Filings reveal DRW’s climb into top rank of trading firms; BlackRock’s Message: Contribute to Society, or Risk Losing Our Support; Euromoney’s RISI unit raided by EU antitrust authorities

Jan 16, 2018

First Read

Hits & Takes
JLN Staff

The CBOE is holding its press lunch today in Chicago. It is the Chicago financial press’s opportunity to ask tough questions to the CBOE management team. My money’s on the first question being about bitcoin.~JJL

A few names mentioned in Bloomberg’s Bitcoin Frenzy Helps Crypto Hedge Funds Reap 1,100% Gains include: Lee Robinson, who co-founded the Altana Digital Currency Fund along with Alistair Milne; Cedric Jeanson of BitSpread Group; Manuel Anguita of Silver 8 Partners; and Daniel Masters, co-founder of Global Advisors Bitcoin Investment Fund. As always, can they keep it going?~JK

Hong Kong stocks hit a new record, via the FT, as did Brazil’s Ibovespa.~JJL

Reuters reports “Pope Francis Warns About Danger Of Nuclear War: ‘We Are At The Very Limit'”~JJL

Garry Jones is no longer covered by a NDA with HKEX and is ready to explore new opportunities in the industry. He will be at Boca this year too.~JJL

The Nigerian Stock Exchange (NSE) announced the promotion of Ms Tinuade Awe to Executive Director, Regulation, effective January 1, 2018.~JJL


Beyond the Bitcoin Bubble; Yes, it’s driven by greed — but the mania for digital cash could wind up building something much more important than wealth.
Steven Johnson – NY Times
The sequence of words is meaningless: a random array strung together by an algorithm let loose in an English dictionary. What makes them valuable is that they’ve been generated exclusively for me, by a software tool called MetaMask. In the lingo of cryptography, they’re known as my seed phrase. They might read like an incoherent stream of consciousness, but these words can be transformed into a key that unlocks a digital bank account, or even an online identity. It just takes a few more steps.

****** Which came first, bitcoin or the hype surrounding bitcoin?~JJL


Just Another Day for Bitcoin—a 20% Plunge; Digital currency down 40% from December high amid growing regulatory scrutiny
Mike Bird and Gregor Stuart Hunter – WSJ
The price of bitcoin plunged by as much as 20% on Tuesday amid concerns about tighter regulation, with the volatile virtual-currency falling below $12,000 for the first time since early December.

***** Bitcoin makes penny stocks look stable.~JJL


Monday’s Top Three
The top read story in yesterday’s holiday edition of JLN was Fortune’s Kraken Bitcoin Exchange Reopens After Lengthy Maintenance. Second was the New York Times piece on the rise of cryptocurrencies, Everyone Is Getting Hilariously Rich and You’re Not. In third was Bloomberg’s piece on the evolution of the bond market, Goodbye to Bond-Trading on the Telephone



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Lead Stories

Filings reveal DRW’s climb into top rank of trading firms; A subsidiary of Don Wilson’s firm pulled in nearly $1bn in revenue in two years
Gregory Meyer in New York – FT
A unit of DRW pulled in almost $1bn in revenue in the space of two years, underlining the Chicago-based firm’s ascent to the upper rank of global proprietary trading companies.

**** I am quoted in this story, but they did not use the best quote I had. I said, “Don Wilson and his team are the modern day incarnation of the O’Connor Brothers.”~JJL

BlackRock’s Message: Contribute to Society, or Risk Losing Our Support
Andrew Ross Sorkin – NY Times
On Tuesday, the chief executives of the world’s largest public companies will be receiving a letter from one of the most influential investors in the world. And what it says is likely to cause a firestorm in the corner offices of companies everywhere and a debate over social responsibility that stretches from Wall Street to Washington.

Euromoney’s RISI unit raided by EU antitrust authorities; Agency covering paper industry investigated as part of probe into anti-competitive practices
Rochelle Toplensky in Brussels, Katie Martin and Matthew Garrahan in London – FT
European Commission regulators have raided publisher Euromoney’s newly-acquired specialist unit covering the paper industry as part of an investigation into the cardboard and paper sack sector.

Financial data firms scrambling to be top cryptocurrency hub
Kevin Dugan and Carleton English – NY Post
The crypto-race is on. As the bitcoin, ethereum, ripple and hundreds of other crypto-coins move from niche investments to more widely accepted ones, financial data companies are racing one another to become the first major hub for the unregulated assets.

Trader VIP Clubs, ‘Ping Pools’ Take Dark Trades to New Level
Annie Massa – Bloomberg
Exclusive venues gain attention in becalmed financial markets; Some money managers still skeptical of electronic firms
First came dark pools, private trading venues that challenged old-school stock exchanges. Now something else lingers in the shadows of Wall Street: ping pools.

Bitcoin Tumbles 20% as Fears of Cryptocurrency Crackdown Linger
Eric Lam and Todd White – Bloomberg
China is said to escalate clampdown on trading, mobile apps; European securities authority criticizes bitcoin’s volatility
January’s cryptocurrency selloff got fresh impetus on Tuesday when bitcoin slumped, plunging as much as 20 percent as the prospect of regulatory crackdowns appeared to spread.

Bitcoin Frenzy Helps Crypto Hedge Funds Reap 1,100% Gains
While most of the world’s institutional investors watched from the sidelines as cryptocurrencies surged last year, a small group of hedge fund managers piled in. – Bloomberg
Call them visionaries or just plain lucky, but boy did they hit the jackpot.

An investing platform founded by a 25-year-old went free — and now it’s facing a backlash from its rivals
Frank Chaparro – Business Insider
Chicago-based investing startup M1 Finance made a bet that it could become a financial services juggernaut by charging its users nothing to use its platform.
Now, some larger players in the automated investing space are criticizing the move.

China to block centralized trading of cryptocurrency; Atomic swaps could remove need for central exchanges
Greg Synek – Techspot
China in 2017 was a hotspot for cryptocurrency trading and investment. As technologies have matured and regulators have stepped in, however, China has tumbled from being a leader of digital currencies.

Norway’s sovereign fund excludes 9 more firms on ethics grounds
Reuters Staff
Norway’s $1.07 trillion sovereign wealth fund has excluded nine more companies from its portfolio based on breaches of its ethical investment criteria, the Norwegian central bank, which manages the fund, said in a statement on Tuesday.

EU’s Tusk, Juncker Dangle Hope That U.K. Will Reverse Brexit
Jonathan Stearns – Bloomberg
European Union leaders kept alive the notion of the U.K. reversing its plan to leave the bloc in a sign of lingering hopes that British Prime Minister Theresa May will halt Brexit scheduled for March 2019.

Exchanges, OTC and Clearing

SIX Appoints Members Of The New Executive Board
On 10 November 2017, SIX announced the realignment of the company and the appointment of the new CEO, Jos Dijsselhof, who assumed office on 1 January 2018. Today SIX will appoint all members of the future Executive Board. The newly constituted Executive Board will take over operational management of SIX on 1 April 2018.

FTSE Mondo Visione Exchanges Index Hits New Record High
The FTSE Mondo Visione Exchanges Index yesterday established a new all-time high closing at 50,366.38, up from Friday’s 50,316.17.

SGX expands range of Daily Leverage Certificates with 7x leverage
First batch of DLCs generated total turnover of S$1.6 billion in less than six months
A new set of higher leverage DLCs will start trading on 24 January 2018
Following the debut launch of Daily Leverage Certificates (DLCs) in July 2017, SGX will welcome an expanded suite of DLCs to be issued by Societe Generale with 7x leverage.

SGX consults on Listing Rule changes consequential to Code of Corporate Governance review
Singapore Exchange (SGX) is seeking feedback on Listing Rule amendments consequential to proposed revisions to the Code of Corporate Governance. The matters SGX is consulting on are in the consultation paper the Corporate Governance Council launched today after its review of the Code.

Withdrawal of admission of 13 Single Stock Futures, five Single Stock Dividend Futures and three equity options due to corporate actions
Due to corporate actions, the Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG decided to withdraw admission to trading of 13 Single Stock Futures, five Single Stock Dividend Futures and three equity options according to the attachment.


BofA Tops IBM and Payments Firms With Most Blockchain Patents
Susan Decker and Jennifer Surane – Bloomberg
Financial companies beat tech in seeking blockchain patents; Blockchain patenting is going to grow, study author says
Bank of America Corp. may not be willing to help customers invest in bitcoin, but that doesn’t mean it isn’t plowing into the technology underlying the cryptocurrency.

Metamako Provides Technology to Monitor Every Trade at Deutsche Börse
Metamako, the leading provider of intelligent, FPGA-enabled network platforms, is providing its technology to Deutsche Börse Group. The exchange is using the company’s network devices to increase the accuracy, speed and precision of data capture, network monitoring and timestamping of its co-location network. Every trade is now monitored by a Metamako device, making it an integral part of the Deutsche Börse infrastructure. The deployment pertains to its 2017 network upgrade of the Eurex and Xetra markets.

Data Center Interconnect Market Migration Toward Cloud-Based Services
Data center interconnect is usually done in an enterprise environment to achieve IT and business objectives. One of the advantages of this technique is it allows different data centers to share resources, pass workloads, and work together. Such a technique can also be utilized to pool resources of multiple data centers to meet scalability goals.

LiquidityBook Caps Transformative Year with New Records for Client Wins, User Growth
LiquidityBook, a leading Software-as-a-Service (SaaS)-based provider of buy- and sell-side trading solutions, today announced that 2017 was a record year across all sales and client growth metrics the firm tracks. The growth was fueled by exceptionally strong demand globally for its industry-leading POEMS (portfolio, order and execution management system) platform, which provides considerable cost, management and functionality benefits versus the legacy platforms many investment managers currently employ.

Google Plans to Expand Huge Undersea Cables to Boost Cloud Business; The search company hopes to lure customers from Amazon and Microsoft with new fiber-optic lines
Drew FitzGerald – FT
Google is expanding its sprawling network of undersea cables to plug into new regions around the world, in a bid to speed up its cloud-computing business and catch up to rivals Microsoft Corp. and Inc. AMZN 2.23%

Broadridge goes global with creation of new business; Tom Carey, president of technology and operations at the firm, will lead the new business.
Hayley McDowell – The Trade
Broadridge Financial Solutions has created a new business to head its international expansion across all business lines in Europe, the Middle East, Africa and Asia Pacific.

Opinion: How bitcoin and blockchain will build internet 3.0; Let cryptocurrency innovators thrive in a permissive regulatory environment
Atulya Sarin – MarketWatch
In the same way that the automobile was a big unknown in the days of horse-drawn carriages, cryptocurrencies are unknown in today’s world of cash, gold, and credit cards. But it would be a grave mistake for government regulators to overreach and delay this innovation from reaching its potential.

Reform financial space with new policies backed with AI, cryptocurrency; We need an open access to all entities desiring to serve the mass middle and bottom of the pyramid without restricting operations through the banking channel
Naveen Surya
Even seven decades after Independence India continues to struggle in providing basic financial inclusion services to crores of our countrymen.

How Santander will use Ripple to execute cross-border payments | Analysis of the deal
By Vicky Beckett – Bobs Guide
Ripple has caused quite a stir (we resisted the pun) in the cryptocurrency market. Recent dips and spikes of XRP, Ripple’s cryptocurrency, have caused many commentators to question the long-term durability of the currency.


Beware the FARA side
Dan McCrum – FT
Compliance teams everywhere can celebrate. While the Trump administration might appear determined to roll back regulations for business, the ongoing probe into Russian meddling in the last election may turn out to be a job creation scheme. The reason is an obscure statute passed to restrict Nazi propagandists in 1938. The Foreign Agents Registration Act was a loosely worded requirement for foreign agents to make themselves known to the Attorney General. Little used, there were just seven FARA prosecutions in the last half century.

For Businesses, Donald Trump’s First Year Is a Net Success; CEOs’ relationship with the president had some tense moments, but most corporate chiefs welcomed the big corporate tax cut and push to ease regulations
Ted Mann – WSJ
The tax overhaul that President Donald Trump signed into law last month capped a year in which his initiatives on taxes, regulation—and many of his public pronouncements on the economy—have been broadly welcomed by business.

Democrats Add Momentum to G.O.P. Push to Loosen Banking Rules
Alan Rappeport – NY Times
The most significant attempt to loosen rules imposed in the wake of the 2008 financial crisis is underway in Congress as the Senate looks to pass legislation within the next month that would roll back restrictions on swaths of the finance industry.

Bitcoin Can’t Save the World’s Autocrats From the Sanctions Squeeze
Vladimir Putin’s finance ministry wants to let cryptocurrencies trade on official Russian exchanges. Kim Jong Un’s hackers are stealing digital cash. Nicolas Maduro hopes a cryptocurrency backed by oil will lure investment back to Venezuela.


ESMA and EBA to hold joint open hearing on Securitisation Regulation
The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) will hold a joint public hearing on the new EU Securitisation Regulation. The hearing will cover the two ESAs’ recently published consultation papers on draft regulatory technical standards (RTS) under the Securitisation Regulation.

Aquis Technologies launches MiFID II SI connectivity hub; The Aquis Market Gateway links SIs and counterparties on a bilateral basis in compliance with MiFID II.
Hayley McDowell – The Trade
Aquis Technologies, part of Aquis Exchange, has gone live with a new connectivity hub to allow systematic internalisers (SIs) and counterparties to link up bilaterally in line with MiFID II.

Nine banks accused of rigging key Canada lending rate; Lawsuit alleges lenders manipulated the Canadian Dealer Offered Rate
Ben McLannahan in New York – FT
A cluster of big banks has been named in a new lawsuit alleging manipulation of a key benchmark lending rate in Canada, opening up a new front in a global scandal that has led to billions of dollars in fines and penalties.

Big banks poised to cash in on Trump’s regulation rollbacks
Kevin Dugan – NY Post
It’s three weeks after Christmas, but banks are still unwrapping presents.

European regulator warns: Investors could lose everything on cryptocurrency ICOs
Andrew Wong – CNBC
Buying into initial coin offerings (ICOs) can lead to the total loss of an investment, said the head of a top European regulator.

Are you a bitcoin user or investor? The IRS wants to know
CBS News
Last year was a momentous one for bitcoin. The cryptocurrency began the year at just under $1,000 and finished at just over $14,000, posting a whopping one-year gain of nearly 1,400 percent.

Sebi mulls review of graded surveillance measures to improve transparency; Mechanism is used to tackle surge in stock prices of firms with poor fundamentals or low liquidity
Ashley Coutinho – Business Standard
The Securities and Exchange Board of India (Sebi) is reviewing the process to bring companies under the graded surveillance measure (GSM) with a view to improve transparency, said two people in the know. GSM aims to tackle the surge in stock prices of companies with poor fundamentals or low market capitalisation witnessing abnormal price rises, and which are not supported by a significant improvement in financial or operational performance.

Investing and Trading

The Momentum Game Has Returned to the Stock Market; MSCI’s U.S. momentum index delivered 44% since the start of 2017, almost double the wider market
James Mackintosh – WSJ
Forget fundamentals: Momentum is back in the stock market. For the first time since the 2008 financial crisis a simple strategy of buying the stocks that had already gone up the most delivered a remarkable outperformance last year. Is it a sign of excess or the start of a new bull run?

Where are all the female investors?
Investment is just for men, judging by the latest tome
Maike Currie – FT
I recently received a complimentary book from the financial publisher Harriman House. Harriman’s New Book of Investing Rules: The Dos and Don’ts of the World’s Best Investors is a beautiful hardback doorstopper with a strikingly-designed outer sleeve, promising to distil more than 400 investment rules. Lovely, I thought, here is something to get me through the dark days of January. As the saying goes, you should never judge a book by its cover.

Investors Can’t Get Enough of the Metal Used to Cut Vehicle Pollution
Eddie Van Der Walt – Bloomberg
Palladium futures rose more than any major commodity last year; Shortage of metal has persisted since 2012, Metals Focus says
Last year’s best-performing commodity hasn’t lost its touch. Spot palladium prices have soared above a record that stood for 17 years.

Can Hedge Funds Handle a Bitcoin Bust?
Lionel Laurent – Bloomberg
Hedge fund managers have been lying awake at night for years worrying about poor performance, weak volatility and whether it might be time to just move on and do something else — like get into bitcoin maybe.

Bitcoin drops as China renews crackdown on cryptocurrency
John Detrixhe – Quartz
Bitcoin fell to the lowest level in more than a month after a report that Chinese regulators are cracking down again on the cryptocurrency, targeting mobile apps and online platforms used for trading. South Korea’s government is also debating how to contain the mania in digital assets after raiding two exchanges last week.


City broker Arden calls for ‘further consolidation’
Hannah Murphy – FT
City stockbroker Arden Partners has suggested it is open to merging with a rival, as new EU regulations look likely to squeeze the already troubled broking industry in the year ahead.

Citigroup Results: 5 Things To Watch; Citi expects to take a $20 billion charge to fourth-quarter earnings due to the tax overhaul
Christina Rexrode – WSJ
This quarter, Citigroup Inc.’s C 1.69% fourth-quarter results will likely be overwhelmed by a giant one-time tax charge. Here’s what to look for in Tuesday morning’s release.

Citigroup bows to activist and discloses gender pay data; Wall Street bank becomes first to share statistics after campaign by Arjuna Capital
Laura Noonan in London and Ben McLannahan in New York – FT
Citigroup has become the first big Wall Street bank to disclose internal data on gender pay, bowing to an activist shareholder that last year launched an unsuccessful campaign against six of the largest US financial institutions.

Ex-Credit Suisse Banker Says His Fraud Brought Health Concerns
Hugo Miller – Bloomberg
A former Credit Suisse Group AG banker, accused of taking millions from rich clients’ accounts to cover trading losses, told the court on a long first day of his trial in Geneva that stress from the financial crisis and his growing losses took a great toll on his health.


Why Chinese love bitcoin but ‘old money’ Hong Kong doesn’t: a former trading platform operator speaks out
South China Morning Post
Bobby Lee, who co-founded a cryptocurrency trader, explains the very different ways they are viewed by Chinese, Hongkongers and Westerners, and why China’s clampdown on trading is only making bitcoin more resilient

Malaysian palm oil farmers protest ban by European Parliament, claiming it would threaten livelihoods of millions; Palm oil, also a major ingredient in products from food to cosmetics, has long been controversial as environmentalists say it drives deforestation
Agence France-Presse
Hundreds of Malaysian palm oil farmers protested on Tuesday against a push by the European Parliament to ban the use of the commodity in biofuels, saying it would devastate rural people’s livelihoods.

Hong Kong needs more financial innovation to effectively tap Greater Bay Area opportunities; Critics say the government’s push for innovation is mere talk that lacks real supportive measures
Eric Ng – South China Morning Post
Hong Kong’s finance industry should offer more innovative financial products by harnessing information technology to tap opportunities in the “Greater Bay Area”, according to a senior banker serving the region.

Cryptocurrency ban could erode China’s competitiveness, say executives at Hong Kong forum; Regulators should instead formulate policies that are welcoming, and promote blockchain use
Georgina Lee -South China Morning Post
China’s regulators should maintain a more welcoming position towards cryptocurrencies, as an outright ban on their use and trade could undermine the country’s economic competitiveness, senior executives said during a panel discussion at the Asian Financial Forum in Hong Kong on Tuesday.

A Month-Long Trading Halt? China’s HNA Group Keeps Investors Guessing
It isn’t uncommon for publicly listed companies to halt trading in their shares for a few hours or a day before a major announcement. But a month?

Nervous investors put the Bank of Japan in the spotlight; Reaction to standard central bank operation underlines twitchiness in the bond market
Roger Blitz in London; Leo Lewis and Robin Harding in Tokyo – FT
Global bond investors are casting a nervous eye at Japan.

China disrupts web access for global groups as censorship bites; Companies fear being forced on to expensive platform surveilled by Beijing
Yuan Yang and Lucy Hornby in Beijing – FT
China is plugging the last holes in its “Great Firewall” internet censorship apparatus, hampering global groups’ ability to operate in the country.


BoE warns of ‘point of tension’ in Brexit talks over financial services ‘mindsets’; Share on Twitter (opens new window)
Caroline Binham – FT
The Bank of England’s top banking and insurance supervisor has warned that differences between European and UK regulators over how to treat retail and wholesale financial firms after Brexit may be a flashpoint in discussions as the UK prepares to leave the European Union, with the fate of 25 of the largest European institutions hanging in the balance.

ECB official warns of Brexit ‘shock’ to financial stability; Philip Lane emphasises London’s importance in providing financing to bloc
Claire Jones in Frankfurt – FT
An influential eurozone central bank official has warned that an abrupt British departure from the EU would be a “genuine shock” threatening the stability of Europe’s financial system.

EU toughens stance for Brexit transition talks; Draft instructions to Barnier want UK to seek consent to recreate trade deals
Alex Barker in Brussels – FT
The EU has toughened its conditions for a post-Brexit transition deal for the UK, demanding that Britain abide by stricter terms on immigration, external trade agreements and fishing rights for nearly two years after it leaves the bloc.

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