Hits & Takes
Yesterday my six foot six inch tall son Robby was diagnosed with a partially collapsed lung, or spontaneous pneumothorax, which is common in tall, thin youth. As a result, I had to miss the Ken Heath Awards presentation where Leo Melamed was one of the winners of the award. I also missed the open house for the new offices of Gate39 Media. Robby is doing well, though he is in a pediatric ICU unit. He is more used to visiting me sitting in a hospital bed than the other way around.~JJL
ICE has a new podcast offering branded as the ICE House. It is produced by Josh King and the most recent edition is the interview that Jeff Sprecher conducted as part of the ICE Energy Breakfast at the FIA International Conference in Boca Raton, FL last week. Sprecher interviews journalist Michael Casey about blockchain. Casey is a “former Wall Street Journal journalist covering global economics and finance, Casey’s written five books and is now a special advisor at the MIT Media Lab, where he works on applications of the decentralizing technology behind bitcoin and other digital currencies.”
It is well worth the listen. King also interviewed me down in Boca for a future podcast. He was intrigued by my story after reading the book “Zero Sum Game.”~JJL
A conversation last evening brought up the name Quandl, which now features 25 million data sets for capital markets. It sees alternative data as a major driver of investment performance in the coming years.~JK
TT’s Elise Fleischaker‘s take on Boca is titled “Report from FIA Boca 2018: Blockchain, Brexit, Bitcoin and More“~JJL
The TABB Group recently interviewed 60 buy-side firms in the US to assess their existing workflows and levels of process integration. You can read more from analyst @dayle_scher and access a free copy of Active Management 2.0 – The Automation Imperative HERE.~JJL
Myths and Misconceptions Surrounding Artificial Intelligence
“We can only see a short distance ahead, but we can see plenty there that needs to be done.” -Alan Turing in 1950’s seminal “Computing Machinery and Intelligence”
While it feels like only recently that company after company, in industry after industry, has started deploying some variety of “machine learning” or “deep learning” or “artificial intelligence” in their marketing materials and new initiatives, technologists and academics have been talking about the field for decades.
But with this recent proliferation of use cases comes the unavoidable confusion over what the terms actually mean in practice. Is there a black box with a bunch of wires coming out of it? Is the answer to everything 42? JLN spoke with Interdeep Singh of CME Group, Brian Peterson of DV Trading, Matt Dixon of IIT and Morgan Slade of CloudQuant about the subject to get some clarity on the nebulous terms.
FIA President and CEO Walt Lukken on the Financial Services Committee Passing Legislation to Support Clearing of Derivatives
FIA President and CEO Walt Lukken today made the following statement after the House Financial Services Committee passed H.R. 4659 to properly calibrate the capital charges contained in the Supplementary Leverage Ratio (SLR) for clearing services:
**** He had me at “properly calibrate.”~JJL
Euronext announces appointments in Euronext London and its US activities
Today, Euronext, announced the following appointments: Paul Humphrey, Head of Fixed Income, Rates and FX (FICC), is appointed in addition to his current position and subject to regulatory approvals, interim CEO of Euronext London, interim Head of Global Sales, and interim member of the Managing Board of Euronext N.V., in replacement of Lee Hodgkinson who is leaving on 30 March 2018. Euronext is in the process of actively searching for Lee Hodgkinson’s permanent replacement.
***** Replacing Lee Hodgkinson is not an easy task.~JJL
Scientists discover the origins of gold in space; A collision in an obscure galaxy, recorded last year, has revealed its violent birth
Clive Cookson – FT
On August 17 last year, the world’s telescopes were mobilised on an unprecedented scale and with a unique urgency. For the first time scientists had detected a burst of gravitational waves, tiny ripples in the fabric of space, from what they believed was an ultra-powerful collision between two neutron stars. Now, they needed colleagues to observe any light or radiation coming from this cataclysmic explosion.
***** A gold mass was created the size of Earth!!!!!~JJL
Wednesday’s Top Three
Our top read stories from Wednesday were led by the announcement of EverMarkets, a futures exchange and clearing house built on blockchain technology. Second was Meet the ‘Flash Boys’ of cryptocurrency looking to shakeup bitcoin futures trading from Business Insider. Third was the New York Times’ article Fox News Analyst Quits, Calling Network a ‘Propaganda Machine’
122,400,828 pages viewed; 23,045 pages; 212,092 edits
CME pursuit of Nex reflects shift in US money markets; Deal would strengthen Chicago exchange’s hegemony of US dollar-denominated trading assets
Philip Stafford – FT
CME Group’s potential purchase of the UK’s Nex Group looks like a contrary move.
SEC fine of radio presenter puts watchdog on the line; The right of in-house judges to punish advisers is under legal threat
Bruce Love – FT
On April 23, the US Supreme Court is scheduled to hear arguments about whether the Securities and Exchange Commission’s cadre of in-house judges exists in violation of the constitution.
Bloomberg and Reuters see market share in data slip; The two dominant providers grew more slowly than the overall market in 2017, survey finds
Hannah Murphy – FT
Bloomberg and Reuters lost market share to smaller financial data providers in 2017, underlining the global finance industry’s gradual shift away from the costly desktop terminals that have long enjoyed a grip on the market.
Oliver Hemsley in talks over Nex Exchange investment; Entrepreneur among several parties considering injection of funds to rejuvenate exchange
Kate Burgess and Philip Stafford – FT
Oliver Hemsley, the retired founder of Numis Securities, is in advanced talks to take on Nex Exchange and turn it into a credible rival to London’s Alternative Investment Market.
Spencer says he would be willing to stay with Nex in CME deal
Philip Stafford – FT
Michael Spencer has told staff at Nex Group he would be willing to stay on in a senior role even if his financial technology company is bought by CME Group.
Dark pool trading halved, LIS activity stagnant as MiFID II DVCs take effect; Statistics from Thomson Reuters show early effect of MiFID II DVCs as dark pool trading plummets, periodic auctions surge but LIS activity declines.
Hayley McDowell – The Trade
Trading in dark pools halved and large-in-scale (LIS) activity dropped slightly across Europe during the first week MiFID II’s of double volume caps (DVCs), according to new data from Thomson Reuters.
Fed hikes rates and raises GDP forecast again
Jeff Cox – CNBC
The Federal Reserve raises rates for the sixth time since the policymaking Federal Open Market Committee began raising rates off near-zero in December 2015.
Lawsuit Funding, Long Hidden in the Shadows, Faces Calls for More Sunlight; Courts have continued to divide over whether to order disclosure
Jacob Gershman – WSJ
Investors placing bets on commercial lawsuits have long operated under a veil of secrecy. But as litigation funding in the U.S. has spread to more courthouses and transformed into a billion-dollar business, plaintiffs and their faceless financiers are confronting calls for more transparency.
SEC Proposes Equity Market Study: Beginning of the End for the Maker-Taker Model?
Annette L. Nazareth, Lanny A. Schwartz, Zachary J. Zweihorn, Meghan E. King & Nancy Lee – Davis Polk
In the first major trading and markets initiative under SEC Chairman Jay Clayton, on March 14, 2018, the SEC proposed to establish a transaction fee pilot program to study the effects of maker-taker fee structures. A pilot study was initially recommended by the SEC’s Equity Market Structure Advisory Committee in 2016, and the Treasury Department also expressed support for such an initiative in last year’s report on capital markets regulation (see our previous blog post). The outcome of this study could lead to further regulation or even elimination of these fee arrangements.
China’s oil futures: frazzle or dazzle for foreign traders?
Josephine Mason, Meng Meng – Reuters
China’s crude oil futures, to be launched on Monday, will be a major step in Beijing’s years-long push to win greater sway over oil pricing, but for western traders it will likely bring frustration as well as opportunity.
Exchanges, OTC and Clearing
Alfen celebrates IPO on Euronext
Alfen (ticker symbol: ALFEN), a specialist in energy solutions for the future, began trading today on Euronext Amsterdam. The listing follows the company’s Initial Public Offering (IPO), with a total offering of EUR 85 million.
Euronext endorses the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD); Increased transparency to seize opportunities and mitigate risks related to the transition to a low carbon economy
Euronext, the leading pan-European exchange in the Eurozone, today endorsed the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations and committed to further support transparency on climate-related risks and opportunities on financial markets.
Investment Barometer: More confidence despite trade dispute; Real estate and gold remain popular investments
Deutsche Boerse Group
The Germans are currently more confident about the financial markets than a year ago. Almost every third person assesses the situation as stable. By comparison, a year ago, this was only 23 percent. At the same time, Germans are not very impressed by US President Donald Trump’s trade policy: only about one in ten worries about his private assets in view of the threat of trade restrictions between the United States and the European Union. However, the most popular investments continue to be real estate and gold. These are the findings of Deutsche Bˆrse Commodities’ latest investment barometer, which is based on a representative Emnid survey.
Notice of Revision to Earnings Forecast and Dividend Forecast
Hong Kong Exchange’s Bet on China Is Suddenly Under Threat
Benjamin Robertson, Jeanny You – Bloomberg
Shanghai bourse official says IPO link is legally impossible; More mainland connects are key part of Charles Li’s strategy
Hong Kong’s stock exchange may have to dial back its ambition to become the indispensable conduit between China’s capital markets and the rest of the world.
Deutsche Boerse could be fined for not updating market on CEO search
Germany’s financial markets watchdog is investigating whether Deutsche Boerse (DB1Gn.DE) should have provided more information to investors during its search for a new chief executive, with a ruling against the company potentially leading to a fine.
CME Group Inc. Announces First-Quarter 2018 Earnings Release, Conference Call
CME Group Inc. will announce earnings for the first quarter of 2018 before the markets open on Thursday, April 26, 2018. Slides and written highlights for the quarter will be posted on its website at 6:30 a.m. Central Time, the same time it provides its earnings press release. The company will hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts’ questions.
Cboe Global Markets’ Exchanges Trading Schedule for Good Friday and Easter Holidays
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today announced the following trading schedule for the company’s options, futures, equities and FX trading venues in observance of the Good Friday and Easter holidays.
Predata Uses Alternative Data to Predict Geopolitical Events
Data has been traditionally an accurate reflection of the past but no matter how much research you do to predict the future, political events, economic events, and natural disasters will likely disrupt your original predictions and have a large impact. In the volatile world we live in, you need a way to predict how these events will pan out and when they will happen. Predata is doing this work for you. Its platform monitors digital conversations across open source social and collaborative media, providing signals and alerts on upcoming geopolitical volatility and can be customized to specific needs and use cases.
Eddie Murphy-Inspired Fintech Firm Signs With Winklevoss Crypto Exchange
Beeks Financial Cloud Group Plc — whose name is a reference to the 1983 film ‘Trading Places’ starring Murphy and Dan Aykroyd — signed a pact with Gemini Exchange, the crypto trading platform run by the billionaire Winklevoss twins. The agreement will allow Beeks clients to trade Bitcoin and Ethereum through Gemini, according to a statement Wednesday.
Economists promote low-volatility cryptocurrency backed by dollars; Described as academic’s asset, specie designed to negate worst aspects of digital coin
Martin Arnold, Banking Editor – FT
Some of the world’s best-known economists will on Thursday announce plans to create what could be described as the academic’s cryptocurrency.
Bitcoin Falls on Fears of Regulatory Trouble for Big Crypto Exchange
Yuki Hagiwara, Yuji Nakamura – Bloomberg
Bitcoin fell after one of the world’s largest cryptocurrency exchanges was said to face a government rebuke for operating without a license in Japan, heightening concern that increased regulatory scrutiny will curb demand for digital assets.
R3 CEO Says Blockchain Is a Once in a Generation Opportunity for Financial Markets
David Rutter, founder and chief executive officer at R3, discusses building blockchain for financial markets. He speaks with Matt Miller and Guy Johnson on “Bloomberg Markets: European Open.”
Cryptocurrency issuers clean up, shun U.S. investors as SEC gets tough
Anna Irrera, Michelle Price – Reuters
Tech start-ups that issue digital tokens to raise funds are falling in line with U.S. securities laws or seeking legal ways to skirt them after the Securities and Exchange Commission (SEC) said it planned to regulate the market.
Blockchain Growing Pains Show There’s No Ledger to Rule Them All
Olga Kharif – Bloomberg
Kik Interactive to begin using Stellar as well as Ethereum; Ethereum blockchain has experienced rising fees, slower speed
Messaging app developer Kik Interactive, which raised about $100 million last year to launch services on the Ethereum blockchain, discovered that the ledger technology isn’t ready for prime time.
Huawei Is in Talks to Build a Blockchain-Ready Smartphone
Camila Russo, Yuan Gao – Bloomberg
Huawei Technologies Ltd., the world’s third-biggest handset maker, is considering developing a mobile phone that will be able to run blockchain-based applications, according to two people familiar with the plans.
Google Is Working on Its Own Blockchain-Related Technology
Olga Kharif, Mark Bergen – Bloomberg
Alphabet division developing a distributed digital ledger; Company insiders say cloud is natural home for the technology
Google is working on blockchain-related technology to support its cloud business and head off competition from emerging startups that use the heavily-hyped technology to operate online in new ways, according to people familiar with the situation.
Pablo Escobar’s Brother Launches New Cryptocurrency
Julia Pimentel – Complex.com
Ever since Bitcoin soared in value, becoming more valuable than things such as Disney or McDonald’s, cryptocurrencies have started to gain serious popularity. (It should be noted that Bitcoin’s value has since taken a sizable dip.)
Aspiring Crypto Bank Crypterium Appoints James Davies as CFO
Crypterium, the “crypto bank for everyone”, has hired James Davies as their Chief Financial Officer (CFO). Davies will oversee the payment partner and exchange integration and the all of the company’s finance functions.
Jack Dorsey believes bitcoin will be the world’s sole currency within 10 years
Taylor Hatmaker – TechCrunch
We knew Jack Dorsey was bullish on bitcoin, but some new quotes reveal that he’s really really bullish.
Bitcoin mania puts cryptos in sight of world finance chiefs
This time last year, finance chiefs from the world’s biggest economies were barely thinking about the niche industry of bitcoin when they met in Germany. Now, they’re loudly warning cryptos could destabilise financial markets.
Trump Hacked the Media Right Before Our Eyes
Ross Douthat – NY Times
Let’s get one thing straight: I am not a fan of Facebook. I’m confident that social media is a cancer on our private lives and a source of derangement in our politics. I take it for granted that the tech barons are acquiring the power to tilt elections, and that they’ll be happy to play handmaidens to tyrants soft and hard so long as they can monetize our data. I take a certain mordant pleasure in watching Mark Zuckerberg and his minions scapegoated for the political failures of late-Obama-era liberalism.
Ex-Chief of C.I.A. Suggests Putin May Have Compromising Information on Trump
Matthew Rosenberg – NY Times
John O. Brennan, the former director of the Central Intelligence Agency, said Wednesday that he thought Russia may have some kind of compromising information on President Trump, setting off furious speculation about whether the former spy chief was basing that assertion on inside information.
House panel passes bill handing Federal Reserve control over ‘Volcker Rule’
A committee in the U.S. House of Representatives voted Wednesday to name the Federal Reserve as the primary regulator for the “Volcker Rule,” which bars banks from speculative trading.
ESMA publishes responses to its Consultation on draft RTS under the new Prospectus Regulation
The European Securities and Markets Authority (ESMA) has published the responses received to its Consultation on draft RTS under the new Prospectus Regulation.
ESMA publishes translations for Guidelines on stress tests scenarios under Article 28 of the MMF Regulation
The European Securities and Markets Authority (ESMA) has issued today the official translations of its Guidelines on stress tests scenarios under Article 28 of the MMF Regulation.
ESMA clarifies treatment of packages under MiFIR’s trading obligation for derivatives
The European Securities and Markets Authority (ESMA) has issued today an opinion providing further guidance on the treatment of packages under the trading obligation for derivatives which the Markets in Financial Instruments Regulation (MiFIR) introduced on 3 January 2018.
SEC Charges UK Broker, Others With Manipulation
T. Gorman – SEC Actions
Since a priority for the Commission’s Enforcement Program is retail investors, a key area of focus is microcap fraud. Recently the agency filed two related microcap fraud actions centered on an FBI sting operation. SEC v. Beaufort Securities Litd., Civil Action No. 2:18-cv-01317 (E.D.N.Y. Filed March 2, 2018); SEC v. Mancino, Civil Action No 3:18-cv-01316 (E.D.N.Y. Filed March 2, 2018).
Online Payment Platform Owners Charged With Money Laundering; Money-service business received multiple cease-and-desist letters, yet allegedly continued its activity
By Samuel Rubenfeld – WSJ
Two Canadian brothers and their money-service business allegedly processed $250 million in transactions without a license on behalf of customers, including Ponzi schemers and a child pornography website, according to U.S. prosecutors.
Sebi mulls overhaul of algo trading rules
Capital markets regulator Sebi is looking at a number of measures to strengthen alg o trading framework, including by mandating the exchanges to offer share d co-location facilities and providing some services for free.
UBS in $230 million settlement of New York mortgage securities probe
Jonathan Stempel, Karen Freifeld – Reuters
UBS AG (UBSG.S) has reached a $230 million settlement to resolve charges brought by New York state that it misled and hurt investors by selling subprime mortgage securities that contributed to the 2008 global financial crisis.
Investing and Trading
Powell’s Fed Debut Shows Shift Away From Theory, Models
Craig Torres, Christopher Condon – Bloomberg
Fed forecasts show mild response to labor market overshoot; Powell willing to let labor market show him when slack is gone
Federal Reserve Chairman Jerome Powell showed he will be guided by the U.S. economy’s performance rather than the theories and models relied upon by his predecessors to set monetary policy for the past three decades.
Has the Global Economy Reached ‘Peak’ Peak?
In 2017, the global economy rode a wave of synchronous growth, low inflation and low volatility. But Investment Management Chief Global Strategist Ruchir Sharma says five trends could make 2018 a very different environment.
How Two Wells in Wyoming Explain the Natural-Gas Glut; Demand is growing, but so are the troves of gas being unearthed by prospectors
Ryan Dezember and Stephanie Yang – WSJ
Natural-gas producers should be delighted: A cold winter has furnaces blazing into late March, domestic demand is up, and record volumes are being sold abroad. Yet fuel prices are depressed. A pair of wells in southwest Wyoming helps explain why.
Financial advisers unsure on robo-advice role in their practices; Advice businesses are cautious about new technology
Bradley Saacks – FT
No one wants to believe their job can be done as well or even better by a machine ó financial advisers included.
Economics failed us before the global crisis; Analysis of macroeconomic theory suggests substantial ignorance of how economies work
Martin Wolf – FT
Economics is, like medicine (and unlike, say, cosmology), a practical discipline. Its goal is to make the world a better place. This is particularly true of macroeconomics, which was invented by John Maynard Keynes in response to the Great Depression. The tests of this discipline are whether its adepts understand what might go wrong in the economy and how to put it right. When the financial crisis that hit in 2007 caught the profession almost completely unawares, it failed the first of these tests. It did better on the second. Nevertheless, it needs rebuilding.
Uber’s $1.5 Billion Debt Deal Touches a Nerve on Wall Street
Sally Bakewell, Lisa Lee – Bloomberg
Banks left out of deal as they await new lending guidelines; Morgan Stanley draws attention by snagging adviser role
For the select group of Wall Street bankers who specialize in doling out leveraged corporate loans, these are exciting, and anxious, times.
Deutsche Bank sees $550 million first-quarter impact from strong euro, funding costs
A strong euro and higher funding costs would have a 450 million euro ($553 million) impact on Deutsche Bank (DBKGn.DE) in the first quarter of the year, the German lender’s finance chief warned on Wednesday.
For the First Time, Goldman’s Not Among the Top Commodity Banks
Jack Farchy – Bloomberg
Goldman fell out of top 3 banks ranked by Coalition for 2017; Big banks’ net revenues in commodities plunged 42% last year
Goldman Sachs Group Inc., for decades Wall Street’s dominant commodities trader, has lost its place among the top three banks in the sector for the first time, according to research group Coalition Development Ltd.
JPM Chief Executive Dimon Pay Ratio Among the Highest of Big U.S. Banks; CEO earned 364 times as much as median bank employee
Emily Glazer – WSJ
JPMorgan Chase & Co. said in 2017 Chief Executive James Dimon earned 364 times as much as the median bank employee, according to the largest U.S. bank by asset’s annual proxy filing.
How much you can earn in your first year at Goldman Sachs, JPMorgan and other big investment banks
Will Martin – Business Insider
Banking is renowned for its high levels of compensation. In return for long hours and often punishing work, bankers tend to be very generously remunerated.
What Next for Pakistan After a Second Currency Devaluation?
Faseeh Mangi, Kamran Haider and Ismail Dilawar – Bloomberg
A rate hike, amnesty scheme expected before elections; Political fallout expected if Islamabad goes to the IMF again
Pakistan has allowed the rupee to weaken twice in a space of four months as it attempts to mend its deteriorating finances before elections due in July.
As Commodities Roar, Africa Wants Bigger Slice of Mining Pie
Thomas Biesheuvel, Thomas Wilson – Bloomberg
Zambia hits Canada copper producer with $7.9 billion tax bill; Congo, Tanzania and Mali already seeking more lucrative deals
One by one, the biggest names in African mining are getting squeezed. The tactics might be blunt, but the message is clear: the countries where they operate want a bigger share of the proceeds.
Volatile Volatility Leaves Europe Investment Banks Whipsawed
Jan-Henrik Foerster, Steven Arons, Nicholas Comfort – Bloomberg
Deutsche Bank, Credit Suisse slump after executive comments; Credit Suisse CEO says ‘March is a bit all over the place’
Europe’s investment banks were upbeat after a spike in volatility at the start of the year promised to revive their battered trading units. By Wednesday, their exuberance had disappeared as quickly as it came.
China Default Risks Flare on Scrutiny of Company Accounting
NDRC move to scrutinize bond issuance more seen crimping sales; Local financing vehicles could see credit events: Tianfeng
As China’s President Xi Jinping steps up efforts to rein in excessive borrowing, the nation’s corporate bond market faces rising default risks as weaker firms and local borrowers struggle to roll over obligations.
EU leaders accused of not protecting citizens’ rights in Brexit deal; Campaigners say withdrawal agreement leaves millions of Europeans facing a bleak future
Lisa O’Carroll – The Guardian
Campaigners for the rights of British nationals and EU citizens after Brexit have criticised Donald Tusk and said the deal about to be signed in Brussels leaves them with a bleak future.