Industry-Driven Derivatives Insights
Thom Thompson – John Lothian News
The following is a discussion of the inaugural quarterly edition of “Derivatives Insight Report” published on April 14, 2019, by Acuiti Business Intelligence, a platform for insights and analytics in the derivatives market. The company was launched by William Mitting in February of this year. Mitting was previously editor and publisher of FOW until it was acquired by Global Investor, where Mitting served as a managing director.
Acuiti published its first quarterly derivatives report about a week ago and it is filled with fascinating insights about developments over the last year and especially the last three months in the world derivatives business. The focus of the report is squarely on how the individual buy- and sell-side businesses see themselves doing rather than providing an industry overview.
To read the rest of this article, go here.
Hits & Takes
Business Insider has a story titled “These Are 13 Of The Best Trading Floor Pranks Of All Time.”~JJL
Do you know about the new game, Satoshi’s Treasure?~JJL
Monero is celebrating its 5th birthday.~JJL
Virginia announced last Friday that it will join the Regional Greenhouse Gas Initiative in 2020, expanding the northeast regional market for carbon to 10 states. New Jersey has also said it will rejoin next year, making it 11 states in the program. Carbon futures are offered on RGGI on ICE and Nodal Exchange.~JK
My son Robby Lothian finished his last merit badge for the rank of Eagle. He just needs to submit his Eagle application and Eagle project report before May 2 when he turns 18.~JJL
Robby has decided to attend the University of Missouri, where his brother Tim went to college. He will be studying information technology there. It is a bit of a family tradition to follow your older brother to school, as I followed my older brother Scott at Purdue University.~JJL
An Operating System for Capital Markets – Mazy Dar, OpenFin
When Mazy Dar worked for a firm in the credit default swap trading space, he became familiar with the challenges posed by application deployment in financial services. It was his experience then that made him realize capital markets could take a page from mobile phone app stores. In this video, Dar talks about the core issues he addresses as CEO of OpenFin, a company that built an operating system for finance that is used by more than 1,500 buy- and sell-side firms to rapidly deploy applications.
Watch the video »
UK financial services? It’s a family affair: report
Simon Jessop – Reuters
Nearly half of all people working in Britain’s financial services industry have followed their parents into the sector, more than three times the national average, research from consultants KPMG showed.
***** All in the family, UK version.~JJL
Wall Street firms are being taken over by 22-year-olds — here are the big banks that rely on junior talent the most
Alex Morrell – Business Insider
As Wall Street banks spend billions to upgrade technology and automate tasks, the mundane and tedious work that used to define the early years of a career at an investment bank is increasingly disappearing, with bots and algorithms springing into action to take over.
***** First American Discount Founder Bill Mallers, Sr. used to say don’t trust anyone under 30.~JJL
Privacy Requirements No Secret; Not Quite the “Thrilla in Manila”
Gary DeWaal – Bridging the Week
The watchdog arm of the Securities and Exchange Commission – the Office of Compliance Inspections and Examinations – issued a Risk Alert summarizing breakdowns in compliance by broker-dealers and investment advisers of their obligations regarding customer information privacy notices and associated policies and procedures. Separately, the New York State Department of Financial Services and a recently declined applicant for a BitLicense engaged in a heated public brawl regarding the cause of the license declination. It was not commensurate with the excitement of the legendary 1975 “Thrilla in Manila” between Muhammad Ali and Joe Frazier, but the fireworks were extraordinarily dramatic by the standards of routine regulatory interactions in a non-litigation setting.
Friday’s Top Three
Our top read story on Thursday was about DRW’s effort to bring digital tokens to the real estate space in Crain’s Chicago Business’s Chicago’s DRW sees real estate token deal fall apart. Second was the FT’s DE Shaw to revert to ‘3 and 30’ model as cost pressures bite. Third was Coindesk’s In First, FinCEN Penalizes Bitcoin Trader for Violating AML Laws, about a California man who allegedly failed to comply with the Bank Secrecy Act.
149,279,746 pages viewed; 23,691 pages; 218,623 edits
Traders Wager on Calm as Volatility Evaporates; VIX index has fallen 12% in April after recording one of the biggest declines in history to start the year
Gunjan Banerji – WSJ
Volatility in the stock market has continued to evaporate in 2019, a sign that some investors are embracing riskier assets again. The Cboe Volatility Index—a yardstick for expected swings in equities—has fallen 12% this month after recording one of the biggest declines in history to start the year. The gauge measures the speed and severity of the stock market’s moves and tends to fall when equities are rising and demand for hedges on the S&P 500 slips. Volatility measures tracking currencies, bonds and oil have also retreated.
US plans to eliminate sanctions waivers on Iranian oil; Fuel prices rise as China, India and Japan among nations pressured to find other sources
Demetri Sevastopulo and Aime Williams, David Sheppard – FT
Japan, South Korea, Turkey, India and China will face pressure to cancel Iranian oil imports as the US eliminates sanctions waivers in an effort to increase pressure on Tehran one year after Washington left the Iran nuclear deal.
Morgan Stanley Picks Hedges to Deal With Potential Trade Turmoil
Joanna Ossinger – Bloomberg
Strategists recommend bets on volatility, EUR/JPY pair; Hedges seen as better than shifting allocation strategy
Investors should use hedges to mitigate the effect of several trade-event risks, according to Morgan Stanley.
Morgan Stanley Center of Excellence Readies Bank for AI’s Data Demands
Companies are looking to supercharge corporate decision making through artificial intelligence, but first they need help preparing the troves of customer and business data they have acquired over the years.
Who wants the grief of running a central bank?
David Smith – The Times
On the surface, all seems calm. In Britain, inflation is a whisker below the official 2% target and, while in normal circumstances the Bank of England would be contemplating higher interest rates because of accelerating wage costs, the pressure to do so is not enormous.
JPMorgan Expanding Blockchain Project With 220 Banks to Include Payments
Daniel Palmer – Coindesk
Investment banking giant JPMorgan Chase is planning to expand an existing blockchain project to include settlement features as it seeks to fend off competition from payments upstarts such as TransferWise and Ripple.
Trump’s Taxes Are Fair Game. Just Ask Warren Harding; The Teapot Dome corruption scandal resulted in a 1924 law that gives the House Ways and Means Committee authority to demand returns.
Stephen Mihm – Bloomberg
If Democrats in Congress succeed in their quest to get Donald Trump to cough up his tax returns, they’ll have another Republican president to thank: Warren G. Harding.
Malware Crypto Ransoms Rose By Almost 90% in Q1: Report
Daniel Palmer – Coindesk
The average cryptocurrency payout for ransomware attacks rose dramatically in the first quarter of 2019, according to a firm that helps victims pay ransoms.
Exchanges, OTC and Clearing
EEX Supervisory Board elects Thomas Book as new chairman
The Supervisory Board of the European Energy Exchange AG (EEX) elected Dr Thomas Book as the new chairman at its meeting on 17 April 2019 in Leipzig.
ECC Supervisory Board elects Heike Eckert as new chairwoman
The Supervisory Board of the European Commodity Clearing AG (ECC) elected Heike Eckert as new chairwoman at its meeting in Leipzig on 17 April 2019.
Notice to Investors on Ten Consecutive Non-business Days at Tokyo Stock Exchange and Osaka Exchange
The markets operated by Tokyo Stock Exchange, Inc. (TSE) and Osaka Exchange, Inc. (OSE) will be closed for ten consecutive days from April 27, 2019 (Sat.) to May 6, 2019 (Mon.).
Establishment of Japan-China ETF Connectivity
Japan Exchange Group, Inc. (JPX) and Shanghai Stock Exchange (SSE) will establish “Japan-China ETF Connectivity”, a scheme for creating ETFs that link the ETF markets of both exchanges. Aimed at increasing opportunities for cross-border investment between the Chinese and Japanese securities markets, this scheme is the result of negotiations with the authorities and market participants based on the Memorandum of Understanding concluded between the two exchanges in October 2018. Please see the Appendix for an outline of the scheme.
The additional trading session starts later for Derivatives market on 2, 8, 15, 16, 23, 28 and 30 May 2019
Please note that the Derivatives Market evening trading session will begin five minutes later, i.e. at 7:05 pm MSK, on 2, 8, 15, 16, 23, 28 and 30 May 2019, as these are the last trading days for options…
China Outlines New Approval Process for World’s Top Games Market
Yuji Nakamura and David Ramli – Bloomberg
Regulators impose new requirements and enhance transparency; Tencent, Netease have struggled with a months-long crackdown]
Chinese regulators have sketched out new requirements for videogame approvals following a year of scrutiny, providing more clarity to Tencent Holdings Ltd. and other players struggling with a crackdown in the world’s largest gaming market.
Fintech’s Next Frontier: The $60 Billion Opportunity To Change Millennials And Their Healthcare
Ashlea Ebeling – Forbes
Alex Cyriac was 33, single and healthy when he got a wake-up call about medical costs in retirement. His mom confided she’d stopped taking a medication because the co-pay under her Medicare drug plan had risen $200 a month. Cyriac insisted she fill her prescription and said he’d pick up the tab. “I had naively assumed that when you retire you have Medicare,” he says.
How Fintech Can Push Small Businesses to the Next Level
Karen Mills, former director at Small Business Administration, discusses the influence of smaller financial technology companies on big banks and how the U.S. government could help small businesses. She speaks on “Bloomberg Surveillance.”
Agility Vital in Fintech Sector (Radio)
Adam Reynolds, CEO:Asia-Pacific, Saxo Capital Markets, joined Doug Krizner and Paul Allen on Daybreak Asia. He discusses the key issues for trading on currency markets, new developments in technology and the importance of widening access to markets.
Bitcoin SV’s Delisting Isn’t ‘Censorship.’ But It’s Still a Problem
Michael J Casey – Coindesk
Is cryptocurrency exchange Binance’s delisting of bitcoin SV a form of censorship? And if so, doesn’t that make hypocrites out of all the Bitcoin Core supporters and Craig S. Wright haters who cheered the downgrading of the latter’s competing bitcoin project? Are they not applying a double standard by simultaneously arguing for immutable, “censorship-resistant” blockchains?
Will Belarus Be the First Country With Nuclear-Powered Bitcoin Mining?
Lubomir Tassev – Bitcoin.com News
Cryptocurrency mining has lost some of its profitability during the prolonged bear market of the past year. However, not all investors are short-sighted. Belarus, for example, is not giving up on its intentions to develop the digital economy, of which the crypto space is a part of. Minsk thinks it has enough resources and soon plenty of cheap energy to power new coin minting facilities and make a buck from bitcoin mining.
JPMorgan Chase to Add New Features to Blockchain-Powered Network for Global Banks
Thomas Simms – Cointelegraph
JPMorgan Chase (JPM) is expanding the use of its blockchain technology to help reduce the number of global payments rejected by errors, the Financial Times reported on April 21. The United States financial giant is adding new features to its Interbank Information Network (IIN,) which is now used by more than 220 banks around the world. The technology was initially designed to help institutions share payments data in real time — cutting delays in processing times.
Campaign to Raise $1 Mln in Crypto for Venezuelans Registers 60,000 Beneficiaries
Marie Huillet – Cointelegraph
A charitable campaign to enable the direct transfer of $1 million in crypto donations to Venezuelans has registered around 60,000 verified beneficiaries and raised $272,000 to date. The news was revealed in an interview with the campaign’s leader, Steve Hanke, with National Public Radio on April 21. Professor Hanke is a professor of applied economics at Johns Hopkins University who reportedly served as economic adviser to former Venezuelan president Rafael Caldera between 1995 and 1996.
FinCEN Issues First-Ever Civil Penalty Against Bitcoin Exchange
Landon Manning – Bitcoin Magazine
The Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury, has imposed its first-ever penalty on a peer-to-peer crypto exchange for violating AML regulations, among other violations. FinCEN announced the penalty on its website on April 18, 2019, declaring that it had levied a civil money penalty against bitcoin trader Eric Powers for “[failing] to register as a money services business (MSB), [having] no written policies or procedures for ensuring compliance with the BSA [Bank Secrecy Act], and [failing] to report suspicious transactions and currency transactions.”
Bloomberg: CFTC is Hesitant to Approve Bakkt’s Bitcoin Futures
Nick Chong – Blocknomi
Since Bakkt, a cryptocurrency initiative backed by the Intercontinental Exchange (ICE) — the New York Stock Exchange’s parent company — was announced, it has been widely anticipated. In fact, pundits across the board have claimed that the startup, intended to be the first platform to offer physically-secured Bitcoin (BTC) futures, will be what boosts the cryptocurrency market out of its doldrums. As CNBC analyst and industry investor Brian Kelly remarked: Bakkt is the “biggest (crypto) news of 2018.”
The Reserve Bank of India announces fintech regulatory sandbox; excludes cryptocurrency projects
The Reserve Bank of India (RBI) has announced the framework for its fintech regulatory sandbox. While the regulatory sandbox invites blockchain projects to take part, it excludes any cryptocurrency-related businesses—enumerating cryptocurrency services, trading, or Initial Coin Offerings in its exclusions list. RBI’s stand against cryptocurrencies is not something new—the institution has banned banks from dealing handling crypto-related transactions or providing services to cryptocurrency businesses.
Can IBM’s World Wire Be The Answer To Cryptocurrency Payments Or Do We Need More Options?
Darryn Pollock – Forbes
If cryptocurrencies were the flavour of 2017, and 2019 is all about enterprise blockchain usage, then it is also important to note the quiet amalgamation of these two that has been bubbling under: the institutionalised cross-border blockchain payment solution. Everyone knows that one of Bitcoin’s most significant assets is its borderless nature and that it can be used as a cross-border payment solution. However, the decentralized nature of Bitcoin has hamstrung its widespread adoption somewhat, and several companies have thus spotted a niche in the traditional market.
Warren Buffett made 12 predictions about bitcoin, table tennis, and his death — here’s how they turned out
Theron Mohamed – Markets Insider
The legendary investor Warren Buffett avoids making predictions, but we’ve gathered 12 of his best guesses about cryptocurrency, table tennis, and even his own death. We’ve detailed each prediction and assessed its accuracy in the slideshow below.
Tennis Star Serena Williams Reveals Investment in Coinbase
Daniel Palmer – Coindesk
Serena Williams, one of the world’s most successful tennis players of all time, has revealed in an Instagram post that she is an investor in cryptocurrency exchange Coinbase.
Trump’s Secret Moscow Skyscraper Pursuit Exposed Him to Kremlin
Steven T. Dennis – Bloomberg
Mueller detailed Cohen-led effort to build Trump Tower Moscow; Candidate Trump denied having anything to do with Russia
Felix Sater argued that a skyscraper in Moscow bearing Donald Trump’s name could be the key to putting the real-estate tycoon in the White House.
Elizabeth Warren’s Higher Education Plan: Eliminate Tuition and Cancel Student Debt
Astead W. Herndon – The New York Times
Senator Elizabeth Warren of Massachusetts, who has structured her presidential campaign around a steady unveiling of disruptive policy ideas, on Monday proposed her biggest one yet: a $1.25 trillion plan to reshape higher education by canceling most student loan debt and eliminating tuition at every public college.
Reagan’s Supply-Side Warriors Blaze a Comeback Under Trump
Ben Schreckinger – Politico
On a Tuesday evening earlier this month, several dozen Washingtonians gathered in a ballroom at the Trump International Hotel, ostensibly to enjoy an open bar and watch a new PBS documentary about money. In reality, the event also served as a rally for a small clique whose fierce devotion to supply-side economics made them influential figures in the 1980s, and has won them renewed clout and access under President Donald Trump.
How Freshman Rep. Katie Porter Puts Wall Street In The Hot Seat; The former law professor is taking notes and even assigning math homework. Wall Street better be paying attention.
Igor Bobic – Business Insider
You don’t often see some of the smartest people in the country being asked to do math at a congressional hearing. (You rarely see tough questions at all, really).
Consumers Bore Cost for U.S. Tariffs on Washing Machines
David Harrison – WSJ
President Trump’s tariffs on imported washing machines cost U.S. consumers about $1.5 billion a year, according to new research.
The paper released Monday found the tariffs raised the price of washing machines by 12%.
The prices of dryers, which weren’t subject to the tariffs but are often sold together with washers, also rose about the same amount.
Trump allies assail Mueller report even as they defend its conclusions
Caitlin Oprysko – Politico
President Donald Trump’s allies fanned out in his defense on Sunday, taking a confrontational stance about the Mueller report and maintaining that even though the report did not lead to the president’s indictment, it was biased and built on a foundation of inappropriate logic and conduct.
FINRA Publishes Consolidated Criteria to Designate Firms for Mandatory Participation in FINRA’s Business Continuity/Disaster Recovery Testing
As required by SEC Regulation Systems Compliance and Integrity (Regulation SCI), FINRA in 2015 adopted Rule 4380 requiring member firm participation in business continuity and disaster recovery (BC/DR) testing. The rule authorizes FINRA to designate firms that must participate in FINRA’s annual BC/DR test based on established standards, which FINRA first published in Regulatory Notice 15-43 and updated in Regulatory Notice 18-09. This Notice consolidates FINRA’s designation criteria, as previously announced in Notices 15-43 and 18-09, without change.
Silicon Valley Company Settles Fraud Charge for Misstating Returns to Investors
The Securities and Exchange Commission today announced that Prosper Funding LLC will pay a $3 million penalty for miscalculating and materially overstating annualized net returns to retail and other investors.
CFTC Cancels April 23 Open Meeting
The Commodity Futures Trading Commission has cancelled the Open Meeting scheduled for Tuesday, April 23, 2019. The matters under consideration are being resolved through the Commission’s seriatim process.
CFTC Approves a Final Rule to Provide Exception to Annual Privacy Notice Requirement
The Commodity Futures Trading Commission (CFTC) today approved a final rule to revise a CFTC regulation that requires certain futures commission merchants, retail foreign exchange dealers, commodity trading advisors, commodity pool operators, introducing brokers, major swap participants, and swap dealers to provide annual privacy notices to customers. The final rule revises CFTC Regulation 160.5 to remove the requirement to provide these annual privacy notices when certain conditions are satisfied.
Investing and Trading
Coffee Prices Plunge Even Though We Can’t Stop Drinking the Stuff; Massive production in Brazil, combined with currency gyrations, has created a glut of cheap, premium coffee
David Hodari – WSJ
Call it the coffee paradox. The brewed beverage has never been more popular, but the price of beans is at its lowest point in over a decade and down by a quarter since October.
Why It’s the End of an Era for Odd Lots
Joe Weisenthal and Tracy Alloway – Bloomberg
No, no, don’t worry, the Odd Lots podcast isn’t coming to an end. But for actual odd lots — trades of securities in unusually-sized increments — it’s the end of an era. Some major banks announced recently that they’re getting rid of their dedicated odd lots desks. On this week’s podcast, we speak with Chris White, the CEO of ViableMkts and BondCliQ about market structure, and why these changes are taking place.
U.S. Ending Iran Waivers Could Affect Oil Markets and Beyond
Pratish Narayanan – Bloomberg
Price impact hinges on ability of others to make up shortfall; Decision also puts focus on viability of OPEC+ output curbs
Six months after the U.S. rocked oil markets by letting Iranian exports continue, its decision to end sanctions waivers that allowed shipments is also set to reverberate across the globe.
FANG Stocks in Sharp Rebound; Fast-growing tech firms shine after punishing fourth quarter
Michael Wursthorn – WSJ
Wall Street’s FANG gang is growing again. Big money managers have resumed buying shares of FANG—which stands for Facebook Inc., Amazon.com Inc., Netflix Inc., Google parent Alphabet Inc. —and others, as the prospect of low interest rates and a still-expanding U.S. economy has pushed investors back into one of the bull market’s historically most profitable trades.
Merrill Lynch bolstering its ranks of financial advisers
John Aidan Byrne – NY Post
Just when many on Wall Street thought Merrill Lynch’s thundering herd of financial advisers were a thing of the past, the Bank of America wealth management arm is hiring hundreds, and ratcheting up plans to enlarge its branch network in Manhattan and the outer boroughs.
Macro hedge funds hopeful the good times are back; Broader market conditions look more favourable after QE’s distorting effects
Laurence Fletcher – FT
Life has not been good for many macro hedge funds in recent years — but the green shoots of recovery are beginning to appear.
The rise of ‘super carry’ unsettles private equity investors; Big buyout groups are upping their share of profits from 20 to 30 per cent on some funds
Javier Espinoza – FT
Some of the largest private equity groups are raising the performance fees they charge investors to well above the industry’s norm at a time when institutions are fighting to put money into the best funds.
Europe’s investment banks braced for more pain; Analysts forecast investment banking revenues will fall as much as a quarter
Stephen Morris and David Crow – FT
European banks are set to report a third consecutive quarter of grim investment banking revenues, which analysts predict will drop as much as a quarter, intensifying calls for another round of job cuts and retrenchment.
Chinese stocks fall on fears of fresh ‘shadow banking’ purge; Drop of 2.3% in benchmark share index follows communiqué from politburo
Hudson Lockett and Yizhen Jia – FT
Chinese stocks fell on Monday amid concerns that Beijing may renew a campaign against shadow banking that contributed to a heavy sell-off across the market last year.
Fatal fever ravages China’s pig farms and shakes global food markets; Pork prices forecast to soar as deaths from disease expected to reach 130m
Gregory Meyer, Hudson Lockett and Andres Schipani – FT
As millions of pigs disappear in China, the rest of the world is beginning to notice.The country’s pig population, the largest in the world, is likely to shrink by almost a third, losing 130m animals as African swine fever ravages the country’s farms.
Sudden Rush to Raise Cash in China Is Burning Stock Investors
Announced rights issues this year is double the amount in 2018; Analysts warn rights offer will weigh on market in near term
China’s cash-strapped companies are going to new lengths to raise money from the booming stock market, even if it comes at a cost to existing shareholders.
Brexit has a chance to kick-start a period of radical change; Britain could end up being one of the most interesting and revolutionary places
John Thornhill – FT
Brexit is a crisis of British governance of omnishambolic proportions. That is surely too good an opportunity to waste.
Theresa May to face grassroots no-confidence challenge
Prime Minister Theresa May is to face an unprecedented no-confidence challenge – from Conservative grassroots campaigners. More than 70 local association chiefs – angry at her handling of Brexit – have called for an extraordinary general meeting to discuss her leadership. A non-binding vote will be held at that National Conservative Convention EGM. Dinah Glover, chairwoman of the London East Area Conservatives, said there was “despair in the party”.
Why May’s and Corbyn’s Brexit plans could harm UK cities
Tom Belger – Yahoo! Finance
A customs union with the EU could let down British cities by failing to protect their trade in services, a think tank has warned. A leading trade expert has also accused Westminster and the media of neglecting Britain’s services sector in debate over Britain’s future, and warned it could be a “mistake of historic proportions.” New figures from the Centre for Cities show cities are particularly dependent on the export of services, making up 77% of the UK total, compared to 52% of goods exports.
‘It’s beyond Brexit. It’s about who governs this country’
Jennifer O’Connell – The Irish Times
Thatcher’s hometown of Grantham is awash with anger and dismay at failure to exit EU. “Feeling stuck in a rut? Ruled by anxiety?” reads a poster in a window at 2 North Parade in Grantham, Lincolnshire. A discreet plaque on the first floor of the chiropractic clinic reveals this is the birthplace of Margaret Thatcher. It is as if the house’s former occupant has returned to make a declaration on the current state of the British Conservative party.