Keeping Tabbs on the Options Industry
Sarah Rudolph – John Lothian News
The outlook for the options industry is a lot less sunny than the skies in Miami Beach, if you listen to the Tabb Group’s Andy Nybo. The industry faces major challenges right now, including a lessening of liquidity, widening bid-ask spreads, and market fragmentation, Nybo told the audience Thursday morning at the Options Industry Conference in Miami Beach.
A recent Tabb study found that these are particular problems for institutional traders, he said.
Overall spreads have widened, but the tiering of liquidity has created a bifurcated market in which 75 percent of all options traded are in the top 100 stock names, Nybo said. Those names are actually showing tighter spreads, while in the less-traded names spreads have been as wide as 41 cents per contract.
Banks Prep Defense for Anti-Wall Street Campaigns; Senior executives from seven banks met on March 31 to discuss options
By VICTORIA MCGRANE
Top executives from the biggest U.S. banks, concerned about anti-Wall Street rhetoric already bubbling up on the 2016 campaign trail, are working to push back against the prevailing narrative that banks are bad.
***** So many scandals leaves such thin skin.
Financial Trading Tech Goes To The Classroom At 4 Chicago Universities
Karis Hustad – Staff writer, Streetwise
Fans of “Ferris Bueller’s Day Off” were shocked to hear the futures trading pits at the Chicago Mercantile Exchange, in all their hand gesture and primary color jacket glory, would be closed this July. Traders themselves, however, weren’t so surprised: for years the market has grown increasingly technology dependent. The need for in-person traders has waned. But the need for traders fluent in the new tech-dependent future of finance are in demand, and that’s where Trading Technologies steps in. The Chicago-based company makes trading software and execution solutions for futures traders across the world. But now Trading Technologies is putting in extra efforts to its education division, which makes software and curriculum specifically for colleges and universities in order to train the next generation of traders.
***** The next generation of traders is a good focus.
Bridging the Week by Gary DeWaal: May 4 to 8 and 11, 2015 (Spoofing Redux; Virtual Currencies; Larger Tick Size; Block Trades; CCP Equivalency; SEC Forum Choices)
Gary DeWaal, Katten Muchin Rosenman LLP
For the third week in a row, an enforcement action involving allegations of spoofing was the highlight of financial services industry news. The CFTC brought a lawsuit last week against the same two traders that the CME Group had summarily barred the prior week from accessing all its marketplaces for 60 days for allegedly engaging in disruptive trading earlier this year. Separately, the SEC approved a pilot program to increase the minimum tick size for quotes and trading in certain small capitalization stocks while FinCEN and the US Department of Justice sanctioned two related purveyors of a virtual currency for not maintaining robust AML procedures. As a result, the following matters are covered in this week’s Bridging the Week:
***** Nothing like shooting fish in a barrel.
Industry looks forward to Futures for Kids Day
Luke Jeffs – Futures & Options World
The futures industry is set to come together next Friday to raise money for Futures for Kids, the industry’s charity, through a range of activities including a 30 mile walk-to-work. The London Stock Exchange has dedicated its iconic market open to raise awareness and funds for the day. Futures firms backing the day include ABN Amro, Citigroup, Deutsche Bank, GH Financials, INTL FC Stone as well as exchanges CME, Nasdaq NLX and the LSE’s LCH.Clearnet, tech firms Fidessa, Trading Technologies, Cinnober and Ullink, and Kite, the consultancy.
***DA: There are other ways to participate in FFK Day. For example, did you know that London City workers spend, on average, GBP 10.59 a day on coffee, lunch and miscellany? Futures for Kids (FFK) suggests that, on 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.
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China’s stock index futures unseat S&P to become world’s most traded
By Saikat Chatterjee. Reuters
Chinese stock index futures have surpassed S&P 500 futures in turnover to become the world’s most traded equity futures as global investors expanded their exposure to one of Asia’s top-performing markets.
A Bitcoin Technology Gets Nasdaq Test; Pilot to take place in fledgling Nasdaq Private Market
By BRADLEY HOPE And MICHAEL J. CASEY, WSJ
Nasdaq OMX Group Inc. is testing a new use of the technology that underpins the digital currency bitcoin, in a bid to transform the trading of shares in private companies.
Big Sugar Order Gives Prices a Jolt; More Than a Dozen Ships Are Lined Up in Brazil to Fulfill the Order
By CAROLYN CUI and JULIE WERNAU, WSJ
One company’s purchase of an unusually large amount of sugar is sending the market scrambling. Wilmar International Ltd. bought 1.9 million tons of sugar on the ICE Futures U.S. Exchange and called on sellers to ship the order—the largest exchange delivery on record—as soon as possible. In response, prices soared in the normally sleepy sugar market.
Comment: SEC should make spoofing focus of markets meeting
Until recently US regulators had one story about the 2010 flash crash. It was in a report Securities and Exchange Commission and Commodity Futures Trading Commission staff delivered almost five years ago, just months after the event.
Regulator probes pitfalls of ‘sharing economy’
Barney Jopson in Washington and Tim Bradshaw in San Francisco, FT
Uber, Airbnb and other pioneers of the “sharing economy” are coming under heightened scrutiny from a US watchdog that wants to know if consumers are at risk from their use of personal data and liability regimes.
Banks plot to withdraw repo trading from London
Patrick Jenkins, Financial Editor, FT
Foreign banks operating from the City of London are plotting a managed retreat from operations that expose them to the UK bank levy, according to senior figures within the industry.
Cyberattacks Represent Top Risk, SEC Chief Says; Mary Jo White voices concern about gaps in how officials are tackling threat
By ANDREW ACKERMAN, WSJ
Cyberattacks represent the “biggest systemic risk” facing the U.S., though government officials may not be tackling the range of cyber vulnerabilities in an optimal manner, Securities and Exchange Commission Chairman Mary Jo White said.
SEC reveals factors behind how it picks courts it uses
BY NATE RAYMOND, Reuters
May 8 The U.S. Securities and Exchange Commission released guidance on Friday about how it decides whether to pursue a case in federal court or before an in-house judge, amid complaints by some defendants that the agency’s administrative court violates their rights.
Creator of ‘GSessions’ bond platform leaves Goldman Sachs
By Katy Burne And Matt Turner, WSJ
Chris White, creator of the “GSessions” electronic bond network at Goldman Sachs Group, has left the firm, according to people familiar with the matter.
SEC’s Stein concerned evolving swaps-margin plan too lax
Neil Roland – MLex
Securities and Exchange Commissioner Kara Stein voiced apprehension that US and overseas regulators will require too few derivatives traders to post margin for uncleared transactions.
SEC and FINRA to Hold National Compliance Outreach Program for Broker-Dealers
The Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) today announced the opening of registration for their 2015 National Compliance Outreach Program for Broker-Dealers. The program is intended to provide an open forum for regulators and industry professionals to discuss compliance practices and exchange ideas on effective compliance structures.
David Grim Named as Director of the Division of Investment Management
The Securities and Exchange Commission today announced that David Grim has been named as Director of the Division of Investment Management. Mr. Grim has been the division’s acting director since February, following the departure of former director Norm Champ.
SEC Examining Blackstone Fee Practices;Private-equity firm says regulator requested information about monitoring-termination fees
By MARK MAREMONT, WSJ
Blackstone Group LP said that the Securities and Exchange Commission recently requested information about certain of its fee practices, including its pre-2014 collection of large one-time fees when selling or taking public companies it controlled.
Exchanges & Trading Facilities
Santiago Stock Exchange and TMX Join to Launch New Venture Exchange
Small and emerging companies in Latin America are going to get an exchange they can trade on – away from their larger brethren. The Santiago Stock Exchange (SSE) and TMX Group’s TMX Venture Exchange has joined forces to create and launch the Santiago Stock Exchange, Venture (SSEV), a new public venture capital market for small and early-stage companies. Currently, the SSEV is focused on mining may expand to other industry sectors at a later stage.
CLTX and LCH.Clearnet launch Mini Fertilizer Contracts
Cleartrade Exchange (CLTX), the Singapore regulated futures exchange for commodity derivatives and LCH.Clearnet Limited (“LCH.Clearnet”), the global clearing house today launched three new Fertilizer Futures contracts designed to bring risk management solutions to a new sector of this growing derivatives market
Shanghai Exchange Seeks Foreign Nickel to Help Ease Shortage
The Shanghai Futures Exchange plans to allow delivery of foreign-made nickel into its futures contracts as it seeks relief from a shortage of domestic supply to the bourse.
Hedge Funds & Managed Futures
Why Hedge Funds Love To Go Offshore
By Trang Ho, Forbes
Hedge fund titan George Soros reportedly amassed $13.3 billion in deferred hedge fund fees and investment gains on those fees by moving his assets to Ireland and then to the Cayman Islands. Hedge funds love to set up shop offshore. And it’s not because of the weather. Setting up a fund offshore has many advantages and is not as hard as you may think, says Gordon Casey. He is the managing director of Front Shore, a hedge fund consulting firm in the Cayman Islands, and author of The Cayman Edge: How to Set Up a Cayman Fund.
Man Group remains cautious despite restructuring on track
David Oakley, Investment Correspondent, FT
Man Group enjoyed strong investment performance in the first quarter as the world’s biggest listed hedge fund underlined it is no longer the laggard in the sector.
Buckle Up for More U.S. Stock Swings
By E.S. BROWNING, WSJ
Since the blowout year of 2013, money managers have warned that U.S. stock gains would be weaker and investors would face more-violent up-and-down swings.
Uber Funding Talks Highlight the Speedy Pace of Investments
By MIKE ISAAC and MICHAEL J. de la MERCED, NY Times
Uber raised a total of more than $2 billion from investors in June and December last year — and is now back for another round. The anonymous messaging start-up Yik Yak collected $73.5 million in three financing rounds in seven months, and Zenefits, a human resources start-up, raised more than $580 million in less than two years, with the latest deal done last week.
Finalists revealed for 20th Fund Manager of the Year Awards
Investment Week is pleased to announce the finalists for its 20th annual Fund Manager of the Year Awards, to be held at the Royal Albert Hall on 9 July.
Lonmin to cut capital spending as low platinum prices bite
James Wilson, Mining Correspondent, FT
Lonmin has warned that weak platinum prices could persist for another two years after the UK-listed miner was pushed into a first-half operating loss and said it would cut capital spending.
Wealth Adviser: Not Different This Time. Not the Same, Either.
by Kevin Noblet, WSJ
Yes, it is dangerous to presume after stocks have soared that some fundamental, historical shift has taken place and that the market won’t fall. But, even though it is wrong to assert “it’s different this time,” it is just as important to consider how some things have changed, columnist Morgan Housel says. Writing in The Wall Street Journal, he gives examples: How companies in recent decades have paid less out in dividends, preferring to use more of their profits for acquisitions and stock buybacks. And how growth in the thirty-something population may be a bullish sign for stocks. Acknowledging these changes can help save investors from making foolish moves, Mr. Housel notes, “such as selling all your stocks because prices might fall.”
Banks & Brokers
BGC Partners Announces Its 2015 Annual Meeting of Stockholders
FXCM Inc. Announces First Quarter 2015 Results; Releases April 2015 Customer Trading Metrics
Goldman Sachs expected to settle forex suit for almost $130 mln – WSJ
Goldman Sachs Group Inc is expected to pay $129.5 million to settle its portion of a lawsuit that accuses banks of rigging prices in the foreign exchange market, The Wall Street Journal reported, citing a person familiar with the matter.
Ex-Goldman trader Lim’s hedge fund assets hit $500 mln – sources
BY NISHANT KUMAR
May 11 Guard Capital, a macro hedge fund led by two former top traders at Goldman Sachs and Noble Group will stop taking money from new investors from July 1 after a more than ten-fold increase in assets since its launch last August, sources said.
Clearing & Settlement
GIC adopts Omego Alert
Securities Lending Times
Singapore’s sovereign wealth fund GIC Private Limited has adopted Omgeo Alert, the industry’s largest web-based global database for the maintenance and communication of account and standing settlement instructions (SSIs).
Centralization Moves to the Foreground
In April, data quality emerged as the prevailing theme of greatest concern in our coverage. This month, data centralization is in the spotlight. Coordination of data might be a better way to describe this. Certainly, centralizing and coordinating data ought to go hand in hand with raising the quality of data, if either effort is going to be meaningful or successful.
SGX looks at introducing FFA clearing in Asian timezone
The Singapore Exchange (SGX) is taking heed of major customers to try and introduce FFA clearing in Asian trading hours, Splash understands. The likes of Noble and Cargill have been urging the SGX to up its FFA game for years and the SGX is willing to respond and give London’s LCH.Clearnet a run for its money, sources connected to the SGX have told Splash.
Indexes & Products
Assets in ETFs Linked to MSCI Indexes Reach Record High of $418 Billion
MSCI Inc. , a leading provider of research-based indexes and analytics, reports that assets in ETFs linked to MSCI indexes grew more than 12 percent in the first quarter of 2015, reaching an all-time high of $418 billion. ETF providers launched 56 products based on MSCI indexes during the period, three times more than the next index provider.
Built For Marketing: Why The S&P 500 And Dow Are Misleading Investors
Since the start of the year, the two major U.S. stock market indexes—the Dow Jones Industrial Average and the S&P 500—have (between them) closed at new highs nine times. But do those highs really mean the market is doing better than ever before? Not necessarily. Human beings pick which stocks to put in these indexes, and their decisions, I fear, are being influenced by marketing.
Still Watching the Russell
Nothing changes sentiment like price moves. I am not referring to the sentiment getting giddy on Friday from the short-term pessimism we saw at the end of the day on Tuesday and into Wednesday. I am referring to my old commentary about how the market teaches us a pattern over and over again and just when we learn it, the market changes the pattern.
Portware’s DePetris Gives Back
If you want something done, ask a busy person, the saying goes. That certainly applies to Scott DePetris, Portware president and chief operating officer. In addition to a demanding full-time job as a top executive at a leading trading-technology provider, DePetris devotes 15-20 hours a week to his role as chairman of LSA Family Health Service, a not-for-profit in East Harlem.
US government warns hedge funds pose cyber risk
Stephen Foley in Las VegasA, FT
Hedge funds are a weak link in the US financial system’s defences against hackers and terrorists, the Obama administration has warned the industry.
BME Completes Its Consultancy Work For The Peruvian Public Debt Market – It Follows The Electronic Platform Created By BME For The Algerian Public Debt Market
BME Innova, the innovation subsidiary of BME, has conducted a consultancy project on the needs and solutions required by Peru’s securities market operation systems, in the area of IT infrastructure.
British Columbia Securities Commission Panel Sanctions Former Broker For Lying To Regulators And Acting Contrary To The Public Interest
A British Columbia Securities Commission (BCSC) panel has sanctioned Douglas William Falconer Wood for lying to regulators and acting contrary to the public interest.
Frank DiPascali Jr., Madoff Aide Who Pleaded Guilty in Fraud, Dies at 58
By STEVE LOHR, NY Times
Frank DiPascali Jr., a top lieutenant to Bernard L. Madoff, who helped carry out one of the biggest frauds in Wall Street history, died on Thursday. He was 58.
Environmental & Energy
How to get your pension fund to divest from fossil fuels
By Patrick Collinson – The Guardian
As part of the Guardian’s Keep it in the ground campaign, which is urging the world’s largest charitable foundations to move their money out of fossil fuels, we look at personal divestment and how you can encourage your pension scheme to shift its portfolio or offer divestment options.
Rebound in US shale will limit oil price recovery
It has been one of the less widely noticed oil price surges. Since January, benchmark Brent crude has risen from less than $47 per barrel to more than $65 per barrel, an increase of about 40 per cent.
Solving the Climate Crisis Will Strengthen Our Economy
Rep. John Conyers – Huffington Post
When I voted for the Clean Air Act as a Member of Congress in 1970, I received a stern warning from special interests: Environmental protection hurts economic growth.
China oil imports surpass those of US
David Sheppard in London and Gregory Meyer in New York, FT
China overtook the US as the world’s biggest importer of crude oil in April, the culmination of a seismic shift in global energy flows over the past decade.
China rate cuts aim to hold line against deflation
Gabriel Wildau in Shanghai, FT
China’s third interest-rate cut in six months signalled the central bank’s commitment to pushing back against deflation and its impact on real borrowing costs. But what is less clear to analysts is the extent to which lower rates — and a host of other easing measures — can solve the conundrum that has bedevilled many a central bank: how to ensure that looser monetary policy translates into a greater flow of funds into the real economy.
HKFE Announces Revised Margins for CITIC Limited Futures
Hong Kong Futures Exchange Limited (HKFE), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has announced that with effect from the commencement of trading on Wednesday, 13 May 2015, the minimum margins to be collected by an Exchange Participant from its clients in respect of their dealings in the following futures contract will be as outlined in the table below.
India’s National Stock Exchange continues to revolutionise the equities sector
By Courtney Trenwith
In 1992, India’s financial markets were considered a closed brokers club riddled with corruption and desperately needing reform and modernisation. The Bombay Stock Exchange (BSE) had dominated the scene for decades, but few were game to dabble in stocks unless they were already a qualified broker on the inside.
Dubai Financial Market (DFM) Enrols “First Gulf Financial Services” To Margin Trading Members
Dubai Financial Market (DFM) today announced that “First Gulf Financial Services” has been accredited to provide Margin Trading service, lifting the total number of DFM brokerage firms providing this service to 27 companies.
Angola stock exchange set to meet 2015 launch deadline
Angola, sub-Saharan Africa’s third-largest economy, will trade selected shares and corporate bonds by the end of 2015, meeting an original deadline for an equities market that was pushed out by two years.
Case of the Vanishing Worker; Unemployment rate is falling in industrial Midwest as residents move away, retire or give up on finding a job.
By MARK PETERS and BEN LEUBSDORF, WSJ
By one key gauge of economic health, this industrial city three hours south of Chicago is well on the way to recovery.
GrainCorp to spend $60m on rural rail network sites
Mitchell Neems, The Australian
GrainCorp will invest $60 million across 13 country sites as part of its “Project Regeneration”, first announced last year.