy Growth Shares, Options Volume
Gregory Calderone – Bloomberg (SUBSCRIPTION)
Investors are looking downright giddy for Canopy Growth Corp.
/jlne.ws/2Ngoaan

****SD: Options ADV is up 6x since mid-July.

FX Options Update: September 6, 2018
Dan Larsen – TradingFloor.com
Saxo Bank head of FX trading Dan Juhl-Larsen’s latest report on the FX Options space is now live, with a look at the South African recession, USDZAR and the bid seen in overnight vols ahead of an expected tariffs announcement from Washington.
/jlne.ws/2oJcT4a

Hedging U.S. Equities with Treasury Options
CME Group – TheStreet
U.S. equities may be in the late stages of a bull market. In their early stages (1991-1996, 2003-2005 and 2009-2014), earnings and equity prices rise in tandem. In the late stages (1997-2000, 2006-2007 and 2015-), earnings stagnate or decline while prices continue to advance anyway (Figure 1). For the moment, earnings remain relatively robust but are not growing any faster than GDP. At some point, with rising interest rates, a tightening labor market and a trade war, earnings may begin to decline outright as they did during the late 1990s and in 2006 and 2007. A decline in earnings does not necessarily imply an immediate decline in stocks but with interest rates rising and the possibility of a recession around 2020, give or take a year, the risks to long-only equity positions are growing.
/jlne.ws/2oLgVJt

Events

T4Youth Registration Has Opened; Chicago’s tech community to “rally” together for 5th consecutive year to raise money and create opportunities for underserved high school students
T4Youth via Medium
T4Youth, Chicagoland’s charity tech table tennis tournament, is now accepting team registrations and corporate sponsorships for the blockbuster annual event, which benefits The Chicago Tech Academy (ChiTech), Chicago’s only public high school to incorporate wall-to-wall project-based learning, entrepreneurial principles, STEM coursework, and real-world experiences with Chicago companies into the curriculum. This year’s tournament will be held on November 14, 2018, at SPiN Chicago, and the winner will earn the title of number-one corporate table tennis team in Chicago. Teams can register on the site: www.T4Youth.com.
/jlne.ws/2M0LLaj

****SD: This event is a ton of fun. I highly recommend it, but be prepared to accidentally step on a bunch of ping pong balls. October has ALTSO’s Rocktoberfest and November has T4Youth – that’s a good string of different sorts of charitable events. Here’s our recap of last year’s T4Youth. Also, did you know that Susan Sarandon is a partner in the SPiN venture?

Miscellaneous

Market Data: The Lifeblood of Efficient Engagement in Global Markets
Intercontinental Exchange
Columbia Business School Professor Charles Jones has released a research paper that examines the role and evolution of equity market data, and reaffirms that exchanges deliver moderately priced, high value market data that enables users to fuel investment decisions for better business returns. The New York Stock Exchange commissioned the paper to provide the industry with a fact-based review of the U.S. equity exchange market data landscape.
/jlne.ws/2NmtQj3

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