CME Launching Bitcoin Futures; Hensarling Leaving Congress; Euronext Renews LCH Deal

Nov 1, 2017

First Read

Are you on the right side of Bitcoin history?
By John Lothian of JLN

Shortly after JLN was published yesterday the news broke that the CME Group would be listing bitcoin futures in the fourth quarter of the year, joining the Cboe in such an offering. The price of bitcoin surged to new highs.

Why did the price go up? Because a new group of suckers,…errr, new traders would be reached with this news and want to buy bitcoin.

Why would they want to buy it? Because it is going up, of course. Greed.

Why are the CME Group and Cboe offering bitcoin futures? Because it is 1997 and you have to decide if you want to be on the right side of history with the Internet of money after missing out on the Internet back in 1997.

This is the argument I heard at the FIA Expo. Get with it, or miss out.

For the rest of the commentary, go HERE


Hits & Takes

Nasdaq will observe a one-minute moment of silence at 9:20 a.m. Eastern Time (ET) to honor the victims and families of yesterday’s Manhattan attack.~JJL

CAIA Association’s 2017 Leadership Awards will feature a keynote address by Steven N. Kaplan, Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business. His subject will be “Past, Present and Future of Private Equity: Is there a bubble brewing?” The event will be Wednesday, November 8 at Baker McKenzie’s office in the Blue Cross Blue Shield Tower at 300 E. Randolph Street in Chicago from 5:30 to 9 PM. Register HERE

A read worth looking at this morning is Emma Davey‘s piece about Bitcoin in FIA’s MarketVoice magazine titled “Cryptocurrency Derivatives: Exchanges Take Interest; The rapid growth and extreme volatility of cryptocurrency trading has sparked interest in developing futures and options that can be traded on regulated exchanges.”

Random factoid: according to 2016 year-end statistics, 26 percent of LSEG’s employees are based in Sri Lanka, second place to the United Kingdom’s 35 percent of the headcount. ~SD

London Stock Exchange Group picked up 3 awards from The Trade News last night: Best Block Trading Venue, Outstanding Equities Venue & Innovation in Clearing.~JJL


Coming Soon: Bitcoin Futures
CME Group
CME Group will launch Bitcoin futures, based on the CME CF Bitcoin Reference Rate (BRR), in Q4 2017, building off of the success of the BRR and demand for a regulated trading venue for the digital asset market.

***This is the CME’s new landing page for its Bitcoin offering.~SD


Some of the biggest trading firms in the world are getting in on the bitcoin business
Frank Chaparro – Business Insider
Two of the largest exchange groups in the world are aiming to launch bitcoin futures this year, and at least two big trading firms are looking to provide liquidity to the would-be market.

***** How much have trading firms made from trading bitcoin? Does the amount start with an m or a b?~JJL


Study: SEC Employees Earn Insider-Trading-Like Returns; Employees at the Securities and Exchange Commission may benefit from divesting companies ahead of investigations, research shows.
Amy Whyte – Institutional Investor
Employees at the U.S. Securities and Exchange Commission earn investment returns similar to the insider traders they prosecute, according to new research from Columbia University and Arizona State University.

***** It would be the best place to get your research.~JJL


The Core
Jim Greco – Trading Places
Today’s newsletter recounts a spooky tale about the history of Island’s trading technology. The 20-year old architecture is used at dozens of Wall Street firms including separate implementations that were built in the past decade at KCG and Virtu. KCG launched an ambitious plan to streamline most of its technology under the Island architecture, but ultimately ran out of time. Now, Virtu is dismantling those plans while Goldman Sachs is gearing up to revamp its infrastructure.

***** Fascinating story about the technology behind the “Core” matching engine technology and its place in many different firms.~JJL


Breaking Through: Brynne Kelly, Part 1
Kara Grygotis, VP, Customer Success – Trading Technologies
Welcome back to Breaking Through: How Three Women Took on the World of Trading, our blog series interviewing female trading pioneers. Our second interview is with Brynne Kelly, a woman who has taken a far different route through the trading industry.

**TT’s interesting and insightful Q&A series with traders continues.~JK


Tuesday’s Top Three
Yesterday’s top stories were led by Bloomberg’s A Well-Known Quant Firm Is Looking for Traders Who Want to Bet on Sports. Second went to the FT’s HKEx’s chief defends LME deal, says will ‘eventually recoup’ the £1.4bn paid. Third went to the Straits Times’ piece about trader Collin Seow in, He turned his life around with own trading system



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Lead Stories

CME to launch bitcoin futures in push for currency’s wide adoption
CME Group Inc. said on Tuesday it will launch a futures contract for bitcoin later this year, marking a major step in the digital currency’s path toward legitimacy and helping propel it to a fresh record high.

Bitcoin Moves Toward Mainstream, Poised to Join Oil, Gold in Futures Trading
Alexander Osipovich – WSJ
CME Group plans to launch a futures contract based on bitcoin, a big step toward moving the digital currency into the financial mainstream.
The Chicago-based exchange operator said Tuesday it aims to launch the futures contract by the end of the year, subject to regulatory approvals.

Vocal, powerful critic of Wall Street rules leaving Congress
Pete Schroeder, Lisa Lambert – Reuters
Representative Jeb Hensarling, the Republican chairman of the U.S. House of Representatives Financial Services Committee, announced on Tuesday that he would retire from Congress at the end of 2018, marking the exit of Congress’s leading advocate for rolling back strict financial rules.

Euronext enters into definitive agreements for derivatives clearing with LCH SA and to become a minority shareholder
Euronext, the leading pan-European exchange in the Eurozone, announces the signing of the renewal of its agreement with LCH SA on the continued provision of derivatives and commodities clearing services for a period of 10 years. This follows the announcement of 8 August 2017.

Citadel’s Kenneth Griffin to Donate $125 Million for University of Chicago Economics
The University of Chicago’s prestigious economics department will be renamed for billionaire hedge-fund manager Kenneth Griffin, who will give $125 million to the university.

As a haven of sensible regulation, the City might even gain from Brexit
Jeremy Warner – Telegraph
Xavier Rolet, chief executive of the London Stock Exchange, thinks Brexit might end up costing the City 100,000 jobs. Bank of England estimates are scarcely any more reassuring. Collating contingency planning by City firms for a hard Brexit, the Bank puts the costs at a possible 75,000 jobs. Lloyd Blankfein, chief executive of Goldman Sachs, has meanwhile suggested in a tweet that thanks to Brexit, his new partially completed European headquarters in London may be left substantially empty.

Bitcoin CME futures approval sparks fears of financial crisis repeat
Jeff Cox – CNBC
CME said it would launch bitcoin futures before the end of the year, sending the cryptocurrency’s price above $6,400.
“It reminds me of the financial crisis all over again,” said Themis Trading’s Joe Saluzzi, who worries that bitcoin is still unregulated and thus open to fraud.

Bitcoin Futures Could Open the Floodgates for Institutional Investors
Camila Russo – Bloomberg
Bitcoin is spiking to a record after CME Group Inc. said it’s planning to launch bitcoin futures as the move could open the floodgates of investors who have been standing on the sidelines as bitcoin soared over 500 percent this year.

Bitcoin Surges After World’s Biggest Exchange Announces Plans for Futures
Nick Baker and Matthew Leising – Bloomberg
Cryptocurrency soars to record high after announcement; Futures seen drawing in professional traders, investors
The world’s largest exchange owner reversed course today and said it plans to introduce bitcoin futures by the end of the year, only a month after dismissing such a plan. The largest cryptocurrency, which has surged more than sixfold this year, climbed to a record high after the announcement.

Exchanges, OTC and Clearing

CME to offer bitcoin futures; Cryptocurrency to join stable at world’s largest exchange group by year-end
Gregory Meyer and Adam Samson – FT
CME Group, the world’s largest exchange operator by market value, is readying plans to offer futures on bitcoin, giving momentum to cryptocurrencies’ move away from the fringes of finance.

Bitcoin Dips a Toe Into the Mainstream
Stephen Gandel – Bloomberg
The status of bitcoin as a legitimate financial asset may be rising even faster than its price.

CFTC Grants Amended Order to Chicago Mercantile Exchange, Inc. Permitting Commingling of Funds in Connection with Futures and Foreign Futures Contracts Listed on the Dubai Mercantile Exchange Limited
The Commodity Futures Trading Commission (CFTC) today issued an amended order to Chicago Mercantile Exchange, Inc. (CME), a CFTC-registered derivatives clearing organization. The order concerns foreign futures contracts currently listed or that will be listed in the future for trading on the Dubai Mercantile Exchange (DME) and cleared by CME. The order was issued in response to a petition CME filed.

Cboe Europe Equities rolls out final MiFID II exchange software; Cboe Europe Equities says it expects to be fully MiFID II compliant by 2 January.
Hayley McDowell – The Trade
Cboe Europe Equities has launched its final exchange software and completed operational preparations for MiFID II.

LSE admits EU supervisory case on repo market after Brexit; Business of clearing derivatives looms large as flashpoint since Brexit vote
Philip Stafford – FT
The London Stock Exchange Group has admitted that part of the EUR1tn-a-day London market for clearing trades denominated in euros could justify tougher oversight from the EU or even move outside the UK.

Poland’s stock exchange earmarks at least 60 pct of profit for dividends
Reuters Staff
Poland’s Warsaw Stock Exchange plans to uphold the policy of spending at least 60 percent of the group’s net profit on dividend, Chief Financial Officer (CFO) Jacek Fotek said on Tuesday.

London Stock Exchange welcomes EU supervision for some clearing services – but others should be treated differently
Courtney Goldsmith – City A.M.
The London Stock Exchange Group (LSE) has welcomed heightened supervision from the EU of some clearing services but dug in its heels over plans to force the industry to move away from the UK.

HKEX to Add Long-dated Contract Months for Futures and Options from 4 December
HSI and HSCEI Futures and Options to be enhanced from 4 December; Long-dated contract months to be rolled out for HSI and HSCEI Futures; Additional long-dated contract months to be rolled out for HSI and HSCEI Options
Hong Kong Exchanges and Clearing (HKEX) announced today (Wednesday) that it will introduce long-dated contract months for its Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) Futures and increase the long-dated contract months for its HSI and HSCEI Options, with maturities up to 5.5 years, on Monday, 4 December 2017.


QuantHouse Announces QuantFEED And QuantLINK For Virtu Financial Giving Clients Access To The New Transparent Mifid II Systematic Internaliser Regime
QuantHouse, the independent global provider of end-to-end high performance market data and trading through API based technologies, today announced the availability of QuantFEED and QuantLINK to Virtu Financial’s disclosed Systematic Internaliser platform enabling clients to access Virtu’s liquidity under MiFID II’s transparent SI regime.

Gold Bugs Embrace Bitcoin, Upending Retail Sellers; A weak dollar and geopolitical tensions have meant gains for gold futures in 2017, but retail sales of gold are at their lowest levels in a decade
Stephanie Yang – Bloomberg
Gold prices are rallying, but retail gold dealers and shops are struggling to survive. Businesses that sell gold coins and other products made from the precious metal usually thrive during years like 2017. Gold futures have gained more than 10%, boosted by a weaker dollar and by big investors looking for a haven during recent geopolitical tensions surrounding North Korea and Iran.

Bitcoin is the future, after all
James Dean, US Business Editor – The Times
Bitcoin surged past $6,400 for the first time yesterday as an American derivatives exchange announced plans to sell futures contracts for the digital currency.

Broadway Technology Adds Three Major Banks as It Expands into Global Fixed Income
Broadway Technology
Broadway Technology, a provider of high-performance fintech and infrastructure solutions, has signed three tier-one banks, including Barclays, to mark its expansion into the global fixed income marketplace. With this move, Broadway is extending its advanced trading capabilities to enable global financial institutions to more efficiently address capital, operational and business model challenges caused by shifting market structure.


Trump’s Trade Endgame Could Be the Undoing of Global Rules
Eduardo Porter – NY Times
What if President Trump’s ultimate goal is to kill the World Trade Organization?

Europe Is Doing So Well Even Politics Can’t Drag It Down
Viktoria Dendrinou – Bloomberg
German coalition talks, Brexit, Italy likely risks to EU; Elections in Czech Republic, Austria highlight anti-EU support
Even as economic confidence in the euro area reaches historic highs, a series of political risks simmering across the European Union still threaten to undermine the bloc’s fragile recovery.

Trump Says He’s Ordering Tougher Vetting After Attack Kills Eight in New York
Justin Sink and Clementine Fletcher – Bloomberg
President, in tweet, calls the driver ‘sick and deranged’; New York police said vehicle drove onto bike path in Tribeca
President Donald Trump ordered the Department of Homeland Security to bolster the vetting of immigrants coming into the U.S. after an Uzbek man allegedly drove a truck down a bike path in New York, killing eight and injuring almost a dozen more.


Miffed about MiFID
Anthony Peters – IFRe
Today I write my last column under the Sol Capital banner.
The great dream we had of creating something better, as every start-up business aims to do, in the fixed income broking arena has largely been smashed by ludicrous construct that styles itself as MiFID II. Sol will carry on in its own way and within its own specialist areas but the world-beating model we had aimed to expand around has crashed and burned. Thus I move on wishing all the very best for the future to the principals who remain behind. I, for my part, am hoping to have sifted through the options and to have chosen my own path forward before too long.

Ex-Merrill Lynch broker pleads guilty to securities fraud
Elizabeth Dilts – Reuters
A former Bank of America Merrill Lynch broker pleaded guilty to a criminal charge of securities fraud for billing clients excessive commissions, according to federal court documents unsealed on Tuesday.

Millennium Settles Charges of Illegal Short Selling in Advance of Stock Offerings
Investment advisory firm Millennium Management LLC has agreed to pay more than $630,000 to settle charges that it shorted U.S. stocks in companies planning follow-on offerings and then illegally bought shares in the follow-on offerings.

US senators seek clarity on Treasury market reforms; Concerns raised about slowing in regulatory overhaul and continued opacity
Joe Rennison in New York – FT
Two prominent senators have asked US regulators to clarify their position on reforms to the Treasury market started under the previous administration, as critics have complained that work has stalled under Donald Trump’s government.

Founder of China-Backed Firm Facing Insider Trading Charges
Giles Turner – Bloomberg
Canyon Bridge’s Benjamin Chow indicted for securities fraud; Company agreed to acquire U.K.’s Imagination Tech in September
The co-founder of the Chinese private equity firm that has agreed to take over the U.K.’s Imagination Technologies Group Plc has been charged with insider trading by U.S. authorities.

Jailed Hedge Fund Head Is Star Witness in Amanat Fraud Trial
Erik Larson – Bloomberg
Maiden is ‘cocaine-addicted’ liar, defense lawyer says; Defense lawyers signal they will target U.S. star witness
Disgraced hedge fund founder Steven Maiden is set to testify Wednesday against two former business associates who stand accused of manipulating shares in the video-software company KIT Digital Inc. before it filed for bankruptcy.

Russian Company Tied to Trump Tower Chat May Stiff U.S.
Christian Berthelsen – Bloomberg
U.S. may file request with judge to enforce agreement terms; Prevezon represented by lawyer who met with Donald Trump Jr.
A Russian-controlled firm is balking at paying a $5.9 million settlement to the U.S. that let it avoid a trial which threatened to expose an intricate international money-laundering scheme.

ESMA is closed for Public Holidays on 1st and 2nd November
We will reopen on Friday 3rd November.

Investing and Trading

Cattle, Hogs Soar to Records While Grain Falters
Megan Durisin and Jeff Wilson – Bloomberg
Agriculture traders seem to be favoring the protein-rich Paleo Diet, loading up on bullish livestock bets while leaving grains behind.

Gasoline flows away from New York Harbor as Midwest prices soar
Devika Krishna Kumar, Jarrett Renshaw – Reuters
U.S. East Coast refiners are sending gasoline barrels to western Pennsylvania instead of the New York Harbor market, compounding an unusual tightness in an area that helps set prices for the nation.

Oil Market Bulls Put America Last
Liam Denning – Bloomberg
America is, as you know, a bit different from the rest of the world. Lately, this exceptionalism has been more noticeable than usual in the oil market.

Why Managed Futures Is No Monster
RCM Alternatives Blog via ValueWalk
Hollywood has done a disservice to many a classic horror tale. Take Mary Shelley’s Frankenstein, for example. Yes, the creature seems a hideous sight to the average villager. But to the blind Mr. DeLacey, he appears in his true form: thoughtful and generous. It’s only when confronted by the irrational behavior of others, does the creature turn into a real monster.
Shelley’s story is similar to how some investors think about managed futures. In fact, Longboard research shows that many financial advisors rank managed futures as one of the least effective diversifiers.

ETF price wars deepen as Deutsche cuts fees at flagship fund
Robin Wigglesworth, US markets editor – Financial Times
The passive investment price wars deepened further this week with Deutsche Bank cutting the cost of its flagship junk bond fund and Franklin Templeton unveiling a series of cheap country-focused exchange traded funds.

Why the Dow Jones Industrial Average Crushed the S&P 500 in October; Some investors remain anxious about what could go wrong for a stock rally that has sent the DJIA to 54 record closes this year
Akane Otani – WSJ
The Dow Jones Industrial Average raced past its peers in October, as a pickup in economic growth around the world boosted shares of blue-chip companies that sell everything from bulldozers to airplanes.

The Fracking Boom’s Midlife Crisis; With much of the easy oil already pumped, what’s next for shale?
Alex Nussbaum and David Wethe – Bloomberg
Crude prices bouncing around $50 to $60 a barrel have kept U.S. shale producers stuck on the edge of profitability. That hasn’t been enough to shut down the oil boom in places such as North Dakota, Texas, and New Mexicoóat least not yet. Drillers are heading into 2018 on the defensive as they face skepticism from shareholders who want to see less investment and more profit. They may also be finding that much of the easy oil has already been pumped.

How to Trick Yourself Into Retiring a Multimillionaire; Use the magic of behavioral economics to improve your savings habits.
Rebecca Greenfield and Francesca Levy – Bloomberg
Most of us are really bad at thinking about and planning for our retirement. Only a third of Americans contribute to employer-provided 401(k) accounts, and about half have no retirement savings at all. Lots of forces are working against us when it comes to saving for the future. For one, retirement feels far away and completely unattainable. After bills, student loans, and rent, we want to spend what we have left on fun things we can enjoy right now. Even for savers, it can be hard to build the best financial habitsóor even know what they might be.

Buffett Streak of ‘Free’ Insurance Money May Be Ending
Noah Buhayar – Bloomberg
Catastrophe claims may lead to rare annual underwriting loss; Business has added $18 billion to Berkshire profits since ’02
The insurance business has been good to Warren Buffett. For decades, his stable of carriers at Berkshire Hathaway Inc. have provided him billions of dollars to invest. They’ve also turned an underwriting profit every year since 2002.


ADM says profit tumbles and issues gloomy view; shares drop
Tom Polansek – Reuters
Archer Daniels Midland Co’s quarterly earnings tumbled 44 percent on severance and restructuring costs and weaker trading profits due to a global grain glut, and the agricultural trader offered a gloomy 2018 forecast, sending its shares dropping as much as 6.7 percent on Tuesday.

For One Swiss Banker, Crackdown Was Opportunity, Prosecutors Say
Chris Dolmetsch – Bloomberg
Stefan Buck went on trial Monday in rare courtroom showdown; Buck is one of dozens charged by U.S. in crackdown on evasion
For many Swiss bankers, UBS Group AG’s admission in 2009 that it fostered tax evasion — and the steep penalty that came with it — was a reason to purge their U.S. accounts.

Credit Suisse’s ex-digital chief Marco Abele launches ICO for blockchain-based investment platform Tend
Lynsey Barber – City AM
The former digital chief of Credit Suisse is launching a blockchain-based investment platform that lets people share ownership of “experiential” assets such as artwork or a classic car, and is seeking to raise funding for the startup via an initial coin offering (ICO).


U.S. Investor Tries to Shake Up Sina, a Pillar of China’s Internet
Alexandra Stevenson – NY Times
The Chinese internet boom has been good to Sina. Maybe, protests one of its American investors, it could have been better.

Saudi Arabia taps BofA banker for sovereign wealth fund job; Alireza Zaimi among first foreigners to take senior role in $230bn investment vehicle
Arash Massoudi, Anjli Raval and Simeon Kerr – FT
Saudi Arabia is set to appoint a London-based financier to a top management post at its burgeoning $230bn sovereign wealth fund, as the kingdom taps foreign expertise to steer an ambitious economic overhaul.

This $132 Million ‘Palace’ in London Has a View Protected by Law; Doughty House, a rare, exceptionally kitted out heritage property, hits the market in Richmond Hill.
Sara Clemence – Bloomberg
The cost of a priceless view: around $132 million. A historic London mansion that looks out on the only view in England that is protected by an act of Parliament hit the market on Monday for 100 million pounds ($132 million)ómore than six times what part of the property listed for five years ago.

This Four-Bedroom Home in Hong Kong Just Sold for $149 Million
Frederik Balfour – Bloomberg
Four-bedroom villa has pool, garden, elevator and harbor view; Property sold by Wheelock to unknown buyer through tender
A luxury home in Hong Kong’s exclusive Peak neighborhood sold for HK$1.16 billion ($149 million), Wheelock Properties Ltd. said.

Europe’s Biggest Fund Managers Set for Face-Off on How to Trade the Pound
Anooja Debnath – Bloomberg
Aberdeen Standard keeps long pound position, sees more hikes; Fidelity cautious on gilts but ‘not far’ from turning neutral
Some of Europe’s biggest fund managers are set for a face-off on how best to trade the U.K.’s first potential interest-rate increase in a decade.

The Bank of England’s Dilemma; Britain’s future prosperity turns on Brexit, and the BOE can’t do much except hold a steady course.
The Editors – Bloomberg
The Bank of England meets on Thursday to decide whether to raise interest rates. With inflation rising and growth slowing, the economy is sending mixed messages and policy makers are in a bind.


Post-Brexit financial regulation cannot be left to negotiators; A group of Wise People is needed to find a solution to the City of London’s problem
Howard Davies – FT
The delay in starting serious negotiations on the terms of the UK’s post-Brexit relationship with the EU27 is frustrating and worrying for all companies that trade with the EU. It generates particularly acute anxiety in the City of London.

Aston Martin Plans U.S. Spending Boost to Hedge Brexit Effect
Jie Ma and Nao Sano – Bloomberg
Luxury sports-car maker worried about non-tariff barriers; A weaker pound may balance out any trade fees, Palmer says
British luxury sports-car maker Aston Martin Holdings Ltd. has a Brexit contingency plan: crank up spending in the U.S., its biggest market.

Top U.K. Bank Regulator Says Brexit May Cost 75,000 Finance Jobs
John Glover – Bloomberg
Sam Woods, the head of Britain’s banking regulator, said consultant Oliver Wyman Inc.’s estimate that Brexit will cause as many as 75,000 job losses in banking and insurance is “plausible” if the U.K. leaves the European Union without a trade deal.

Brexit Race for Space Sends Frankfurt Office Rents to a Record
Lukanyo Mnyanda – Bloomberg
Demand for offices in Frankfurt and prime rents have climbed to a record as the city emerges as one of the favorites to attract financial firms from London in the run-up to the U.K.’s exit from the European Union, according to lobby group Frankfurt Main Finance.

U.K. Hints at Compromises on Brexit Bill as Date Set for Talks
Tim Ross – Bloomberg
Negotiations in Brusssels to resume Nov. 9 for 2-day session; Deal on money likely to favor EU, Brexit secretary says
The U.K. signaled it’s preparing to compromise over money in its stand-off with the European Union, as a new round of Brexit talks offered the chance to break the deadlock.

Electoral Commission opens investigation into Brexit donor Arron Banks
Helen Cahill
The Electoral Commission has opened an investigation into Leave donor Arron Banks.


Google Docs Glitch That Locked Out Users Underscores Privacy Concerns
Maya Salam – NY Times
Google Docs threw some users for a loop on Tuesday when the service suddenly locked them out of their documents for violating Google’s terms of service. The weird part? The documents were innocuous. The alerts were caused by a glitch, but they served as a stark reminder that not much is truly private in the cloud.

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