Hits & Takes
By JLN Staff
The opinion piece in the Pekin Daily Times takes aim at the hedge fund and alternative investment space, including research saying that “of the 33 states for which data was available, the average state pension fund returned 5.46 percent over the decade ending in June 2017. A sample index fund of 60 percent stocks and 40 percent bonds returned 6.4 percent on an annualized basis during that time.”~JK
Brookings put out a study on global metropolitan areas with the fastest growing economies, and the list of the top 50 as measured by annual GDP growth from 2014-2016 is stunning – 45 of the top 50 are in China. However, one of the five not in China is actually the city in first place – Dublin. ~SD
According to CLS data, currency trading volumes rose 2.6 percent in July on last year, although July volumes were 13.7 percent lower than the previous month of June.
CLS said the average daily traded volume of currencies submitted to it reached $1.638 trillion in July, up from $1.596 trillion in the same month in 2017, Reuters reported.~SR
The newest CFTC Talks podcast is out. It’s a shorter, “FlashCast” episode focused on a single subject and features John Coughlan of the CFTC’s Market Intelligence Branch. ~SD
MWE World of Opportunity – Are we reliving history?
“The important thing to understand about crypto is it’s polymorphic… meaning that the same thing can be an investment,… it can be a commodity… or it can be a currency.”
Did you know that when bitcoin was trading at its highs in December 2017, one could regularly purchase it for $1,000-$2,000 less than the “highs” being reported in the news? In this video from MarketsWiki Education’s World of Opportunity event in New York, Dave Weisberger, head of equities at ViableMkts, compares the current state of crypto trading infrastructure to previous market structure issues.
Watch the video here »
SEC Facing Lawsuit over Decision to Force Electronic Delivery of Shareholder Reports
WhatTheyThink: Market Intelligence for the Printing Industry
The Coalition for Paper Options, whose members include Consumer Action, the National Consumers League, and the National Grange, have joined Consumer Action, the American Forest & Paper Association, the Printing Industries Alliance and Twin Rivers Paper Company in filing a federal petition for review to stop Rule 30e-3, adopted June 4 by the Securities and Exchange Commission (SEC) to switch the default distribution method for annual and semi-annual mutual fund performance reports from mail to electronic delivery.
**** The SEC is facing a lawsuit from the paper-based communications lobby. I think I know who the folks at the Scranton office are rooting for in this legal tussle.~SD
Sorry, But Starbucks Will Not Be Accepting Bitcoin
Jordan Pearson – Motherboard
Contrary to numerous news reports, Starbucks’ new cryptocurrency partnership with Microsoft and Intercontinental Exchange doesn’t mean you’ll be able to spend your bitcoins at the coffee retailer’s locations.
****Let’s be clear, people would only be spending some fraction of bitcoin anyway – whose Starbucks bill comes out to $6,700? ~ SD
****Actually, I think that’s three lattes and a strawberry scone.~SR
Elon Musk declares plan to take Tesla private
Arash Massoudi, Richard Waters and James Fontanella-Khan – Financial Times
Elon Musk took to Twitter on Tuesday to declare that he wanted to take Tesla private in a deal that would value the company at $70bn, potentially bringing an end to his fractious relationship with Wall Street.
Mr Musk announced his plans in a Twitter post shortly after a Financial Times report that Saudi Arabia’s sovereign wealth fund had taken a $2bn stake in the electric carmaker.
**** Now where is that checkbook?~JB
ICOs Are Turning Exclusive as Wealthy Investors Snatch Up Deals
Justina Lee – Bloomberg
ICOs were supposed to be IPOs without the Wall Street middlemen and Washington meddling. Now they’re looking a bit less revolutionary.
Initial coin offerings have raised $18 billion for blockchain startups this year, almost five times last year’s total, according to CoinSchedule. But unlike 2017, this is increasingly due to blockbuster sales that targeted accredited (read: wealthy) investors instead of just anyone with an internet connection.
**** Is anyone surprised?~JB
Apple tells lawmakers iPhones are not listening in on consumers
David Shepardson, Stephen Nellis – Reuters
Apple Inc told U.S. lawmakers on Tuesday that its iPhones do not listen to users without their consent and do not allow third-party apps to do so either, after lawmakers asked the company if its devices were invading users’ privacy.
**** Anyone who has tried to get Siri to respond could tell you this. “Siri…hello Siri…hey Siri…you there Siri?”~JB
6 Books That Will Teach You About The Real Wall Street
Kevin McPartland – Forbes
There is always a story – sometimes interesting, sometimes boring – explaining how we got here and why things are the way they are. In an age where Wall Street remains largely misunderstood by non-Wall Streeters, and many on Wall Street must maintain such a laser focus on the task at hand that they can’t see the forest for the trees, hearing the stories that explain how the market really works and why it works the way it does is more important than ever. Innovation, failure, genius and greed all played their part – but putting those things in context is of critical importance and will help move the market and your career forward. These are my favorite books that tell those stories:
**** Still some summer left for a good beach book.~JB
Tuesday’s Top Three
Tuesday’s top stories were a string of animosity, curiosity and sadness. The New York Post’s piece on what billionaires and their ex-wives do in their spare time caught the most attention with Inside the bitter divorce war between billionaire exes. This time it’s Bill Gross and his ex, Sue who leave one wondering, “Isn’t there anything better to do with your money?” Second was the curious case of Carthage College, which does know what to do with its endowment money, in Bloomberg’s Tiny Wisconsin College Using Index Funds Trounces Endowment Rivals. Third was the JLN obituary Joe O’Neill, New York Commodity Exchange Executive, Passes Away
130,795,233 pages viewed; 23,232 pages; 214,495 edits
Mosaic Data touts analytics platform that could cut trading losses
Laura Noonan – Financial Times
More than 20 investment banks and asset managers are considering using a real time data analytics platform for the $2.1tn interest rate swap market that could reduce trading “fat finger” and other trading losses and boost revenues in their Fixed Income, Currencies and Commodities businesses.
Incentives to centrally clear over-the-counter (OTC) derivatives
The report concludes that the reforms – particularly capital requirements, clearing mandates and margin requirements for non-centrally cleared derivatives – are achieving their goals of promoting central clearing, especially for the most systemic market participants. This is consistent with the goal of reducing complexity and improving transparency and standardisation in the OTC derivatives markets. Beyond the systemic core of the derivatives network of CCPs, dealers/clearing service providers and larger, more active clients, the incentives are less strong.
****Financial Times with FSB gives mostly positive review of post-crisis derivatives rules
SEC’s Proposed Curbs on Stockbroker Advice Under Attack; Plan from Trump-appointed officials at SEC runs into criticism from both brokers, investors
Dave Michaels – WSJ
A government proposal to restrict incentives that can bias broker advice to clients is generating complaints both from Wall Street and investor advocates. The plan by the Securities and Exchange Commission, developed by Trump-appointed officials, may replace some aspects of an Obama-era regulation by the Labor Department that Wall Street successfully challenged in court. A federal court invalidated the Labor rule, and the Trump administration declined to appeal the decision, killing it for good.
CFTC’s Giancarlo cites threat from China futures markets in bid for more money
MLex Market Insight
J. Christopher Giancarlo, head of the US Commodity Futures Trading Commission, said China’s futures markets pose a long-term challenge to the United States that should be met with more congressional funding for the Washington regulator. He sounded his warning in a Texas speech* last week in front of House Agriculture Committee Chairman Mike Conaway as a trade conflict between the world’s two biggest economies was heating up with new tariff threats.
‘Skin in the game’ is vital, says Gerald Beeson of Citadel
Chris Flood – Financial Times
The question often fired at US fund managers – “Where are the customers’ yachts?” – ricochets off Gerald Beeson, a top executive of Citadel, the Chicago-based hedge fund.
The naive inquiry, meant to highlight the difference between financiers and their clients, was immortalised by Fred Schwed’s eponymous book, which took a “good hard look” at Wall Street in 1940.
Schwed’s question is still relevant today. Investment managers often command vast salaries that appear wildly unfair to the public, with hedge fund managers gaining notoriety because of the mismatch between high fees and poor performance.
****Missed this over the weekend.
MiFID II: July Heatwave Slows Trading, But Structural Shifts Continue
Tim Cave – Tabb Forum
With a heatwave scorching much of Europe and inboxes filling up with out-of-office replies, it is no surprise to learn that trading slowed considerably in July. Total average daily notional in Europe’s equity markets fell by more than one-fifth month-over-month, to around EUR75 billion, according to TABB Group’s latest European Equities LiquidityMatrix, released today. Yet many of the structural changes ushered in by MiFID II at the start of the year showed no signs of abating, even in the depressed volume environment.
Investor Appetite for Hedge Funds Is Soaring – But Define ‘Hedge Fund’
Katia Porzecanski – Bloomberg
Investors are back to loving hedge funds, if you can still call them that. Net demand for allocating to hedge funds is the highest in at least three years at 28%, compared with 12% a year prior, according to a Credit Suisse Group AG survey released Tuesday. That ranks them only 1 percentage point behind private equity among the top alternative asset classes.
The Hedge Fund 100: Quant Funds Excel – at Asset Gathering
Steve Taub – Institutional Investor
The quants are still ruling the hedge fund world — at least when it comes to gathering assets. A handful of quantitative firms have continued to gobble up large sums of assets, catapulting many of them to the top of Institutional Investor’s 17th-annual Hedge Fund 100 ranking of the 100 largest hedge fund firms in the world as of year-end 2017.
Knight: Pension managers’ strategy cost retiree accounts up to $1T
Most of the losses came from these pension managers’ commitment to “alternative funds,” which invest in private equity and hedge funds instead of traditional stocks and bonds, according to reporter Dion Rabouin.
China announces 25% tariffs on $16 billion worth of US goods, including crude oil and cars
Exchanges, OTC and Clearing
Asia Embraces Dual-Class Shares, and Investor Activists Smolder
Benjamin Robertson and Andrea Tan – Bloomberg
In the battle between Asia and the U.S. for the next wave of technology listings, the shareholder advocates lost out.
After years of debate, Hong Kong and Singapore’s stock exchanges this year allowed companies to list shares with different voting rights. The fear that the next Alibaba Group Holding Ltd. or Baidu Inc. would opt for New York finally won out over concerns that dual-class shares would erode the long-term integrity of markets by allowing corporate founders to run roughshod over other investors.
Intercontinental Exchange Prices $2,250,000,000 in Senior Notes and Issues Notice of Redemption of 2.50% Senior Notes Due 2018
Intercontinental Exchange announced today that it priced an underwritten public offering of $2.25 billion in new senior notes.
SGX reports market statistics for July 2018
…Total Derivatives volume was 16.9 million, down 5% month-on-month (m-o-m) and up 19% year-on-year (y-o-y).
Euronext Announces Monthly Volumes for July 2018
In July 2018, the overall average daily volume on derivatives reached 543,902 contracts, up +9.3% compared to July 2017 and down -6.6% compared to the previous month. In detail:
Hong Kong exchanges first-half net profit up 44 pct to record
Alun John – Reuters
Hong Kong’s stock exchange operator said first-half net profit rose 44 percent, thanks to record high revenues from both trading and new listings.
Canada’s Pot Exchange Publishes Investors’ Personal Information
Kristine Owram – Bloomberg
The Canadian Securities Exchange has been publishing personal information of investors on its website for 15 years, including home addresses and amounts of their investments, a practice one shareholder rights advocate calls a “disturbing” breach of privacy.
Redline Trading Solutions Breaks 180 Nanosecond Tick-to-Trade Barrier
Redline Trading Solutions, the premier provider of high-performance market data and order execution solutions, today announced the production deployment of its hybrid software and FPGA-based market data and order execution gateway solution.
What’s missing from the OCC’s fintech charter
Karen Shaw Petrou – American Banker
The Office of the Comptroller of the Currency recently finalized its controversial decision to authorize a special-purpose fintech charter.
Although the OCC emphasizes that it’s holding these special-purpose charters to standards equivalent to those demanded of national banks, this is only sort of true with regard to the named prudential requirements, and it looks to be completely incorrect on critical restrictions on competitive and financial risk. These omissions have significant consumer protection, safety and soundness and structural impacts. Absent egregious violations, a charter granted cannot be revoked. The OCC should be sure it isn’t a shadow-bank enabler before it hands out these high-powered charters.
UK’s Financial Conduct Authority Collaborates On New Consultation To Explore The Opportunities Of A Global Financial Innovation Network
The Financial Conduct Authority (FCA) has, in collaboration with 11 financial regulators and related organisations, today announced the creation of the Global Financial Innovation Network (GFIN), building on the FCA’s proposal earlier this year to create a ‘global sandbox’.
Using machine learning to understand the mix of jobs in the economy in real-time
Arthur Turrell, Bradley Speigner, James Thurgood, Jyldyz Djumalieva and David Copple – Bank of England’s Bank Underground Blog
Recently, economists have been discussing, on the one hand, how artificial intelligence (AI) powered by machine learning might increase unemployment, and, on the other, how AI might create new jobs. Either way, the future of work is set to change. We show in recent research how unsupervised machine learning, driven by data, can capture changes in the type of work demanded.
Thought-Leading Fintech Session Predicts The Future Is Chat-Bots
Gina Clarke – Forbes
It’s not often that thought-leaders gather around a table, but that’s exactly what the University of Essex and insurance industry disrupters Hood Group set out to do. Just last month they pulled together industry leaders to talk about cyber security, how we analyse our data and waves in artificial intelligence.
And although top-name specialists from Microsoft, Filament, Profusion, and Signal Media attended, the real buzzword of the day was ‘chat-bot’ as they discussed the implications these handy automated new teams had on everything from marketing to the future of the insurance industry.
Turning Call Center Data Into Dollars at TD Ameritrade, USAA
Steve Cocheo – The Financial Brand
Many banks and credit unions spend a big chunk of their marketing budgets on consumer research, including studies, polls, and focus groups. But how useful — really — is the formal research your financial institution pays for? It might bear little resemblance to how people really behave and what they are truly looking for.
FINRA Issues Special Notice on Fintech and the Broker Dealer Industry
JD Alois – Crowdfund Insider
FINRA (Financial Industry Regulatory Authority) has issued a consultation on Financial Technology or Fintech and the Broker Dealer industry. The Special Notice was published at the end of July and is seeking comments until October 12, 2018.
Ex-regulators join advisory board of cryptocurrency startup Omniex
Former U.S. Securities and Exchange Commission chairman Arthur Levitt and former Federal Deposit Insurance Corp chair Sheila Bair have joined the board of advisors of cryptocurrency trading platform Omniex, the company said on Tuesday.
How your investments could soon be recorded using blockchain technology
Gregg Bell – MarketWatch
Within three to five years, blockchain-based investments are likely to be part of typical mainstream investment strategies the way private equity, hedge funds, real estate, commodities and derivatives contracts are today.
This is not to say that Main Street will be investing in cryptocurrencies, although they may, but rather that existing investments will rapidly migrate to blockchain recording and settlement systems. Look at the recent announcement by Intercontinental Exchange Inc., the parent of the New York Stock Exchange, that it will launch its own cryptocurrency exchange this year.
Barclays traders say they’re building out a crypto desk— but the bank says it has nothing in the works
Oscar Williams-Grut – Business Insider
Barclays appears to have had at least two former traders looking at the viability of a cryptocurrency trading desk within the firm’s investment bank.
Matthieu Jobbe Duval and Chris Tyrer have been working on a “digital asset project” since January, according to their LinkedIn profiles. A source told Business Insider the two had been looking at cryptocurrencies.
West Virginia to Offer Blockchain Voting for This Year’s Midterm Elections
Rachel Kraus – Mashable
A new pilot program in West Virginia aims to take voting into the technological future. In doing so, the state has cast its eye toward one of the most popular tech buzzwords of 2018.
Regulators Plan ‘Global Sandbox’ for Fintech Including Blockchain
Wolfie Zhao – Coindesk
A number of financial regulators from across the globe are forming a new alliance to facilitate the growth of financial technologies such as blockchain and distributed ledger technology (DLT).
Study Provides an Interesting Look at Changing Bitcoin Narratives
Jamie Redman – Bitcoin.com
Last week Nic Carter, the partner at Castle Island Ventures and co-founder of Coinmetrics.io, published an interesting study that looks at the ever-changing narratives tied to Bitcoin technology. Carter and his fellow researcher Hasufly scraped up a lot of data stemming from Bitcointalk.org posts over the years that highlight some of the community-derived visions of what Bitcoin should be and how these visions have changed over time.
Blockchain in Financial Services: Where Are We Now?
Andrew Dunmore – Maven Wave
A lot has transpired since we last covered the topic of blockchain in financial services in the May 2017 Maven Wave newsletter: at that time, the price of bitcoin (BTC) had yet to rise above $2,000 and the concept of an ICO (initial coin offering) was just emerging in the eyes of the public. Since then, BTC topped $19,000 in December and has recently traded around $8,000 while ICO’s raised $5.6 billion in 2017 and, according to PwC, over $13 billion so far in 2018.
SEC Postpones Decision on Vaneck Solidx Bitcoin ETF but Previous Concerns ‘Resolved’
Kevin Helms – Bitcoin.com
The U.S. Securities and Exchange Commission (SEC) has extended the time period it needs to make a decision on the Vaneck Solidx bitcoin ETF based on the proposed rule change filed by Cboe BZX Exchange. Meanwhile, the ETF team has submitted to the SEC key changes addressing all concerns cited as reasons for rejecting Solidx Bitcoin Trust ETF last year.
US DEA: Criminal Activity in Cryptocurrency Has Dropped 80 Percent Since 2013
William Suberg – Cointelegraph
An agent of the U.S. Drug Enforcement Administration (DEA) has noted that Bitcoin’s (BTC) role in crimes has dropped to just 10 percent of transactions, while transactions themselves have “grown tremendously,” Bloomberg reports August 7.
Over $9 billion wiped off bitcoin’s value after SEC postpones key decision on a cryptocurrency ETF
Arjun Kharpal – CNBC
Bitcoin fell sharply on Wednesday after the U.S. Securities and Exchange Commission (SEC) delayed a decision on a proposed bitcoin exchange-traded fund (ETF), which would have been the first financial product of its kind.
Code as a Weapon: Amir Taaki Wants You to Join the Real Crypto Revolution
Rachel Rose O’Leary – Coindesk
There are many words that could be used to describe Amir Taaki – but today, ambitious is best. The infamous bitcoin developer – known for co-creating Dark Wallet, Darkleaks and OpenBazaar – took the stage during a hackathon he hosted in the wake of the Privacy Enhancing Technologies Symposium (PETS) in Barcelona last week, the same city where he plans to set up his academy of coders, hackers and philosophers dubbed Autonomous Polytechnics.
‘We Are at the Limit’: Trump’s Tariffs Turn Small Businesses Upside Down
Ruth Simon – The Wall Street Journal
The firm, which employs five people in Asheville, N.C., imports the bikes it designs from a factory in Jinhua City, China, and says it can’t find comparable motors in the U.S. The tariffs, if they go into effect, would add $425 to the cost of its bikes, which currently retail for as much as $3,250. The dealership idea is now on hold while the company tries to figure out a new wholesale price that dealers will accept and that won’t kill its profit.
U.S. sanctions threat hurts Russian banks, rouble
The rouble weakened and shares in Russia’s top lenders Sberbank and VTB fell on Wednesday after the Kommersant daily said they could be banned from operating in the United States under proposed U.S. sanctions legislation.
Iranian Hackers Turn to Ransomware, Bitcoin as Economy Stalls
Threat comes as the U.S. moves to reimpose tough economic sanctions on the country
By Robert McMillan – The Wall Street Journal
Iranian hackers are developing software attacks that render computer systems inoperable until a digital ransom is paid, a new report says, a threat that comes as the U.S. moves to reimpose tough economic sanctions on the country.
Goldman Sachs Is Said to Be Under U.S. Scrutiny in Malaysian Inquiry
Matthew Goldstein – NY Times
Federal prosecutors in Los Angeles drafted a criminal complaint against a former Goldman Sachs banker early this year for his alleged role in a vast Malaysian fraud, but the charges were never filed because of a Justice Department turf battle, according to two people familiar with the investigation.
SIFMA Submits Comments To The SEC On Regulation Best Interest
SIFMA today responded to the Securities and Exchange Commission (SEC) request for comment on its proposed Regulation Best Interest (Reg BI), expressing support for the proposal and offering suggestions to ensure it most efficiently accomplishes its stated goal of protecting investors.
Investing and Trading
ABN Amro Clearing focuses on Brazil, de Bruijn to lead
Global Investor Group
ABN Amro Clearing will target clients domiciled outside of Brazil trading on the B3 exchange
Fund Files: Goldman plots thematic ETFs; Newton PM exits
Goldman Sachs is plotting five thematic ETFs, based on indices provided by Motif Capital Management, according to a Securities and Exchange Commission (SEC) filing.
The five ETFs are:Goldman Sachs Motif Data-Driven World; Goldman Sachs Motif Finance Reimagined; Goldman Sachs Motif Human Evolution; Goldman Sachs Motif Manufacturing Revolution; Goldman Sachs Motif New Age Consumer.
E-sports and retail forex
Paul Orford – FinanceFeeds
In forex we often pat ourselves on the back for being at the vanguard of technological innovation and with finding new areas to use in making our companies as profitable as possible.
Over the past couple of years, we have seen the exponential rise of brokers sponsoring everything from football stars and Formula One to Mads Mikkelsen dressed stereotypically in black, looking pensive and playing chess.
I’ve often found that there’s a distinct lack of innovation in branding, with one broker following the other in what they believe works.
Record decline in the ag barometer as trade war concerns and low commodity prices weaken producer outlook
The Purdue University/CME Group Ag Economy Barometer declined 26 points, down to 117, in July making it the largest one-month decline in producer sentiment since data collection began in October 2015. The drop in sentiment was fueled by increasing trade war concerns and decreasing commodity prices.
New TP Icap boss pledges to protect pay in cost battle
Samuel Agini – Financial News
The new chief executive of TP Icap, the interdealer broking giant under pressure to bring costs under control, has said too much focus on keeping levels of broker pay down could damage the group.
J.P. Morgan and Goldman Sachs are adding algo-trading VPs
Sarah Butcher – efinancialcareers
Structurers aside, one type of finance professional is particularly popular this year: the systematic or algorithmic (algo) trader. Whether it’s to work on the central risk book or creating algos for customer trades, banks are busy looking for algo trading talent. Both Goldman Sachs and J.P. Morgan have recently added vice president (VP) level talent in the area. Goldman Sachs hired Tim Rohkemper from Credit Suisse. J.P. Morgan hired Fabian Mehmke from Deutsche Bank. Both joined in London.
ABN Amro to cut jobs as it retreats to Dutch market
Martin Arnold – The Financial Times
ABN Amro plans to cut 250 jobs in its corporate and investment bank, its worst performing unit, as the majority state-owned Dutch bank continues to shrink back to its domestic market. The lender, which is 56 per cent owned by the Dutch government, said the fresh restructuring of its corporate and investment unit would retrench from some internationally focused businesses, such as trade and commodity finance, and from more cyclical areas.
ITG Reports Second Quarter 2018 Results
ITG (NYSE: ITG), a leading independent agency broker and financial technology provider, today reported results for the quarter ended June 30, 2018.
Turkey: how investors turned on Erdogan
Jonathan Wheatley, Roger Blitz, Chloe Cornish and Steve Johnson – Financial Times
A turbulent past 24 hours for the Turkish lira is the latest development in a testing year for Turkish bonds and equities.
China soybean prices spike as trade war worries feed supply fears
China’s soybean and soymeal prices jumped on Wednesday, with beans posting their biggest daily gain in a decade, as data showing a drop in soybean imports stirred supply concerns as a bitter trade dispute between Washington and Beijing plays out.
Pressure Builds on U.K. Labour to Back Second Brexit Referendum
Thomas Penny – Bloomberg
Pressure is building on U.K. opposition leader Jeremy Corbyn to switch course and back a referendum on whatever Brexit deal the government reaches with the European Union.
Labour Party activists are trying to force a debate on the issue at its annual conference in Liverpool next month. If they succeed — and there are still some hurdles — a second plebiscite that could potentially reverse Brexit becomes much more likely.
Brexit at breaking point? Diary dates for Britain’s EU departure
British Prime Minister Theresa May has less than eight months to negotiate a Brexit deal, sell it to her divided Conservative Party and win parliamentary approval.
How Brexit Could Affect Finance, Real Estate And The Global Economy
Ely Razin – Forbes
As the date for Britain’s exit from the European Union inches closer, the U.K. is in turmoil over how exactly that withdrawal will look.
Since July, two high-profile pro-Brexit leaders, David Davis and Boris Johnson, have quit the cabinet and British Prime Minister Theresa May released a white paper outlining the government’s vision for its post-Brexit relationship with the European Union.