First Read

Hits & Takes

We concluded our MarketsWiki Education series for the summer last week at Trading Technologies on Friday. Between three sessions in New York and four in Chicago over the previous two weeks, we had more than 500 attendees and 42 speakers from the industry. We will be posting videos of those presentations in the coming days. A thanks to all our sponsors for helping us make it happen – CME Group, CBOE, Nasdaq, IFM, Trading Technologies, IIT, Barchart, OCC, Thomson Reuters. ~JK

Did you know “central counterparty clearing was invented in 1872 by the Minneapolis Grain Exchange? That factoid came from OCC President and COO John Davidson in a Q&A in OCC News for July. ~SD


Rebates and Market Data: No Need to Reinvent the Wheel

At Trading Chicago presented by FOW and John Lothian News, Peter Maragos, CEO of Dash Financial Technologies, spoke to JLN about what he sees as the most pressing issues in equity and options markets: what to do about rebates and leveling the playing field when it comes to market data access.

Read the rest and watch the video »


Bordeaux Wine Estate Chateau Fauchey Sold to Chinese Investor
Guy Collins – Bloomberg
Purchase extends trend of Chinese acquisitions in region; Chateau surrounded by vines dates back to 15th century
A Chinese property investment company has acquired French wine estate Chateau Fauchey on the right bank of the Garonne river southeast of Bordeaux, according to an emailed statement from Maxwell-Baynes-Vineyards, an affiliate of Christie’s International Real Estate.

**JK: Why do I keep thinking about the Japanese buying spree of the 1980s?


Calypso Acquires Stake in Sernova Financial
Calypso Technology, Inc.announced today that it has acquired a minority stake in the capital of Sernova Financial, a provider of Cloud-based clearing and post trade services

**JK: Sernova‘s Jaki Walsh was recently featured in our videos on post-trade, The Problem With Post-Trade Is… and The Solutions To All Your Post-Trade Problems.


Wisconsin Company To Implant Microchips In Employees
Josh Rosenthal –
A Wisconsin company is about to become the first in the U.S. to offer microchip implants to its employees.
Yes, you read that right. Microchip implants.
“It’s the next thing that’s inevitably going to happen, and we want to be a part of it,” Three Square Market Chief Executive Officer Todd Westby said.
The company designs software for break room markets that are commonly found in office complexes.

****JB: What happens when you leave the company? Is there a surgeon at your exit interview?


LOPR; Transitory EFRPs; Injunction Against Cutting Off Services; Convictions for Manipulation Overturned; London Whale
Gary DeWaal – Bridging the Week
A broker-dealer agreed to pay a fine of US $2.5 million to the Financial Industry Regulatory Authority and three other self-regulatory organizations for alleged violations of its obligation to report large options positions timely and accurately. In addition, two firms resolved disciplinary actions with CME Group exchanges for purportedly violating prohibitions against engaging in transitory exchange for related position transactions.


Friday’s Top Three
Sometimes we’re really just worried about ourselves. Our top story of the day, by just one reader, was the Telegraph’s piece Are you fat or just big boned? How to tell if your weight is a danger to your health. The close second went to FinanceFeeds’ piece on the latest patent case Parties in Trading Technologies patent infringement case refuse to settle. Third went to Bloomberg’s Machines Poised to Take Over 30% of Work at Banks, McKinsey Says. Have a good week everybody.


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Lead Stories

Commodities Are Good for Traders, Bad for Investors; These assets are in the midst of a prolonged drawdown.
Ben Carlson – Bloomberg
Investing in commodities is tough. Things are so tough, in fact, that many commodities traders are fleeing the business altogether.

Trading Technologies appeals another Patent Board decision involving Interactive Brokers, TradeStation, IBFX
Earlier this month, FinanceFeeds have informed their readers about Trading Technologies seeking to overturn a February decision by the Patent Trial and Appeal Board (PTAB) in a legal move concerning the so-called “patent ‘556”, called “System and Method for Displaying Order Information in Relation to a Derivative of Price”.
As per the latest court filings, seen by FinanceFeeds, on July 21, 2017, Trading Technologies made another move towards a decision by the Board concerning the same patent.

MarketAxess chooses Amsterdam as EU base after Brexit; Decision in part due to uncertainty over departure transitional period
Philip Stafford – FT
MarketAxess, one of the world’s largest corporate bond trading venues, has chosen Amsterdam as its main base for the EU after the UK leaves the single market.

Two top Wall Street chiefs celebrate $314m share bonanza; Dimon and Blankfein lead way with stock gains boosted by Trump effect on markets
Laura Noonan in New York – FT
The men running two of Wall Street’s biggest banks saw the value of their shareholdings rise by a combined $314m in 2016 as stock market prices rocketed in the aftermath of Donald Trump’s election as US president.

Bitcoin averts split as miners back new software upgrade
Gertrude Chavez-Dreyfuss – Reuters
Digital currency bitcoin on Friday averted a split into two currencies after its network supported an upgrade to its software that would enhance its ability to process an increasing number of transactions.

Mystery Bond Trader Nets $10 Million on Treasury Strangle Gamble
Edward Bolingbroke and Brian Chappatta – Bloomberg
The unknown bond trader who placed a potentially record wager in the Treasury options market may have just netted a $10 million profit.
The $10 million worth of put and call options on 10-year Treasury futures that the trader purchased on July 11 expired Friday at 3 p.m. in New York. At expiry, the benchmark 10-year yield was about 2.23 percent, down about 15 basis points from when the so-called strangle trade was initiated.

Questions swirl as ‘advisers’ say they never worked for Chicago investment firm
Kate MacArthur – Chicago Tribune
Nin Desai, CEO of Chicago-based Nin Ventures, is on the defensive after two men she listed as advisers to her company have denied their involvement, leading to broader questions about the firm. Dr. Sunil Patel and Gurbaksh Chahal say they aren’t involved in Nin Ventures. Both men have said they sent cease-and-desist letters to Nin Ventures and Desai.

Deutsche Bank, JPMorgan Agree to Settle Yen-Libor Lawsuits
Chris Dolmetsch – Bloomberg
Banks will pay $148 million to resolve claims of manipulation; Agreements follow similar settlements by Citigroup, HSBC
Deutsche Bank AG and JPMorgan Chase & Co. agreed to pay a combined $148 million to resolve claims that they conspired to manipulate the benchmark yen Libor rate and said they will cooperate with investors suing other banks.

China Nasdaq About to Be Cheaper Than Nasdaq for First Time
Emma Dai – Bloomberg
Valuation gap narrows to least since ChiNext started in 2010; Chinese gauge’s declines will continue, says ICBC strategist
China’s small-caps share gauge, cowed by the nation’s battle against speculators, is on the verge of becoming cheaper than the Nasdaq Composite Index for the first time on record.

U.S. to drop criminal charges in ‘London Whale’ case
Jonathan Stempel – Reuters
U.S. prosecutors have decided to drop criminal charges against two former JPMorgan Chase & Co (JPM.N) derivatives traders implicated in the “London Whale” trading scandal that caused $6.2 billion of losses in 2012.

Getting on With Brexit in the City That Hates It the Most; European connections helped power Bristol’s prosperous economy. Now its vibrant high-tech companies are struggling to plan ahead.
Matthew Campbell – Bloomberg
Bristol’s Temple Quay Market looks like the Britain that wanted to stay in the European Union.

Exchanges, OTC and Clearing

London Stock Exchange Group tests blockchain for private company shares
Anna Irrera and Jemima Kelly – Reuters
The London Stock Exchange Group Plc has teamed up with IBM to build a blockchain-based platform to digitally issue private shares of small and medium enterprises in Italy.
The platform is being built and tested by Borsa Italiana, the LSEG’s Italian exchange operator, and will seek to make it easier to track and exchange shareholder information of unlisted businesses, the companies said on Wednesday.

SIX Swiss Exchange concludes upgrade of trading platform
SIX Swiss Exchange has successfully completed the upgrade of its X-stream INET trading platform, once again underlining its status as one of the most technologically advanced exchanges in the world.


Bold and Cautious: London Stock Exchange Group’s Careful Blockchain Steps
Noelle Acheson – CoinDesk
Over 20 years ago, with little fanfare and much skepticism, the London Stock Exchange (LSE) took a bold step that ended up changing company finance.
Eager to open up the market and diversify its income, the LSE launched a new type of stock exchange aimed at smaller high-growth companies unable to meet the broader exchange’s requirements. The Alternative Investment Market, or Aim, was born.

Aviva and Founders Factory to support five fintech startups
Aviva and Founders Factory are today announcing the first five startups selected for its fintech programme and the launch of a brand new startup to make social care easier.

Financial services to drive fastest IT budget increases says IDC
Fintech Innovation
The annual IDC Worldwide Semiannual IT Spending Guide: Industry and Company Size predicts that improvements and stability in business confidence across a broad range of vertical industries will drive stronger IT spending growth this year. Leading the charge is the financial services where the analyst predicts IT budgets will grow by more than 5%.

Calpyso Teams Up with LIST, Rolling Out Automated Workflow Solution
Finance Magnates
Ahead of the passage of MiFID II in January, the demand for compliant platforms and solutions has never been higher. Calypso Technology Inc. has teamed up with software vendor LIST to deliver its new end-to-end Enterprise Platform. The new joint solution comes in accordance with a major European bank, emphasizing a fully automated trading process.

Singapore Startup Counts on Visa to Take Bitcoin Into Real World
Krystal Chia and Sterling Wong – Bloomberg
TenX’s Visa prepaid card converts digital currencies to cash; The company has raised $80 million through a token sale
A recurring challenge for bitcoin and other cryptocurrencies is how to make them work in the real world. A Singapore-based startup says the answer is its Visa card.


Wall Street Outlasts Congress on Banker Pay, But Still Loses; Adherence to Dodd-Frank guidelines, changes in bank business mean compensation has edged down for many
Telis Demos and Dave Michaels – WSJ
Trump administration regulators have signaled they want to abandon long-simmering plans to further regulate pay on Wall Street.


French Insider-Trading Probes Face Curbs on Access to Phone Data
Gaspard Sebag – Bloomberg
French markets regulators’ powers to investigate insider trading face curbs following a court ruling that creates privacy protections for investors and traders.
The ruling from France’s Constitutional Court on Friday will limit the Autorite des Marches Financiers’ access to phone records during civil market-offense probes after judges criticized lawmakers for failing to include privacy-right safeguards for suspects when enacting the legislation overseeing the issue several years ago.

TP ICAP appoints Bloomberg Entity Exchange for key MiFID II compliance role
TP ICAP, the world’s largest interdealer broker, has selected Bloomberg Entity Exchange as the chosen platform to help clients register onto new trading venues operated by its broking businesses, including Tullett Prebon and ICAP.

Notice of Annual Meeting of FINRA Firms and Proxy
FINRA will conduct its annual meeting of firms on Tuesday, August 22, 2017, at 10 a.m. Eastern Time in the FINRA Visitors Center, 1735 K Street, NW, in Washington, D.C. The purpose of the meeting is to elect individuals to fill one small firm and one large firm seat on the FINRA Board of Governors (FINRA Board).

When the Trading Stops—Part 2: Delays and Suspensions
Pete Chandler – FINRA
Stock trading in U.S. markets usually proceeds smoothly throughout the trading day, but interruptions can occur, as we learned in the first part of our series on trading halts.

SIFMA Submits Comments to SEC on Standards of Conduct for Financial Professionals
SIFMA today submitted comments to the SEC in response to Chairman Clayton’s recent request for public comment on the standards of conduct for investment advisers and broker-dealers.

Oil markets need regulator in face of speculators: Eni CEO
Energy markets might need to be regulated to put a brake on widespread financial speculation that is distorting crude prices, the head of Italian oil major Eni told Il Sole 24 Ore newspaper.

U.S. financial regulators to discuss MetLife lawsuit next week
Lisa Lambert – Reuters
Heads of the U.S. financial regulatory agencies will meet behind closed doors next Friday to discuss MetLife Inc’s (MET.N) lawsuit against them, according to a notice from Treasury, as the Trump administration wrestles with reforms put in place in response to the financial crisis.

Investing and Trading

Vanguard closes in on BlackRock’s number-one spot; Title of world’s largest asset manager moves closer after inflows of $1bn a day
Chris Flood – FT
Vanguard is closing in on BlackRock’s title as the world’s largest asset manager after pulling in more than $1bn a day of investor money since the start of the year.

Federal Reserve now faces prospect of global monetary policy tightening
Howard Schneider – Reuters
Prospects for tighter monetary policy in Europe and other countries could pose a fresh problem for the Federal Reserve when it meets next week to ponder its plan to reduce its $4.2 trillion bond portfolio purchased after the 2008 financial crisis.


Battle Is On Over Government’s Version of Yelp for Banks; White House says government complaint database is unfair to banks, but consumers say it can spur action
Yuka Hayashi – WSJ
A government complaint database popular with consumers has become the latest battleground for efforts to curb the Consumer Financial Protection Bureau’s authority.

Deutsche Bank and Barclays hit hardest by fixed-income falls; Low volatility in second quarter cited as main cause for trading slump
Laura Noonan – FT
Deutsche Bank and Barclays are expected to emerge this week as the biggest European casualties of the fixed-income trading slump that dogged US banks’ second-quarter earnings, but analysts do not believe the situation is serious enough to merit swingeing cutbacks at either institution.

Ex-UBS Compliance Officer, Day Trader Deny Insider Trading
Suzi Ring and Helen Chandler-Wilde – Bloomberg
Abdel-Malek, Choucair deny five charges in London court case; Pair accused of making 1.4 million pounds in trading
A former UBS Group AG compliance officer and a day trader charged by U.K. regulators with making 1.4 millions pounds ($1.8 million) from insider trading pleaded not guilty in a London court.


Here’s the One Market Where Tech Stocks Aren’t in Charge; In China, investors have been rushing out of startups and pouring into old-guard, government-backed enterprises
Tech shares have been on a tear this year, driving up stock markets around the world. One market, however, has been a notable exception to this trend: China.

Traders Fear Hard Landing in Emerging Markets
Natasha Doff – Bloomberg
Carry-trade exit in EM is ‘quite small’: Schroder’s Olu-Pitan; Benchmark BlackRock bond ETF has doubled in size this year
The rapid growth of a BlackRock Inc. exchange-traded fund that tracks emerging-market debt is causing jitters among investors.


EU warns on failure to apply money laundering rules; Brussels sends letters to 17 countries about missing deadline to launch company register
Jim Brunsden in Brussels – FT
Brussels has rebuked national governments in the EU for failing to apply rules aimed at making it harder for terror organisations and criminal gangs to hide their money by shifting it around European countries.

The U.K.’s Brexit Bill Shouldn’t Derail Talks; Flexibility on both sides isn’t too much to ask.
The Editors – Bloomberg
The first sticking point in Brexit negotiations is the size of the U.K.’s final bill with the European Union. It’s a silly dispute that both sides need to get past as quickly as possible so they can move on to more consequential matters.

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