Pardon the Interruption
About a week back, we released Part 1 of our four part series, “Sweet 16: The Tops for 2016,” in which we took the best answers from the interviews we conducted at FIA Expo in four categories: exchanges, macroeconomics, regulation and technology. After the first installment, we scattered the globe – Jim attended the FIA Asia conference in Singapore while Doug spent a couple of days in New York. Meanwhile (and speaking of a weak back), John was and is out of the office for a couple of days.
Now that we are back to full(ish) staff, it is time to continue the series. Part 2, Macroeconomics, will be published tomorrow. In case you missed it, see a repeat of Part 1 below.
Sweet 16: The Tops For 2016 – Exchanges
Exchange leaders will be dealing with big changes at their respective companies in 2016, from launching new competing markets and dealing with new regulation to integrating new data acquisitions to expanding across different time zones. In JLN’s Sweet 16, we spoke with Michael Davie, Terry Duffy, Jeff Sprecher and Rama Pillai about the top exchange priorities for 2016.
Watch the video »
What Happens When the Fed Raises Rates, In One Rube Goldberg Machine
By QUOCTRUNG BUI, AMANDA COX and ALEXANDRA GARCIA – WSJ
Exactly seven years ago, the Federal Reserve cut interest rates to almost zero in order to nurse the ailing economy back to health. Today, it is expected to change direction. The Fed believes that the economy is strong enough that it can withstand slightly higher rates and that now is the time to take action to prevent excessive inflation from breaking out in the future.
**** Mass confusion, chaos – you know, normal market activity.
Cinnober makes Fintech Top 100
Cinnober has made the rankings of the 2015 Fintech 100. The listing also further designates Cinnober as one of the most intriguing 50 “emerging stars” — described as “exciting new fintechs with bold, disruptive and potentially game-changing ideas”.
***** Cinnober = Intriguing? Yes!
Review: ‘The Big Short’, directed by Adam McKay
Philip Stafford – FT
Hollywood has always had a difficult relationship with the business of Wall Street.
Frequently bankers and business owners are the villains of the piece or are used to depict stories of personal foibles or redemption. It is not helped that the jargon of finance is often abstruse, and much of the daily grind done by computers. Only a handful of films, such as Wall Street, Trading Places and Margin Call, have got under the skin of finance and appealed to a wider audience.
***** Phil Stafford is now doing movie reviews? I don’t remember his review of Dumb and Dumber Too!
Vote Doug Bry and Ernest Jaffarian for NFA Board, CTA/CPO Category
John Lothian – John Lothian News
Doug Bry and Ernest Jaffarian deserve the votes of NFA member Commodity Trading Advisors and Commodity Pool Operators in the upcoming contested election for the Board of Directors of the National Futures Association. They have worked hard on behalf of CTAs and CPOs and have made a positive impact on the board. They deserve to be re-elected.
**** Voting early and often does not mean voting more than once per election. It means vote every election, every chance you get. Have your voice be heard.
Fed Poised to Deliver a Gift to CME Group, Automated Traders
The Federal Reserve’s decision tomorrow on whether to boost interest rates for the first time since 2006 is poised to reinvigorate exchange operator CME Group Inc. and line the pockets of automated traders like Virtu Financial Inc.
***DA: The algos were hung by the server with care, in hopes that Ste. Janet soon would be there.
MarketsWiki Page of the Day
CSI 300 Index
MarketsWiki Recent Updates
Companies, Organizations and Groups
72,043,806 Pages Viewed; 21,753 Pages; 195,385 Edits
Fed Poised to Mark the End of an Era
By JON HILSENRATH – WSJ
Long run of near-zero rates helped cut joblessness and boost U.S. growth, but weak spots linger
The Federal Reserve’s likely decision Wednesday to raise short-term borrowing costs will mark the end of an era of zero interest rates, a period of extraordinary policy experimentation that has yielded mixed results.
Mispricing derivatives a danger for real assets
Laurence Mutkin – FT
Growing dislocations between financial assets and derivatives are a symptom of increasing fragmentation in global financial markets. This poses a systemic risk which policymakers need to address.
Regulation hurting clearing liquidity – LCH
Futures & Options World
Declining repo market liquidity and restrictions on central bank access are impacting the ability of clearing houses to manage their liquidity profiles, according to a new paper released by LCH.Clearnet. The European clearing house’s latest paper highlights some of the unintended consequences of ongoing regulatory reforms and their impact on clearing houses.
Nasdaq Co-President Adena Friedman to be named chief operating officer: source
Securities exchange operator Nasdaq Inc’s (NDAQ.O) Co-President Adena Friedman will be named chief operating officer (COO) on Wednesday, according to a source with direct knowledge of the matter.
Paul P. Andrews of FINRA Named IOSCO Secretary General
The Board of the International Organization of Securities Commissions (IOSCO) today announced it has appointed Paul P. Andrews as its new Secretary General. Mr. Andrews is currently the Vice President and Managing Director of International at the Financial Industry Regulatory Authority (FINRA). He will take up his position at IOSCO for a three-year renewable term in March 2016.
Parliament approves the automatic exchange of tax information
Parliament has now approved the Convention on Mutual Administrative Assistance in Tax Matters, which was developed jointly by the Council of Europe and the OECD (Organisation for Economic Cooperation and Development).
It is going to be even worse than we thought on Wall Street
By Matt Turner – Business Insider
Some of Wall Street’s most senior bankers lined up last week to issue a grim forecast: Trading revenues in the last three months of the year would be down by double-digits.
Barclays to Sell Risk Analytics and Index Unit to Bloomberg
By TAPAN PANCHAL – WSJ
Sale represents latest move by British bank to focus on core operations
Barclays PLC on Wednesday said it has agreed to sell its risk analytics and index solutions business to Bloomberg LP for £520 million ($782 million), in the British bank’s latest move to focus on its core operations.
The Best Way to Inside Trade: Unlisted Derivatives Outside U.S.
U.S. regulators are becoming increasingly concerned about a complicated derivative that’s popular abroad and was used by scammers to earn millions of dollars based on inside information. The derivatives, called contracts for differences, are banned in the U.S. and have proven difficult for regulators like the Securities and Exchange Commission to track since they don’t trade on exchanges. They’re legal in the U.K. and becoming more common there, with the number of people who trade CFDs increasing by 14 percent to 24,000 in 2014 from a year earlier, according to a survey from research firm Investment Trends.
The FCA’s approach to advancing its objectives
This guidance sets out what firms and consumers can expect from the FCA and how we intend to deliver our statutory responsibilities. It is based around our three operational objectives of protecting consumers, ensuring market integrity, and promoting effective competition.
Feedback statement to The FCA’s approach to advancing its objectives
In this Feedback Statement we report on the feedback we received to our publication in July 2013 of general guidance on what firms and consumers can expect from the FCA and how we intend to deliver our statutory responsibilities.
Esma’s Maijoor calls for swift resolution to Mifid uncertainty
Jim Brunsden in Brussels and Philip Stafford in London – FT
Europe’s top markets supervisor has urged Brussels to move swiftly to set a new timetable for rolling out a landmark overhaul of trading rules after policymakers conceded that a planned January 2017 “Big Bang” is logistically impossible.
Merrill Lynch v. Manning: SCOTUS to Decide Scope of Federal Jurisdiction in Certain Securities Cases
Orrick – Securities Litigation and Regulatory Enforcement Group via JD Supra
On December 1, 2015, the Supreme Court heard argument in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning. In that case, the Court will resolve the split in the Circuits as to whether Section 27 of the Securities Exchange Act of 1934 (“the ’34 Act”) provides federal jurisdiction over claims that are asserted under state law but are based on violations of regulations adopted under the ’34 Act.
Treasury Department Issues Cybersecurity Checklist for Financial Institutions: What Might Apply to Your Financial Services Company?
by Samuel Reger, Mark A. Rush, Thomas Ryan, Joseph Valenti | K&L Gates LLP via JD Supra
On November 17, 2015, Deputy Treasury Secretary Sarah Bloom Raskin devoted her remarks at the Clearing House Annual Conference to financial sector cybersecurity.  She concluded with a list of recommendations for handling cybersecurity at financial institutions. In light of them, prudent in-house counsel, compliance officers, and security personnel may want to review their company’s cybersecurity plan to determine which of the deputy secretary’s recommendations are applicable. This Alert recounts Deputy Secretary Raskin’s “to-do list” and provides step-by-step suggestions regarding cybersecurity response plans in light of it.
Exchanges & Trading Facilities
Friedman to Be Nasdaq Operating Chief
By BRADLEY HOPE – WSJ
Seen as front-runner to Nasdaq’s CEO when he leaves, Adena Friedman is from non-exchange side of the business
When Adena Friedman returned to Nasdaq Inc. last year as its co-president, the first thing she did was embark on a trip around the globe.
Deutsche Börse picks ex-UBS banker to head venture effort
By Anna Irrera View Social links for Anna Irrera – Financial News
The German exchange group Deutsche Börse, which has been an active investor in new financial technologies, has appointed a former capital markets banker at UBS to oversee its investments in young companies.
Nadex Closes Canadian Accounts but Explores Options to Return
The CFTC-regulated venue decided to stop accepting applications from Canadian residents and to close existing Canadian members’ accounts.
ICE Futures U.S. Achieves Daily Volume Record In Mini MSCI Complex
Records Set In Mini MSCI EAFE Index And Mini MSCI Emerging Markets Index
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. achieved a daily volume record in the mini MSCI® futures complex on December 14, 2015. Within the portfolio, daily volume records were also set in the mini MSCI EAFE index future, which tracks equities in the developed markets of Europe and Asia, and the mini MSCI Emerging Markets index future.
Mini-DAX® Futures: update
Since 28 October we offer in parallel to our popular DAX® Futures (FDAX) new Mini-DAX® Futures (FDXM) which have a significantly lower contract value of only EUR 5. After less than 35 trading days the newly listed contracts have already generated considerable liquidity.
Futures on the indices ATX, ATX five, CECE EUR and RDX EUR: Extension of Designated Market-Making schemes
In order to further promote trading activities, the Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG decided the following effective 1 January 2016:
Parrot raises EUR300M on Euronext Paris; Rights issue in France a resounding success, market capitalisation over EUR680 million
EnterNext, the Euronext subsidiary dedicated to promoting and growing the market for small and medium-sized companies (SMEs), today congratulated Parrot, a pioneer in wireless products, on its successful rights issue on Euronext Paris. It was the largest capital increase of a mid-size French tech business in recent years.
Arrangements for Adjustment of GCL-Poly Structured Products and Options
Hong Kong Exchanges and Clearing Limited (HKEx) has announced the arrangements for the adjustment to GCL-Poly Energy Holdings Ltd (GCL-Poly) structured products and options to account for GCL-Poly’s rights issue.
Hedge Funds & Managed Futures
Sir Chris Hohn’s TCI returns market beating 14%
Miles Johnson – FT
Sir Chris Hohn has described the $10bn The Children’s Investment Fund he founded as “the antithesis of the classic hedge fund” after it returned a market-beating 14 per cent in a year when many rivals have floundered.
Brevan Howard Suffers From ECB’s Restraint
By LAURENCE FLETCHER – WSJ
Brevan Howard, one of the world’s biggest hedge funds betting on bonds and currencies, suffered a loss of approximately $670 million as the European Central Bank shocked markets with lower-than-expected stimulus this month.
RPT-As end of Fed’s “free money” nears, consumers still likely to spend
By Howard Schneider – Reuters
Judged by how long it has been going on, the current U.S. economic expansion should be on its last legs, but the mood in this rebounding heartland auto town would not show it.
Saxo Bank’s 10 Outrageous Predictions for 2016
Could the euro, Brazil and oil be the unlikely winners of the year? Saxo Bank, the online multi-asset trading and investment specialist, has today released its annual set of ‘Outrageous Predictions’ for the year ahead. These are 10 unlikely, yet perhaps underappreciated, events that could have significant consequences on the financial landscape as we venture into 2016.
Banks & Brokers
Jefferies Trims Balance Sheet, Shuffles Ranks Amid Bond Market Turmoil
By PETER RUDEGEAIR and JUSTIN BAER – WSJ
Investment bank blames ultralow interest rates, collapse in energy markets and low trading volume
Jefferies Group LLC posted a substantial decline in fourth-quarter trading revenue and trimmed its balance sheet in the latest sign that Wall Street’s risk appetite is waning.
Bankers’ bonus cap drives up salaries, says Bank of England
By Tim Wallace- Telegraph
Europe’s bonus cap has driven up salaries in banks and made top bankers’ pay less flexible, making banks and the financial system more fragile, according to regulators
Bankers’ salaries are rising because of the EU’s bonus cap, the Bank of England has suggested, as financial institutions refuse to cut payouts in response to tougher regulations.
Brokers and Advisers Fight For Millenials’ Money
At 32, Bo Lu is a millennial cautionary tale for old-school banks and brokers. A first-generation American who emigrated from China with his parents at 7, Lu lives in a world of monitors and motherboards. He graduated with a computer-science degree from the University of Illinois and landed at Microsoft. He and his engineering friends in Seattle soon went looking for an adviser who could guide them about investing their nascent savings. To their surprise, they found none.
A regulatory death spiral for banks
Some regional Federal Reserve presidents are worried that low interest rates and investors’ search for yield have created a new bubble in commercial real estate that could affect financial system stability.
Clearing & Settlement
McKinsey: Custodians’ fee structure at risk from blockchain
Custodians, clearing houses and messaging networks all face possible revenue reductions from the advance of bitcoin’s underlying technology, but there are still some major challenges ahead before blockchain can take off in capital markets, a report from McKinsey concludes.
McKinsey Sees BlockChain Potential
Distributed ledger, or blockchain, technology allows copies of a ledger to be distributed and validated by multiple users who verify changes. This allows transfers and payments directly between members of the network without using intermediaries which cuts settlement times, as well as reducing credit and liquidity risk.
EMIR Mandatory Clearing Will Start On 21 June 2016
Squire Patton Boggs, via Lexology
The European Union regulation on derivatives, central counterparties and trade repositories (EMIR) introduces new requirements to improve transparency and reduce the risks associated with the derivatives market. EMIR also establishes common organisational, conduct of business and prudential standards for Central Counterparties (CCPs) and trade repositories.
Indexes & Products
What the oldest stock market index is saying now
The oldest stock market index has also been one of the weakest. I’m referring to the Dow Jones Transportation Average, which was created in 1884, a dozen years before its better known sister, the Dow Jones Industrial Average. Even as the Dow Industrials were holding their own over the past couple weeks, the Dow Transports were breaking down in a big way.
It Might Be Time For VIX ETNs, But…
Investors have been treated to plenty of talk about increased market volatility in recent weeks, and such talk can increase the allure of volatility exchange-traded products, such as the iPath S&P 500 VIX Short Term Futures. Whether market participants actually gravitate to those products is a different story.
Currency-Hedged ETFs Can Serve as Core Holdings
Currency-hedged exchange-traded funds continue to enjoy strong inflows in 2015. Through the first 11 months of the year, a net $45 billion flowed into these products, accounting for a significant slice of the net $209 billion of flows into international-equity funds and ETFs.
Bloomberg to Acquire Barclays Risk Analytics and Index Solutions Business
Bloomberg L.P. announced today that it has entered into an agreement to acquire Barclays Risk Analytics and Index Solutions Ltd. (“BRAIS”), a leading provider of benchmark and strategy indices, portfolio analytics, risk and attribution models, and portfolio construction tools. BRAIS’s benchmark indices span global markets covering multiple asset classes, most notably the Barclays Family of Aggregate Bond Indices.
SEC Approves Plan to Issue Stock Via Bitcoin’s Blockchain
THE SECURITIES AND Exchange Commission has approved a plan from online retailer Overstock.com to issue company stock via the Internet, signaling a significant shift in the way financial securities will be distributed and traded in the years to come.
‘Fintech’ expansion lures foreign banks to Israel
BY TOVA COHEN – Reuters
A five-minute chat with an executive from Israeli start-up MyCheck was enough to spark the interest of Mariano Belinky, managing partner at Banco Santander’s venture capital division.
The ghosts of fintech past
Not a day goes by without a “blockchain is going to revolutionise finance” story in the press, despite no working proof of concept being available to anyone, growing volumes of vapourware doing the financing rounds and the most promising endeavours being mostly linked to nothing more spectacular than the formation of ever stronger bank cartels complying with increasingly strict origination rules.
Machine learning plays vital role in evolution of Man
By Stefanie Eschenbacher – Financial News
Having surpassed humans in the speed and complexity with which they can trade sometime ago, computers are now catching up with us in the ability to learn – and as that capacity grows, one of the world’s biggest hedge fund managers is exploiting it.
Quandl Releases Access to Barchart Market Data
Barchart, a leading provider of market data and information, has announced today that its market data is now available through Quandl’s data marketplace (www.quandl.com). Based in Toronto, Quandl is an online platform that provides data analysts with easy access to accurate and timely financial data in the precise format they need it. Barchart will be offering several databases of index and futures price data via Quandl, giving their users access to institutional quality financial market data in an easy-to-use, reliable and flexible manner.
Thomson Reuters Helps Improve Insight and Workflow for Corporate Finance Professionals with Introduction of FX Monitor in Eikon Messenger
Move gives corporate treasurers greater control by simplifying access to financial services community alongside exclusive news and analysis from Thomson Reuters
Keeping in touch with the rapidly changing and time-sensitive foreign exchange markets can pose significant challenges for corporate treasurers as they manage their ongoing cash management needs. In response to this, and to better serve its growing community of corporate users, Thomson Reuters has launched FX Monitor in Eikon Messenger.
SEC Announces Fraud Charges Against Investment Adviser
The SEC alleges that Atlantic Asset Management LLC (AAM) invested more than $43 million of client funds in illiquid bonds issued by a Native American tribal corporation without disclosing the conflict of interest that the bond sales generated a private placement fee for the broker-dealer, whose parent company partially owns AAM.
SEC Files Charges in Multi-Million Dollar Market Manipulation
The Securities and Exchange Commission today charged a New Jersey man and his company with illicitly pocketing $13 million from an elaborate pump-and-dump scheme. The SEC alleges that Samuel DelPresto teamed up with others to secretly obtain control of substantially all available stock in four microcap companies and to facilitate coordinated trading that created the appearance of liquidity and market demand for the stocks. After unwitting investors were enticed through promotional campaigns to buy the stock at inflated prices, DelPresto dumped his shares on the market.
Ex-Wall Street execs get prison time for $11M con job
By Rebecca Rosenberg – NY Post
Lufthansa heist victim demands payment for testifying at trial
Three greedy executives at a now-defunct Wall Street trading company were sentenced Tuesday for defrauding investors out of more than $11 million to fund their lavish lifestyles. CEO Craig Rothfeld and majority owner Michael Romano each got 1 1/2 to 4 1/2 years in state prison after pleading guilty to grand larceny and other raps.
Environmental & Energy
Congress Reaches Fiscal Agreement That Ends U.S. Oil Export Ban
Congressional leaders unveiled a broad package of spending and tax legislation that would avert a U.S. government shutdown and lift the 40-year-old ban on crude oil exports.
Record high Arctic temperatures in 2015 having ‘profound effects’ on region; Latest Noaa report reveals 2015 temperatures were in some cases 3C above long-term average and 70% of ice pack in March was made of first-year ice
Oliver Milman in New York – The Guardian
The Arctic experienced record air temperatures and a new low in peak ice extent during 2015, with scientists warning that climate change is having “profound effects” on the entire marine ecosystem and the indigenous communities that rely upon it.
Carbon trading and offsetting can only cause more delays, Opinion News & Top Stories – The Straits Times
The Paris Agreement has mostly been greeted with enthusiasm, though it contains at least one obvious flaw. Few seem to have noticed that the main tool mooted for keeping us within the 2 deg C global warming target is a massive expansion of carbon trading, including offsetting, which allows the market exchange of credits between companies and nations to achieve an overall emission reduction. That’s despite plenty of evidence that markets haven’t worked well enough, or quickly enough, to actually keep the planet safe.
Carbon trading in Paris Agreement has set us up for failure
Hidden away in the pages of UN-speak that make up the Paris Agreement are the makings of global carbon market in which a host of exotic emissions derivatives can be freely traded, writes Steffen Böhm. And it’s all going to be a huge and expensive distraction from the real and urgent task of cutting emissions.
Xi Jinping defends China’s right to ‘sovereign’ internet
Charles Clover – FT
China’s President Xi Jinping on Wednesday defended China’s right to a “sovereign” internet in a speech that underlines China’s increasingly assertive efforts to justify online censorship.
China slowdown sinks Asia sentiment to 4-year low with Singapore most pessimistic: Survey, Economy News & Top Stories
The Straits Times
Sentiment at some of Asia’s biggest firms deteriorated again in the fourth quarter, falling to a four-year low under the weight of concerns about slowing growth in China, the region’s biggest economy, a Thomson Reuters/Insead survey showed.
Most of the world’s female billionaires are heiresses—but in this region, a majority are self-made
Ashley Rodriguez – Quartz
Most of the world’s female billionaires owe their fortunes to rich parents or husbands from whom they inherited their wealth. But not in Asia. There, a majority of the small but growing number of female billionaires are self-made.
Hong Kong’s Banks, Awash in Money, May Ignore Fed’s Cue on Rates
Hong Kong’s lenders are awash with near-record levels of interbank funds, giving them scope to resist the immediate need to pass on any interest-rate increase by the city’s de facto central bank and the U.S. Federal Reserve this week.
Reform of China’s booming internet financial services comes as fraud cases highlight lack of efficient industry regulation
South China Morning Post
China’s plans to modernise its financial services have come at a time when the mainland’s internet finance industry is booming, but regulators are also facing challenges following recent cases of fraud. The influence of the internet on global business will be come under the focus of this week’s three-day World Internet Conference, attended by many senior technology company executives, in Zhejiang province, which opened on Wednesday.
Collaboration: key to Internet finance growth in Hong Kong
Internet finance has become one of the hottest emerging industries in the past year. Thanks to the highly regulated banking industry in China, more non-banks are engaging in banking activities using the Internet. Hong Kong is significantly lagging behind China in this space. But experts said collaboration with these Chinese players will help to boom Hong Kong’s market of Internet finance.
Vietnam Sails Smoothly Through The Commodity Storm
The Market Oracle
Vietnam’s economy, driven by its strategic advantage of low cost manufacturing, is continuing to maintain its position as one of the fastest growing economies in Asia, and is poised for stronger economic growth throughout 2025.
Saudi King Salman orders investments in Egypt exceed $8 bln
Al Arabiya News
Saudi Arabia’s King Salman on Tuesday ordered the kingdom to help meet Egypt’s petroleum needs for the next five years, Saudi state news agency SPA reported. He also ordered that Saudi investments in Egypt be more than $8 bln (30 billion Saudi riyals,) SPA said.
Modest world growth forecast for 2016
Eminent experts and thought leaders from international organizations including the World Bank, the International Monetary Fund (IMF), the World Economic Forum (WEF) and Foreign Affairs magazine presented in-depth analyses and forecasts on the state of the Arab region and the world at large focusing on the economic and political landscape as part of the eighth Arab Strategy Forum in Dubai on Tuesday.
Emerging Markets Gird for Fed Rate Increase
The Federal Reserve’s expected first rate increase in almost a decade is stirring fears of another wave of turmoil in emerging markets that have already been hit by financial squalls, rising debt levels and anemic demand. Investors have already withdrawn a net $500 billion from emerging markets in 2015, the first annual outflow in decades. The question now is whether the Fed move provokes a stampede.