High Frequency Chatter
Doug Ashburn – JLN
The talking heads on TV love anniversaries. They are the easiest way to fill space in the 24-hour news cycle. In the debate over high-frequency trading, however, the network brass at CNBC and Fox Business could not wait a full year before starting the “Flash Boys: One Year Later” party.
Yesterday, CNBC aired a segment with Michael Lewis, author of the book that brought HFT into the mainstream vernacular. In the segment, Lewis defended his liberal use of the term “rigged” when describing the stock market, and said the markets are still rigged. The network flashed back to April 1, 2014 (not quite one year ago) when Lewis, IEX CEO Brad Katsuyama and former BATS president Bill O’Brien squared off in a debate that, well, got ugly.
Not coincidentally, Katsuyama appeared on the show a few minutes later, to discuss IEX’s one-year trajectory, market share and the company’s plans to transform from dark pool to stock exchange.
Meanwhile, over on Fox Business, our favorite regulator-turned-industry-advocate, Bart Chilton, took the other side of the argument. In the segment with Maria Bartiromo, Chilton, spokesman for the Modern Markets Initiative, called Flash Boys “a big lie,” and said that markets are cheaper, faster and better for retail customers. He said the front-running argument is not backed up by facts, and he went on to call Lewis out as “an author just trying to sell books.”
“My favorite Michael Lewis book is “The Blind Side,” said Chilton, “and I think he had a big blind side on this issue.”
If you would like to learn more about HFT, have a look at our HFT series from last year. We interviewed a number of participants, including regulators, dark pool operators, and members of both the buyside and sell-side.
Finally, here is one issue to which there is no argument – Futures for Kids (FFK) is a fantastic organization that does a tremendous service to the industry and allows us all to “give a little back.” Its newest campaign, “Food for a Day” is provides a unique opportunity to do just that – give a little back.
And I mean a little. Did you know that London City workers spend, on average, GBP 10.59 a day on coffee, lunch and miscellany? FFK suggests that, for this year’s FFK Day, May 15, bring a sack lunch, make your own coffee, and take the ten-and-a-half quid (about $16) and donate to the organization. You’ll be glad you did.
New Energy: Nasdaq’s Greifeld Looks To Shake Up Energy Space
Nasdaq’s CEO Robert Greifeld shook things up at the FIA Boca Conference with the announcement it plans to launch a new futures exchange that will focus on energies, bringing new competition to the Intercontinental Exchange and CME Group. Greifeld spoke with John Lothian News editor-in-chief Jim Kharouf about the new pricing and clearing model, as well as his views on regulation, technology and how Nasdaq is positioned going forward.
“The statement of the problem is this, we do not have a single customer who says “I would prefer to be in a vertical monopoly, I prefer to be in a situation where my open interest is trapped in a clearing house and locked into the trading,’ ” he said. “That’s the fundamental problem we’re trying to solve.”
Watch the video »
Eurex expands interest rate derivatives offering
Euro Bund options with weekly expiration dates to launch in late April 2015
The international derivatives market Eurex Exchange, a subsidiary of Deutsche Börse Group, is launching new options contracts on the Euro Bund futures with weekly expiration dates (weekly options) on 20 April 2015. Contracts with expiration dates on the five following Fridays will be offered in addition to the existing options on the Euro Bund Futures. This expanded range of options further diversifies Eurex Exchange’s offering of euro-denominated interest rate derivatives.
***** I love a good expiration.
ICE Benchmark Administration Launches LBMA Gold Price; Transitions Gold Price to Transparent, Electronic Auction Process
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that ICE Benchmark Administration (IBA) successfully launched the LBMA Gold Price on Friday March 20, 2015, replacing the London Gold Fix established in 1919. IBA has transitioned the gold price to a new, independently administered, transparent and electronic auction process.
***** The Fix is dead. Long live the Fix!
U.S. Catfish Fight Deals a Blow to Import
By TENNILLE TRACY, WSJ
A white flaky fish known as basa or swai, which recently overtook cod and crab to become the sixth most popular seafood in the U.S., could soon disappear from American dinner plates.
***** This story is for my favorite former catfish farmer/trader/technology executive.
The Neuroscience Behind Hot-Headed Emails
MURALI DORAISWAMY: It’s easy to lose one’s cool in the fast-paced, react-now, high-stress world of business—just look at the emails or tweets that have come back to haunt so many leaders these days. And there’s a scientific explanation for why it’s can be so easy for any of us to fire off insensitive or angry tirades.
***** Don’t think with your limbic system. It is never a good thing.
MarketsWiki Page of the Day
MarketsWiki Recent Updates
Companies, Organizations and Groups
60,306,257 pages viewed, 8,160 articles, 190,695 edits
As Silence Falls on Chicago Trading Pits, a Working-Class Portal Also Closes
By WILLIAM ALDEN, NY Times
The pits where generations of sweating traders in colorful jackets once bellowed out orders for wheat, corn and cattle contracts, using hand signals and sheer force of personality, are almost empty. The smattering of traders who hung around them on a recent day appeared listless, some glancing at tablet screens, others staring blankly into space.
***** Interesting angle on the closing of the pits, and right on. The people being hired today are not the street smart former jocks.
Speed Traders Team Up in Microwave-Tower Superhighway Plan
by John Detrixhe, Sam Mamudi,Bloomberg
Two key competitors in the technological arms race that’s driving financial markets ever closer to light speed have called a truce.
China’s Mass Affluent to Have Double U.S. Counterparts’ Assets by 2020
By YVONNE LEE, WSJ
In five years, China’s mass affluent will have double the assets of their U.S counterparts. By 2020, financial assets of those with $100,000 to $2 million in China will reach $53 trillion versus $27 trillion in the U.S., as mainlanders benefit from the country’s large population and economic growth, according to an Economist Intelligence Unit global report sponsored by Citigroup Inc.
U.K. FCA Plans Review of Dark Pools, Big Data in 2015 Agenda
by Suzi Ring, Bloomberg
Conflicts of interest in dark pools and how insurers use big data are two of the main areas the U.K. Financial Conduct Authority will look into over the next year, the regulator said in its annual business plan.
Deutsche Bank Said to Weigh Shrinking Securities Unit
by Nicholas Comfort, Bloomberg
Deutsche Bank AG, which runs Europe’s biggest investment bank, is looking at shrinking its trading businesses as it reviews three options to boost the firm’s profitability, according to a person familiar with the matter.
Bill Takes Aim at S.E.C. Waivers for Firms That Broke Law
By PETER EAVIS, NY Times
The Securities and Exchange Commission faces new pressure from Congress to make it harder for lawbreaking companies to hold on to important privileges that help them raise money in the markets.
BATS moves fast to extend FX presence in London
The Trade News
BATS-owned FX trading platform Hotspot is to launch a London matching engine this year. The acquisition of Hotspot FX from broker KCG Holdings was announced in January and completed earlier this month.
U.K. Financial Watchdog Plans Scrutiny of Dark Pools, Bank Culture; Financial Conduct Authority warns of risk of more manipulation of widely used financial benchmarks
By MARGOT PATRICK
The U.K. Financial Conduct Authority has put dark pools, asset-manager fees and banking culture in its sights for closer study in the coming year, warning that it still sees the risk of manipulation in widely used financial benchmarks.
S.E.C. Faces Tough Challenge to Enhanced Broker Rule
By PETER J. HENNING, NY Times
In a Smith Barney commercial from the 1970s, the actor John Houseman intoned that the firm made money the old-fashioned way: “They earn it.” The question for clients is what standard their brokers should be judged by when making money off them, an issue that has proved to be divisive as the Securities and Exchange Commission considers imposing a higher standard for recommendations.
CFTC Staff Issues Advisory Reminding Futures Commission Merchants, Clearing Members, Foreign Brokers, Swap Dealers, and Certain Reporting Markets of their Reporting Obligations Pursuant to the Ownership and Control Final Rule
The U.S. Commodity Futures Trading Commission’s (“Commission”) Division of Market Oversight and Division of Swap Dealer and Intermediary Oversight today issued a staff advisory (CFTC Staff Advisory No. [15-14]) to remind futures commission merchants, clearing members, foreign brokers, swap dealers, and certain reporting markets (collectively, “reporting parties”) of their obligation to obtain information on a timely basis from their customers or counterparties in order to comply with the ownership and control reports final rule (“OCR Final Rule”).
FCA publishes its Business Plan for 2015/16 and announces details of new supervision and authorisation divisions
We set out the key areas of work we will undertake in the forthcoming financial year with the publication of our Business Plan for 2015/16.
Our Business Plan 2015/16
Our Business Plan sets out the activities that we intend to carry out in 2015/16 to protect consumers, enhance market integrity and promote competition.
FCA plans dark pools investigation
The Trade News
The Financial Conduct Authority has confirmed the timeline for a thematic review on “conflicts of interests” in dark pools.
The “Fake Fiduciary” Pivot
by Joshua M Brown, The Reformed Broker
Mary Jo White, who runs the SEC, has now thrown her weight behind a universal fiduciary standard for all brokers and advisors who serve the investing public. She joins the White House itself on this side of the issue. Anyone with any common sense agrees that all investors, regardless of financial status, deserve unconflicted advice based solely on what’s in their best interests.
Final Rules: CFR Part 1 Residual Interest Deadline for Futures Commission Merchants
Effective Date: Tuesday, May 26, 2015
Exclusive: Central banks agree new rules for FX market conduct
BY PATRICK GRAHAM, Reuters
Banks must prevent traders sharing order information under a new global code of conduct that bans traditional slang usages and gives dealers more guidelines for what they can and cannot say about the world’s biggest financial market.
Exchanges & Trading Facilities
AUTO TRADER OPENS LONDON STOCK EXCHANGE AS LARGEST IPO OF THE YEAR
London Stock Exchange
London Stock Exchange today welcomes Auto Trader Group plc, the UK’s largest digital automotive marketplace, to the Main Market. The IPO successfully raised £1.39 billion, the largest fundraising since 2013, giving the company a market valuation of £2.35 billion, the biggest IPO in London in 2015. To mark the occasion, Auto Trader’s longest serving employee, Kate Roberts, opened London trading this morning.
Ex-NYSE Chief Niederauer to Advise Tera
Supports growing markets footprint. Duncan Niederauer, the former CEO of New York Stock Exchange, has taken an advisory role with aspirant swap execution facility and derivatives trading platform TeraExchange.
Nasdaq to provide trading technology for bitcoin marketplace
ByMichael J Casey, The Wall Street Journal
Nasdaq OMX Group has agreed to provide New York-based startup Noble Markets with core technology to power a new marketplace aimed at allowing companies and institutional investors such as hedge funds to trade bitcoin and related digital-currency assets.
HOTSPOT TO EXPAND EUROPEAN PRESENCE WITH LAUNCH OF LONDON MATCHING ENGINE
BATS Global Markets Business Unveils Plans for Epicentre of FX Trading
Hotspot, a leading institutional foreign exchange (FX) market owned and operated by BATS Global Markets, today announced plans to expand its European presence with the launch of its first Europe-based FX matching engine later this year.
Eurex plans weekly options on Bund futures
The Trade News
Eurex Exchange will launch weekly options contacts on its highly liquid Euro Bund futures in April, allowing investors to react quicker to market events.
Nasdaq To Power Digital Currency Marketplace For Noble Markets – New Institutional Cryptocurrency Marketplace Will Operate X-Stream Trading Technology
MondoVisione Nasdaq (Nasdaq:NDAQ) and Noble Markets, announced today that Noble Markets will implement Nasdaq’s X-stream trading technology for the company’s soon to be launched digital currency marketplace. X-stream is the most widely used exchange trading technology in the world, powering more than 30 marketplaces globally.
Hedge Funds & Managed Futures
UK inflation falls to zero
Ferdinando Giugliano, Economics Correspondent, FT
The UK’s annual inflation rate fell to zero in February, as the slide in the cost of oil continued to act as a break on prices.
Fed’s Bullard: Zero Rates No Longer Appropriate for U.S. Economy;Bullard says he expects the economy to recover in the second quarter following a soft start to the year
By JASON DOUGLAS, WSJ
A top Federal Reserve official said Tuesday the U.S. central bank should begin raising short-term interest rates as soon as possible.
Banks & Brokers
Despite Regulatory Advances, Experts Say Risk Remains a Danger to Large Banks
By MAYRA RODRÍGUEZ VALLADARES, NY Times
With all the new laws and regulations since the financial crisis, it would be easy to believe that the banking industry is safer. Unfortunately, speakers at the Federal Reserve conference at George Washington University on Friday offered a range of reasons for why that’s not the case.
Wrangling over reserves blurs US bank performances
Tom Braithwaite, FT
Next week, finance departments at US banks will start scurrying to produce their first-quarter earnings statement. If previous quarters are a guide, the results — due to be announced in mid-April — will include money made from loans, underwriting and trading securities
US regulators veto ‘living wills’ of RBS, HSBC and BNP Paribas
Tom Braithwaite and Eric Platt in New York, FT
US regulators vetoed the living wills of Royal Bank of Scotland, HSBC and BNP Paribas on Monday, ordering the banks to improve the planning in the event of their demise.
Clearing & Settlement
Euro ccp reignites the debate on limit switch
The European Central Counterparty (EuroCCP) has initiated a discussion around the need to deploy a limit switch mechanism, or kill switch, to avoid the contagion of erroneous trades. Following a discussion paper published in October 2014, EuroCCP organized a workshop earlier this year that brought together more than 30 delegates, from trading firms and trading platforms to clearing participants, which had expressed the need for a process to immediately stop a firm from trading when a serious problem suddenly arises
The world’s next credit crunch could make 2008 look like a hiccup
A solar eclipse, a super moon, the FTSE 100 breaching 7,000 and the US Federal Reserve speaking in tongues – truly some kind of financial apocalypse must be nigh. Well, maybe.
Dealers ease stance on naming swap counterparties
Dealers could be starting to loosen their grip on the practice of revealing counterparty names on derivatives traded on swap execution platforms – an apparent reversal of sentiment that could ease the shift of over-the-counter swaps onto anonymous central limit order books, as Dodd-Frank envisaged.
Sri Lanka CSE to set up a clearing house with UK’s BTA Consulting
Lanka Business Online
The Colombo Stock Exchange has signed an agreement with UK’s BTA Consulting to provide consultancy and project management services to set up a clearing house in Sri Lanka.
Indexes & Products
STOXX Opens Office In Australia – New Office Covering Australia And New Zealand Expands STOXX’s Global Presence
STOXX Limited, a leading provider of innovative, tradable and global index concepts, today announced the expansion of its presence in Asia/Pacific with the opening of a new office in Sydney.
Three new db x-trackers ETFs launched on Xetra;ETFs provide access to small, mid and large cap US stocks
Three new db x-trackers ETFs from the product family section of Deutsche Asset & Wealth Management have been tradable in Deutsche Börse’s XTF segment on Xetra since Monday.
China to overhaul ETF options
The Trade News
The Shanghai Stock Exchange (SSE) will attempt to perfect the operations of SSE 50 ETF options, according to Gui Minjie, member of the CPPCC National Committee and SSE chairman of governors.
Bitcoins in One Basket
By Megan McArdle, Bloomberg
On Friday, I did a Third Way panel on bitcoins with Jerry Brito of Coin Center, a think tank dedicated to all things bitcoin. Since I was the appointed skeptic, thanks to my earlier writings on digital currency, this was a pretty tough assignment considering that one of the world’s leading experts was sitting at the other end of the table.
Facebook May Host News Sites’ Content
By RAVI SOMAIYA, MIKE ISAAC and VINDU GOEL, NY Times
Nothing attracts news organizations like Facebook. And nothing makes them more nervous.
Search and You Will Find
TT Trade Talk by Stefani Sandow, Product Manager
Although TT has only recently been released to the public worldwide, for the last year, we have been honing and refining the software in our early-access program. One of the features of the new TT platform that has received a significant amount of attention is a key differentiator in the way users can scan the universe of tradeable products.
Citadel fined $70,000 for accidentally sending orders to CME
Citadel Securities, LLC has agreed to pay a $70,000 fine to CME Group Inc for sending a minute-long series of accidental stock-futures orders to the exchange operator, according to a disciplinary notice issued on Monday.
CFTC Orders Marubeni America Corporation to Pay $800,000 for Inaccurately Reporting Positions in Multiple Grains
The U.S. Commodity Futures Trading Commission (CFTC) issued an Order filing and simultaneously settling charges against Marubeni America Corporation, a dealer and merchant of agricultural commodities and the largest overseas subsidiary of Japan-based Marubeni Corporation, for failing to comply with its legal obligation to submit accurate monthly CFTC Form 204 Reports, regarding the composition of Marubeni’s fixed price cash grain purchases and sales, in violation of the reporting requirements in CFTC Regulation 19.01.
Ex-Rabobank trader pleads guilty to conspiracy charge in U.S. Libor case
A former trader at Dutch lender Rabobank pleaded guilty on Monday to U.S. charges that he took part in a scheme to manipulate Libor, the benchmark interest rate at the center of global investigations into misconduct at various banks.
Madoff feeder fund settles; victims’ recovery tops $10.6 billion
BY JONATHAN STEMPEL, Reuters
The trustee recovering money for Bernard Madoff’s victims on Monday announced a settlement to recoup $93 million from a “feeder fund” that sent client money to the swindler’s firm, boosting the total sum raised to roughly $10.65 billion.
Merrill Lynch fined $2.5 million in Massachusetts
Massachusetts’ top securities regulator on Monday said that he has fined Bank of America’s Merrill Lynch unit $2.5 million for failing to stick to its own compliance rules.
Environmental & Energy
(California’s) Republicans take another stab at cap-and-trade gas exemption
By Alexei Koseff – Sacramento Bee
Efforts last year to delay bringing transportation fuels under California’s cap-and-trade program were a bust. Despite concerns raised by industry groups and moderate Democrats, the new regulation went into effect on Jan. 1, part of the state’s sweeping 2006 law aimed at reducing carbon emissions blamed for climate change.
GM’s Chevrolet invests big in carbon offsets
By Greg Gardner – Detroit Free Press
General Motors’ Chevrolet brand was the leading corporate purchaser of carbon offsets in 2012 and 2013, buying credits representing the reduction of 4.6 million metric tons of greenhouse gas emissions in projects outside their own businesses, according to a report from an environmental research group.
Here’s How $20 Oil Could Become a Reality If Storage Runs Out
The looming storage crisis explained
EEX Exchange Council Agrees To The Extension Of Power Options To Further Market Areas – Contract Specifications For The Agricultural Index Futures Approved – Straight-Through Processing (STP) At ECC Simplified
On 19 March 2015, this year’s first meeting of the Exchange Council of the European Energy Exchange (EEX) was held in Milan. It was chaired by Peter Heydecker, Vitol SA. At the meeting, the focus was on the extension of the product portfolio in the power segment and the transfer of agriculturals trading from EUREX to EEX.
CNOOC’s Nexen closing down crude oil trading division – sources
BY NIA WILLIAMS AND CATHERINE NGAI, Reuters
Nexen Energy, a wholly owned subsidiary of China’s CNOOC Ltd (0883.HK), is closing its crude oil trading division following a round of job cuts announced last week, four market sources said on Monday.
TOCOM To Launch Gold Daily Futures Contract On May 7
The Tokyo Commodity Exchange, Inc. (TOCOM) today confirmed the Gold Daily Futures contract launch slated for May 7, 2015. This follows regulatory approval from the Minister of Agriculture, Forestry and Fisheries and the Minister of Economy, Trade and Industry on March 23.
Yuan Facing International Trade Headwinds;Potential blow to Beijing as it pushes for bigger role for yuan abroad
By ANJANI TRIVEDI
Sharp moves in global foreign-exchange markets have diminished the use of China’s yuan in international trade, dealing a blow to Beijing as it pushes for a bigger role for its currency abroad.
China’s bond market passes property test
Josh Noble in Hong Kong, FT
Asia’s fast-growing bond market faced its biggest challenge earlier this year, with the sudden fall from grace of Kaisa, the Shenzhen-based property developer.
Speed Gives Way to Safety as SGX Upgrades Derivatives Market
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by Eduard Gismatullin, Bloomberg
Singapore Exchange Ltd. is shifting its focus from speed to safety as Southeast Asia’s biggest bourse embarks on the latest upgrade to its derivatives-trading technology.
Bourses push ahead with index launches;With rising demand from asset managers for indices to be used as benchmarks, exchanges are keen to tap into this opportunity
Sneha Padiyath, Business Standard
Stock exchanges are all geared up to expand their index products portfolio. Both BSE and NSE have introduced new indices this year, with BSE going forward and replacing some of the existing indices
40 years ago…And now: Stock markets still suffer trust deficit
Business Standard News
Scams used to be simpler in the old days, recalls investment advisor Arun Kejriwal. For example, if you bought a share from a broker and its price went up sharply, the shares were unlikely to be transferred in your name soon because, inevitably, the broker would come back to you and say there was a signature mismatch. So, as an investor, you had to go through the entire process again. If the share price fell by then, you were likely to get the shares. Otherwise, the seller would continue to reap the benefits of the rising stock price.
3 brokerage officials arrested in NSEL fraud case get bail; Executives were arrested in connection with the Rs 5,574.34 crore fraud at the National Spot Exchange Ltd
The Maharashtra protection of interest of depositors (MPID) court on Monday granted bail to three brokerage executives who were arrested in connection with the Rs.5,574.34 crore fraud at the National Spot Exchange Ltd (NSEL).