Mystery of Russian Crime Gang, ADM Brokers Solved in U.K. Court; SEC poised to shorten settlement cycle for securities trades; The Banker-Turned-Seminarian Trying to Save Citigroup’s Soul

Mar 17, 2017

First Read

Boca Bits
JLN Staff

During the exchange leaders panel, panelists were asked what company and city would dominate swaps clearing in 5 years. During CME Group CEO Terry Duffy‘s response, he (again) raised the spectre of the CME Group moving out of Chicago by refusing to say where CME would be headquartered in a half decade.

The consensus from the Washington Outlook panel was it will be extremely difficult for any reforms (read Dodd-Frank) to make it through Congress, so significant regulatory shifts will emerge from the agency level.

Chris Giancarlo got a standing ovation at FIA Boca, while Sen. David Perdue, who serves on the Senate Ag Committee, did not.

FIA’s annual futures and options survey is out and shows that global volumes rose 1.7 percent to a record 25.22 contracts in 2016.

Congratulations to Sean Smith, who took the new role of managing director of derivatives licenses at FTSE Russell, leading the company’s efforts in options and futures. He is the right guy at the right time for the job.

According to ICE CEO Jeff Sprecher, exchanges collaborate on issues regarding cyber security with working groups more than the public might think (after the necessary confidentiality agreements are in place of course).

China now has six of the 10 largest ports in the world and 30 of the top 50. That means two-thirds of the container traffic in the world passes through Chinese hands. SGX’s Michael Syn said that puts SGX and its new Baltic Exchange in a strong position to capitalize on shipping and freight.

SGX’s London office will move into the Baltic Exchange building on April 7.

NEX Group was prominently represented at the event, not only with its leader Michael Spencer, but with its full team ready to explain the new company’s vision and strategy, post ICAP. More on that to come in JLN.

On March 29, CBOE will release a timeline regarding Bats integration.

Mentioned at the Silicon Valley Meets Wall Street panel — at what point will we be able to say, “Alexa, buy 100 shares of $XYZ”?

Without naming names, Scott Mullins of Amazon Web Services said there are matching engines in the cloud, albeit in test mode.

FIA Boca had another strong showing with about 1,100 attendees from a record 25 different countries. A great conference considering the snowy weather and flight delays.


Vision: What Richard Sandor Saw And Still Sees In Carbon Markets

Richard Sandor has seen just about everything in his career as the “father of financial futures.” From creating the first interest rate futures contract to founding the Chicago Climate Exchange, he tells it all in his latest book, “How I Saw It: Analysis and Commentary on Environmental Finance”. He spoke with John Lothian News about just how far carbon markets have come since 1999.

“It’s amazing to me, where we came from in the last two decades and during the period of this book, from 1997 or 1999 to 2005,” Sandor said. “What became a theoretical construct became a reality today adopted around the world.”

Watch the video »


CME Group Announces Rutgers University Wins 14th Annual Trading Challenge; Innovative competition aims to educate & inspire next generation of finance professionals
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the winners of its 14th annual CME Group Trading Challenge, including the first-place winners from Rutgers University. This is the first time in three years that the winning team has been from a university in the United States.

***** Another Big Ten win!


Amid ‘Trump Effect’ Fear, 40% of Colleges See Dip in Foreign Applicants
The president of Portland State University, Wim Wiewel, met last week with 10 prospective students in Hyderabad, India. But what started as a get-acquainted visit quickly turned into more of a counseling session, as the students expressed fears about coming to the United States this fall.

***** Foreign students tend to pay full price for tuition, which subsidizes the cost to U.S. citizen students. We can probably expect to see higher tuition prices because of the “Trump Effect.”


Tillerson Doesn’t Rule Out Preemptive Strike on North Korea
by Nick Wadhams and Kanga Kong – Bloomberg
Rules out talks with North Korea until it gives up weapons; China’s retaliation against South Korea is ‘inappropriate’
Secretary of State Rex Tillerson said the U.S. is considering “all options” to counter North Korea’s nuclear threat while criticizing China over moves to block a missile-defense system on the peninsula.

***** I thought he said North Korea did not have anything to fear from the U.S.


Thursday’s Top Three
Racing out ahead in our top three yesterday is FIA inducts 14 individuals into FIA Futures Hall of Fame. In a strong second we have the WSJ’s Virtu Financial Makes Bid to Acquire KCG Holdings. Rounding out the week is our own Spencer Doar in JLN, How do we make American markets great again? Keep it simple, stupid.


MarketsWiki Stats
95,706,005 pages viewed; 22,385 pages; 204,354 edits
MarketsWiki Statistics


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Lead Stories

Mystery of Russian Crime Gang, ADM Brokers Solved in U.K. Court
by Patrick Gower and Suzi Ring – Bloomberg
Police say firms were laundering dirty money through trades; Four companies say U.K. police abused power by seizing checks
A year-old mystery over the identities of four companies at the center of allegations of Russian money-laundering that led to the dawn arrest of a London broker was solved this week in a city courtroom.

SEC poised to shorten settlement cycle for securities trades
Sarah N. Lynch – Reuters
U.S. securities regulators are poised to shorten the amount of time it takes for a securities trade to settle, from three to two business days, in an effort to reduce credit and market risk exposure.

The Banker-Turned-Seminarian Trying to Save Citigroup’s Soul; Bank takes new approach to cultural issues: hires David Miller as on-call ethicist
Can a big bank have a conscience? Citigroup hired one. David Miller is an on-call ethicist the bank consults on weighty questions of right and wrong, supplementing its armies of lawyers and compliance officers. A Princeton University professor by day, Dr. Miller has worked with Citigroup intermittently for the last three years to tackle abstract issues about banking and morality.

**JK: I wonder, does he pray for Chuck Prince?

Currency Traders Race to Reform ‘Last Look’ After Bank Scandals
by John Detrixhe – Bloomberg
Public disclosures may help image after scandals, fines; Industry developing code of conduct for trading practices
Currency traders may not be fast enough, at least when it comes to cleaning up their image.

OCC Educating Lawmakers on Potential Impact of Tax Reform on Listed Equity Options Market
Craig Donohue, OCC Executive Chairman and CEO
Last November?s national election results brought dramatic change to Washington, D.C., not only in the White House, but also on Capitol Hill. One of the areas that OCC and the U.S. Securities Markets Coalition has been paying close attention to is the issue of comprehensive tax reform and its potential impact on the U.S. listed equity options markets.

Goldman Sachs’ Blankfein on government positions, public service
Portia Crowe – Business Insider
Goldman Sachs CEO Lloyd Blankfein dedicated a portion of his annual letter to defending his firm’s tradition of sending alumni to government positions. “Gary was not the first person from Goldman Sachs to join the government, and we hope and expect that he will not be the last,” Blankfein wrote of Gary Cohn, his former no. 2 executive who left in December to join President Trump’s administration.

February 2017 Swaps Review
Amir Khwaja – Clarus FT
Continuing with our monthly Swaps review series, let’s look at volumes in February 2017.

Scotland could abandon currency union with UK, says Alex Salmond; Westminster delay will increase nationalist support, warns ex-SNP leader
by: Henry Mance, Political correspondent – FT
Scottish Nationalists are prepared to change their blueprint for independence and abandon previous proposals for a currency union with the rest of the UK, the former first minister Alex Salmond has said.

Virtu’s bid for KCG stokes liquidity fears; Deal could result in less trading and lower exchange revenues
Robert Mackenzie Smith –
Traders and exchange operators are raising concerns about Virtu Financial’s proposed acquisition of KCG, which they say may worsen liquidity in already fragile markets. Both firms are active market-makers in equity, foreign exchange and interest rate products. “There’s concentration and now there are fewer liquidity providers,” said Eric Chern, chief executive at Chicago Trading Company (CTC), a proprietary market-making firm specialising in derivatives. “In the past two weeks, we’ve had a

Letter bomb at IMF’s Paris office injures woman employee
Sophie Louet and Bate Felix – Reuters
A female employee of the International Monetary Fund suffered injuries to her face and arms on Thursday when a letter bomb mailed from Greece and addressed to the world lender’s European representative blew up as she opened it, officials said.

Exchanges, OTC and Clearing

CCP chiefs warn on clearing provision capacity; Ice and LCH question whether direct buy-side clearing models can alleviate capital crunch
Robert Mackenzie Smith –
Derivatives markets are facing a dangerous lack of capacity when it comes to client clearing provision, senior executives at the world’s largest central counterparties (CCPs) have warned – but operators are split on whether clearing models that allow buy-side firms to face CCPs directly are part of the solution. Speaking at the International Futures Industry Conference in Boca Raton, Florida today (March 16), representatives from both Ice and LCH warned that the decline in the number of futu

Does the CBOE takeover of BATS go against the spirit of MiFID?
FTSE Global Markets
The takeover of BATS by the CBOE could present significant challenges to smaller MTFs looking to make a mark in a post MiFID world. Sylvia Smit, head of Equity Markets Delivery at Delta Capita looks at some of the potential issues they might face.

Options on Banca Monte dei Paschi di Siena S.p.A.: Exercises in the March 2017 expiration
On the basis of § 16 Para. 3 Clause 4 of the Exchange Rules of Eurex Deutschland and Eurex Zürich, the Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG order the following:

The Mercado Alternativo de Renta Fija (MARF) today registered a new bond tranche issued by Masmovil Broadband with a 5.75% annual coupon and maturity in 2024. The amount of this new issue, which adds to the EUR30 million placed in July 2016, is EUR38 million and was placed at a 5.1% yield.

SIX develops blockchain bond trading platform; New platform covers full bond trading lifecycle from issuance to settlement, although it is some way off market wide adoption.
By Hayley McDowell – The Trade
SIX Securities Services has developed a blockchain powered service covering the full bond trading life cycle from issuance to settlement.

Canada Goose Lists on Toronto Stock Exchange
Toronto Stock Exchange (TSX) today announced Canada Goose, a leading maker of Arctic luxury apparel, began trading on TSX this morning under the symbol TSX:GOOS. Canada Goose is the largest retail IPO year-to-date 2017 on TSX.


Illinois watchdog first U.S. regulator to join blockchain consortium R3
Anna Irrera – Reuters
The Illinois Department of Financial and Professional Regulation has joined the blockchain consortium led by startup R3, as financial watchdogs around the world seek to better understand the opportunities and risks of the emerging technology.

Blockchain Capital to raise $50 million, partly with digital token sale
U.S.-based venture capital firm Blockchain Capital LLC said on Thursday it plans to raise $50 million for a third fund through capital from its partners and a sale of its own digital tokens.

The ‘King of Mining’ and a former Merrill Lynch dealmaker back fintech startup Revolut
Oscar Williams-Grut, Business Insider UK
A raft of City grandees including a former star dealmaker known as the “King of Mining” and a key advisor behind Royal Bank of Scotland’s $100 billion (£67 billion) takeover of ABN Amro have invested in fintech app Revolut, filings suggest.

The Fintech Files: 3 Truths And 2 Myths
By Larry Cao, CFA
Neal Cross is the chief innovation officer of DBS, Singapore’s largest bank. His role affords him a unique perspective on many issues in fintech. We had a fascinating conversation on the subject late last year. Below are some of the thoughts he shared with me. He’ll also be speaking from Hong Kong at our Beijing-Hong Kong Fintech Connect Summit on 25 March 2017.

Fintech And Digital Wallets: Innovative Approach vs. Security Concerns
We are progressively being occupied with more up-to-date and better installment systems. Recently in 2017, Consumer Electronics Show or CES, we can witness these new methodologies. While all these money-related advanced and creative techniques for payment are probably going to develop, there is an equivalent level of security concern. Since we are amidst the principal wave of Fintech appropriation over the budgetary organizations, there are excessively numerous holes in security and compliance. New application engineers and IT organizations harbor a comparative sentiment. Juned Ghanchi of IndianAppDevelopers organization drives mobile application development organization in India. The organization stated, “conveying money related tech at the cost of security is the exact opposite thing we can consider. This is the reason the reception is still moderate crosswise over banks and budgetary foundations”. Before we assess these concerns, let’s discuss the rising Fintech, computerized payment procedures and the conceivable outcomes they offer.


One Beneficiary of GOP’s Tax Bill: President Trump; The big tax cut moving through Congress as part of a health bill could potentially save the president millions
The first big tax cut moving through Congress under President Donald Trump would likely benefit the president himself, potentially saving him millions of dollars in taxes on his rental income next year and even more money on other income if he wins a second term.

What the Markets Are Teaching the Trump Administration
By Komal Sri-Kumar – Bloomberg
Donald Trump’s unexpected election produced a sharp reaction in equity and bond markets. The Dow Jones Industrial Average closed up 0.4 percent on Election Day as investors had anticipated Hillary Clinton’s victory. As the outcome became clear a few hours later, investors expressed their disappointment by pushing the Dow Jones futures down 800 points at 2 a.m. New York time on Nov. 9.

Politics Hedging Becomes Pain Trade for Europe Stock Investors
by Aleksandra Gjorgievska – Bloomberg
Traders pay up for protection, VStoxx contracts volume soars; Dutch vote result sends equities up and volatility down
Traders’ choice to hedge against European equity volatility is proving to be a costly one, especially in light of the Dutch vote dealing a blow to the surge of populism in the region.

Ex-Workers at S.E.C. Nominee’s Firm Urge Him to Denounce Travel Ban
Some members of the elite legal community are making an unusual appeal to one of their own, asking that he speak out against the White House’s attempt to restrict travel to the United States by people from several predominantly Muslim countries.


China’s new bitcoin rules call for identity check
Chao Deng – MarketWatch
China’s central bank is moving to regulate its domestic bitcoin industry, circulating new guidelines that, if enacted, would require exchanges to identify clients and adhere to banking regulations.
Recent scrutiny by the central bank has already led exchanges to impose trading fees and suspend withdrawals of bitcoin from their platforms. Chinese investors have fled the market.

Sebi writes to Centre on capital gains in non-STT transactions; Markets regulator wants inter-promoter transfers, Esops out of Budget proposal ambit
Pavan Burugula – Business Standard
The Securities and Exchange Board of India (Sebi) is learnt to have given its final recommendations on the Union Budget proposal of imposing a capital gains tax on shares acquired without paying Securities Transaction Tax (STT).

Stockbroker Is Sentenced to Six Months’ Imprisonment for Insider Trading
By REUTERS via NY Times
A former investment adviser at Oppenheimer Holdings was sentenced on Wednesday to six months’ imprisonment after he pleaded guilty to insider trading based on information from a childhood friend who worked at Pfizer Inc.

Buy-side to wait until deadline before implementing unbundling; Recent survey finds majority of buy-side firms will wait until MiFID II is launched before implementing unbundling.
By Hayley McDowell – The Trade
Investment management firms are expecting to wait until the official launch of MiFID II before implementing unbundling, according to a survey.

TradingScreen launches MiFID II trading and matching engine; Turn-key SI/OTF developed with pre- and post-trade reporting for MiFID II.
By Hayley McDowell – The Trade
TradingScreen has launched a trading and matching engine for European banks, brokers and institutions who are implementing technology for MiFID II compliance.

Investing and Trading

Did Xie Zhikun’s Nearly $1 Billion Go Missing? A Private-Equity Mystery; Chinese investor says he backed XIO Group big-time; it says he didn’t, and now he has filed suit
When Chinese billionaire Xie Zhikun toured Europe in the summer of 2015, his hosts took him to the Aston Martin factory in the English Midlands, to the women’s tennis final at Wimbledon and to dinner at London’s Connaught Hotel, where he was presented with a portrait of himself painted in tea, according to people who helped organize the visit.

New York Pension Fund Dismisses a Third Brokerage Amid Bribery Scandal; The step comes as the pension fund reviews the actions of former portfolio manager Navnoor Kang, who has pleaded not guilty to federal bribery charges.
A New York state pension plan said it cut ties last week with Amherst Pierpont Securities, a brokerage that won nearly $2 billion in annual bond-trading business during the tenure of a portfolio manager now facing federal bribery charges.

JPM Quant Frets Stock Complacency Too High After Dutch Vote
by Adam Haigh and Lu Wang
Complacency among equity investors is rising after Dutch voters inflicted a blow to political populism and JPMorgan Chase & Co. says it’s a good time to hedge against a slide in stocks.

The 34-Year-Old Hedge Fund Manager Who Bet Everything On A Stock That Tanked
By Nathan Vardi and Antoine Gara – Forbes
Vadim Perelman was a young hedge fund hot shot not so long ago, overseeing a portfolio in the hundreds of millions at the age of 31, hopping on corporate boards, and issuing lengthy slide presentations about his favorite stock picks. But then Perelman placed an enormous bet on a single company, Walter Investment Management.


Edge or Liability? White House Ties May Cut Two Ways for Goldman
During a recent meeting with stock analysts to discuss a huge loss, the chairman of the Royal Bank of Scotland sought to inject some levity.

Bob Diamond to Return to U.K. Banking With Panmure Gordon Buy; Former Barclays chief executive teaming up with Qatari investment group
Former Barclays PLC Chief Executive Bob Diamond is to return to U.K. banking by joining forces with a Qatari investment group to buy 140-year-old stockbroker Panmure Gordon & Co. PLC.

Bob Diamond joins Qataris to launch bid for Panmure Gordon; Barclays ex-chief makes City return with move for lossmaking broker
by: Martin Arnold and Jennifer Thompson – FT
Bob Diamond, the former Barclays chief executive, has teamed up with the investment vehicle of the Qatari royal family to launch a bid for Panmure Gordon, the lossmaking stock broker and investment bank.

JPMorgan Chase names new head of retail brokerage
By Elizabeth Dilts – Reuters
JPMorgan Chase & Co named the head of its Latin America Private Bank as the new chief executive of its New York-based retail brokerage, JPMorgan Securities, the bank said on Thursday.

Virtu Seeks KCG’s Retail Order Flow
By John D’Antona – Markets Media
Virtu Financial’s unsolicited offer to buy KCG Holdings is all about the little guy – retail order flow.

JP Morgan adds block liquidity through SLS; Service launched by SIX Swiss Exchange and Liquidnet provide block liquidity for institutions.
By Hayley McDowell – The Trade
JP Morgan has signed up to a block liquidity service run by SIX Swiss Exchange and Liquidnet (SLS) to expand its liquidity pool for clients.


Lenders and Greece ‘wide apart’ on bailout review: euro zone official
Francesco Guarascio and Lefteris Papadimas – Reuters
Greece and its international creditors remain divided over the terms of a review of the country’s bailout program, a senior euro zone official said on Thursday, a gap that will prevent Athens from getting fresh financial support.

Unpaid wages, sackings stir new tension in Nigeria’s oil hub
Tife Owolabi and Libby George – Reuters
The moment a group of Nigerian contractors met executives from Italian oil major ENI to discuss unpaid wages they started shouting, calling them fraudsters and liars until a police commander restored calm.

G-20 Finance Chiefs Said to Drop Climate Reference in Document
by Alessandro Speciale and Rainer Buergin – Bloomberg
U.S., China, India, Saudi Arabia said to resist climate effort; Germany set to instead present climate plan at working group
Finance ministers from the world’s biggest economies dropped a reference to climate change in a draft of their statement at a Group of 20 meeting, frustrating plans by Germany to devote a section to the topic, according to people familiar with the talks.

JPM Quant Frets Stock Complacency Too High After Dutch Vote
by Adam Haigh and Lu Wang – Bloomberg
Netherlands election seen as blow to populist politics; Kolanovic says near-term market weakness more likely than not
Complacency among equity investors is rising after Dutch voters inflicted a blow to political populism and JPMorgan Chase & Co. says it’s a good time to hedge against a slide in stocks.


Carney Warns of Balkanization Risk in Global Financial Markets
by Alexander Weber – Bloomberg
FSB chief urges G-20 nations to boost regulatory cooperation; Incomplete standards could fragment funding, liquidity pools
Mark Carney, head of the Financial Stability Board, warned against giving in to “reform fatigue” a decade after the financial crisis, and called on the Group of 20 nations to strengthen regulatory cooperation.


In Trump’s America, the competition for investigative journalists is fierce
By Benjamin Mullin- Poynter
In the months since the election, America’s major newsrooms have been recruiting investigative journalists with the knowledge and skills to dig into government institutions at the federal, state and local levels.

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