First Read

By Jim Kharouf, JLN Editor-in-Chief

While the London Stock Exchange-Deutsche Boerse deal looks to be failing, an acquisition in Chicago is done. CBOE Holdings and Bats Global Markets are due to close their deal today, bringing together two exchanges that have been pioneers in their own ways. CBOE, the first equity options exchange, will now take on the 12-year old upstart from Kansas City.

John Lothian once wrote that “Bats has changed the game.” It certainly has, with cutting edge technology and a grit that quickly made it one of the second largest US equity market and the fastest growing options markets around. Bats is more than that, of course, with 11 markets globally and a ranking as the top stock exchange in Europe – not LSE, not Deutsche Boerse

CBOE’s purchase puts that exchange firmly into the international arena now. Its proprietary products have served the company well, and now stand to expand further with the international markets it brings into the fold. It’s way more than that, though, with technology, cross-asset class products and some interesting businesses that cross over into the end-user trading space.

It’s been an amazing ride for Bats, which started in a North Kansas City storefront. CBOE will take the wheel now with an interesting and exciting journey ahead.


She hustled her way from receptionist to sales at Trading Technologies
My job is mostly sales initiatives, so my clients are the fixed-income exchanges. I’m trying to bring them to the TT platform. I also sell to individual users, as well.

**JK: If you ever wanted to know what makes this country great, it is people like Tati Graef who find their way.


Communications Web Content Specialist Job Opening
Description: The Web Content Specialist manages all aspects of NFA’s external website, ensuring it serves the needs of NFA Members and other audiences.
Manage and enhance the content, organization and appearance of NFA’s external website.
Manage and enhance NFA’s e-communications.


The Three E’s for the Modern Compliance Department
In early February, the CME Group broadened its spoofing rule to include “attempted spoofing,” and increased the amount of potential fines for disruptive trading activity and attempted market manipulation. Not only did this news catch my eye, but it confirmed what I have been expecting to see for a while: the CFTC is starting to put increased pressure on the exchanges to detect and punish illegal trading activity. The CME is not the only derivatives exchange that has been feeling the pressure from the CFTC, as ICE has been mandated to speed up their investigations of market manipulation as well.

**JK: Neurensic focuses on the next big thing.


Junior partner aims to be Nex big thing in exchange rivalry
James Hurley, The Times
Patrick Birley, 51, makes for an unconventional stock exchange boss. His City career has been punctuated by a stint running a brewery on the Isle of Wight and later farming a smallholding in the south of France.

**JK: Mr. Birley has taken unconventional to a new level.


JPMorgan Software Does in Seconds What Took Lawyers 360,000 Hours
by Hugh Son – Bloomberg
New software does in seconds what took lawyers 360,000 hours; Bank seeking to streamline systems, avoid redundancies
At JPMorgan Chase & Co., a learning machine is parsing financial deals that once kept legal teams busy for thousands of hours.

**JK: Does this open a whole new book on lawyer jokes?


YouTube Tops 1 Billion Hours of Video a Day, on Pace to Eclipse TV; Google unit posts 10-fold increase in viewership since 2012, boosted by algorithms personalizing user lineups
YouTube viewers world-wide are now watching more than 1 billion hours of videos a day, threatening to eclipse U.S. television viewership, a milestone fueled by the Google unit’s aggressive embrace of artificial intelligence to recommend videos.

**JK: 900 million of those hours spent on cat and skateboard wipeout videos.


Take Our Survey: Please
John Lothian News
Yes, we do love technology and maybe you can too. Help us out with a 3-minute JLN survey so we can learn a bit more about our readers as well as what you like and what you don’t like about our publications and websites. It’s also a great place to leave us comments and suggestions for future content and services. If you fill it out, you could win an Amazon Echo, which answers just about everything but cannot take our survey. Here’s the link to the survey. Alexa says thanks!


Monday’s Top Three
Monday’s top story was not your normal JLN fare as the New York Post’s Bloomberg saleswoman sues over rape, rampant drug culture” was the top story clicked on. The ever popular Jessica Darmoni came in second with “Four steps to developing your personal brand” from her site The Title Connections. When will she start the Dear Jessica advice column? And last, Warren Buffett’s hedge fund industry analysis “Buffett Says $100 Billion Wasted Trying to Beat the Market” took third place.


MarketsWiki Stats
94,631,963 pages viewed; 22,363 pages; 204,002 edits
MarketsWiki Statistics


Lead Stories

‘Inverted’ Model Said to Be Considered for NYSE’s Newest Exchange
Alexander Osipovich – WSJ
The New York Stock Exchange is considering a time-honored move to boost market share: copy an innovation from competitors. NYSE has approached market participants about launching a so-called “inverted” exchange, a move that would borrow from the playbook of rivals Nasdaq Inc. and Bats Global Markets Inc., people familiar with the situation said.

LSE-Deutsche Börse merger crumbles as tensions boil over; A third attempt in 17 years to combine the European exchanges is in the balance
by: Philip Stafford in London and James Shotter in Frankfurt – FT
The merger between the London Stock Exchange and Deutsche Börse was billed as a bridge between Europe’s two main financial hubs but now those foundations are fast crumbling.

Tokyo Stock Exchange aims to use AI to detect unfair trading
Finance Feeds
One more step has been made towards the use of Artificial Intelligence (AI) solutions in the trading industry, and, without any surprises – this is happening in Japan again. –
Today, Japan Exchange Regulation (JPX-R) and Tokyo Stock Exchange, Inc. (TSE) announced they are working on applying AI to market surveillance operations by using technologies developed by NEC Corp (TYO:6701) and Hitachi, Ltd. (TYO:6501)

DTCC Moves to Next Stage of Digital Asset Blockchain Trial
The Depository Trust & Clearing Corporation (DTCC) has completed the first leg of a post-trade distributed ledger trial conducted in partnership with startup Digital Asset Holdings.

DTCC and Blythe Masters push blockchain for repos; Digital Asset Holdings and the post-trade giant complete a proof-of-concept using blockchain to keep track of transactions in real time
By Yolanda Bobeldijk – Financial News
A project to bring cutting-edge blockchain technology to the vast $3-trillion-a-day US repo market has come a step closer to fruition.

Blockchain Regulation Comes Into Focus
Joseph King, DTCC Via Tabb Forum
Fintech innovations promise to transform capital markets, but regulators must balance growth and innovation with systemic risk and protecting the interests of the investing public. Financial industry executives share their thoughts on the top regulatory issues related to new technologies, such as distributed ledger technology, and how to navigate these unchartered waters.

Filings shed light on the secrets of ‘super investors’; Highly successful investors who regularly trounce S&P 500 eschew macro forecasting
Smart Money
by: Miles Johnson – FT
In recent years the idea that no person or fund can consistently outperform the wider stock market by skill alone has been fashionable. Emboldened by traditional investment houses haemorrhaging market share to automated passive funds, the once-maligned advocates of the efficient market hypothesis have revised their mantra: you can’t beat the market, so buy an exchange traded fund instead.

Inside Harvard’s Radical Plan to Reverse a Decade of Poor Returns; Harvard will use a generalist approach where staffers look across the entire portfolio to make investment decisions
Early on Jan. 25, staffers at Harvard University’s endowment streamed into the boardroom on the 14th floor of its offices in the Federal Reserve Bank of Boston’s building. In back-to-back sessions, endowment executives told them big changes were coming to Harvard’s investment strategy, and that half the firm’s 230-person staff would be laid off.

FIA- Default in a Day
Medium – Douglas Monieson
The first panel of the day was “Default 101,” which was chaired by Gary DeWaal of Katten Muchin Rosenman and featured Ed Gogol from the CME Group, Steven Kastenholtz of SG Americas Securities, and Jeff Ollada from Mizuho Americas. DeWaal began with a history of some major defaults over the past 25+ years and the other panelists weighed in with their perspectives on the current state of the industry. Kastenholtz described how there is a greater level of information and transparency in the markets today as more rules have led to enhanced due diligence on both sides of the FCM/customer relationship.

Cortland Capital Market Services Launches Global ABL Servicing Platform
Cortland Capital Market Services, a Chicago based global investment servicing company, and its wholly owned UK subsidiary, Cortland EMEA Limited, announced the launch of a new global asset-based lending platform. Cortland’s ABL Servicing focuses on serving investment managers, commercial lenders and commercial finance companies throughout the United States and Europe. Cortland further announced that industry veteran Ellen Cook will lead ABL Servicing Operations.

Surging exports propel US to bigger impact on global oil market; Outbound shipments of more than 1.2m barrels a day present challenge to Opec nations
by: Gregory Meyer in New York
A voracious thirst for petroleum makes the US one of the largest importers of oil. But for the past two weeks it has also scaled the ranks of exporters.

The Morning Ledger: As White House Signals Rollback, SEC Advances Regulation Effort
Good morning. The Securities and Exchange Commission said it will continue its enforcement and oversight work even though part of the existing legal framework underpinning these actions might the altered under the new administration, Tatyana Shumsky writes.

MarketAxess Appoints Christophe Roupie as Head of Europe and Asia
MarketAxess Holdings Inc. (MKTX), the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed income markets, today announced the appointment* of Christophe Roupie as Head of Europe and Asia for MarketAxess Europe Limited and Trax.

Exchanges, OTC and Clearing

LSE balked at Brussels demand without consulting partner D Börse; UK exchange’s rejection of call to sell stake in MTS means merger is likely to be off
by: Philip Stafford in London, Rochelle Toplensky in Brussels and James Shotter in Frankfurt – FT
The near collapse of the EUR29bn merger between the London Stock Exchange Group and Deutsche Börse was precipitated by the LSE’s decision to aggressively reject concessions demanded by Brussels without warning or consulting its German partner.

Brussels under fire for derailing LSE merger with Deutsche Borse
Ashley Armstrong & Bradley Gerrard – The Telegraph
Senior bankers have criticised the European Commission for torpedoing the London Stock Exchange’s planned merger with the Deutsche Borse, accusing it of being intransigent.

CBOE Holdings, Inc. To Join S&P 500
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it will join the S&P 500, effective at the open of trading on Wednesday, March 1.

Asia’s Shortest Trading Day? Shanghai. Longest? Singapore: Chart
by Andrea Tan and Jake Ulick – Bloomberg
Singapore’s stock exchange is open for trading from 9 a.m. to 5 p.m., with no pause for lunch, making it the longest trading day among Asia’s major markets. The eight hours of non-stop trading is twice as long as Shanghai but traders may be about to get their lunch break back. The bourse scrapped the break in 2011 — a year when the Tokyo Stock Exchange and Hong Kong Exchanges & Clearing Ltd. also shortened their lunch hours.


Banking giants JP Morgan, Santander and BNY Mellon join Ethereum blockchain group
A host of big banks including JP Morgan, Santander, UBS and BNY Mellon have joined the Enterprise Ethereum Alliance (EEA), alongside Microsoft, Intel and many blockchain heavyweights from startups, academia and consultancies.

R3 engineers: “we don’t need” blockchain
IBS Intelligence
Blockchain consortium R3CEV appears to have revealed that it is moving away from the technology that brought scores of major banks into its fold.
The utilisation and implementation of a purely blockchain-based system has never been on the cards at the firm, according to a presentation from R3 engineers seen on Reddit, which stated “no blockchain because we don’t need one”.

Blockbuster Deals in China Make Asia-Pacific the Leader in Global Fintech Investments, Accenture Analysis Finds
Press Release
Global investment in financial technology (fintech) ventures grew 10 percent in 2016, to US$23.2 billion, driven primarily by a wave of blockbuster deals in China, according to Accenture (NYSE:ACN) analysis of data from CB Insights, a global venture-finance data and analytics firm.

Edmond Tehini returns to Calypso as Managing Director, Sales
Press Release
Calypso Technology Inc., a leading provider of capital markets and investment management software, announced it has appointed Edmond Tehini as Managing Director of Sales in the Middle East, based in Dubai.

RSA Insurance Group Onboards CloudMargin for Collateral Management Solution
Press Release
RSA Insurance Group plc, a leading multinational insurer, has deployed the multi-award winning CloudMargin platform for its over-the-counter (OTC) derivatives and Repo portfolios. CloudMargin is the world’s first cloud-based, end-to-end collateral and margin management tool.

Equinix (EQIX) to Acquire ICT-Center AG for Less than $5M
Equinix, Inc. (Nasdaq: EQIX) entered into an agreement for the purchase of ICT-Center AG, Zurich’s data center operating business in Zurich, Switzerland.

Bitcoin’s Top Rival Is Up 90% and Ready to Ditch Mining
by Olga Kharif – Bloomberg
Ethereum’s developers set course for mining-free model; Blockchain seen as potential backbone for business, finance
Marco Streng’s computer servers are what make Ethereum tick.


Bitcoin Investor Peter Thiel is Allegedly Trump’s ‘Shadow President’
Evander Smart – Bitcoinist
Bitcoin investor and PayPal cofounder Peter Thiel is becoming very influential in the growing Trump administration.

David Cameron wants to use blockchain technology to fight government corruption
Oscar Williams-Grut – Business insider
Former Prime Minister David Cameron at Monday’s Blockchain event. Tom Campbell/Blockchain
LONDON — Former Prime Minister David Cameron said on Monday that the technology that underpins digital currency bitcoin could be used to revolutionise governance and reduce global corruption.

Trump and the Media; What exactly does an American president owe the New York Times?
Who says Donald Trump is against entitlement reform? While he probably won’t propose changes to Medicare or Social Security in his first budget proposal, the President seems eager to consider whether all members of the media establishment should continue to enjoy privileges not available to the average citizen.


SEC wades in on robo-advisors
Business Insider
The SEC has been paying greater attention to robo-advisors recently, as the technology becomes more widespread. In November, the regulator held a forum covering the topic to gain a better understanding of the technology; and in January, it included robo-advisors on its list of potential risks to retail investors for the first time, and said that it would examine these players more closely.

Two Barclays Libor Traders `Driven by Money,’ Prosecutors Say
by Jeremy Hodges and Suzi Ring – Bloomberg
Ryan Reich, Stylianos Contogoulas charged with Libor-rigging; Pair being prosecuted in London by U.K. Serious Fraud Office
Two former Barclays Plc traders charged with rigging a key interest-rate benchmark were “driven by money,” prosecutors told a jury on the first day of trial in London.

Trump Regulation Rollback May Threaten U.S. Firms’ EU Access
by Silla Brush and Alexander Weber – Bloomberg
Dombrovskis says EU to monitor review of Dodd-Frank rules; EU will assess ‘practical outcomes’ of U.S. policy overhaul
President Donald Trump’s planned rollback of financial rules could undermine years of trans-Atlantic negotiations and threaten U.S. firms’ access to European Union capital markets, according to the bloc’s financial-services policy chief.

ICAP Dismissed From US Libor Class Action Case
NEX Group plc (“NEX”), (NXG.L), announces that on 21 February 2017 the United States District Court in the Southern District of New York dismissed two entities which formed part of the ICAP Group (ICAP plc and ICAP Europe Limited) from a class action case brought by various investors who alleged manipulation of the Euro Interbank Offered Rate “Euribor”.

Investing and Trading

Hedge funds up 1.35 per cent in January, says BarclayHedge
Hedge funds were up 1.35 per cent in January, according to the Barclay Hedge Fund Index compiled by BarclayHedge, with all but two of Barclay’s 17 hedge fund indices gaining ground during the month.

Don’t Let a Bad Process Derail Your Investments
Barry Ritholtz – Bloomberg View
Something I try to stress in these columns is the importance of a valid process. Sure, I have a fondness for behavioral economics, but that’s because I know how cognitive errors can so easily derail our thought processes. Rather than impose a belief system on the reader (“ABC asset class is great!”), I prefer instead to help readers think through their own approaches: the classic “give a fish” versus “teach to fish” test, which dates back (literally) to biblical times.

Paul Tudor Jones’ New Hedge Fund Pitch: Low, Low Prices; Tudor’s flagship fund ended 2016 roughly flat despite a run-up in the U.S. stock market
Paul Tudor Jones for years charged some of the highest fees in the hedge-fund industry. Now the billionaire is cutting them for the second time in eight months.

Wall Street gadfly Mike Mayo is among latest layoff casualties
By Kevin Dugan – NY Post
Mike Mayo, an outspoken Wall Street analyst who was often a thorn in bank CEOs’ sides, was laid off with about 90 other people on Monday when Chinese brokerage CLSA decided to close its US operations.

Fed may need to raise interest rates in ‘near future’: Kaplan
The U.S. Federal Reserve might need to raise interest rates in the near future to avoid falling behind the curve on inflation, Dallas Fed President Robert Kaplan said on Monday.

Don’t Let a Bad Process Derail Your Investments
By Barry Ritholtz – Bloomberg
Something I try to stress in these columns is the importance of a valid process. Sure, I have a fondness for behavioral economics, but that’s because I know how cognitive errors can so easily derail our thought processes. Rather than impose a belief system on the reader (“ABC asset class is great!”), I prefer instead to help readers think through their own approaches: the classic “give a fish” versus “teach to fish” test, which dates back (literally) to biblical times.

Traders Glued to These Trump Stock Trades Heading Into Address
by Joseph Ciolli – Bloomberg
Financials, retailers, building stocks among most exposed; S&P 500 is up for five straight weeks ahead of Trump speech
While investors in every asset class will be hanging on President Donald Trump’s speech to Congress Tuesday, it’s those who have furiously bid up equities — in hot-topic sectors like financials, retail and healthcare — who may have the most on the line.


Morgan Stanley Gave Some Wealth-Management Clients Wrong Tax Information
Liz Hoffman – WSJ
Morgan Stanley said it had given a “significant number” of its 3.5 million wealth-management clients wrong information that caused them to underpay or overpay their taxes over the past five years. In its annual regulatory filing Monday, the firm said it is in “advanced discussions” with the Internal Revenue Service to settle the matter at no cost to affected clients. It has set aside $70 million to cover the costs, which include paying back taxes owed to the IRS as well as reimbursing clients who overpaid.

Brokerage CLSA shuts US equity research; plans fixed-income launch
Sumeet Chatterjee and Dan Freed – Reuters
Hong Kong-based brokerage CLSA will halve its U.S. headcount by shutting its equity research services, as declining payments prompt it to make an about-turn from its recent measures to expand the business in the world’s largest economy.

A Wells Fargo Breakup Proposal Will Be on Bank’s Proxy
Emily Glazer – WSJ
Should Wells Fargo & Co. be broken up? Shareholders will be able to vote on that question this year after the embattled bank’s attempt to block it failed. The Securities & Exchange Commission wrote that it disagreed with the Wells Fargo’s desire to exclude from its proxy a shareholder proposal to examine divesting certain businesses or breaking up the bank, according to a letter reviewed by The Wall Street Journal.

Goldman’s new London office set for occupancy in 2019
Olivia Oran – Reuters
Goldman Sachs Group Inc (GS.N) is building a 1.1 million square foot office in London with initial occupancy slated for 2019, it said in a regulatory filing on Monday, even as global banks grapple with risks around Brexit.


China capital crackdown threatens wave of overseas buyouts; Delay in Wanda’s $1bn takeover of Golden Globes producer signals shift in Beijing
by: Don Weinland in Hong Kong – FT
Has China’s crackdown on capital flight claimed its biggest name to date?
The fate of a $1bn deal struck in November by Dalian Wanda, the Chinese real estate and entertainment giant, is in doubt. People with knowledge of Wanda’s buyout of the US’s Dick Clark Productions, the company behind the Golden Globe Awards, said last week that it was struggling to get approval to move money offshore, putting the transaction at risk.

The Brokerage Firm CLSA Shuts Part of Its U.S. Business
The Chinese-owned brokerage firm CLSA Americas unexpectedly shut down its stock research unit and related functions on Monday, sending some employees and analysts scrambling to pack their things

Biggest Wealth Fund Returns $53 Billion After Trump Rally
by Mikael Holter – Bloomberg
Holdings in emerging markets rose to $92 billion in 2016; Fund now invested in 77 countries, added Argentina last year
Norway’s sovereign wealth fund, the world’s biggest, gained 447 billion kroner ($53 billion) last year after stocks rallied following the election of Donald Trump and as the investor plowed deeper into emerging and frontier markets.

CLSA’s U.S. Mission Was Crazy
By Nisha Gopalan – Bloomberg
Investment research is a tough business, especially in equities. Anyone in doubt need only look at CLSA Ltd., a Hong Kong-based brokerage that’s known in Asia for its independent analysis and a star-studded annual investor forum.

Gazprom Sees Cheap Gas Keeping European Buyers Hooked for Years
by Elena Mazneva – Bloomberg
Gas giant sees EU market share stable or rising by 2025; U.S., Australia will send LNG mostly to Asia, America: Gazprom
Russia will keep Europe hooked on its natural gas for years to come, using its huge reserves and lower production costs in Siberia to maintain attractive prices, according to state-run Gazprom PJSC.


Major warns May of fickle allies who want EU ‘total divorce’; Former prime minister says Britain made ‘historic mistake’ with vote to leave
by: George Parker, Political Editor – FT
John Major, the former Conservative prime minister, has urged Theresa May to face down Tory Eurosceptics during the Brexit negotiations, warning that they are fickle friends who want a damaging “total divorce” from the EU.

U.K. Finance Jobs at Risk From Brexit Aren’t Confined to London
by Richard Partington – Bloomberg
About 1.5 million finance jobs are outside the British capital; TheCityUK report shows London only accounts for half of output
David Whitehouse has two business cards: one for his office in London’s Shard skyscraper, the other for a rundown building in Manchester.


FINRA’s Academic Corporate Bond TRACE Data Product Goes Live
FINRA today launched its new Academic Corporate Bond TRACE Data product, an enhanced historical data product available solely to institutions of higher education.

Pin It on Pinterest

Share This Story