Time To Revive Financial Innovation
By Jim Kharouf – JLN
So the pendulum swings.
In recent days and weeks, financial industry participants have welcomed a softer tone on regulation from the Trump Administration. For some in the industry, the heavy lead regulatory blanket that has weighed down the industry appears to be lifting. Could we be opening the doors to a new era of financial innovation?
In the midst of the Dodd-Frank rules rollout, mandated by Congress and ushered in by the CFTC and SEC among others, we’ve seen little progress in terms of innovation within the financial services sector with the exception of reporting, compliance and audit solutions. Yes, tech firms are pushing ahead with new functionality, even new technologies, but much of their time has been spent on the question of how to incorporate regulations into everything they do. While that makes basic sense, it has risen to a level many call absurd.
FIA president and CEO Walt Lukken has been pushing for “smarter” regulation that helps address risk and wrongdoing with a balance of cost and practicality (see Three ideas for Trump and FIA Boca Optimism). And yesterday, FIA went on the offensive with a new comment letter opposing the CFTC’s position limits reproposal, calling it “an overboard solution in search of a hypothetical problem.” (See letter below in Leads.)
Meanwhile, savvy industry veteran Thomas Thompson, who has served the Chicago Board of Trade, Eurex and most recently the start-up agricultural SEF called Seed CX, argued in his new letter to the CFTC for “lighter” regulation. Having gone through the SEF application process for Seed, Thompson found that following the Part 37 rules and “putting it all in place was not only costly in dollar terms but also distracted management attention from relevant commercial issues and for the most part extinguished the appetite for invention.” (See below)
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Some Lighter Regulation for New Ag Markets, Please: 5 Recommendations
Thom Thompson – LinkedIn
Commodity derivatives trading in the United States has become concentrated at a few futures exchanges. Market participants worry about sources of innovation and the general vitality of the industry. The Commission should be sensitive to the barriers to entry that its regulations raise and concerned about how they negatively affect innovation.
**JK: Some good ideas in here.
Stop! This is NOT like the dot-com bubble… it’s much worse, according to this chart
The man behind the iBankCoin blog on Thursday morning asked his readers: “Where were you when Snap ripped off America?” While his rant focused on the wild valuation the Snapchat parent SNAP, +3.47% reached in its debut, others may see the booming IPO as a last gasp before the bubble pops like it did back in the days of Pets.com and Webvan.
**JK: I’m snapchatting this article to all my friends.
Harvard Academics Reveal Blueprint for Avoiding Stock Crashes
Good news for everyone waiting for a bubble to burst. Predicting sectorwide crashes in the equity market isn’t impossible.
That’s the conclusion of Harvard University researchers who studied boom-and-bust cycles in publicly traded U.S. industries since 1926. In a new paper, Robin Greenwood, Andrei Shleifer and Yang You found that while not every violent advance in shares ends in horror, those that do share common traits. Among them: rising volatility and greater share issuance.
**JK: Blair Hull will enjoy reading this. You should talk to him about market timing.
ETFs might do investors more harm than good
Have ETFs done individual investors more harm than good?
Warren Buffett, the CEO of Berkshire Hathaway, and John Bogle, the founder of Vanguard, worry that they have. Those investment gurus are among the experts who argue that ETFs, which can be easily traded throughout the day, encourage self-destructive short-term trading that almost invariably leads to lower long-term returns.
**JK: Much debate about who is doing more harm to individual investors lately.
Goldman Irks Bankers With New Rules on Mobile Perks
Goldman Sachs Group Inc.’s dealmakers endured job cuts and a tough bonus season. Then the penny pinchers turned to their beloved phones.
In a push to cut costs and shift employees from BlackBerry devices to personal mobile phones, the firm is imposing a new policy around the world for reimbursing data and calling expenses, according to an internal memo seen by Bloomberg.
**JK: Lloyd Blankfein’s cell phone bill is too high? Better switch to Verizon unlimited.
What Booming Markets Are Telling Us About the Global Economy
The stock market reached yet another new high on Wednesday, the latest development to make a mockery of what savvy economic commentators thought they knew about the world.
Consider how things looked one year ago. The world economy seemed hopelessly trapped in a cycle of low growth and inflation. Markets recoiled at the mere possibility that the Federal Reserve would raise interest rates. Populist political insurgencies seemed to threaten yet more financial market chaos.
**JK: We’re in the “we know nothing” era.
Corporate Communications Intern – Summer 2017
This role will be responsible for internal and external communications, primarily supporting the Media Relations and Employee Communications functions. This position will provide the intern with the opportunity to gain hands-on experience in a fast-paced environment, while working with a variety of corporate communication professionals at CME Group.
For media relations, the candidate will assist in conducting research on industry trends and speaking opportunities, developing and maintaining press lists, participating in brainstorming meetings, and assisting with pitch letters, media interview briefs and press releases.
**JK: Got a student in mind?
Wednesday’s Top Three
Yesterday’s most read story by far was City AM’s column http://jlne.ws/2lXEFti. Second went to the NY Times piece, Yahoo’s Top Lawyer Resigns and C.E.O. Marissa Mayer Loses Bonus in Wake of Hack. Third went to the NY Times piece on Ray Dalio, Bridgewater Associates, World’s Biggest Hedge Fund, Shakes Up Leadership
94,880,793 pages viewed; 22,367 pages; 204,055 edits
Banks paid $321 billion in fines since financial crisis: BCG
Banks across the world have paid about $321 billion in fines since the 2007-2008 financial crisis as regulators stepped up scrutiny, according to a note by the Boston Consulting Group.
Almost ten years since the financial crisis, the banking industry has not completely recovered, BCG said in an industry report.
American banks have never made more money
American banks raked in record profits last year as they continue to rebound from the meltdown of 2008.
Not only did the banking industry notch its third year of record profits in the past four, but FDIC statistics published this week showed that loan growth was strong and the number of “problem banks” fell to a seven-year low.
FIA: Position limits rule needs more study and hedging exemptions
FIA has submitted comments urging the Commodity Futures Trading Commission (CFTC) to assess whether position limits are needed and to expand exemptions for hedging activities before setting any new federal position limits.
Deutsche Bourse fintech venture fund targets blockchain and AI
The unit’s managing director Ankur Kamalia says that DB looked into over 250 investment opportunities last year, before taking the plunge on a handful: distributed ledger outfit Digital Asset Holdings; API specialist figo; a joint venture with the Naga Group to create a marketplace for trading virtual gaming items; and an investment in the first German growth fund for fast-expanding B2B-software companies, Digital Growth Fund I.
Snapchat’s Imran Khan career, and how much money he made in IPO
When Snapchat’s parent company, Snap Inc., begins trading on the New York Stock Exchange on Thursday, its sale will prove a windfall for a handful of executives who helped grow the company from a tiny startup to a $24 billion juggernaut in five years.
That includes one unlikely addition: chief strategy officer Imran Khan.
Who’s Right: Warren Buffett or Larry Fink?
Are shortsighted managers underinvesting in the American economy because they want to line the pockets of investors through share buybacks?
Yes, says the world’s biggest fund manager: American capitalism needs to be fixed. No, says the world’s most successful investor, good projects aren’t dying for lack of financing.
Goldman’s $3 Billion Drop in the ETF Bucket
Goldman Sachs Group Inc. has amassed $3 billion in its exchange-traded funds in just 18 months, one of the most successful debuts in the industry.
Few have noticed, illustrating the conundrum for banks that have come late to the $2.7 trillion U.S. ETF market. While banks have decided the sector’s significant growth potential is too good to miss, ETFs remain a tiny niche relative to the core businesses of investing and lending at banks such as Goldman Sachs and J.P. Morgan Chase & Co., another recent entrant.
Morgan Stanley is Biggest Wall Street Winner in Snap IPO
Morgan Stanley is set to reap nearly $26 million in fees from Snap Inc.’s initial public offering, making the Wall Street bank one of the big winners in the successful share sale Thursday.
Pimco’s New Bond Chief Is Nailing It
After star money manager Bill Gross left in 2014, Pacific Investment Management Co. seemed destined to fade from prominence and become just one of the many firms that dot the U.S. bond-industry landscape. But then Dan Ivascyn, the man tapped to replace Gross, got hot.
China’s $8 Trillion Bond Treasure Spurs Global Funds to Hire
Speculation that China’s 56.3 trillion yuan ($8.2 trillion) bond market is about to go more global is spurring investment funds to hire in the nation.
A central bank official said at the end of last year that China will create conditions for the inclusion of yuan debt in global indexes. BlackRock Inc. has said inclusion could be announced in 2017, and that the firm has hired for credit research in the nation. Invesco Ltd. says such a development may come in the next 12 months, and also aims to expand in the country.
Hedge Funds: Clients Revolt as Traders Get Rich
Investors are bailing out of hedge funds or leaning on them to reduce fees. In 2016, hedge funds suffered their first withdrawals since the financial crisis, with investors yanking $70 billion, or about 2.5 percent of assets. Pension funds in U.S. states including Illinois, New York, Kentucky and Rhode Island have eliminated or reduced their holdings. They followed the biggest one, the California fund known as Calpers, which began to divest in 2014 after concluding hedge funds were too expensive and complex.
Exchanges, OTC and Clearing
CME Group Reached Average Daily Volume of 18.4 Million Contracts in February 2017
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that February 2017 average daily volume (ADV) reached 18.4 million contracts, down 1 percent from a strong February 2016.
Intercontinental Exchange Reports ICE & NYSE February 2017 Volumes
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported February 2017 trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
Euronext Announces Volumes for February 2017
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for February 2017.
The February 2017 average daily transaction value on the Euronext cash order book stood at EUR7,065 million, down -17.7% compared to February 2016 and up +9.4% from the previous month.
CBOE Futures Exchange Reports February 2016 Trading Volume
CBOE Futures Exchange, LLC (CFE®) today reported that February average daily volume (ADV) was up 23 percent from February 2015, but down 25 percent from January 2016. Exchangewide total volume also rose in February compared with a year ago, up 29 percent compared with February 2015, but down 21 percent from January 2016.
MIAX Options Reports February 2017 Trading Activity
MIAX Options Exchange today announced that over 19.4 million contracts were executed on MIAX Options in February 2017, equating to an average daily volume (ADV) of over 1 million contracts.
CBOE Holdings Plans Listing Of Snap Inc. (SNAP) Options
– Expected to Start Trading on Friday, March 10
– Listing on CBOE, C2, BZX and EDGX Exchanges Planned
Chicago Board Options Exchange
CHICAGO, March 2, 2017 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today announced it plans to list options on Snap Inc. (SNAP), the parent company of the picture-taking and sharing mobile app Snapchat.
CBOE Holdings anticipates trading in options on Snap will begin on Friday, March 10, once the underlying stock has been certified as meeting all of CBOE Holdings’ applicable exchanges’ listing criteria.
Moscow Exchange Trading Volumes In February 2017
In February 2017, total trading volume across Moscow Exchange’s markets was RUB 63.9 trln. The Equity and Bond Market posted the strongest growth (+34.7%) during the month, with bond trading volumes rising by 77.4%. Money Market trading volumes also increased (+1.3%).
SIX Swiss Exchange Reports Weak Volumes for February 2017
Switzerland’s principal exchange, the SIX Swiss Exchange, today released its February 2017 trading update, which saw a weak performance across various segments compared to the prior month and also when weighed against its 2016 equivalents.
The Technology Impacts of Mifid II (Part 2)
One of the biggest impacts of Mifid II, in terms of workload for market members is on direct market access (DMA) gateways—the software that connects internal trading systems to the venues themselves. Mifid II requires changes to the electronic messages sent and received by participants. These changes include updates to timestamp granularity to support microseconds, new message fields—some that must be computed by the order management system (OMS)—related to transparency and for market operator record-keeping, and complete new workflows for new market models. Brokers will have to map new fields on the order message (e.g., identifiers for individuals involved in the investment decision) to short code forms, but a lack of agreement on a common format means these codes may be different depending on the trading venue, creating a complex data mapping challenge.
Euronext invests $10 million in bond trading platform Algomi
European exchange operator Euronext has invested $10 million (£8.1 million) in London fintech startup Algomi.
Euronext announced the investment on Friday. It already has a joint venture with Algomi, which will see Euronext leverage Algomi’s bond trading technology to push into North America and Asia.
Banks are sold on blockchain, concerned about collaboration
Several ideas are emerging about the adoption of blockchain in the financial services industry that are quite different than what anyone would have predicted two or three years ago.
The choices banks are making are steering financial blockchains in a direction that is far from the mysterious Satoshi Nakamoto’s conception of it, and closer to more traditional technologies out there today — a Google Docs of sorts for banks with immutability and security built in.
Equinix Inc.: Equinix Acquires 34 Acres of Land in Ashburn for Interconnection Data Center Expansion
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today announced it has purchased four parcels of land spanning 34.5 acres in Loudon County, Virginia, proximate to Equinix’s current Ashburn data center campus. The acquisition of this property will provide Equinix with room to build multiple new greenfield International Business Exchange™ (IBX®) data centers in this densely interconnected location.
Dash’s Maragos Talks Merger, Market Share and Structure
John D’Antona Jr. – Traders News
Dash Financial announced Wednesday that that it has completed its merger with LiquidPoint (Convergex’s Options Trading and Technology business) to create Dash Financial Technologies. Private equity firm GTCR, which facilitated the transaction, is the majority owner of the new firm. Peter Maragos, CEO of Dash Financial Technologies, discussed the acquisition and other market topics. Dash recently finalized its merger with the LiquidPoint options business from Convergex. What was the impetus for that deal and what is the vision for the new Dash?
47 Banks Complete DLT Cloud Pilot With Ripple Tech
A consortium of 47 banks has completed a distributed ledger technology (DLT) pilot that is now set to move to production in 2017.
R3 Makes a Habit of Sending Cease-and-Desist Letters to Bitcoiners
The blockchain consortium, whose primary goal is to cut costs for the back office processes at major banks, seems to have no problem lobbying legal threats at members of the Bitcoin Community who do not follow the consortium’s line. – www.nigeriatoday.ng
Peter Todd, a longtime Bitcoin Core developer, received legal threats lobbied by R3.
“R3’s allergic to criticism,” tweeted Bitcoin developer Peter Todd, who has worked with R3CEV. “Sent me a cease and desist for suggesting that there might be prior art on their patent.”
Australian Securities Exchange Makes Progress with Blockchain Tests
Rick Holliday-Smith, ASX chairman, noted at the annual general meeting that the government last year clarified the medium market structure for clearing cash market equities, enabling ASX to invest an infrastructure to meet global industry standards, according to meeting notes posted on the website.
This enabled the development of a DLT solution to replace Clearing House Electronic Subregister System (CHESS), the core system underpinning the post-trade processes in Australia’s cash equity market.
Trump’s stealthy deregulation delights business
Another week, another wave of soaring stock markets. This time, the rally was partly sparked by signs that US Federal Reserve officials such as Lael Brainard and Bill Dudley are ready to embrace interest rate rises.
Icahn’s Trump Relationship Sparks a Civil War in the U.S. Ethanol Industry
Billionaire Carl Icahn’s relationship with President Donald Trump has helped spark a round of recriminations within the $24 billion American ethanol industry just as it navigates one of the most crucial points in its history.
The discord has emerged in the past three days as ethanol companies react to a proposal from Icahn and a lobby group that would shake up how the industry is regulated.
SEC Civil Claims Against Texas Attorney General Are Dismissed
A federal judge dismissed civil claims that Texas Attorney General Ken Paxton defrauded investors by recruiting them to invest in a technology company without disclosing he was being compensated to promote the company’s stock.
Winklevoss Twins Await Imminent SEC Decision on Bitcoin ETF
Tyler and Cameron Winklevoss will know within days whether they’ve won approval to begin offering their bitcoin-based exchange traded fund, with the digital currency’s record rally hanging in the balance.
Officials from the Securities and Exchange Commission met with the twins on Feb. 14 to discuss their proposal for an ETF based on the digital currency, according to a short notice of the meeting published on Feb. 22. A decision is due by March 11. The 35-year-old twins want to trade the security on the Bats BZX Exchange Inc.
Buy-side brace for further regulatory scrutiny
Asset managers globally will face ‘rigorous regulatory scrutiny’ with emerging proposals from regulators including MiFID II, UCITS and AIFMD.
A report from the Boston Consulting Group explained historically the regulatory focus has been on large banks following the financial crisis in 2007-2008, but this is shifting towards buy-side firms.
Investing and Trading
The price of bitcoin is now the same as the price for an ounce of gold
Two years ago, the value of Bitcoin slumped so badly that the digital currency was being written off as a failed experiment.
No longer. Bitcoin has charged back, and as of today (March 2), for the first time ever, one Bitcoin is worth more than a troy ounce of gold.
Social-media ETF gets no sympathy bump from Snap trading debut
The social-media industry is having one of its most eventful and exciting days in a while, with the Thursday trading debut of Snap Inc., the largest IPO since 2014, but none of that is trickling down to the largest exchange-traded fund to track the space.
Snap Inc. SNAP, +0.86% the parent company of messaging app Snapchat, surged more than 40% on Thursday, but the Global X Social Media ETF SOCL, -1.83% fell 1.5%.
T Rowe Price $17bn fund reveals details of private investments
T Rowe Price’s flagship small companies fund has revealed annualised returns of nearly 35 per cent from its private investments, rebutting critics who argue that mutual funds should eschew riskier, unlisted companies.
ETFs Race to Fastest Yearly Start Ever Based on Inflows, BlackRock Data Show
Investors poured $62.9 billion into exchange-traded funds in February, pushing the year-to-date world-wide tally to $124 billion, the fastest start of any year in the history of the ETF industry, according to data from BlackRock Inc.
U.S. ETFs accounted for $44 billion of that, pushing assets in U.S. funds to almost $2.8 trillion.
Pimco’s Income Fund Surpasses Total Return in Assets
Pacific Investment Management Co.’s Income Fund has eclipsed the firm’s well-known Total Return Fund in assets.
The Income Fund, overseen by Pimco investment chief Dan Ivascyn, managed $75.37 billion as of Feb. 28. That surpasses Total Return, which managed $74.23 billion.
World’s Biggest Pension Fund Posts Record $92 Billion Gain
The world’s biggest pension fund posted the biggest quarterly gain in its history as Japanese stocks surged and a plunge in the yen boosted overseas investments after Donald Trump’s election victory.
Banks Can’t Keep EU Access With Shells After Brexit: ECB
U.K. banks trying to keep access to European Union markets after Brexit will have to set up full-scale operations in the bloc, European Central Bank Executive Board member Sabine Lautenschlaeger said.
Bank of Japan publishes bond buying plans to keep yields at 0%
The Bank of Japan published detailed schedules of planned asset purchases for the first time on Tuesday as it sought to prove its commitment to a zero per cent cap on 10-year government bond yields.
Most-Traded Bonds Vanish From India’s Repo Market as Banks Hoard
India’s most-traded bonds have become virtually unavailable in the repurchase market as banks looking to maximize treasury gains before closing books for the year ending March 31 refuse to part with the securities.
Canadian Banks Storm Back as Markets Boom, Energy Woes Recede
Profit at Canada’s six biggest banks soared 25 percent to a record C$11 billion ($8.2 billion) collectively in fiscal first quarter, as they left the oil rout behind and benefited from buoyant capital markets to reap gains in trading and wealth management.
Goldman Sachs Is Skeptical About a Big Profit Rebound in Europe
by Sofia Horta E Costa – Bloomberg
Europe’s best earnings season in two years has stirred up a whole lot of enthusiasm from investors itching for that rebound.
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Not so fast, say Goldman Sachs Group Inc. strategists. The region’s companies are nowhere near as profitable as those in the U.S., with a widely-flagged gap in margins that remains near its biggest in three decades. While that may narrow, it won’t necessarily be to Europe’s benefit.
Foreign Investors Spurn China’s Markets
China is opening its financial markets more than ever to global investors, hoping the charm offensive will attract more money just as it struggles to stem heavy capital withdrawals.
Africa’s Top Hedge Fund Starts Food-Focused Private-Equity
Polar Star Management Ltd., which runs one of the best-performing African and Middle East hedge fund over the past five years, plans to start a private-equity unit that will invest in agriculture to exploit rising demand for food.
Saudi Arabia woos Hong Kong institutional investors to its equity market
South China Morning Post
Saudi Arabia is seeking to attract Hong Kong institutional investors to its stock market, the largest in the Middle East, as the country loosens restrictions on foreign direct investment and hopes to join MSCI’s widely-tracked emerging market index.
Hong Kong’s soaring office rents now triple those of Singapore, Property News & Top Stories
The Straits Times
Hong Kong’s office rents are almost three times higher than those in Singapore as property markets in the two cities diverged sharply in recent years, ccording to a report by Cushman & Wakefield.
The gap has boosted Singapore’s appeal as a competitive business hub and made it a more attractive location for companies to house their regional headquarters, said the report released on Friday (March 3).
Time To Dump Chinese Banks: Deutsche – Asia Stocks to Watch
Chinese banks have rallied 33% over the last year thanks to a revival of inflation. The reasoning is that as producer prices rise, Chinese corporations will enjoy fatter profit margins and find it easier to service their debt, which bodes well for banks. Investors were also attracted to the banks’ handsome dividend yields.
Morgan Stanley is really bullish on China, here’s what’s behind the contrarian call
Investors around the world are predicting a number of calamitous downturns for China’s economy, but a team of experts from Morgan Stanley are making the opposite call: Asia’s largest economy will manage to avoid a financial shock and it will “continue to present significant investment opportunities for global investors.”