First Read

JLN Exchange Leader Series 2017: By Leveraging Bats’ Technology, CBOE’s Tilly Wants To Expand Footprint

CBOE Holdings arguably had its biggest year in history in 2016 with the purchase of Bats Global Markets for $3.2 billion. The deal expanded CBOE’s footprint in the securities space in the US and in Europe, plus forex as well. It also provided a new technology platform to keep CBOE competitive.

Read the rest and watch the video »


CloudMargin gains traction: Remote processing and storage is here to stay in financial services
Spencer Doar – JLN

There is no more room for doubting the cloud. Regulators have become acclimated to the concept of remote processing power and clients have been reassured as to its safety. Now the value proposition is laid bare and the current rate of adoption appears to be entering exponential mode.

For 3-year-old collateral management firm CloudMargin — whose offering handles margin requirements across multiple counterparties for multiple asset classes — the embrace of cloud technology helped it grow its client base by 50 percent so far in 2017 to more than 30 asset managers, insurance agencies, banks and brokers, utilizing a network of more than 20 exchanges.

“People are much more comfortable with the cloud than they were six months ago and even more comfortable than they were 12 months ago. It’s definitely a trend,” said CloudMargin CEO Steve Husk. “I talk about dinosaurs and mammals. I think the dinosaurs are really those institutions that still want to build walls around IT centers and make sure everything is kept in-house.”

Read the rest of the story here.


SARs and Red Flags; International Spoofing; Pre-Execution Discussions; Making Capital Markets Great Again
Bridging the Week – Gary DeWaal
Last week, a registered broker-dealer was charged by the Financial Industry Regulatory Authority for failing to consider whether problematic trading by certain direct market access clients that caused it to limit or stop their trading also warranted filing suspicious activity reports with the Financial Crimes Enforcement Network. Additionally, stock traders were substantially penalized in Singapore and China for engaging in spoofing-type conduct following first-of-their-kind enforcement activities by local authorities. Finally, Jay Clayton, President Trump’s nominee to serve as Chairman of the Securities and Exchange Commission, testified before a Senate committee that, if confirmed, he hoped to enhance US capital markets to make them more attractive to potential new issuers – perhaps by reducing regulations.


Fake news is shared as widely as the real thing; Study of US battleground state Tweets finds propaganda overwhelming mainstream media
David Blood in London – FT
Nearly a quarter of web content shared on Twitter by users in the battleground state of Michigan during the final days of last year’s US election campaign was so-called fake news, according to a University of Oxford study.

***** Twitter has a bot problem. I wonder when was the last, or first time, the CFTC went after someone for spreading false news on social media. It happens all the time on Twitter and other social media platforms, and they know it. I would look for some low hanging fruit if I were them.


The age of unenlightenment; An inflated sense of our own wisdom is making us dumber and less civil. Can the experts bring us back into line?
Robert Armstrong – FT
The most pressing question of our age is not what will happen when the computers outsmart us. Nor is it the future of globalisation, or how to stop climate change. It is much more fundamental than these: Why is everyone so mean and stupid, and why is it getting worse?

***** We need a great theologian to help us.


The 300-Year Quest to Make a Foolproof £1 Coin; Sir Isaac Newton founded modern physics but struggled to make a coin that couldn’t be counterfeited.
Eddie Van Der Walt and John Detrixhe – Bloomberg
Can Britain’s oldest manufacturer beat modern counterfeiters?

****** Keep trying.


Survey Finds Foreign Students Aren’t Applying to American Colleges
Ron Allen – NBC News
Application and acceptance season is underway at America’s colleges and universities. But this year, some institutions of higher learning may see a noticeable dip in attendance from one group purposely choosing to stay home: foreign students.

***** I don’t think this is bullish for Domino’s Pizza.


Veronica Augustsson, Cinnober – From Sports To Business In An International Arena
MarketsWiki Education

“The financial ecosystem is created by business people and it will be changed by technology. It is with technology that we will make a safer world, a better world, a more efficient world that we can trust even more.”

Veronica Augustsson, the CEO of Cinnober Financial Technology, has a background in both computer science and sports and believes that business people can learn from sports, because business is a team sport.

Read the rest and watch the video »


Goldman Sachs reduces amount it gives to charities by £5m
Sam Dean – The Telegraph
Wall Street investment bank Goldman Sachs reduced the amount its British charitable arm gave to good causes by about £5m last year. Goldman Sachs Gives UK awarded £17.8m in grants in the 12 months to June 30 2016, its latest accounts reveal.

***** God’s work costs less these days, I guess.


The Arctic is missing ice three times the size of California this year
It’s the end of the Arctic winter and there’s less sea ice than ever before—ice the size of three Californias is missing.

***** I hear ocean views in Nevada are soon to be a thing.


Friday’s Top Three
Friday’s top stories were led by two Bloomberg stories, ‘Hamilton’ Fights the Laws of Economics (and Loses) and Post-Bitcoin Technology Has Geeks, Giants, and Hackers Excited. Third went to JLN’s JLN Exchange Leader Series 2017: Durkin Says CME Growth Is All About Customers


MarketsWiki Stats
96,455,099 pages viewed; 22,393 pages; 204,527 edits
MarketsWiki Statistics


Lead Stories

LSE shareholders: no need for board overhaul if tie-up tanks
Lucy Burton and Ben Martin – Telegraph
Investors in LSE Group have called for Xavier Rolet to remain as chief executive, despite the impending collapse of its £24bn merger with Deutsche Boerse.

With Deutsche Boerse deal all but off, London Stock Exchange must now focus on finding a new leader
James Quinn – Telegraph
Xavier Rolet has been a wise steward of the London Stock Exchange. From his appointment as chief executive in March 2009, replacing Clara Furse who failed to transform the business, the canny Frenchman has been able to turn the British bourse into far more than just an equities platform. Yes, from Furse he inherited a business that was starting to develop – it was on her watch that the Borsa Italiana deal was struck – but it is as a result of Rolet’s eight-year tenure that LSE Group, as it is now known, has gained international stature.

Michael Spencer moves NEX and man cave from the City
Russell Lynch – Evening Standard
Billionaire Michael Spencer is moving his new broking business — complete with personal “man cave” — from Broadgate to a new home on the fringes of the City, the Standard understands.

The High-Speed Trading Behind Your Amazon Purchase; Beneath the placid surface of product pages lies an unseen world of bots,
Christopher Mims- WSJ
I wanted to buy some mini marshmallows recently, so I went on Amazon. Perhaps because of their resemblance to packing material—light, bulky, ubiquitous—I figured they’d be cheap. But when I found the most popular brand, not only did the marshmallows cost twice what I’d pay at my local store, but the price had skyrocketed overnight.

Traders used poker games and food menus to make a killing off illegal trades and cover it up but then AI found out
Arjun Kharpal – CNBC
Over the course of a few evenings in 2013, the heads of trading from major investment banks got together for some poker nights. It was a bit of relaxation from their hectic schedules. But what their seemingly-innocent hands of Texas Hold’em revealed was a story of traders gone rogue.

Oil trading surge strengthens grip of big commodity houses; Vitol, Glencore and Trafigura handle daily volumes equivalent to half Opec output
David Sheppard and Neil Hume – FT
The world’s largest independent commodity houses have expanded their oil trading volumes by more than 65 per cent during crude’s near three-year slump, marking them out as the biggest beneficiaries in the industry from oil’s protracted downturn.

What Happened to Banker Bashing?
Edward Robinson – Bloomberg
Attitudes are shifting from Wall Street to London to Paris; More permissive approach could augur deregulation in the U.S.
They were called public enemies. They were strung up in effigy during protests in London and New York. Their behavior spurred an outcry that changed the politics of the West.

Members agree that the single currency needs more integration
The Economist
Many British Tory Eurosceptics trace their beliefs back to the 1992 Maastricht treaty which agreed to create a single currency. To them, Maastricht represented a Franco-German stitch-up. The French president, François Mitterrand, accepted German unification, and in exchange the German chancellor, Helmut Kohl, agreed to give up the D-mark for the euro.

The end of global QE is fast approaching
Gavyn Davies – Financial Times
One of the most dramatic monetary interventions in recent years has been the unprecedented surge in global central bank balance sheets. This form of “money printing” has not had the inflationary effect predicted by pessimists, but there is still deep unease among some central bankers about whether these bloated balance sheets should be accepted as part of the “new normal”. There are concerns that ultra large balance sheets carry with them long term risks of inflation, and financial market distortions.

You Want To Get A Job At A Hedge Fund? How Are Your Storytelling Skills?
Alex Gavrish, Etalon Investment Research – ValueWalk
Alex Gavrish explains how storytelling skills can improve your chances of landing a job offer from a hedge fund and advance your career as an analyst

Hedge fund firm Brevan Howard granted injunction to block Reuters story
Brevan Howard Asset Management, a British hedge fund firm, has been granted an injunction to prevent Reuters publishing a story it says is based on confidential information.

Reviving Deutsche Bank in US is priority for CEO John Cryan; German lender’s chief is taking a stronger personal grip on the American business
Ben McLannahan – FT
Just over a year ago, when shares in Deutsche Bank were tumbling, the bank started putting out messages on screens in the lifts and lobbies of its building in lower Manhattan, assuring staff that it had plenty of capital to absorb losses and cash to pay bills.

Caught Between JPMorgan and Wal-Mart, Congress Avoids Fee Rule
Elizabeth Dexheimer – Bloomberg
Competing constituents own businesses in every district; Representatives are in no hurry to cast vote for or against
Congressional Republicans are eager to overhaul the Dodd-Frank financial law. One part, however, they wouldn’t mind putting off.

Pension Crisis Too Big for Markets to Ignore
Danielle DiMartino Booth – Bloomberg
In late 2006, Aaron Krowne, a computer scientist and mathematician, started a website that documented the real-time destruction of the subprime mortgage lending industry. The Mortgage Lender Implode-O-Meter caught on like wildfire with financial market voyeurs, regularly reaching 100,000 visitors. West Coast lenders, some may recall, were the first to fall in what eventually totaled 388 casualties.

Exchanges, OTC and Clearing

Amundi Onboard with LCH’s CDSClear Service; Amundi becomes the first buy-side firm to use LCH’s clearing service for Credit Default Swaps (CDS) via its clearing broker, BNP Paribas.
clearing and settlement
Aggelos Andreou – Waters Technology
The clearinghouse has announced that Paris-based asset management firm, Amundi, has agreed to use CDSClear and will become the first European buy-side firm to use the service, and the 13th member in total to have joined LCH’s service for CDS clearing.

The Italian job: how a meeting in Rome stung a £24bn merger
Lucy Burton – Telegraph
When Italian finance minister Pier Carlo Padoan met with the bosses of the London Stock Exchange and Deutsche Boerse on a sunny morning in Rome last July, he wanted to make one thing clear: should the two merge, the Italian trading platform MTS should not be touched.

Deutsche Boerse extends finance head’s contract
German exchange operator Deutsche Boerse (DB1Gn.DE) has extended the contract of finance head Gregor Pottmeyer by five years until 2022, it said on Friday.

Tokyo, Osaka bourse operator to introduce telework
The Mainichi
Japan Exchange Group Inc. will introduce telecommuting for its workers, adding to a growing move among Japanese businesses to adopt the working style on the back of the government’s bid to reform the nation’s working practices.


Baymarkets Appoints Per Andersson As Head Of Sales And Business Development
Baymarkets Technology AB (Baymarkets), a leading Nordic provider of FinTech and RegTech solutions to the global financial services industry, announced today the appointment of Per Andersson as Head of Sales and Business Development. His arrival brings 20 years of experience of building and managing businesses in the FinTech sector and he joins Baymarkets’ management team with immediate effect.

Societe Generale boosts derivatives execution with algo adoption; With the move towards greater adoption of electronic execution, Societe Generale is boosting its technology to trade derivatives faster.
Joe Parsons- The Trade
Societe Generale is planning to enhance its electronic execution capabilities by bolstering its use of algorithmic trading technology.

Alibaba’s finance arm to allow financial institutions to set up shop in investing app
Tracey Xiang –
Ant Fortune, the investing app of Ant Financial Services Group (Alibaba Group’s finance affiliate), unveiled earlier this week Caifu Hao which will allow third-party financial institutions to set up shop inside the app.

Meet Itiviti: combining the strengths of Orc, Tbricks and CameronTec
In February 2016, Itiviti was born out of the merger between market leaders Orc, Tbricks and CameronTec. One year on, Lee Griggs – President EMEA at Itiviti – explains how far the company has come and the positive reaction seen from the market in response to Itiviti’s expanded offering for the sell-side.


“There Is No Indication That Trump Is Pro-Competition”
Asher Schechter – Stigler Center at the University of Chicago Booth School of Business Blog
A new paper by economists Steven C. Salop and Carl Shapiro explores what antitrust might look like under President Trump. In an interview with ProMarket, Shapiro explains why he doesn’t think Trump sees competitive markets “as something to be protected and nurtured.”

Trump to Begin Reversing Obama-Era Cutbacks in Carbon Dioxide
Jennifer A Dlouhy – Bloomberg
EPA Chief Scott Pruitt says rollback will begin on Tuesday Clean Power Plan aimed to limit greenhouse gas emissions The Trump administration will issue an executive order on Tuesday that begins dismantling a rule under former President Barack Obama that slashed carbon dioxide emissions and discouraged coal-fired electricity, U.S. environmental chief Scott Pruitt said.

Trump risks losing Wall Street’s faith after healthcare failure; White House insists tax reform will prove simpler but defeat has sown doubts
Robin Wigglesworth – FT
The US stock market’s shifting reaction to the inability of Donald Trump and the House of Representatives to repeal Obamacare belies the much bigger question the failure raises for Wall Street: can this administration steer corporate tax cuts through Congress?

Icahn Raises Ethics Flags With Dual Roles as Investor and Trump Adviser
Eric Lipton- NY Times
Since Carl Icahn, the billionaire investor, was named by President Trump as a special adviser on regulatory matters, he has been busy working behind the scenes to try to revamp an obscure Environmental Protection Agency rule that governs the way corn-based ethanol is mixed into gasoline nationwide.


CFTC Staff Provides Relief Associated with Swap Trade Confirmations
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) today issued a no-action letter extending relief associated with swap trade confirmation requirements that previously was provided in CFTC Staff Letter 16-25, which expires March 31, 2017.

A Rogue Trader Blames the System, but Not All Are Persuaded
Anita Raghavan – NY Times
Six years ago, Kweku M. Adoboli was a UBS trader with a rich life in London. He had a two-bedroom apartment in London’s fashionable Shoreditch neighborhood. He had a girlfriend he was planning to marry. And he had just earned 360,000 pounds in salary and bonus as a trader at the giant Swiss bank. Today, he doesn’t have a job or a girlfriend, and he lives with a university friend and his friend’s family in Edinburgh.

Obama’s fiduciary rule is a disaster, warns former SEC regulator; Norm Champ backs US president to reduce red tape stifling the financial sector
Attracta Mooney – FT
Norm Champ, the former head of the investment division at the US financial regulator, is an outspoken supporter of Donald Trump. He makes no secret of the fact he donated thousands of dollars to Mr Trump’s presidential campaign last year.

U.K. FCA Investigating Cobham’s Handling of Inside Information
Suzi Ring and Benjamin D Katz – Bloomberg
Cobham said issue referred to FCA’s enforcement division; FCA investigation looking at company’s 2016 rights issue
The U.K. Financial Conduct Authority is investigating how electronics maker Cobham Plc handled inside information prior to an announcement of a 2016 rights issue.

Trump SEC Pick: No ‘Specific’ Plan to Gut Dodd-Frank
Ben Bain – Bloomberg
President Donald Trump’s pick to lead the Securities and Exchange Commission said he has no specific plans to dismantle regulations implemented under the Dodd-Frank Act, but that the new administration wants to examine whether the 2010 law is stifling economic growth.

Investing and Trading

Playing Devil’s Advocate on Index Funds
Ben Carlson – A Wealth of Common Sense
There are plenty of people out there worried about index funds but most of their claims are likely unfounded or misunderstandings about the way things work in the markets. The ones I don’t buy are that indexing gives you “mediocre” or “average” results (it doesn’t – it almost guarantees you’ll be top quartile after fees) or that there are fewer investors allocating capital correctly (most of the money coming out of active funds was being closet indexed anyways) or index funds are a fad (I believe the shift to low-cost investments is secular, not cyclical).

How should active management fit into one’s portfolio?
Ryan Vlastelica – MarketWatch
The trend in the great investing debate of active versus passive management is clear, but that doesn’t mean the issue is simple or even close to settled.

Louis Dreyfus eyes sale of controlling stake in metals unit; Potential deal highlights how trader is focusing on core agricultural business
Neil Hume, Commodities and Mining Editor – FT
Louis Dreyfus Company, one of the world’s biggest commodity traders, is eyeing the sale of a controlling stake in its fast-growing metals unit as its seeks to focus on its core agricultural business and reduce its debt load.

The minimum price a founder can sell their company for
Kadhim Shubber – FT
Venture capitalists will tell you they’re in the business of making high-risk, high-reward investments. Their trade isn’t for wimps – you’ve got to have nerve when you’re making all-or-nothing bets on the future.


U.K.’s Biggest Banks Tested for Deep Recession in BOE Scenarios
Stephen Morris and John Glover – Bloomberg
Lenders to submit post-Brexit contingency plans for approval; Firms to be probed on long-term effects of poor profitability
The Bank of England will subject the U.K.’s biggest lenders to a stress test featuring a deep economic slump and a sharp depreciation of the pound as the country prepares for the impact of withdrawal from the European Union.

‘Project Scalpel’: Behind Big Banks’ Plan to Save $2 Billion; Wall Street firms discuss joint venture to process transactions
Telis Demos and Liz Hoffman – WSJ
Big banks have cut more than $40 billion of costs since the financial crisis. They aren’t done.

A German Bank Accidentally Transferred $5.4 Billion to Four Other Banks
Eyk Henning – Bloomberg
Germany’s state-owned KfW repeats single payment several times; Glitch was discovered early, money has been returned
Germany’s state-owned development bank KfW, which gained publicity for erroneously transferring hundreds of millions of euros to Lehman Brothers Holdings Inc. the day the U.S. firm filed for bankruptcy, has done it again.

IG sees revenues fall during “quiet” third-quarter, but fourth-quarter has “started better”
Online trading giant IG Group PLC (LON:IGG) saw its revenues fall in the third quarter during “a quiet period in global financial markets” and against an uncertain regulatory background, sending its share price lower, although it added that the fourth quarter had “started better”.

Old Mutual sells $446 million stake in US asset management arm; Old Mutual has agreed to sell minority stake in OM Asset Management to HNA Capital US.
Hayley McDowell – The Trade
Old Mutual has agreed to sell almost a quarter of their stake in its OM Asset Management business to China’s HNA Capital US for the sum of $446 million.

Once golden, Robert Rubin’s hedge fund proteges lose some luster
Svea Herbst-Bayliss and Lawrence Delevingne – Reuters
Learning to invest on Goldman Sachs’ (GS.N) risk arbitrage desk, made famous by leader Robert Rubin, was once seen as a fast track to fortune. But the band of hedge fund protégés who mastered their trade under the former Wall Street star and U.S. Treasury Secretary have stumbled in recent years.


Shadow bank crackdown prompts China cash crunch
Gabriel Wildau – Financial Times
China’s financial system suffered a cash crunch this week as new regulations designed to curb shadow banking caused big lenders to hoard funds, highlighting the danger of unintended consequences from official moves to lower their debt.

Exchange traded funds arrive in east Africa; Barclays launches gold ETF on Nairobi’s stock exchange and more could follow
John Aglionby in Nairobi
Barclays Bank on Monday launched the first exchange traded fund in east Africa when it listed the Barclays NewGold ETF on the Nairobi stock exchange.


The ties of affection that bind Scotland to the Union
John Lloyd – Financial Times
A week ago, Nicola Sturgeon, first minister of Scotland’s devolved government, stood before the Scottish National party’s annual conference in Aberdeen and repositioned it for the age of austerity.

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