Saving Big Money: How a small fintech firm figured out how to save banks billions with DLT
Jim Kharouf, JLN
There’s a lot of chatter these days about the viability, perhaps even the legitimacy, of distributed ledger systems for the financial markets. Lost in the “blockchain is dead” noise are some interesting cases that show just how DLT technologies can be used effectively in key pain points in the market.
“This has been a true hype cycle,” said Arjun Jayaram, CEO and founder of Baton Systems.
The Gartner Hype Cycle is the theoretical sort of N-shaped graph that indicates an innovation trigger, inflated expectations, a so-called trough of disillusionment and then an upward slope of enlightenment, or adoption. Jayaram has seen it up close but may be finding the right way to gain adoption with the firm’s DLT high-speed payment service.
To read the rest of the article, go here.
Hits & Takes
John Lothian Productions shot its first video interview for the “Open Outcry Traders History Project” when I interviewed Mike Fishbain of Trading Technologies. Fishbain is a former CME scalper in various trading pits. Thank you Mike for helping kick off this project.~JJL
If you are a former or current open outcry trader interested in participating in the project, please email me at email@example.com.~JJL
Edward Cox, Jr., a 60-year member of the Chicago Board of Trade, has died at the age of 83. Condolences to the Cox family and his many friends.~JJL
This is a perfect example of why the Open Outcry Traders History Project is so important right now. We want to capture the stories and experiences of open outcry traders before they and their stories disappear.~JJL
The IOMA-WFE’s 36th Clearing & Derivatives Conference is on April 2 to 4, 2019 in Mumbai, India.~JJL
Have spare time in your day to digest a 711 page PDF? If so, here is the Economic Report of the President.~SD
Stacie Hartman is joining the law firm Steptoe & Johnson as co-chair of its Financial Services Practice.~JJL
What does it mean when you wear colorful socks? This article explains the science behind it.~JJL
^Sometimes it just means you need to do laundry.~SD
John Lothian News will again be putting on its MarketsWiki Education program this summer in Chicago and New York. Suggestions for potential speakers are welcome. Email me at firstname.lastname@example.org any suggestions.~JJL
The Spread – There Goes the Sun – 3/18
Last year we filmed our FIA Boca edition of “The Spread” in a pool. However, we were at a different Airbnb this time, so you are not in for a repeat treat.
Watch the video and see the stories referenced here »
Ex-CFTC chairman calls for SEC to regulate cryptocurrencies
Thom Thomson, JLN
Economic Studies at Brookings yesterday dropped a call for better regulation of the cryptocurrency and digital assets industries by none other than Tim Massad, the former chairman of the CFTC. As befits the former head of an agency that embraced principles-based regulation, Massad’s paper is long on analysis of the industries and the regulatory issues that seem to afflict business conditions.
Tuesday’s Top Three
Our top read story of the day was Bloomberg’s From Fraud to Fintech, Quadriga Co-Founder’s Past Crimes Emerge. Second was Chuck Mackie’s piece for JLN, Chicago Mayor Emanuel addresses FinTank meeting, makes case for Chicago as crypto and fintech hub. Third was about Morrie Tobin, in The Wall Street Journal’s The Yale Dad Who Set Off the College-Admissions Scandal
147,313,882 pages viewed; 23,599 pages; 217,737 edits
Digital Asset promotes co-founder to CEO as it enters new era post-Blythe Masters; Digital Asset’s new CEO will be faced to provide a new strategic direction to Digital Asset after Blythe Masters, the former CEO, left in December.
Joe Parsons – The Trade
Blockchain technology specialist Digital Asset has appointed one of its co-founders to CEO, replacing Blythe Masters who stepped down at the end of 2018.
Report Says Most Crypto Trading Volume Is Suspicious
Olga Kharif – Bloomberg
Startup the Tie compared exchange volume with web traffic; Firm says 75% of reported activity was double what is expected
Most of the trading volume on the world’s largest cryptocurrency exchanges is questionable, according to a report from a startup that revisits one of the recurring concerns in the decade-old digital-asset market.
Volatility spike prompts reforms at equity-options clearing house; OCC’s rethink on risk models follows last year’s ‘Vix-mageddon’ episode
Philip Stafford – FT
The clearing house charged with overseeing the trading of options based on the Vix volatility index expects to finalise new risk models over the summer, after a sharp spike in the benchmark last year exposed flaws in their calculation.
Former Numis boss Hemsley pulls out of deal for Nex Exchange
Philip Stafford and Kate Burgess – FT
Oliver Hemsley, the retired founder of Numis Securities, has pulled out of a deal to take over Nex Exchange, which sought to revitalise the UK market for fledgling shares.
SEC to examine competition among US asset managers; Regulator fears that industry consolidation will hit investor choice
Chris Flood – FT
The US financial regulator is set to examine whether investors’ choice of asset management companies will be damaged by competitive pressures that threaten to destroy smaller players.
ASX’s blockchain project gets nasty
Chanticleer – AFR
The once-in-a-generation change in the technology platform for processing Australian share trades is either proceeding smoothly towards its 2021 starting date or it is facing a monumental backlash from various market players.
Banks progress on adhering to stricter international rules; Survey shows compliance with Basel III standards that were set to promote stability
Claire Jones – FT
Banks are making progress towards meeting globally agreed standards, set after the financial crisis to ensure lenders can handle future bouts of market turmoil.
EU, UK market watchdogs clash over no-deal Brexit share trading
The European Union’s markets watchdog published guidance on Tuesday identifying which shares investors in the bloc could no longer trade in London if there is a hard Brexit next week.
****Financial Times – UK riled by EU share trading plans for no-deal Brexit
Why further financial crises are inevitable
Martin Wolf – Financial Times
We learnt this month that the US Federal Reserve had decided not to raise the countercyclical capital buffer required of banks above its current level of zero, even though the US economy is at a cyclical peak. It also removed “qualitative” grades from its stress tests for American banks, though not for foreign ones. Finally, the Financial Stability Oversight Council, led by Steven Mnuchin, US Treasury secretary, removed the last insurer from its list of “too big to fail” institutions.
A transatlantic front opens in the Brexit battle over derivatives
Gillian Tett – Financial Times
Another week, another round of baffling Brexit political farce. But if you want a different perspective on these dramas, ponder a topic that (almost) no British politician ever bothers to discuss: the state of London’s gigantic derivatives market after leaving the EU.
Barclays agrees record sponsorship of English women’s football; Bank’s £10m deal with FA hailed as the largest corporate investment in UK female sport
Murad Ahmed – FT
The Football Association has agreed a more than £10m deal with Barclays to sponsor the top tier of English women’s club football, in what the groups describe as the largest ever corporate investment in UK female sport.
SEC says Musk’s contempt defense ‘borders on the ridiculous’
U.S. securities regulators countered Tesla CEO Elon Musk’s contempt-of-court defense Monday night, writing in court papers that he brazenly disregarded a federal judge’s order and that one of his arguments “borders on the ridiculous.”
Exchanges, OTC and Clearing
CME Group Announces Record COMEX Copper Options Open Interest
CME Group, the world’s leading and most diverse derivatives marketplace, today announced COMEX Copper options open interest reached a record 62,220 contracts on March 18, surpassing the previous record of 56,674 contracts set on February 22.
Competition Is Good. Differentiation Is Better
Don Ross, PDQ Enterprises – TABB Forum
When it comes to keeping down prices, competing always beats whining, says PDQ’s Don Ross, which is why he is pleased to see that big trading firms are taking on rising exchange data charges by starting their own exchange, MEMX. But it will make little difference for the most important investor group in this country: institutional asset managers, he argues. MEMX’s entry may well contribute to the long-established trend of lower trading costs for retail investors. But for institutions, MEMX is largely a non-event.
DTCC members add $26bn to default funds in 2018
Alessandro Aimone – Risk.net
Aggregate mandatory contributions by members of the Depository Trust & Clearing Corporation (DTCC) to its three default funds rose 33% in 2018 to their highest level since public disclosures began.
Eris swap futures volumes surge following CME migration; March is the largest volume month ever for Eris swap futures after the derivatives were migrated to CME Group at the end of last year.
Hayley McDowell – The Trade
Swap futures volumes at Eris Exchange have surged following its recent migration of the derivatives to US exchange operator CME Group.
Ronin Capital Expands Use of Rival Systems for Options Trading in Asia
Rival Systems … announced that Ronin Capital, a proprietary trading firm, has deployed the Rival platform for their trading initiatives in Asia. Ronin Capital is now using Rival to trade options and futures on the Hong Kong Futures Exchange and Osaka Securities Exchange. Rival was selected for this initiative as it provides superior speed, unparalleled support, and commitment to working with traders to quickly deliver innovative features.
Trade Informatics appoints Andrew Shortland as EMEA chief; Former Jefferies head of international equities to oversee regional expansion of analytics vendor.
John Brazier – The Trade
Trade Informatics has announced the appointment of Andrew Shortland as its new CEO for the EMEA region.
Norsk Hydro Ransomware Attack Is ‘Severe’ But All Too Common
Nate Lanxon – Bloomberg
Norsk Hydro ASA confirmed that a ransomware attack was behind production outages across the aluminum producer’s operations in Europe and the U.S.
Itiviti accelerates buy-side capital markets connectivity with RTM in Brazil
Itiviti, a leading technology and service provider to financial institutions worldwide, has partnered with technology company RTM, the largest Brazilian financial extranet provider to the buy-side industry. The combination of Itiviti’s NYFIX order routing network with RTM’s technology solutions will enable RTM clients to provide on-net clients with access to the 700-strong international broker community and its associated services, such as NYFIX TCA, NYFIX Market Access, NYFIX Matching and the NYFIX Store, along with RTM’s existing reach.
Bangkok Capital Asset Management selects DTCC to streamline post-trade processes
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade infrastructure for the global financial services industry, today announced that Bangkok Capital Asset Management Co., Ltd. (BCAP) has become the first domestic investment manager in Thailand to adopt DTCC’s Central Trade Manager (CTM), a global platform for the central matching of cross-border and domestic transactions that enables BCAP to significantly improve their post-trade processes.
Digital Asset Names Company Co-Founder, Yuval Rooz, Chief Executive; Rooz takes CEO reins from AG Gangadhar, who remains the executive chairman of the board
Digital Asset, the creators of DAML and leading provider of Distributed Ledger Technology (DLT) solutions, announced today that Yuval Rooz has been appointed the company’s Chief Executive Officer (CEO), effective immediately. Digital Asset’s Executive Chairman, AG Gangadhar, was appointed acting CEO in December and will continue to advise the company’s leadership team as executive chairman.
Bitcoin Is in the Dumps, Spreading Gloom Over Crypto World; he value of all cryptocurrencies outstanding is down 85% from peak and volumes on U.S. exchanges have been falling; making it through ‘winter’
Paul Vigna – WSJ
Bitcoin is in the longest slump of its 10-year history. That is forcing even its most ardent supporters to shelve dreams of global disruption and focus on simply tightening their belts long enough to outlast the downturn.
Binance Now Lets Australians Buy Bitcoin With Cash at Over 1,300 Stores
Yogita Khatri – Coindesk
Cryptocurrency exchange Binance has unveiled a new platform in Australia that allows users to buy bitcoin with cash from high-street stores.
Galaxy Capital-Backed Caspian to Offer Crypto Derivatives Trading
Yogita Khatri – Coindesk
Galaxy Capital-backed institutional trading and portfolio management platform Caspian is launching trading in cryptocurrency derivatives.
Silvergate saw boom in crypto clients in Q4 – with startup deposits surging
The Block Crypto
59 additional crypto businesses signed up to bank with Silvergate in the fourth quarter of 2018, taking its total number of crypto clients to 542, according to the bank’s December IPO prospectus.
$25 Million in 2 Weeks: BlockFi Booms as Bitcoin and Ether Investors Seek Interest
Anna Baydakova – Coindesk
BlockFi is planning to roll out new products every six months and raise more capital.
BlockFi wasn’t the first lending startup in the cryptocurrency market, but it’s likely the one getting the most attention these days ó including some heat from community members.
Bitcoin Blight Deepens
Dmitry Moraine – Barron’s
Financial advisors who cautioned clients about investing in cryptocurrencies when prices were skyrocketing in 2017 look pretty smart right now.
Bitcoin billionaires Tyler and Cameron Winklevoss ‘still doing better’ despite crypto nosedive
Margi Murphy – The Telegraph
Tyler Winklevoss takes a seat in the Austin, Texas hotel where we’re meeting. “I’m feeling the time difference,” he says. They have flown in from New York. It is one hour behind.
It’s time to strengthen the regulation of crypto-assets
Timothy G. Massad – Brookings
There is a gap in the regulation of crypto-assets that Congress needs to fix. The gap is contributing to fraud and weak investor protection in the distribution and trading of crypto-assets. In “It’s time to strengthen the regulation of crypto-assets,” Timothy G. Massad discusses how better regulation will benefit crypto investors, further the development of new technologies, curtail the use of crypto-assets used for illicit payments, and reduce the risk of cyber attacks, which can result in collateral damage elsewhere in our financial system.
Trump’s Lawyers Ask U.S. Appeals Court to End Emoluments Suit
Andrew M Harris – Bloomberg
Donald Trump, as president and a private citizen, asked a federal appeals court to put an end to lawsuits challenging his ability to make money from his Washington hotel even if some of the revenue comes from other governments.
President Trump Has Some Stories to Tell About Deutsche Bank; Why a German banking giant is in the news, and why the White House might worry.
Timothy L. O’Brien – Bloomberg
In 2006, Donald Trump sued me for libel, claiming that a biography I wrote, “TrumpNation,” lowballed his wealth and misrepresented his track record as a businessman. Trump lost the suit in 2011. He had sought $5 billion in damages, which was, more or less, the difference between what he claimed he was worth at the time ó about $6 billion ó and what my sources believed him to be worth: $150 million to $250 million. ($5 billion was also substantially more than the advance my publisher paid me to write the book.)
Trump Economic Advisers Don’t View High Oil Prices as All Bad
Tina Davis – Bloomberg
Higher oil prices may not always be a bad thing for the U.S. economy, according to a White House report.
U.S. bank regulator fines Citigroup $25 mln for violating fair lending rules
The U.S. Office of the Comptroller of the Currency (OCC) said on Tuesday it has fined Citigroup $25 million for violating the Fair Housing Act after it denied some borrowers preferential rates on the basis of their race, color or other factors.
ESMA sparks concern with share trading Brexit plans; Major UK stocks including Vodafone and Coca-Cola would have to be traded within the EU in ‘no-deal’ Brexit scenario under the share trading obligation.
Hayley McDowell – The Trade
Market participants across Europe will be forced to trade several major UK stocks on European venues if the UK leaves the EU without a deal later this month, sparking huge concern from the UK’s financial regulator.
ESMA publishes its Data Operational Plan under a no-deal Brexit scenario
The European Securities and Markets Authority (ESMA) has today published a statement in relation to the impact on ESMA’s databases and IT systems of a no-deal Brexit scenario on 29 March 2019.
Guidance on FOCUS Reporting for Operating Leases
In October 2018, the staff of the SEC Division of Trading and Markets (the SEC staff) issued no-action relief (the no-action relief letter) regarding the treatment of operating leases under SEA Rule 15c3-1 (Rule 15c3-1) in connection with the Financial Accounting Standards Board’s (FASB) Accounting Standards Update for Leases (the Lease Accounting Update). Based on discussions with the SEC staff, and in response to member inquiries, FINRA is issuing this Notice to provide guidance to members for reporting lease assets and lease liabilities on their FOCUS reports.
Member Relations & Education: Making Regulation Smarter
As a self-regulatory organization, FINRA is uniquely positioned to gain meaningful insights from its members to help ensure FINRA’s regulatory programs are working for everyone. Tasked with maintaining that relationship and keeping an open dialogue is FINRA’s Office of Member Relations and Education.
FCA response to National Audit Office report
The FCA welcomes today’s report by the National Audit Office – Regulating to protect consumers: Utilities, communications and financial services markets (link is external). The report provides a view of the challenges that regulators, including the FCA, face when measuring their performance and understanding what works well for consumers.
ASIC winds up illegal land banking investment scheme and associated entities
ASIC has successfully sought orders from the Federal Court to wind up Melbourne-based company Aviation 3030 Pty Ltd (Aviation) on the basis that there is a justifiable lack of confidence in the management of Aviation by its directors.
Notice from UK Financial Conduct Authority – African Land and Capital Carbon Credits schemes
Following action in the High Court in relation to a series of unregistered collective investment schemes, the Financial Conduct Authority of the United Kingdom (FCA) is seeking to identify investors who may be eligible for restitution.
Investing and Trading
Exclusive: Lyft’s IPO oversubscribed after two days – sources
Joshua Franklin – Reuters
Lyft Inc’s initial public offering (IPO) is oversubscribed based on commitments made so far by investors, making it more likely that the ride-hailing startup will fetch or even exceed the $23 billion valuation it is seeking, people familiar with the matter said on Tuesday.
Chief aims for Occidental Petroleum to be ‘carbon neutral’; Shale producer pins hopes on enhanced oil recovery using captured greenhouse gases
Ed Crooks – FT
In the Permian Basin of Texas and New Mexico, the racing heart of the US shale oil boom, there is generally not too much soul-searching about the implications for the climate of their production. The availability of truck drivers and pipeline capacity for transporting the oil to market are much more pressing concerns.
FX market volatility at its lowest level since 2014
Peter Wells – Financial Times
If you thought the equity market looked calm at the moment, it can’t hold a candle to foreign exchange, where levels of volatility are hovering around their lowest levels since 2014.
Opinion: When the U.S. falls into a recession, a credit bubble will explode
John Mauldin – MarketWatch
The European Central Bank this month said it would keep record-low interest rates for longer. The news comes shortly after the U.S. Federal Reserve gave in to the stock market and held off on further interest-rate increases.
UBS fined £27.6 million for MiFID reporting failures; The FCA hands UBS largest MiFID transaction reporting fine to date after more than 130 million reports were found to be inaccurate.
Hayley McDowell – The Trade
The UK’s financial regulator has handed UBS a fine of £27.6 million for failings related to more than 135 million MiFID transaction reports.
INTL FCStone Acquires the Futures and Options Brokerage and Clearing Business of UOB Bullion and Futures Limited in Singapore
INTL FCStone Inc. today announced that its Singaporean subsidiary INTL FCStone Pte Ltd has executed an asset purchase agreement to acquire the futures and options brokerage and clearing business of UOB Bullion and Futures Limited, a subsidiary of United Overseas Bank Limited. Closing is conditional upon receiving regulatory approval by the Monetary Authority of Singapore.
BlackRock Has Never Charged This Little for an Index Mutual Fund; Money manager’s move is indication of pressure firms face to lower prices of their most common stock-and-bond investments
Dawn Lim – WSJ
BlackRock Inc. is cutting the price big clients pay to invest in its largest equity index mutual fund, a bid by the giant money manager to close the gap with cheaper rivals.
Why Wells Fargo is struggling to put its past behind it; Scandal-stricken bank may not rebound like JPMorgan Chase after the ‘London Whale’
Ben McLannahan – FT
“Is the problem fixed at Wells Fargo?” asked Sean Duffy, a Republican congressman. “It is,” replied Tim Sloan, the bank’s CEO.
Lloyds faces £300m bill for Standard Life Aberdeen divorce; Reports on the arbitration case read rather like the accounts of a costly marital split
Matthew Vincent – FT
Reports that Standard Life Aberdeen has won an arbitration case with Lloyds Banking Group over their £109bn fund management break-up read rather like the accounts of a costly divorce?.?.?.
UBS Says First Quarter Was ‘One of the Worst’ in Recent History
Patrick Winters – Bloomberg
CEO Ermotti says investment banking revenue down a third; Bank is slowing hiring, information technology projects
UBS Group AG Chief Executive Officer Sergio Ermotti gave a gloomy outlook to investors at a conference in London Wednesday, saying conditions in the first three months have been among the toughest in years.
Goldman Sachs says half of all the junior bankers it hires must be women
Hugh Son – CNBC
Goldman Sachs expanded a year-old program to hire more workers from underrepresented groups, including goals for black and Latino hires for the first time.
Colombian proposal to ditch NY coffee price may send buyers elsewhere
Julia Symmes Cobb, Ayenat Mersie – Reuters
A proposal by Colombian coffee growers’ federation that producer countries sell their high-quality harvests untethered from the New York market price could encourage buyers to look for alternative providers, importers and exporters said.
Hedge Fund Veteran Says $130 Billion Bond May Just Fix Venezuela
Ben Bartenstein – Bloomberg
Osorio proposes rolling up Venezuela’s debt into one bond; Nation’s liabilities currently stand at about $130 billion
Venezuela watchers have floated plenty of ideas for fixing the economic and humanitarian crisis, from a bitcoin drop to an oil-for-food plan, but the idea of wrapping all the nation’s debt into one giant bond issuance is perhaps the wildest proposal yet.
China Hushes Hong Kong’s ‘Insane’ Bank; Once celebrated for outside-the-box thinking, a Hong Kong-based brokerage lost its voice amid the tightening grip of a state-owned parent.
Nisha Gopalan – Bloomberg
In the end, the “insane asylum” got sedated. CLSA Ltd. once earned that proud moniker from its former chief executive officer, Jonathan Slone, for its nonconformist research ideas. After a decade as CEO and 30 years at the brokerage, Slone this week became the latest and the most high-profile departure, closely following former Chairman Tang Zhenyi.
Indian Diamond Tycoon Accused of $2 Billion Fraud Arrested in London, Police Say
Franz Wild – Bloomberg
Modi is expected to appear in a London court on Wednesday; India seeks to extradite Modi for allegedly defrauding a bank
Indian diamond tycoon Nirav Modi, who allegedly defrauded a state-run bank of $2 billion, was arrested and is due to appear in court on Wednesday, London’s Metropolitan police said in a statement.
India’s Rupee Just Went From Asia’s Worst to Best Currency
Kartik Goyal – Bloomberg
Overseas inflows in stocks, bonds near $5 billion in March; Rupee may advance to 67 per dollar by June-end: Scotiabank
Asia’s worst-performing currency took five weeks to become its best. The turnaround has been fueled by the improved chances of Prime Minister Narendra Modi winning a second term amid recent tensions between India and Pakistan. The optimism has led to local shares and debt luring robust flows, which have turned the carry-trade returns on the rupee to the highest in the world in the past month.
U.S. sanctions Venezuela gold mining company for backing Maduro
The United States imposed sanctions on Tuesday against Venezuela’s state-run gold mining company Minerven and its president, Adrian Perdomo, accusing them of illicit operations and propping up the government of President Nicolas Maduro.
UK to lose £1tn of financial assets to Europe due to Brexit; Banks and investors forced to finalise plans only days from set departure date
Stephen Morris – FT
Financial services companies have committed to move about £1tn of assets out of the UK into Europe as the industry triggers its worst-case contingency plans with no Brexit deal in sight, according to consultancy EY.
UK heads for cliff-edge showdown on Brexit; May seeks short delay to EU divorce but Juncker warns no extension likely to be granted this week
George Parker and Guy Chazan – FT
Britain is headed for a showdown just days before it is due to crash out of the EU after Jean-Claude Juncker signalled European leaders would be unable to grant an extension to next week’s Brexit deadline at a Brussels summit starting on Thursday.
EU hardens stance on Brexit delay as May’s cabinet splits over its demands; Barnier lays down conditions ahead of summit where PM will seek extension
Mehreen Khan, Alex Barker, Victor Mallet and George Parker – FT
The EU has told Britain there are no guarantees it can delay Brexit, raising the risk that Theresa May will leave a crucial summit this week with no assurances that the UK will be able to stay in the bloc beyond the scheduled departure date of March 29.