Nasdaq’s Blueprint for a New Era of Trading; Revitalizing the Capital Markets; Managed-Futures Fund Launches In Q1 2017

May 5, 2017

First Read

So You Want Data? Julie Armstrong Menacho Says CME Is Transforming Data
JohnLothianNews.com

Every exchange is looking at new ways to store, package and provide data to end users. CME’s Julie Armstrong Menacho said the exchange is creating platforms for the next generation of data.

Speaking at Barchart’s FinTech Exchange Chicago conference in April, Armstrong Menacho outlined CME’s Technology Partner Services Directory, which provides a host of certified vendors from ISV’s, market data providers and risk management platforms. The new platform has more than 80 partners and plans to list around 200 by year end.

The exchange has also been migrating its historical data into the cloud for about two years and now offers over 450 terabytes of data that stretches back to the 1970s, also with a self-service online portal for easier access. Customers can now buy the data as a one-time purchase or on a subscription basis with daily updates. CME offers five data sets including market depth, top of book, end of day prices, time and sales and block trades. The exchange partnered with Amazon Web Services for its storage and ClickSmith as the online portal service.

Read the rest and watch the video »

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Virtu CEO Aims to Be the Good Guy of High-Speed Trading; Douglas Cifu’s firm poised to acquire rival KCG amid tough environment for HFT industry
Alexander Osipovich – WSJ
High-frequency trading firms are often cast as villains. Virtu Financial Inc. Chief Executive Douglas Cifu is determined to be seen as one of the good guys.
/goo.gl/YYKKL7

***** Doug seeks to be Virtu-ous.

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AxiomSL Appoints Peter Tierney CEO APAC as Firm Readies for Next Growth Phase
Yahoo Finance
AxiomSL, the global leader in regulatory reporting, data and risk management solutions, today announced the appointment of Peter Tierney as CEO of the firm’s Asia Pacific (APAC) region.
/goo.gl/iwdh5t

**JK: Good luck to Peter Tierney.

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Here’s Why Deutsche Bank London Staff Are Really Unhappy
Stephen Morris – Bloomberg
61% of Deutsche Bank staff complain after CEO slashed pay; U.S. firms still pay more than U.K. and European peers
Less than a quarter of London’s investment bankers were pleased with their 2016 bonuses, with staff at Deutsche Bank AG the most disgruntled after Chief Executive Officer John Cryan slashed discretionary compensation for many top traders and advisers. By a small margin, those at JPMorgan Chase & Co. were happiest.
/goo.gl/vaoBRb

**JK: This is a very unhappy crowd.

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Las Vegas strip club launches own cryptocurrency redeemable for drinks, dances
Henry Hughes – SMNWeekly
A new Las Vegas striptease club, The Legends Room, has launched its own cryptocurrency – Legends (LGD) – that can be used to pay for drinks and dances in the club, with a 20% discount, guaranteeing anonymity.
jlne.ws/2q48rju

**JK: What happens in cryptocurrency, stays in cryptocurrency.

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Cinnober Q1 Results
Cinnober
Net sales for the period amounted to SEK 85.6 million (SEK 76.3 million). The operating loss for the period amounted to SEK 1.9 million (profit SEK 1.1 million). The loss before tax for the period amounted to SEK 2.9 million (profit SEK 0.5 million). Cinnober holds a very strong position in its traditional market. Our core business is growing and continues to show improved profitability. At the same time, we are focusing on two growth areas, where, through subsidiaries, we are establishing new offerings, primarily in reporting services, clearing and risk solutions, for a larger target group in the form of international banks.
/goo.gl/kb1mup

***** There is a time to plant and a time to reap. While Cinnober reaps the benefit of their strong business, they planted a lot during the quarter, which is reflected in their statement.

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Thursday’s Top Three
Sometimes when we look at clicks, we’re surprised by what garnered the most attention. Yesterday’s top three were not a surprise. The top two stories pertained to the revelation that ICE and CME considered a tie-up last year. First was FT’s ICE held talks with US rival CME over exchanges merger and second was Bloomberg’s Two Market Giants Tried to Create a $75 Billion Mega-Exchange. The third was about a much-used upstart in the broking world, Robinhood stock-trading app confirms $110M raise at $1.3B valuation.

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MarketsWiki Stats
99,573,151 pages viewed; 22,486 pages; 205,796 edits
MarketsWiki Statistics

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Lead Stories

Nasdaq’s Blueprint for a New Era of Trading
Adena Friedman – WSJ
With the Nasdaq index above 6000 and the bull market in its ninth year, many investors are looking to tax reform as the next economic driver. That’s a good bet. Last year the managing director of S&P Global Market Intelligence estimated that every percentage-point reduction in the corporate tax rate could boost S&P 500 profits by 1%. But tax reform isn’t the only change needed to open a new era of growth in equities. Reforming financial markets is crucial too. Make no mistake: America’s capital markets are the envy of the world.
jlne.ws/2q3tiDt

Revitalizing the Capital Markets
Nasdaq
Nasdaq’s blueprint for revitalizing the U.S. capital markets will create a vibrant ecosystem that delivers enhanced opportunities, a more inviting environment for growth and innovation, and accelerates job formation and wealth creation.
/goo.gl/4Lsywd

Managed-Futures Fund Launches In Q1 2017
Seeking Alpha
Managed futures didn’t have the best start to 2017 it we’re specifically referencing performance, but there are glimmers of light worth mentioning from Preqin’s Q1 Hedge Fund Quarterly report. While Preqin estimates the industry was down -0.30% over the first three months of the year, more and more CTAs have set up shop.
jlne.ws/2pHGblb

EU plans to ease derivatives rules in bid to boost economy
Francesco Guarascio and Huw Jones – Reuters
The European Union has proposed easing derivatives rules in a move which will save pension funds billions of euros, as it seeks to boost growth in the bloc.
/goo.gl/NjH9vH

Fake news infiltrates financial markets; US regulator warns against increase in online paid stock-promotion campaigns
Chris Flood – FT
On January 18 2012, an article appeared on Seeking Alpha, the finance-focused website, entitled “Another revival could be in store for ImmunoCellular Therapeutics”. The article highlighted the US drug company’s work in developing an experimental cancer treatment.
/goo.gl/lq9bPs

EU outlines 3 options for London’s euro clearing business; Brussels says it will not be swayed by jobs or market developments
Philip Stafford and Rochelle Toplensky – FT
Brussels said on Thursday it would not be swayed by jobs or market developments as it decides whether to force sections of London’s vast euro denominated clearing business into the EU after the UK leaves the bloc.
/goo.gl/x8HyXr

’50 Cent’ trading mystery focuses on $20bn London fund; Wall Street bankers say Ruffer is investor buying insurance against market meltdown
Joe Rennison, Christian Pfrang and Miles Johnson – FT
For several months, the identity of a mystery buyer of millions of dollars of insurance against financial meltdown has consumed Wall Street traders.
/goo.gl/nf0NHO

China’s War on Debt Causes Stocks to Drop, Bond Yields to Shoot Up and Defaults to Rise; Banks and companies scramble for funds after regulators push to rein in risk
Lingling Wei and Chao Deng – WSJ
A wave of regulations aimed at cutting risk in China’s financial system is rippling through the country’s markets and sending banks and companies scrambling for funds.
/goo.gl/YK7YZy

How a Hedge-Fund Ace Chased Silicon Valley Riches—and Embarrassed Himself
Rob Copeland and?Peter Rudegeair – WSJ
For a solid decade, Nick Adams averaged 28% annual returns on the money he managed for a secretive trillion-dollar investment firm. Then he fell in love with Silicon Valley venture deals. That’s when things took a very different turn. Today, the Wellington Management Co. star has been reduced to steps unthinkable for most hedge-fund managers. He is admitting mistakes and apologizing. He has even agreed to refund fees, according to investors.
jlne.ws/2q3UIZZ

Call for truce in Brexit war of words
Arthur Beesley, Stefan Wagstyl and James Politi – Financial Times
Donald Tusk, the European Council president, has called for a ceasefire in the verbal hostilities over Brexit with Theresa May, warning that talks could become “impossible” if calm is not restored. The intervention by Mr Tusk is part of a concerted effort to defuse the tension between Brussels and London after the UK prime minister accused EU officials of trying to sabotage her election campaign.
jlne.ws/2q3PIV0

MetLife changes hedging strategy after billions in losses
Suzanne Barlyn – Reuters
MetLife Inc has changed its derivatives trading strategy after two consecutive quarters in which losses from wrong-way trades hurt the insurer’s profit. The largest U.S. life insurer has altered the “technique and structure” of certain hedges to make the company less sensitive to interest rate movements, Chief Executive Officer Steven Kandarian told analysts on a call to discuss first-quarter results on Thursday.
jlne.ws/2q3Kn00

****SD: Multiple reasons are given for what went wrong, but the eyebrow-raiser is “general ‘ineffectiveness.'”

GAIN Capital revenues dive 49% in Q1, $18.9 million loss, $5 million paid for FXCM US clients
Leaprate
Retail forex broker Gain Capital Holdings Inc (NYSE:GCAP) has reported what can only be described as a horrific quarter to begin 2017.
/goo.gl/bO1qOH

Exchanges, OTC and Clearing

DTCC Appoints Val Wotton As Managing Director, DTCC DERIV/SERV
Mondovisione
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced that Valentino (Val) Wotton has been appointed Managing Director, DTCC Deriv/SERV, effective August 29, 2017. In this role, Mr. Wotton will be responsible for product development and strategy, reporting to Chris Childs, President & CEO of DTCC Deriv/SERV.
jlne.ws/2q3Oglt

Bats Announces New Complex Order Options Functionality; Exchange will offer complex order functionality in late 2017; Augments CBOE Holdings leading position in the U.S. options market
Bats
Bats, a CBOE Holdings, Inc. company, and a leading operator of equities and options exchanges in the United States, announced today that it is planning to launch new complex order functionality on its EDGX options exchange.
/goo.gl/1IOi2a

Bats upgrades complex order book for CBOE options orders
The Trade
The expanded service will include new order handling, risk management and trade through protections and will form the foundation for all complex orders handled by CBOE markets.
jlne.ws/2pHDa4q

Eurex lists European factor futures
Helen Bartholomew – Reuters
Eurex has listed its first contracts linked to iStoxx European equity factor indices, allowing investors to trade six individual risk factors in futures format. The indices, which were developed in collaboration with independent asset management firm Alpha Centauri, allocate to alternative sources of beta in an attempt to deliver equity-like returns with low correlation.
jlne.ws/2q32enI

EEX Acquires 100% Ownership Of US Nodal Exchange
Business Wire
The European Energy Exchange (EEX), part of Deutsche Börse Group, and the owners of US-based Nodal Exchange Holdings, LLC have successfully closed the transaction under which EEX has acquired 100% of the equity in Nodal Exchange.
/goo.gl/uv1Csh

You Broke Our Heart, Jeff
Themis Trading Blog
We always look forward to reading though the earnings call transcripts from the stock exchanges each quarter. There is often a nugget or two of information from the exchange CEO’s that surprises us and makes us question if exchanges actually care about a healthy market structure or if they only care about their own bottom line. Here are two good examples from the 1Q quarter calls.
/goo.gl/780hZF

SGX reports market statistics for April 2017
SGX
Securities – Total Securities market turnover value was at S$21.6 billion, down 26% month-on-month and up 2% year-on-year, over 19 trading days. Total Derivatives volume was 13.55 million, down 14% month-on-month and down 9% year-on-year.
/goo.gl/kcKVIR

GPW Group’s Record-High Q1 2017 Revenue Driven By Rising Volumes On The Financial Market
Mondovisone
In Q1 2017, GPW Group continued its development initiatives aimed at growing the customer base, increasing liquidity and enhancing the cost regime to bolster efficiency of the Group. As a result, in Q1 2017 the GPW Group generated record-high sales revenues of PLN 91 million and a net profit of PLN 27.7 million; EBITDA stood at PLN 46.8 million. The results were driven mainly by growing turnover on the financial market.
/goo.gl/dVsZfz

Fintech

Trump visa crackdown spurs tech moves to Mexico; Silicon Valley expands south for access to skilled engineers struggling to enter US
Hannah Kuchler, Aliya Ram and Jude Webber – FT
Donald Trump’s pledge to clamp down on immigration has soured relations between Mexico and the US as the new president looks to build a border wall between the two countries.
/goo.gl/YPffI5

Oracle Closes Big Cloud Deal With AT&T, Inks Equinix Partnership
Data Center Knowledge
Thursday was a big day for Oracle’s cloud infrastructure business, with the company announcing a major cloud deal with AT&T and a partnership with Equinix to make Oracle’s cloud network accessible directly from data centers of the world’s largest retail colocation provider.
jlne.ws/2pHzmjo

Politics

Why Sweden Killed the Carried Interest Tax Break: QuickTake Q&A
Niclas Rolander and Niklas Magnusson – Bloomberg
Private equity partners in Sweden are reeling from a court decision that ends the tax break known as carried interest. Sweden is not the first country to target the widely reviled exemption, which lets some high-income fund managers pay taxes at a lower rate by counting their earnings as capital gains rather than salaries. The ruling, which could force some managers to pay back taxes on profits earned a decade ago, puts Sweden Inc. at loggerheads with the state and may even lead some firms to leave the country.
/goo.gl/nP2t1f

House Panel Approves Plan to Undo Parts of Dodd-Frank Financial Law; Financial Choice Act includes easing regulations and some capital requirements for healthy
Rachel Witkowski – WSJ
The House Financial Services Committee launched a Republican-supported rollback of Obama-era financial regulations, voting 34-26 along party lines Thursday for a plan to undo significant parts of the 2010 Dodd-Frank law.
/goo.gl/wL8yIt

Regulation

CFTC Permits Registered CTAs to Use Third-Party Recordkeepers; Action May be Required
Ropes & Gray LLP – JDSupra
On April 20, 2017, the Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight (the “Division”) issued Exemptive Letter No. 17-24 (“Letter 17-24”), which provides exemptive relief to registered commodity trading advisors (“CTAs”) from the requirement of CFTC Rules 4.33 and 4.7(c)(2) that required books and records be kept at the CTA’s main business office (the “Relief”).1 Additional action must be taken before a CTA is permitted to rely on the Relief.
jlne.ws/2pHxZkK

House panel passes Republican measure gutting Dodd-Frank reforms
Greg Robb – MarketWatch
The House Financial Services panel on Thursday passed Republican legislation to roll back major sections of the Dodd-Frank financial reform law. In a party line 34-to-26 vote, the panel voted to remove restrictions the Obama administration placed on banks if they agree to hold a higher level of capital.
jlne.ws/2q48USM

Joint Public Statement FSMA-ESMA Regarding EURIBOR
Mondovisione
The European Securities and Markets Authority (ESMA) and the Financial Services and Markets Authority (FSMA) of Belgium have issued a joint statement regarding the Euribor benchmark.
jlne.ws/2q3YsL0

Investing and Trading

The Slow, Leaking Poison of the Bond Market
James Mackintosh – WSJ
One might expect an all-star conference hosted by former junk bond king Michael Milken to be full of boosters for the riskier side of the credit markets, but not a bit of it. The prevailing mood this week at Mr. Milken’s annual gathering in Los Angeles was of caution about the lack of yield from the so-called high-yield market.
jlne.ws/2q3ZZ3C

Opinion: Bull run for gold is pure fantasy
Mark Hulbert – MarketWatch
Sentiment conditions remain unfavorable for gold. That’s surprising, since gold has endured a terrible couple of weeks. Normally that would have been enough to convince gold market-timers to run to the bearish camp, and in the process create the sentiment foundation from which a subsequent rally could be built.
/goo.gl/HdgCeI

Apple Buys More Company Debt Than World’s Biggest Bond Funds
Claire Boston – Bloomberg
Company invests $148 billion of cash pile in corporate bonds; ‘Difficult for us to speculate’ on repatriation, CFO says
If Apple Inc. were a bond fund, it would dwarf the competition.
/goo.gl/PhylOc

Oil Collapses to $45 as U.S. Shale Output Confounds OPEC Cuts
Ben Sharples, Serene Cheong and Grant Smith – Bloomberg
U.S. crude production rises in longest run of gains since 2012; Crude-price decline drags shares of energy companies lower
Oil slid below $45 a barrel for the first time since OPEC agreed to cut output in November as U.S. shale confounds the producer group’s attempts to prop up prices.
/goo.gl/DcJPtF

15 Years of SPIVA – Where Does the Active Versus Passive Debate Go From Here?
Aye Soe – Indexology
In the inaugural publication of the Journal of Portfolio Management in 1974, Nobel Laureate Paul Samuelson wrote that there is no “brute fact” that “there could exist a subset of decision makers in the market capable of doing better than the averages on a repeatable, sustainable basis.”[1] That article partly inspired John Bogle to launch the first index mutual fund.[2] Even though over four decades have passed since Paul Samuelson penned the article, his words remain relevant to today’s world of investing. This year marks the 15th anniversary of S&P Dow Jones Indices publishing the SPIVA U.S. Scorecard.
/goo.gl/RYq3Yx

Institutions

Exclusive: Global grain major ADM eyes cuts to Europe operations
Jonathan Saul and Michael Hogan – Reuters
U.S. agribusiness Archer Daniels Midland Co (ADM.N), reeling from the impact of a global grain glut, is now preparing to scale back its operations in Europe in a bid to boost profits, two sources with knowledge of the matter said. The Chicago-based agribusiness warned on Tuesday that worsening market conditions were making it difficult to turn a profit trading grain internationally, leading to the biggest daily share loss in eight years.
jlne.ws/2q3SGZS

Banks are finding it harder to attract young recruits
The Economist
“Fist bump, man.” That was how a young employee at Bank of America Merrill Lynch expressed his approval after a presentation to staff, recalls Diego De Giorgi, head of investment banking there. The boss obliged. After a recent “town hall” meeting he got an e-mail from a second-year analyst who wanted to discuss some ideas. Mr De Giorgi duly invited him and a few of his peers for a chat.
/goo.gl/f0PdR6

A decade after the crisis, how are the world’s banks doing?
The Economist
The election of Donald Trump as America’s 45th president dismayed most of New York; Mr Trump’s home city had voted overwhelmingly for another local candidate, Hillary Clinton. But Wall Street cheered. Between polling day on November 8th and March 1st, the S&P 500 sub-index of American banks’ share prices soared by 34%; finance was the fastest-rising sector in a fast-rising market.
/goo.gl/Fi3BWN

You can earn 4 times the bonus working as a junior banker for an American bank in London than a British one
Will Martin – Business Insider
Junior bankers in the London who work for British-headquartered banks earned bonuses this year of just one-quarter to what those working for American institutions in the UK earned this year, according to salary-benchmarking site Emolument.
/goo.gl/WpxWB9

Regions

The Evolution of Emerging Markets; Almost 80% of the emerging market index is made up of countries that were not investible in 1988
Dan Kemp – Morningstar
The late Sir John Templeton was well-known for saying “the four most dangerous words in finance are ‘this time it’s different'”. This wisdom has provided a lot of value over the years, and his preference for historical analysis has been particularly useful in understanding market cycles in a long-term setting. However, the other side is that one must also be mindful of the ways markets evolve. This can be demonstrated in a variety of ways, but we have selected emerging markets below as a means of illustrating the dangers of expecting history to exactly repeat itself.
/goo.gl/190lmh

Chinese Tech Investments Spur Huge Returns for Pint-Sized ETF
Carolina Wilson – Bloomberg
EMQQ fund is outperforming BlackRock’s far bigger EEM; Chinese internet companies Alibaba, Tencent spur growth
Take China and technology, put them together, and what do you have? One of the best performing exchange-traded funds in the world.
/goo.gl/FIdSV9

Brexit

Brexit is making Goldman Sachs eye up Frankfurt and Dublin for expansion
Lianna Brinded – Business Insider
Goldman Sachs is speaking to several different European cities as part of its Brexit contingency planning.
/goo.gl/gyjFzT

Theresa May’s Brexit Britain can no longer be considered a serious country
Joris Luyendijk – The Guardian
As the UK’s delusions and denial continue, continental Europeans are rethinking all those stereotypes about a liberal island set in a sea of reason and pragmatism
For many years now the logo “Keep calm and carry on” has been a huge hit across Europe. You can find it on posters, T-shirts and mugs – both the original text as distributed in 1939, to steel the British people for the war to come, as well as many “funny” variations. The slogan’s popularity is easy to understand as it unites the most important positive stereotypes about Britain in Europe: a pragmatic and liberal island people who were on the right side in second world war.
/goo.gl/nYIvRi

City of London’s Brexit job losses limited to ‘low thousands’ – new policy chief
Huw Jones and Andrew MacAskill – Reuters
A shift in banking jobs from Britain to continental Europe because of Brexit is likely be in the “low thousands”, the City of London’s new policy chief said on Thursday – and warned that a “turbulent” few months lay ahead.
/goo.gl/MMTbdw

Miscellaneous

Scope of Federal Probe into Fox News Broadens; Federal investigators have interviewed network executives and on-air talent, asking about sexual-harassment settlements
Joe Flint and Michael Rothfeld – WSJ
Federal authorities have interviewed current and former Fox News employees and on-air talent in a widening inquiry into the nature of sexual-harassment settlements and alleged intimidation tactics at the network, according to people familiar with the probe.
/goo.gl/Y3v0vR

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Past JLN Newsletters

CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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