First Read

Options Industry Conference Preview Part 2: OCC’s Craig Donohue on Gina McFadden and Changes at the Top of OCC

As the 35th Options Industry Conference gets underway, OCC Chairman and CEO Craig Donohue spoke with John Lothian News about everything from the industry’s first woman to be awarded the Joseph Sullivan Award to executive changes at the clearinghouse.

Read the rest and watch the video »


Anonymous warns world to ‘prepare’ for World War 3
Chris Perez – NY Post
The infamous hacktivist group Anonymous has released a chilling new video — urging people across the globe to “prepare” for World War 3 — as the US and North Korea continue to move “strategic pieces into place” for battle.

***** Prepare for the unpreparable.


Why Do Gas Station Prices Constantly Change? Blame the Algorithm
Sam Schechner – WSJ
One recent afternoon at a Shell-branded station on the outskirts of this Dutch city, the price of a gallon of unleaded gas started ticking higher, rising more than 3½ cents by closing time. A little later, a competing station 3 miles down the road raised its price about the same amount.

****** I was asking myself this question yesterday. I smell collusion every time I gas up.


FBI’s Comey says being on Twitter is like being ‘in every dive bar in America’
Twitter is sometimes ‘wonderful’ and ‘depressing,’ director says
Federal Bureau of Investigation Director James Comey said he’s on Twitter but doesn’t use the social-media platform to tweet, only to listen—and especially to listen to what’s being said about the agency he leads.

****** The ultimate guy’s trip, every dive bar in America.


The Financial Conduct Authority just spent £70,000 on a new logo, including hiring a Saatchi & Saatchi agency
Mark Sands – City AM
The industry-funded Financial Conduct Authority has spent almost £70,000 on a refresh of its brand, including a brand new logo designed by Saatchi & Saatchi, City A.M. can reveal.

***** I would have designed it for £60,000.


Beauty Pageant Head Elected President of Philippine Bourse
by Ditas B Lopez – Bloomberg
Ramon Monzon pledges to speed unification with bond exchange; He has been an independent director of bourse since 2015
The Philippine stock exchange’s new president, Ramon Monzon, pledged to reduce brokers’ ownership of the bourse, refine rules on short-selling and introduce structured warrants.

****** Monzon also won the swimsuit category.


Monday’s Top Three
The most-read story yesterday, by a long shot, was the Wall Street Journal’s scary-sounding “Traders Are Fleeing the Options Market”. Next up was The Guardian’s “What’s it like to lose £350m? A rogue trader confesses,” and third was Business Insider’s “There’s a new front in the brutal battle among America’s stock exchanges,” about Bats’ proposed alternative to the closing auction.


MarketsWiki Stats
99,885,666 pages viewed; 22,487 pages; 205,807 edits
MarketsWiki Statistics


Lead Stories

Bats targets NYSE and Nasdaq end-of-day volume with new offering
By John McCrank – Reuters
No. 2 U.S. exchange operator Bats said on Monday it plans to offer a cheaper alternative to the closing auctions for New York Stock Exchange- and Nasdaq-listed securities, taking aim at one of the busiest and most-lucrative trading periods of the day.

ICE turns to atomic clock for time-stamping trades; Shift reflects incoming new rule under Mifid to keep pace with high-frequency trading
by: Philip Stafford – FT
Intercontinental Exchange will start timestamping thousands of European futures trades using an atomic clock because current technology is not reliable enough to meet new European standards trying to keep up with high-frequency traders.

trueEX files lawsuit against Markit; Legal action taken following Markit’s decision to prohibit access to its trade processing service, MarkitSERV.
By Hayley McDowell – The Trade
trueEX is seeking legal action against Markit for anti-competitive reasons following a decision to terminate access to its trade processing service, Markit SERV.

Refugee Turned Fintech Chief Aims to Upend a $444 Billion Market
by Edward Robinson – Bloomberg
WorldRemit uses mobile money to make inroads in remittances; Biggest challenge is keeping digital cash away from terrorists
Refugee, economist, whistle-blower, entrepreneur — Ismail Ahmed has played many roles in his odyssey from war-torn Somalia to London’s fintech frontier.

Exchange Wants to Shake Up End-of-Day Stock Trading Format
by Annie Massa – Bloomberg
Bats has new way to trade stocks listed by rivals at the close; Swell of passive investing adds new importance to auctions
As the minutes tick down to 4 p.m. each trading day, a crucial process plays out in the U.S. stock market. Bats Global Markets wants to shake up how it works.

Opinion: Nouriel Roubini: Why are markets ignoring the black swans?
By Nouriel Roubini – MarketWatch
With Emmanuel Macron’s defeat of the right-wing populist Marine Le Pen in the French presidential election, the European Union and the euro EURUSD, -0.3661% have dodged a bullet. But geopolitical risks are continuing to proliferate.

Trader who lost $456 million says he was basically working in a ‘nuclear reactor’
By Shawn Langlois – MarketWatch
Alexis Stenfors worked as a currency trader for Merrill Lynch in London back in 2009, when global markets were still reeling from their worst crisis in almost a century. Stenfors, a trader with 15 years experience, had a hunch that there was more carnage to come and that the financial system was about to implode.

My Notes from the Sohn Investment Conference, Part I
The Reformed Broker
Welcome to my notes from the 22nd annual Sohn Investment Conference, live from Lincoln Center on the west side of Manhattan. My coverage picks up at the start of the 2:15pm session. Prior to this, we heard from Keith Meister (Corvex Capital) on how we wants to see the CenturyLink – Level 3 deal progress as well as Bill Ackman (Pershing Square) making a time share pitch or something related to his holdings in the Howard Hughes Corporation.

****SD: Part II of his notes here.

Exchanges, OTC and Clearing

CBOE Holdings Reports First-Quarter 2017 Results; Reported Results Include Bats Effective March 1
First-Quarter 2017 Highlights
GAAP Revenue Less Cost of Revenue of $193.4 Million, up 35 Percent, Reflects the Bats Acquisition; Organic Net Revenue of $154.2 Million, up 8 Percent, Driven by Increased Trading in VIX Futures and SPX Options(1),(2); GAAP Diluted EPS of $0.16; Non-GAAP Adjusted Diluted EPS of $0.78(1); Bats Integration on Track; Synergy Realization Ahead of Plan; Reduced Debt Incurred in Connection With the Bats Acquisition by $150 Million During the Quarter; Quarterly Highs Set in SPX Options Trading and Bats Options Exchanges and Hotspot Market Share

DTCC’S OMGEO CTM Enables Post-Trade Processing Capabilities To Private Fund Managers In China
The Depository Trust & Clearing Corporation (DTCC), announced that Omgeo Central Trade Manager (Omgeo CTM), its strategic platform for the central matching of cross-border transactions and which is a part of DTCC’s Institutional Trade Processing Product Suite, now enables Wholly Foreign-Owned Enterprises (WFOEs) in providing Private Fund Manager (PFM) services in China.

Start-up trading venue trueEX sues Markit
by: Joe Rennison – FT
Start-up trading platform trueEX has filed a complaint against industry giant Markit, claiming the company, which provides post-trade services to derivatives users, engaged in anticompetitive conduct by terminating its relationship with the trading venue.

Shenzhen Stock Exchange And China Construction Bank Deepen Strategic Cooperation To Drive Matchmaking Of SME Financing And Investment
On May 5, 2017, Shenzhen Stock Exchange (SZSE) and China Construction Bank Co., Ltd. (CCB) signed a strategic cooperation agreement in Shenzhen, which deepens the strategic partnership on the exiting basis.

New OMX Helsinki Benchmark Portfolio Selected – New Portfolio Of The OMX Helsinki Benchmark Index Will Become Effective June 1, 2017
Nasdaq (Nasdaq:NDAQ) announced today the results of the semi-annual review of the OMX Helsinki Benchmark Index (Nasdaq Helsinki: OMXHB), which will become effective with the market open on Thursday, June 1, 2017.|

SGX welcomes Waterland Futures as Derivatives Trading Member
Singapore Exchange (SGX) announced today that Waterland Futures Company Limited (WLF) has become a Trading Member in its derivatives market.

May 2017 Eligible ETFs and Stocks; To Clearing Member Firms; Chief Financial Officers; Back Office Managers
From CME Clearing
CME Clearing accepts a select number of shares of ETFs and stocks for customer and house segregated performance bond collateral for Base Guaranty Fund products. ETFs and stocks are each capped at $500 million per clearing member firm. Please refer to the Standard Acceptable Collateral and Resources website for further details regarding acceptable collateral, haircuts, and limits.

FIA’s April 2017 SEF Tracker
Total trading volume on SEFs averaged $429.2 billion per day during the month of April, down 43.0% from the previous month and 5.2% from April 2016. The decrease in trading volume was driven mainly by a drop in on-SEF trading of interest rate swaps, which was down 45.3% from March 2017 and 7.0% from April 2016.

LiquidityBook Adds Industry Veteran Les Vital as Head of Technical Sales as Demand for its POEMS Platform Grows
LiquidityBook today announced the addition of Les Vital as Head of Technical Sales. The appointment comes as demand accelerates for its industry-leading POEMS (portfolio, order and execution management system) platform, with clients across the Americas and Europe turning to LiquidityBook to help reduce TCO (total cost of ownership), improve efficiency and meet increasing regulatory compliance demands including MiFID II.


Netting no problem for blockchain, tech firms tell regulators; Firms say DLT can sit with current market practice, but instantaneous settlement ‘not desirable’
Luke Clancy –
Blockchain technologists are getting used to finding themselves on the back foot. Delays to big-ticket projects, strategy disagreements and a growing volume of legal and operational headaches ha

Rival Systems Integrates With QuantHouse’s Ultra-Low Latency Market Data Feed – Further Expanding Its Equities Offering And Global Reach
Rival Systems
Rival Systems (Rival), an award-winning provider of trading and risk management software, today announced that it has integrated into its trading platform QuantHouse’s end-to-end ultra-low latency market data feed.

GreenKey Files Patent on MiFID II Solution: Voice to Electronic Quote
GreenKey Technologies
GreenKey Technologies, creator of an artificial intelligence (AI) and voice-driven collaboration tool for financial market participants, announced today that the U.S. Patent and Trademark Office has accepted its application for human speech-to-text and subsequent interpretation of spoken financial trades in a fast and accurate manner.


Trump review of Wall Street rules to be done in stages: sources
By Olivia Oran and Pete Schroeder – Reuters
The U.S. government’s review of a landmark 2010 financial reform law will not be complete by early June as originally targeted, and officials will now report findings piece-by-piece, with priority given to banking regulations, sources familiar with the matter said on Monday.

Mercer Sued by Hedge Fund Worker Fired After Blasting Trump
Erik Larson – Bloomberg
Hedge fund mogul Robert Mercer, one of the biggest financial backers of Donald Trump’s presidential campaign, was sued by a former employee who claims he was fired for calling Mercer racist and publicly criticizing his support of Trump.


ISDA AGM Focuses On Push For Derivatives Market Efficiency
The steps that could be taken to make the derivatives market more efficient and less complex will be debated by senior regulators and market executives at ISDA’s 32nd annual general meeting (AGM) in Lisbon on May 8-10.

Securities Commission Malaysia Introduces Regulatory Framework To Facilitate Digital Investment Management Services
The Securities Commission Malaysia (SC) today introduced the Digital Investment Management framework, setting out licensing and conduct requirements for the offering of automated discretionary portfolio management services to investors.|
Digital investment management is a fund management business which incorporates innovative technologies into discretionary portfolio management services.

ISDA CEO Scott O’Malia’s presentation at ISDA 32nd Annual General Meeting, Lisbon Read More

Proposed Rule Change to Adopt a Fee Schedule to Establish the Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail
Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a proposed rule change to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).

Sebi allows investors to buy mutual fund schemes via digital wallets; However, e-wallet issuers would not be permitted to offer any incentive such as cash back
Business Standard
Securities and Exchange Board of India (Sebi) on Monday allowed investors to buy mutual fund schemes for up to Rs 50,000 through digital wallets, making it easier for them — especially the young generation — to purchase these instruments.

ESMA chief supports stricter supervision on UK CCPs; ESMA’s Steven Maijoor has welcomed proposals to impose stricter controls on UK CCPs clearing euro-denominated derivatives.
By Joe Parsons – The Trade
The chair of Europe’s securities watchdog has voiced his support for stricter supervision of clearers of euro-denominated derivatives based outside of the EU.

SEC Probes Rental Home Values Backing Private-Equity Bond Deals
by Matt Scully – Bloomberg
Radian’s Green River says U.S. queries broker price opinions; Probe said to question if firms’ assessments overstated values
U.S. securities regulators are investigating whether bonds backed by single-family rental homes and sold by Wall Street’s biggest residential landlords used overvalued property assessments.

Publication of the Report by the Working Group on Financial Markets under the Financial System Council
FSA Japan
The Working Group on Financial Markets under the Financial System Council (chairman Hideki KANDA, Professor, Gakushuin University Law School) has discussed and deliberated on various issues related to financial markets and exchanges in Japan twelve times since May 2016.

Investing and Trading

As index reach grows, FTSE Russell chief downplays fears
Ross Kerber – Reuters
Don’t fear the indexes, learn from them. That is the message from Mark Makepeace, the chief executive of FTSE Russell, the index provider whose products are now used to track roughly $12.5 trillion as clients pour money into so-called passive products.

The leopard’s spots
Mat Lystra – FTSE Russell
“A leopard can’t change its spots” is a saying rooted in the belief that a person’s core character doesn’t change over time. The same cannot be said of the markets, public companies or investment strategies, which is why the Russell Style Indexes have become such powerful tools for portfolio measurement and construction.

Wall Street’s fear gauge falls to lowest level since 1993; Vix index tumbles to 9.77 as French election result helps calm geopolitical nerves
by: Robin Wigglesworth and Joe Rennison in New York – FT
Wall Street’s “fear gauge” has tumbled to its lowest level in more than two decades after the expected but welcome French election victory of Emmanuel Macron helped vaporise US stock market volatility.

Here’s What Some of the World’s Top Money Managers Are Betting On
Bloomberg News
Ackman hails Hughes, Einhorn on Core and Gerstner on United; Palihapitiya calls Elon Musk ‘our generation’s Thomas Edison’
Money managers including David Einhorn and Bill Ackman descended on New York’s Lincoln Center on Monday where about 3,000 people gathered at the annual Sohn Investment Conference, one of the hedge fund industry’s marquee events, to hear the latest trade picks.

As index reach grows, FTSE Russell chief downplays fears
Ross Kerber – Reuters
Don’t fear the indexes, learn from them. That is the message from Mark Makepeace, the chief executive of FTSE Russell, the index provider whose products are now used to track roughly $12.5 trillion as clients pour money into so-called passive products.

Italian Bonds May Be Traders’ Next Obsession After French Vote
by John Ainger – Bloomberg
Nation’s election, risk of ECB taper put bonds under pressure; Citigroup sees spread over bunds reaching highest since 2013
Bond investors are a pessimistic bunch.

For Crowdfunding Investors, A Way to Sell; Investors offered chance to trade on secondhand market
By Philip Georgiadis – WSJ
One of Europe’s largest equity crowdfunding platforms will be the first to offer investors a chance to trade their investments on the secondhand market, breaking new ground in an industry quickly becoming an important funding source for small businesses.


Banks Want Mnuchin to Intervene in Fight Over New Loan Rule; Bank CFOs say rule ‘could do economic harm’ by reducing lending and making borrowing more expensive
By Michael Rapoport – WSJ
Banks are trying to enlist the Trump administration to fight a new accounting rule requiring them to book losses on soured loans more quickly, potentially setting the stage for a clash between the Treasury Department and the Securities and Exchange Commission.

Piketty’s Capital Was So Popular There’s a Sequel
Peter Coy – Bloomberg
If you’re reading this article, it may be because you’re one of the 2 million people who bought a copy of Capital in the Twenty-First Century by French economist Thomas Piketty. The long, dense academic treatise was the biggest publishing surprise of the year when it came out in English in 2014. It’s not clear how many people actually made it to the end, or even past the first few pages, but buying a copy was a sure sign that you cared about inequality (bad) and serious scholarship (good).

Goldman names Lemkau, Nachmann to co-head investment banking
Olivia Oran – Reuters
Goldman Sachs Group Inc (GS.N) named M&A co-head Gregg Lemkau and financing group chief Marc Nachmann as co-heads of the firm’s global investment banking division, according to an internal memo on Monday.

Goldman shakes up investment bank leadership; Cascade of changes follows move by Gary Cohn to Washington
by: Ben McLannahan, James Fontanella-Khan and Arash Massoudi – FT
Goldman Sachs has shaken up the leadership of its investment banking arm, in a reshuffle touched off by the departure to Washington last year of its former president, Gary Cohn.

Ex-Nomura Trader Says He Was Trained to Lie to Customers
Chris Dolmetsch – Bloomberg
Former Nomura traders accused of teaching deceitful tactics; Mortgage-securities dealers are charged with conspiracy, fraud
A former Nomura Holdings Inc. bond trader said he was trained to lie to customers shortly after coming to the company in order to boost the firm’s commissions.
Frank DiNucci Jr. said the tactics he learned included lying about where Nomura had bought or sold bonds and misrepresenting the price it had paid.

Harvard Is Trying to Sell $2.5 Billion in Endowment Assets
Michael McDonald – Bloomberg
Harvard University’s endowment is trying to sell about $2.5 billion of private equity, venture capital and real estate investments, according to a person familiar with the matter.

JPMorgan Tells Banks to Partner Up as U.S. Deposit Drain Looms
by Matthew Monks – Bloomberg
Crunch may be felt this December as Fed’s policy reverses; Midsize-bank deals already underway in quest for deposits
JPMorgan Chase & Co. has some advice for regional banks: A deposit drain is coming, so merge while you can.

Banks ‘put lives at risk’ as charity accounts are shut without notice; Some charities with links to developing countries have been deemed ‘high risk’ by banks
Ben Chapman – Independent
Banks have been accused of putting lives at risk by shutting down accounts belonging to charities without warning.


Colombia Urges Blood Diamond-Style Controls for Gold Buyers
Oscar Medine – Bloomberg
Central banks may have bought illegally-mined precious metal; Less than a fifth of Colombia’s gold is produced legally
Colombia is calling for tougher controls over international gold purchases to curb the amount of illegally-mined metal entering mainstream markets, following similar moves by the diamond industry. “There’s a responsibility on the part of buyers to make certain what the origin of the gold is that they are acquiring,” Colombian Mining and Energy Minister German Arce said. “My fear is that there’s a lot of illegally-extracted gold that ends up in central bank vaults.”

SPIVA Latin America Year-End 2016 Results
Phillip Brzenk – S&P Dow Jones Indices
Equity markets in Latin America saw gains across the board in 2016, with Brazil being one of the leaders, as the S&P Brazil BMI (BRL) returned 37.90%. The Chilean market saw the largest yearly return since 2010, with a return of 13.53% for the S&P Chile BMI (CLP), while the S&P Mexico BMI (MXN) returned 6.99%.

China Deleveraging Pain Puts Investors on Contagion Alert
by Chris Anstey, Isabella Cota, and Ben Bartenstein – Bloomberg
Emerging markets would be most vulnerable, Invesco’s Uy says; ‘We don’t yet see it as a big risk-off event,’ says Aberdeen
What may be shaping up as China’s most concerted effort yet to bring its credit boom under control is spurring investors to gauge any contagion to broader financial markets, a-la 2015, when Chinese turmoil caused global ructions.

Colombia Urges Blood Diamond-Style Controls for Gold Buyers
by Oscar Medina – Bloomberg
Central banks may have bought illegally-mined precious metal; Less than a fifth of Colombia’s gold is produced legally
Colombia is calling for tougher controls over international gold purchases to curb the amount of illegally-mined metal entering mainstream markets, following similar moves by the diamond industry.

DCCC launches ‘ActiveRisk’ Risk Management System
The Dubai Commodities Clearing Corporation (DCCC), the leading Central Counter Party (CCP) in the region and a wholly owned subsidiary of the Dubai Gold & Commodities Exchange (DGCX), has announced the launch of a state-of-the-art Risk Management System (RMS) called ActiveRisk.


Jeremy Corbyn says elites trying to ‘hijack Brexit’
Jeremy Corbyn has said wealthy elites are trying to “hijack” Brexit as he formally launched Labour’s campaign.

French business leaders are right to hail Emmanuel Macron’s victory – but we will not see a flood of jobs from London to Paris
Julian Harris – City AM
If you were running a financial services company in France you could be forgiven for breathing a sigh of relief following the election of Emmanuel Macron, the centrist former-banker who swept to power on Sunday night.


Inside The Employment Agreement Of Secretive Hedge Fund Renaissance Technologies
Nathan Vardi – Forbes
David Magerman spent more than two decades working for Renaissance Technologies, the enormously successful and secretive quantitative trading hedge fund founded by billionaire James Simons. Renaissance’s Medallion strategy, which is now only open to Renaissance’s employees and owners, is often viewed as the greatest hedge fund ever.

The ‘Frightful Five’ Aren’t So Scary, as Long as They’re Competing
Jeremy G. Philips – NY Times
There is a growing drumbeat that the five leading tech behemoths have turned into dangerous monopolies that stifle innovation and harm consumers. Apple, Alphabet, Microsoft, Amazon and Facebook — what the tech columnist Farhad Manjoo calls the Frightful Five — have a combined market capitalization of more than $2.7 trillion and are an increasing part of everyday life. They are each assembling enormous pools of data about their users — which they use not just to sell more targeted advertising, but to improve and personalize their services, increasing their network advantage against smaller players.

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