First Read

Save the Dates For Chicago MarketsWiki Education World of Opportunity Series
By John J. Lothian

The Chicago MarketsWiki Education World of Opportunity dates are set for July. We are returning to the Illinois Institute of Technology’s Stuart School of Business the week of July 17 to 21. IIT is also known simply as Illinois Tech.

We are seeking speakers and sponsors for the series in Chicago, New York and London. We are hoping to announce a date for a Stockholm event soon. We are pushing back plans for a Frankfurt event for the time being.

We are looking for a venue the New York sessions of the MarketsWiki Education series. Please contact me with suggestions.

At the end of the month, I will be down in Miami for the Commodity Markets Council State of the Industry 2017. I will be moderating the last panel of the conference focused on regulatory issues. The members of the panel include: Tom Sexton, senior vice president, general counsel and secretary, National Futures Association; Mike Gill, chief of staff for CFTC commissioner Chris Giancarlo; Chris Edmonds, senior vice president, financial markets, ICE; Jim Newsome, former CFTC chairman & founding partner, Delta Strategy Group; and Jill Sommers, former CFTC commissioner.

Right before my panel is a political panel moderated by Alan Sobba. His panel includes Dawn Stump, principal, Stump Strategic, Scott Parsons, founding and managing partner, Delta Strategy Group, Lance Kotschwar, Gavilon Global Ag Holdings and Paul Balzano, House Agriculture Committee.

This will be the first industry event after the U.S. election and inauguration, so there will be lots of potential change to talk about.

Lastly, my good friend and accountant Harlan Ten Pas has “retired” from RSM US, according to sources. Harlan has battled to recover from a heart attack and a stroke in recent years. In November, the Pathway to Adventure Council of the Boy Scouts of America created the RSM Harlan Ten Pas Award to honor scouts who had earned five merit badges in the Trading Tech 300 program. We wish Harlan the best.


Eris Keeps Pace With Evolving Swaps Markets With New Hire, George Harrington
Sarah Rudolph, JLN
As the interest rate swaps market continues to evolve, Eris Exchange is keeping pace.
Eris, the U.S. futures exchange that offers interest rate swap futures as an alternative to OTC swaps, has made a new hire to help bring in more big OTC participants. George Harrington previously headed Bloomberg Markets and oversaw Bloomberg’s SEF, MTF, and Japanese ETP regulated trading platforms, so he has plenty of experience with the regulations that led to a boom in SEFs and the futurization of interest rate swaps.


Why I’m Concerned About the Independence of U.S. Statistical Agencies
Brent Moulton –
Are the White House and the Bureau of Labor Statistics headed for a train wreck? The most recent BLS statistics for December showed 7.5 million unemployed persons and an unemployment rate of 4.7 percent. But throughout his campaign, President Trump repeatedly described the official BLS unemployment statistics as “phony numbers,” saying that the “real” unemployment rate could be as high as 42 percent.

**JK: We are in an era where we are exploring the question: What are facts?


The Failed Quest to Bring Down Wall Street’s Most Wanted Man
Katherine Burton – Bloomberg
Steve Cohen had a target on his back. The government was determined to prove that the hedge fund manager, known on Wall Street for eye-popping annual returns of 30 percent, made some of his billions trading on inside information. Sheelah Kolhatkar, a staff writer at the New Yorker (and a former correspondent for this magazine), has written a fast-paced tale of how the feds worked for almost a decade to build a case against him, and why they couldn’t indict him, in Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street (Random House, $28).

**JK: Did they try the accountant? Worked on Al Capone.


Brand New: Hehmeyer Moves Into Managed Futures & More

Sometimes it’s time to diversify.

Chris Hehmeyer formed a new firm called Hehmeyer Trading & Investments LLC that will expand into the managed futures and introducing broker space. The renamed company comes from his prior firm, HTG Capital Partners, which acquired Kottke & Associates in late 2016. The new name helps simplify things for Hehmeyer, who has integrated HTG’s proprietary trading operation along with Kottke’s commodity trading advisor and introducing broker business.

Hehmeyer, who serves as CEO of the the new entity, sees plenty of opportunity in the CTA business. He said there is an appetite for non-correlated investments and that managed futures are a good fit for investors. The firm is looking to expand into the so-called 40-Act space, or managed futures mutual funds. That actively managed sector has continued to grow and Hehmeyer aims to tap into it.

Watch the video »


5 Questions with James Bailey a/k/a Yoda (@JediEconomist) on Twitter
Brian Mehta – Trading Technologies
James Bailey, or Yoda as he is known on Twitter, has been a professional trader for 13 years, using TT software for the last 10 years. He started as a local before spending two years working for a fund, trading emerging market FX. He recently returned to his own account, trading short term interest rate (STIR) futures strategies. James spoke to us for this blog post in plain English, but he tweets in character as Yoda while communicating on Twitter. You can follow him there at @JediEconomist.

**JK: Oh, economics you seek.


Michael Kraines Brings 25 Years of Strategy Experience as Trading Technologies’ New CFO
Sarah Rudolph, JLN
It’s time for some strategic thinking. Trading Technologies has announced the hiring of its first ever chief financial officer, Michael Kraines.

**JK: In case you missed it yesterday. Our top read story of the day.


Tuesday’s Top Three
I don’t care what people say about technology, we’re in the people business. Our top three stories of the day were all about people, led by JLN’s piece on Trading Technologies’ new hire Michael Kraines Brings 25 Years of Strategy Experience as Trading Technologies’ New CFO. Second went to Business Insider’s wide ranging Q&A Terry Duffy interview CME CEO. Third was WILD, Jessica Darmoni’s coverage of the organization she put on the map. Her story
WILD Organization Evolves with New Board Members and Executive Team detailed the women that make it run.


MarketsWiki Stats
92,752,268 pages viewed; 22,317 pages; 203,311 edits
MarketsWiki Statistics


Lead Stories

At 34, the LME’s Newest Leader Ranks as One of the Youngest CEOs
Eddie Van Der Walt and Mark Burton – Bloomberg
Chamberlain is a good candidate for permanent CEO role: Sucden;LME, world’s biggest metals marketplace, is owned by HKEx
The London Metal Exchange’s new chief is also one of the youngest in the industry.

Banks’ AI plans pose threat to thousands of jobs; Automated compliance systems set to wipe out post-crisis regulatory roles
Martin Arnold, Banking Editor – Financial Times
Thousands of jobs will be put at risk as the world’s biggest banks harness artificial intelligence systems to the wave of roles created in recent years to meet ever-growing regulatory demands, industry experts have warned.

Eris Exchange hires Bloomberg LP head of global markets; Harrington will lead the onboarding of new clearing and execution clients for the swaps futures exchange.
Joe Parsons – The Trade
US swap futures exchange Eris has acquired Bloomberg LP’s head of global markets George Harrington, in its latest high-profile hiring.

HTG Capital Partners Rebrands as Hehmeyer Trading + Investments
Business Wire via Yahoo
HTG Capital Partners, LLC, a proprietary trading firm, today announced that the company has rebranded itself as Hehmeyer Trading + Investments. The rebrand effort finalizes a restructuring of the organization into three main divisions: Hehmeyer Trading Group, its proprietary trading business; Hehmeyer Customer Services, its futures introducing broker operations; and Hehmeyer Capital Management, its commodity trading advisor and commodity pool operator.

Remember ABX? Wall Street Said to Test New Mortgage Index
Matt Scully – Bloomberg
A bond-market startup is a step closer to reviving crisis-era derivatives that let investors bet on U.S. homeowner defaults. JPMorgan Chase & Co., Bank of America Corp. and Credit Suisse Group AG have given price data to the startup, New York- based Vista Capital Advisors, which rolled out the latest version of its pilot initiative this month, according to a person with knowledge of the matter. Vista has been working on the project for the past few years with Intercontinental
Exchange Inc. The firm plans to use that data to create indexes of mortgage securities, which in turn would become the basis for the derivatives, said the person, who asked not to be identified because the matter is private.

Flash Crashes and securities taxes
Avinash Persaud – LiveMint
At 8.32pm on 10 May 2010, Central European Time, I stepped up to a lectern to speak about financial stability to an audience of international officials and academics at the grand President Wilson Hotel in Geneva, Switzerland. As I began talking, heads started dropping one by one, transfixed to the screens of their smartphones. I try to give short presentations to maximize attention but no one seemed to be paying the blind bit of notice. When I came to a close, 30 minutes later, heads lifted to their previous position, punch drunk. In just 30 minutes, traders wiped almost $1 trillion off the value of US stocks, before putting it back. That is how I experienced the first Flash Crash.

Two Contracts With No Future
Streetwise Professor
Over the past couple of days two major futures exchanges have pulled the plug on contracts. I predicted these outcomes when the contracts were first announced, and the reasons I gave turned out to be the reasons given for the decisions. First, the CME announced that it is suspending trading in its new cocoa contract, due to lack of volume/liquidity. I analyzed that contract here. This is just another example of failed entry by a futures contract. Not really news.

BGC Brokers Announces Collaboration with Pirum Systems to Launch ColleX for Managing Post-Trade Connectivity
BGC Brokers L.P. (“BGC Brokers”) a subsidiary of BGC Partners, Inc. group (NASDAQ: BGCP), today announced that it is collaborating with Pirum Systems (“Pirum”), the market leader in connectivity and real-time straight-through processing (STP) to the securities finance industry, to launch BGC’s latest offering ColleX and improve post-trade efficiency for clients.

Three Whistleblowers Split $7 Million SEC Reward
Samuel Rubenfeld – WSJ
The Securities and Exchange Commission said Monday it issued a $7 million award to be split among three whistleblowers.

UK universities pension plan in novel deal with Credit Suisse; Deal highlights shifting roles of banks and investors in European capital markets
Dan McCrum – FT
The pension plan for UK universities has snapped up most of a $3.1bn portfolio of loans backed by lending to European companies, in a collaboration with Credit Suisse which highlights the shifting roles of banks and investors in the continent’s capital markets.

Wall Street Is Hiring … in Florida; The nearshoring strategy is aligned with President Trump’s push to keep jobs in the U.S.
Jonathan Levin – Bloomberg
When Deutsche Bank sent senior Wall Street executive Leslie Slover to run its expanding outpost in Jacksonville, Fla., she wasn’t entirely ready for the lifestyle. Gone were the skyscrapers and subways. In their place was a corporate campus with a pond and vast parking lots, flanked by rows of new town houses, some inhabited by employees. The on-site culinary options? A cafeteria and some food trucks. Suddenly, Slover had to relearn to drive.


Brexit as a game of Chicken; ‘What if, as you hurl your own steering wheel out of the window, you notice your rival has done exactly the same?’
Tim Harford – FT
At times such as these, I wish I could hear what Thomas Schelling had to say. It might be too much to claim that Schelling was one of the most intriguing characters of the 20th century but he was certainly one of the most interesting economists. He began his career working on the Marshall Plan before advising the administrations of Presidents Kennedy, Johnson and Nixon on nuclear strategy.

May Gives In to U.K. Lawmakers’ Demands to Publish Brexit Plan
Thomas Penny – Bloomberg
U.K. Prime Minister Theresa May said she will publish her plan for negotiations to leave the European Union after lawmakers demanded greater scrutiny in Parliament.

Exchanges, OTC and Clearing

TSX Targets Currency Risk
John D’Antona – MarketsMedia
The Toronto Stock Exchange is looking to broaden its horizons and has petitioned its market regulator to allow it to launch a new trading board. The TSX filed with the Ontario Securities Commission that would permit the Canadian exchange operator to launch an International Trading Board for S&P 500 stocks, which will allow certain US-listed stocks to trade in Canadian dollars.

IEX Group John Ramsay on speed bump and CHX
John Ramsay, IEX Group – Business Insider
A change in administration and at the helm of the SEC typically encourages conversation about regulatory reform. How much regulation is too much, what assumptions are worth reexamining, and how can the government make sure that innovative ideas have a chance to succeed and at the same time protect investors and market integrity?

Tokyo Commodity Exchange: Change To Immediately Executable Price Range (DCB Range) For Rubber
Immediately Executable Price Range (DCB Range) for Rubber contracts will be changed to JPY 3.0 from the Day Session on the 1st of February 2017.

LCH SwapAgent to connect to AcadiaSoft Hub
LCH SwapAgent will supply independent risk calculation to AcadiaSoft Hub; Will reduce disputes in the non-cleared margining process; Current AcadiaSoft users to benefit from a simplified margining process
LCH, a leading global clearing house, announced today that its LCH SwapAgent service will supply risk calculation data to the AcadiaSoft Hub following the planned launch of LCH SwapAgent in H1 2017. Connecting LCH SwapAgent to the AcadiaSoft Hub (“The Hub”) will further streamline the margining process for the banks already using The Hub to comply with the non-cleared margin rules, which came into effect in the US and Japan on 1 September 2016.

LSE’s Curve passes two trading milestones
Luke Jeffs – Futures & Options World
London-based market completed first block, hits new high of open interest
The London Stock Exchange’s CurveGlobal venue has passed two milestones as it nears its four month anniversary by matching its first block trade and hitting 60,000 lots of open interest. The LSE Group-backed Curve, which went live on September 26 last year, successfully completed its first block trade on Friday and broke the 60,000 lots threshold of open interest for the first time on Monday.

Exchange Publishes Results of its Latest Review of Disclosure in Issuers’ Annual Reports
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Wednesday) published a report on the findings and recommendations from its review of issuers’ annual reports1 for the financial year ended between January and December 2015.

Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced the results of the ICE Endex gas storage auction held on January 25, 2017, on behalf of GasTerra.

A former regulator talks speed and special interests in the stock market
John Ramsay, IEX Group – Business Insider
A change in administration and at the helm of the SEC typically encourages conversation about regulatory reform.


Federal Debt Projected to Grow by Nearly $10 Trillion Over Next Decade
Alan Rappeport – NY Times
After seven years of fitful declines, the federal budget deficit is projected to begin swelling again, adding nearly $10 trillion to the federal debt over the next 10 years, according to projections from the nonpartisan Congressional Budget Office that reveal the strain that government debt will have on the economy as President Trump embarks on plans to slash taxes and ramp up spending.

Trump Euphoria Turns to Market Frustration
Jason Schenker – Bloomberg
After initially posting a remarkable jump after the election in November, U.S. stocks have hit a road block. Since mid-December the Dow Jones Industrial Average has made many attempts to reach the mythical 20,000 mark, but has so far failed. What at first could only be described as unbridled optimism about the pro-growth policies put forth by Donald Trump has faded somewhat..

Goldman’s Cohn Unlocks More Than $284 Million by Joining Trump
Dakin Campbell and Anders Melin – Bloomberg
Bank speeds delivery of compensation awards to ex-president; Gary Cohn also was paid $20 million for his work in 2016
Gary Cohn’s jump from Goldman Sachs Group Inc. to Donald Trump’s administration is helping him unlock more than $284 million in pent up bonuses, stock holdings and other investments through the Wall Street bank.

Investing and Trading

Doubts Arise as Investors Flock to Crowdfunded Start-Ups
Nathaniel Popper – NY Times
Ryan Feit left behind his lucrative career at a private equity firm to chase the dream of crowdfunding. Mr. Feit, a 33-year-old graduate of the Wharton School of the University of Pennsylvania, went to Washington several times to lobby for a new law that allowed small-time investors to buy stock in start-ups — and then set up one of the first websites that list companies trying to raise money. But what Mr. Feit has seen since he set up his site, SeedInvest, has dented his enthusiasm.

Bloomberg index to include China onshore markets; Bond information provider goes where MSCI fears to tread
Jennifer Hughes in Hong Kong – FT
Bloomberg has gone where MSCI feared to tread, becoming only the second major index provider to include China’s onshore markets in widely-followed benchmark indices in a move that could prompt rivals to follow suit.

The New Generation of Green Investors
Ved Malla – S&P Indexology Blog
In recent years, socially responsible investing has gained importance among market participants worldwide. There has been an increase in the number of those who have become socially conscious and want their investments to go to businesses that acknowledge the relevance of environmental, social, and governance factors to doing business. Green investment is considered a subset of socially responsible investment that focuses on the environmental aspects of businesses.

Industrial Commodities Prices to Surge in 2017
World Bank
The World Bank is forecasting strong gains for industrial commodities such as energy and metals in 2017, due to tightening supply and strengthening demand.

Index IDEA: ETF leaders discuss the value of taking a multi-factor view on the markets
FTSE Russell
Experts from leading ETF issuers gathered with global index leader FTSE Russell at the annual #InsideETFs industry conference this week to discuss the growing popularity of multi-factor approaches and the implications for market participants of using multi-factor indexes.


Head traders unimpressed with standard broker algos
Hayley McDowell – The Trade
A recent poll of buy-side head traders found the majority are unsatisfied with the standard algorithms provided by their brokers, as they look for a more personalised way to execute trades.

White Male Bank Culture ‘Difficult to Take,’ U.K. Regulator Says
Suzi Ring – Bloomberg
The financial industry’s “white male” culture isn’t changing quickly enough, according to the U.K. regulator’s head of supervision, who said the country is unlikely to see a female chief executive officer at a major bank for at least five years.

Saudi Aramco asks banks to pitch for world’s largest share sale
Reem Shamseddine and Tom Arnold – Reuters
Oil and gas company Saudi Aramco has invited banks to pitch for an advisory position on what is expected to be the world’s biggest initial public offering, sources familiar with the matter told Reuters on Tuesday.

J.P. Morgan, Intuit Give Mint, TurboTax Customers Wider Access to Bank Data; Agreement will allow website users to look at Chase accounts without giving out password
Emily Glazer and Peter Rudegeair – WSJ
J.P. Morgan Chase & Co. and Intuit Inc. have ended a long standoff with a new agreement to let the bank’s customers check account information on the technology firm’s sites without sharing their Chase passwords.

Cryan’s Next Fix: Deutsche Bank’s $800 Billion Fund Business
Steven Arons and Ambereen Choudhury – Bloomberg
Deutsche Bank’s Moreau is reviewing options for the business; Clients have pulled money for five straight quarters
John Cryan has spent the past 18 months downsizing Deutsche Bank AG’s investment bank, cutting thousands of jobs, and settling billion-dollar legal disputes.


Deloitte is Officially Launching Blockchain Lab in Dublin
Tatsiana Yablonskaya – Coinspeaker
The new laboratory is staffed with 25 blockchain developers and designers working to transform the way digital services are provided.

Financial tech startup Overbond launches bond issuing service
Solarina Ho and Anna Irrera – Reuters
Financial technology startup Overbond Ltd is launching a service that will allow companies to issue bonds digitally, the company said on Wednesday.


SEC fines Citigroup, Morgan Stanley over forex trading program
Citigroup Inc (C.N) and Morgan Stanley (MS.N) each agreed to pay more than $2.96 million to settle charges they misled investors about a foreign exchange trading program they were selling, the U.S. Securities and Exchange Commission said on Tuesday.

SEC: Timothy L. Warren, Associate Director Of Enforcement In Chicago Office, To Retire After 30 Years Of Service
The Securities and Exchange Commission today announced that Timothy L. Warren, Associate Director of Enforcement in the Chicago Regional Office, is retiring at the end of this month after more than 30 years of service.

Citi and Morgan Stanley fined $6m for ‘misleading’ FX trading programme; CitiFX Alpha trading programme misinformed investors about risk and cots of being a part of the group.
Hayley McDowell – The Trade
Morgan Stanley and Citigroup have agreed to pay almost $6 million in fines for misleading and making false statements to investors about a foreign exchange trading programme.

Morgan Stanley, Citigroup Charged With Misleading Investors About Forex Trading Program
The Securities and Exchange Commission today announced that Morgan Stanley Smith Barney and Citigroup Global Markets have agreed to pay more than $2.96 million apiece to settle charges that they made false and misleading statements about a foreign exchange trading program they sold to investors.


Exclusive: MSCI head expresses concern on China capital controls
Trevor Hunnicutt – Reuters
China’s progress toward full inclusion of its stocks in global benchmarks could be halted if the world’s second-largest economy cracks down further on people moving money out of the country, index provider MSCI Inc’s top executive said on Monday.

Will Trump Block Latin America’s Recovery?
Jose Antonio Ocampo – Project Syndicate
Across Latin America, there is a growing sense of anguish that is reminiscent of Michael Corleone’s lament in The Godfather III: “Just when I thought I was out, they pull me back in.” At a time when the region seemed finally to be grasping economic recovery, Donald Trump’s inauguration as President of the United States has brought new trade and financial uncertainties to Latin America.

Egypt Studying Stocks Stamp Duty as Bourse Surges Amid Overhaul
Stuart Biggs – Bloomberg
Finance Minister El-Garhy says level won’t dissuade investors; Bond sale shows strong overseas interest in Egypt: minister
Egypt’s government is studying how and when to implement a stamp duty on stock transactions, and remains committed to a three-year delay on a capital gains tax, according to Finance Minister Amr El-Garhy.

China central bank to keep up spot checks on bitcoin exchanges
China’s central bank will continue to conduct spot investigations on bitcoin exchanges, its Beijing head office said on Wednesday, in a statement on its website.


After the Bell: Drilling Down the Blockchain: Beyond the Pilot Programs Tickets, Tue, Jan 31, 2017 at 5:30 PM
If 2016 was the Year of theoretical applications and Proofs of Concept (POC) then 2017 is the Year of Beyond the Pilots – tangible applications to solve real-world problems. With more investment and more expectations of the capabilities of blockchain, this After the Bell session addresses where we’re at and where we’re going for blockchain.

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