Chinese-backed bid for Chicago Stock Exchange hits a snag; Nasdaq seeks boost from bitcoin products; Clash Between Founder and Protégé Plunges Och-Ziff Into Crisis

Jan 24, 2018

First Read

Hits & Takes
JLN Staff

The FIA’s volume release today revealed global futures and options volumes in 2017 were flat, with 25.1 billion contracts traded. Options volumes were up 11 percent and futures volumes slipped 6.6 percent. The top exchange by volume was CME Group with 4 billion contracts traded, up 3.7 percent from 2016, followed by the National Stock Exchange of India with 2.4 billion contacts, up 16.3 percent and the Intercontinental Exchange with 2.1 billion contracts (futures and equity options), up 4.3 percent. ~JK

John Lothian News revamped its MiFID II page in Marketswiki. The page is a concise explanation of the directive, its history and a simple summary of some of the key elements, supported by 19 different sources. It has been viewed 71,112 times. ~JK

Cryptocurrency company bcause has quite a few big names on its board including: Tom Hammond, Scott Early, Ron Filler and others from the tech, investment banking and crypto space. It is an interesting firm that Thomas Flake, Fred Grede are putting together. ~JK

The OIC 2018 conference agenda is out. Check it out HERE. ~JJL

Trading Technologies is hiring a Sales Manager in Tokyo. Must be fluent in Japanese and possess extensive financial industry sales abilities. ~JJL

From HKEX’s Twitter: 3 new records set in #HK! #ShenzhenConnect S/B turnover reached a record high of HK$8.05 billion, Futures and Options set a Day Session turnover record of 1,799,960 contracts while whole day total turnover of Futures and Options hit 1,877,644 contracts. ~JJL


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Don’t count your chickens; NAFTA’s end could hit U.S. poultry hard
Jason Lange, David Alire Garcia – Reuters
Workers at the Sanderson Farms plant in Palestine, Texas, are cutting up chickens for export to Mexico, a market that has become a pillar of the town’s economy and a key focus of the U.S. poultry sector.

**** “Hello, Credit Suisse/Barclays/etc?” … “Yeah, could you create an index of poultry-centric companies with large exposure to Central and South American markets?” … “Awesome, could you then create an ETN based on that?” … “Okay, cool – can you follow that with a -2x leveraged ETN?” … “Nice. Last, could you push for the regular ETN to trade under FOWL, and the inverse to trade as FOUL?” … “Sounds good. Thank you.” ~SD


An Update on the Consolidated Audit Trail

At STAC’s 92nd Annual Mid-Winter Meeting, JLN spoke with Shane Swanson, chief compliance officer with Thesys CAT LLC, about the state of the Consolidated Audit Trail (CAT). The CAT will be a large trade data repository for options and equities used for surveillance and tracking purposes. Recall that Thesys CAT is the recently formed subsidiary of Thesys Technologies tasked with developing the CAT.

The plan was intended to go live in November 2017, but as the date neared the SROs put in a one year exemptive request. While the SEC has not granted the request, it did agree to work toward a new timeline. In the interim, the industry is using the proposed November 2018 deadline as a guidepost. Now, Swanson says Thesys CAT is in an iterative process that will have much more industry involvement.

A new draft of the industry spec will be ready on February 15, with a final spec ready in late October 2018. Feedback and questions are encouraged.
Watch the video and read the rest here »


Senate Confirms Jerome Powell as Federal Reserve Chairman
The Fed governor will succeed Janet Yellen as the central bank’s leader in early February
David Harrison – The Wall Street Journal
The Senate confirmed Jerome Powell to become the 16th chairman of the Federal Reserve, clearing the way for a new leader likely to continue raising interest rates to keep the economic expansion on track.

**His picture does not look like he is happy with interest rates.~JK


If You’re a Purist About Scotch Whisky, You Might Find This Hard to Swallow
Saabira Chaudhuri – WSJ
Here’s a neat story. The documents involved are top secret. They detail a plot by a multinational company to challenge hundreds of years of tradition. Some find the suggestions so hard to swallow they are warning of rebellion.

**Quote of the day: “There is not a single chance of a change of the rules,” says Gavin Hewitt, onetime chief executive of the SWA. “Whoever is saying that is talking through a complete hole in their head.” I’ll take that shot now.~JK


Tuesday’s Top Three
Do you know who Brandon Chez is? The Wall Street Journal’s story on The Programmer at the Center of a $100 Billion Crypto Storm was the top read story of the day yesterday. Second went to another Bitcoin story, After Bitcoin Futures, Watch Out for Crypto Repos. Third was, you guessed it, another Bitcoin piece from Marketwatch, Goldman issues a warning on bitcoin—and an even bigger warning on Ethereum



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Lead Stories

Chinese-backed bid for Chicago Stock Exchange hits a snag
Lynne Marek – Crain’s Chicago Business
A group of investors seeking to purchase the Chicago Stock Exchange, including some from China, are willing to pay $27 million for the small bourse, but they many need more time to get the deal done. The would-be buyers, including Chinese company Chongqing Casin Enterprise Group and Chicago-based Saliba Ventures, are preparing to ask for an extension on their exclusive right to negotiate a purchase, said Anthony Saliba, who leads Saliba Ventures. Currently, that exclusive arrangement with the exchange’s parent, CHX Holdings, lapses at the end of February. The group may request two or three more months to close on their 2016 proposal if the Securities and Exchange Commission doesn’t approve it soon, he said.

Nasdaq seeks boost from bitcoin products; Chief executive Adena Friedman exploring cryptocurrency offering for retail investors
Gillian Tett in Davos and Nicole Bullock in New York – FT
Nasdaq is actively exploring bitcoin-linked products and other digital currencies that would appeal to retail investors, Adena Friedman, the exchange’s chief executive has said.

Clash Between Founder and Protégé Plunges Och-Ziff Into Crisis
Gregory Zuckerman and Rob Copeland – WSJ
Once they were mentor and protégé. Now Daniel Och and James Levin are trapped in a battle for the future of one of New York’s biggest investment firms.

Bcause LLC Announces Board Election Results for World’s First Full-Stack Cryptocurrency Ecosystem; Karan Rai Elected Chairman; Jerry Chan, Scott Early, Ron Filler, Tom Hammond, Chris Sikes Elected Directors
Because, LLC
Bcause LLC, creator of the world’s first full-stack cryptocurrency ecosystem, announced today the results of its Board of Managers and Chairman elections certified at its Board meeting last night. Members of the Board of Managers elected Karan Rai as the new Chairman of the Board. Shareholders of the privately held company elected five new directors – including three highly accomplished financial industry veterans specializing in futures, clearing, and securities and derivatives law and compliance; a cryptocurrency expert from the firm’s lead investor, and one of the company’s founders.

Hong Kong exchange blames Brexit for stalled HK-London Connect; Charles Li says European regulator is stalling, citing Britain’s looming exit from EU
Emma Dunkley in Hong Kong – FT
Brexit has stalled plans for an exchange tie-up between Hong Kong and London as the European regulator has dragged its feet on approving the deal, says the head of the Hong Kong stock exchange.

Cboe Global Markets Recognized in Hong Kong As Approved Stock Exchange
Cboe Global Markets, Inc.
Cboe Global Markets announced Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) has included Cboe BZX Exchange, Inc. in its List of Approved Stock Exchanges.

World’s largest ETF roars past $300bn in assets; SSGA’s S&P 500 tracker hits milestone on its 25th birthday
John Authers, Joe Rennison and Robin Wigglesworth – FT
The bull market in US stocks has created the first $300bn exchange-traded fund. Assets at State Street Global Advisors’ SPDR S&P 500 fund passed the landmark on Monday, almost exactly 25 years after it started trading.

How to Root Out Corruption Without Introducing More; The Foreign Corrupt Practices Act is open to political abuse, but that’s no reason to scrap it.
Tyler Cowen – Bloomberg
Are you worried there may be corruption in the American executive branch today, yet also fearful that the tools for rooting out such malfeasance may be abused? If so, welcome to the dilemmas surrounding the Foreign Corrupt Practices Act.

Exchanges, OTC and Clearing

FIA Releases Summary Statistics For 2017 Futures And Options Volume And Open Interest
Press Release – FIA
FIA today released summary statistics for annual trading activity in the global exchange-traded derivatives markets. The number of futures and options that changed hands on exchanges around the world stayed roughly the same in 2017 as in 2016, according to FIA’s data. The total number of contracts traded in 2017 was 25.199 billion, down 0.1% from 25.220 billion in 2016.
There were variations by product types, however. Options volume globally was up 11.0%, while futures volume was down 6.6% on 2016. There were also variations in volume trends across different regions, with trading activity on exchanges in the Americas rising during 2017, but not enough to offset a decline in trading activity on exchanges in Europe and Asia-Pacific.

HKEX Lays Out Key Plans for 2018
Hong Kong Exchanges and Clearing Limited (HKEX) plans to implement Hong Kong’s biggest listing regime reform in 25 years to provide issuers and investors with a wider range of choices, enhance its market infrastructure with major trading system changes, and work to bolster its risk management at lower overall costs to the market, said Chief Executive Charles Li as he highlighted key plans for this year at HKEX’s annual media luncheon.

Hong Kong Stock Exchange Chief Calls Potential Aramco Listing a “Match Made in Heaven”
Gregor Stuart Hunter – WSJ
While Hong Kong’s stock exchange hasn’t received an official request from Saudi Aramco to list in the city, its chief executive says it’s pushing hard to win a slice of the state-owned oil giant’s initial public offering.

With turnover close to HK$200b, new HKEX platform can handle 60,000 trades per second; The state-of-the-art Orion Trading Platform will replace the 17-year-old AMS/3.8 system on February 5
Enoch Yiu – South China Morning Post
Hong Kong Exchanges and Clearing will launch a new stock trading system next month, as it upgrades the bourse infrastructure to handle rising volumes and turnover that is approaching HK$200 billion (US$25.5 billion).

Charles Li: Years of hard work begin to show signs of harvest

FTSE Mondo Visione Exchanges Index Racks Up New Record Smashing Through 52,000 Mark
The FTSE Mondo Visione Exchanges Index smashed through 52,000 and then some to close on Tuesday at 52,260.49, up from Monday’s 51,998.08.


Major cloud outage could leave $15bn bill, study finds; Small and medium-sized companies would bear brunt of cyber failure
Oliver Ralph, insurance correspondent – FT
The failure of a top cloud services provider, such as Amazon Web Services or Microsoft Azure, would cost the US economy up to $15bn, with most of the burden falling on small and medium-sized businesses, new research shows.

Davos: Blockchain can no longer be ignored; Technology that powers cryptocurrencies has weathered a storm of opposition
Martin Arnold in Davos – FT
The world’s big financial institutions are wrestling with a cryptocurrency dilemma: whether to stand by and denounce a technology many distrust but also fear — or join those investing in it.

$9 billion startup Stripe drops bitcoin support because it doesn’t make sense as a means of payment
Becky Peterson – Business Insider
The $9 billion digital payments company Stripe is killing off its bitcoin product, the company announced Tuesday. Citing a decrease in use by both retailers and customers, Stripe said will wind down support for its bitcoin payment application and stop processing bitcoin payments entirely on April 23.

Fintechs impatient as British banks seek extra time to open up
Emma Rumney – Reuters
Financial technology firms were supposed to start breaking into mainstream banking this month when new rules forced Britain’s nine big banks to loosen their grip on the industry.

Major payments firm to stop accepting bitcoin
Daniel Shane – @CNNTech
An early cheerleader for bitcoin has announced it’s pulling the plug on the digital currency. Leading online payments company Stripe said it will stop processing bitcoin transactions in April.

Hackers are using blacklisted bitcoin apps to steal money and personal data, according to research
Ryan Browne – CNBC
Hackers are targeting app stores from the likes of Apple and Google with malicious cryptocurrency apps to steal money and personal data, according to a study.

Amazon’s cloud business acquires Sqrrl, a security start-up with NSA roots
Jordan Novet – CNBC
Amazon’s cloud business has acquired Sqrrl, a cybersecurity start-up that spun out of the National Security Agency.

****** Sometimes I have a hard time concen….SQRRL!~JJL


Inside the Dysfunctional Relationship of Donald Trump and Theresa May; Forget closer transatlantic ties and a state visit to London, it’s been a year of public clashes.
Tim Ross and Margaret Talev – Bloomberg
When Theresa May returned to the grandeur of the British Embassy on Washington’s Massachusetts Avenue in January last year, her aides had no idea how spectacularly awry her visit to Donald Trump’s White House had gone.

Economists think Trump harmed the world economy, but not that of their country; A survey asked over 1,000 economic experts how the US president is doing on key economic policy outcomes, writes Alessandro Lanteri
London School of Economics and Politics
On November 8th 2016, I was in Mexico City having dinner with a group of people. Suddenly, the person sitting across from me started receiving an unconscionable number of emails, messages, and calls on two devices simultaneously. As the polls from the American presidential election became public, this person had to leave the dinner to field the incoming flow of alarmed inquiries from international investors, who had just committed a substantial sum of money to a project under this person’s management.


CFTC Commissioner Rostin Behnam Announces Legal Team
Commodity Futures Trading Commission (CFTC) Commissioner Rostin Behnam today announced that John Dunfee, Laura Gardy and Alicia L. Lewis will serve as his Special Counsel.

Trump’s FDIC Pick Plays It Safe on Fight Over Big Bank Leverage
Jesse Hamilton – Bloomberg
Jelena McWilliams, President Donald Trump’s pick to be the next chief of the Federal Deposit Insurance Corp., is tiptoeing through a battlefield that pits the agency against other regulators in a fight over big-bank leverage.

Interval Funds—6 Things to Know Before You Invest
Erika Karell – FINRA
Interval funds are closed-end investment companies that might appeal to investors looking for new ways to diversify their portfolio. These funds, most of which do not trade on an exchange, can provide individual investors with access to exotic or alternative investments typically limited to hedge funds and other institutional investors. But interval funds come with their own set of risks and have a fee structure that might leave some investors with sticker shock.

Investing and Trading

Blame Central Banks for the U.S. Dollar’s Dark Days; Some market participants say an end to the dollar’s drop may not be imminent
Saumya Vaishampayan and Mike Bird – WSJ
The U.S. dollar’s rout extended to a fresh milestone Wednesday as it dropped to its lowest point since late 2014 against a basket of leading global currencies.

Opinion: Bitcoin is crashing and could bottom as low as $2,000
Howard Gold – MarketWatch
The trend for bitcoin now is unmistakable — down, down, down. Bitcoin has crashed. Bitcoin BTCUSD, +1.70% has lost half of its value in just over a month. This is not a “correction” ultimately leading to new highs. This is not fuel for contrarians. Plain and simple, bitcoin is falling and it won’t be getting up.

Most ICOs are unjustified, but soaring due to FOMO
Anora M. Gaudiano – MarketWatch
Investing in the ICO market is a risky proposition due to questionable valuations, hacking and regulatory crackdowns that can render token prices extremely volatile, according to a comprehensive study by consulting firm Ernst & Young.

U.S. Investors Need to Shed Their Home-Country Bias; American financial assets are expensive, but foreign markets offer higher yields.
Ben Carlson – Bloomberg
Investors have been told for a few years that all financial assets are expensive. This conclusion has led market participants from retirees to pension plans to worry about future returns given that government bond yields are at sub-3-percent levels and stock market valuations are close to the highest levels in history.


JPMorgan rolls out $20 billion investment plan after tax gains
Sweta Singh, David Henry – Reuters
JPMorgan Chase & Co (JPM.N) unveiled a $20 billion investment plan on Tuesday to hike wages, hire more, open new branches and expand its business as it takes advantage of sweeping changes to the U.S. tax law and a more favorable regulatory environment.

Hedge Funds Grow Wary of Cryptocurrency Mania; Their caution is the latest sign of doubt among investors that the red-hot rise of bitcoin and its ilk is sustainable
Gregor Stuart Hunter and Laurence Fletcher – WSJ
Hedge funds that rode the wave as cryptocurrencies surged last year have turned cautious, the latest sign of doubt among investors that the red-hot rise of bitcoin and its ilk can be sustained.

Credit Suisse CEO says year off to good start
Reuters Staff
The year has got off to a good start as the U.S. economy performs well and market volatility picks up, Credit Suisse (CSGN.S) Chief Executive Tidjane Thiam said on Wednesday.

RBS to sell London HQ as cost-cutting drive continues
Iain Withers – Telegraph
Taxpayer-owned RBS is ditching the London headquarters from which disgraced former boss Fred Goodwin ran his bloated banking empire prior to the financial crisis.

Bitcoin is not an investment we would advise, UBS chairman says
Silvia Amaro- CNBC
UBS believes that bitcoin is a speculative investment and is not advising its clients to invest in the digital currency, the bank’s chairman told CNBC Tuesday.


Bankers Wasting Millions Must Go to Jail, German Prosecutors Say
Karin Matussek – Bloomberg
Prosecutors seek prison terms for ex-Sal.Oppenheim leaders; No ‘bubble for banker’ who cause huge losses, prosecutor says
German courts should give stiffer sentences to bankers who waste millions with irresponsible business decisions, a top prosecutor told judges hearing an appellate case against former executives of Sal. Oppenheim.

Venezuela says ‘petro’ cryptocurrency pre-sale will be in hard currency
Venezuela’s “petro” cryptocurrency will initially be offered in a pre-sale in hard currency and other cryptocurrencies, the government said on Tuesday, and not initially available in the country’s collapsing bolivar currency.

China’s Beleaguered HNA Group Faces a Debt Wall in Second Half
Lianting Tu – Bloomberg
Struggling Chinese conglomerate HNA Group Co. faces rising bond maturities later this year even if it’s able to navigate current difficulties in repaying debt to banks.

Chinese companies ‘increasingly falling victim to bitcoin, cryptocurrency fraud’; Companies in China face higher risks of new scams as they adopt new technology and mobile payment methods, according to the annual fraud report of global risk management firm Kroll
Enoch Yiu – South China Morning Post
Bitcoin and other cyber-related fraud are on the rise in China as the world’s second largest economy develop and adopt new technology and online payment methods, according to global risk management firm Kroll.

China’s HNA Group says wins compliance clearances from JPMorgan, UBS, other banks
Julie Zhu – Reuters
China’s HNA Group [HNAIRC.UL] said it has passed compliance checks of several global banks, a rare bit of good news for the cash-strapped conglomerate amid global regulatory scrutiny of its governance and ownership.

Exclusive: China’s state-owned firms to face more mergers, bankruptcies
Soyoung Kim, Paritosh Bansal – Reuters
China’s state-owned enterprises will face more mergers and bankruptcies as the government overhauls the lumbering state sector, the head of the country’s state asset regulator told Reuters.

Cracks Are Showing in China’s Shadow Banking Industry
Bloomberg News
Strains are spreading in China’s $15 trillion shadow banking industry as investors pull back from the debt-like savings products that helped drive leverage to dangerous levels.

The Internet Is Filling Up Because Indians Are Sending Millions of ‘Good Morning!’ Texts; The country, newly online, has become obsessed with sending cheery greetings from smartphones, causing head scratching in Silicon Valley
Newley Purple – WSJ
Google researchers in Silicon Valley were trying to figure out why so many smartphones were freezing up half a world away. One in three smartphone users in India run out of space on their phones daily. The answer? Two words. “Good Morning!”


No Deportations for EU Citizens Even in Event of No-Deal Brexit
Alex Morales – Bloomberg
Don’t worry, David Davis is keen to point out: No European Union citizens will be deported from Britain after the country leaves the bloc, even if it fails to secure a trade deal.

Britain seeking equivalence with EU regulation, not harmonisation – minister
Reuters Staff
Britain will not seek to harmonise its regulations with the European Union after leaving the bloc, but will aim instead for “outcome equivalence”, Brexit minister David Davis said on Wednesday.


Widespread sexual harassment exposed at charity dinner for U.K.’s business elite
Chris Newlands – MarketWatch
The dinner that has sparked an outcry was held at London’s Dorchester Hotel.
Prominent businesswoman Gina Miller has called for the resignation of the men accused of endorsing a secretive, male-only charity dinner for Britain’s business elite that has sparked outcry over the treatment of women working at the event.

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CEO, Trading Technologies

Past JLN Newsletters

CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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