Bits & Pieces
By JLN Staff
Brookly McLaughlin has rejoined Intercontinental Exchange as senior director, marketing and public affairs, giving ICE more political punch. She returns after a little more than a year at Magnetar Capital.
McLaughlin originally came to ICE in the CCX deal. She was the communications director for the Chicago Climate Exchange before it was acquired by ICE. She also previously worked for the U.S. Treasury Department under Hank Paulson.
The Security Traders Association of Chicago is in day two of their Annual Mid-Winter meeting at the Hilton in Chicago. Today Drew Mauck of 3 PTS Communications will lead a panel dsicussion on “Trading Under Trump.”
Panelists include Michael Lev of the Chicago Tribune, Bob Iaccino of Path Trading Partners, Lanre Sarumi of Level Trading Field and Deanna Hawthorne Lahre of StatFutures.
The work on our offices is finally done, though we are still settling back in. Come stop by suite 1602 of the CBOT Building and say hello if you are in the neighborhood.
Get Whatcha Need
Leo Murphy – Trading Technologies
I think maybe Mick Jagger needs to talk to some of today’s graduates and hiring managers. It seems that some aren’t sure what they want—and consequently don’t get what they need. The current skills gap quandary is not a myth, but rather an expensive problem. And it seems that it is “degree agnostic.”
**JK: Study cited showed “graduates lacked hard skills, such as writing proficiency, public speaking and data analysis, as well as soft skills, like critical thinking and problem solving.” Gaming skills, however, are off the charts.
Ex-Barclays Banker Leaked Tips for Job With Plumber; Gets Jail
A former Barclays Plc director said he had enough after 32 years on Wall Street and was hoping to land a less stressful job at a friend’s Long Island plumbing company. So he started passing tips about pending mergers to him.
**JK: How much is a clog worth?
Five fintech surprises for 2017
Haskell Garfinkel, fintech co-lead at PwC, delves into the facts, fads and fiction that will shape the fintech universe in 2017.
**JK: Number one: One-size fits all robo-advisors will struggle.
How a Sensational, Unverified Dossier Became a Crisis for Donald Trump
Scott Shane, Nicholas Confessore and Matthew Rosenberg – NY Times
Seven months ago, a respected former British spy named Christopher Steele won a contract to build a file on Donald J. Trump’s ties to Russia. Last week, the explosive details — unsubstantiated accounts of frolics with prostitutes, real estate deals that were intended as bribes and coordination with Russian intelligence of the hacking of Democrats — were summarized for Mr. Trump in an appendix to a top-secret intelligence report.
**JK: I vote for Hugh Laurie to play the British spy in the movie.
Wednesday’s Top Three
Yesterday’s top read story came from Bloomberg, covering the controversial opinion that quants are roiling markets. It’s piece, Wall Street’s Most Famous Quants Fed Up With JPMorgan Soothsayer, follows the view of AQR. Second went to the staggering number of bond trading platforms in The Trade’s Number of bond trading platforms available reaches 128. Our third most read piece of the day was another floor closure, the FT’s piece NYSE MKT to end floor trading for small stocks
92,226,114 pages viewed; 22,303 pages; 203,185 edits
NYSE to expand floor trading as part of integrated dealing system; Increased number of securities will include Nasdaq-listed stocks and ETFs
Nicole Bullock – FT
The New York Stock Exchange is expanding trading on its storied floor as part of a move to an integrated technology system for trading equities and options on its markets.
****SD: Reuters story here
U.K. Bankers Drop Push to Keep EU ‘Passporting’ After Brexit
Gavin Finch – Bloomberg
Lobby group calls for U.K., EU deal guaranteeing market access; TheCityUK wants interim deal as early as March to retain jobs
The U.K.’s finance industry dropped its demand to maintain the current easy access to the European Union’s single market once Brexit takes place.
When Bad Things Happen to Good Funds; A strong long-term record isn’t enough to hold on to investors.
Charles Stein – Bloomberg
William Nygren has succeeded at a difficult task: picking stocks to deliver market-beating returns over long stretches of time. Both his $16.5 billion Oakmark Fund and his $5.6 billion Oakmark Select Fund have topped the S&P 500 by an annual average of more than a percentage point over the past 15 years. Even so, investors pulled billions of dollars from his two big mutual funds last year.
US derivatives market will trump post-Brexit Europe; With Europe’s derivatives clearing landscape unclear following the UK Referendum, the US market could be the next destination for business.
Dan Barnes – The Trade
For the derivatives markets, a shakeup in national or regional market integrity like Brexit is likely to have subtle effects. The derivatives business is a global market. That has not dampened the aspirations of certain politicians. Soon after the referendum, the French president, François Hollande, called for euro-denominated clearing to be relocated to the European Union from the UK.
JP Morgan slapped with $900k fine for overcharging clients; Clients were overcharged $7.8 million for clearing and exchange services, according to the CFTC.
Hayley McDowell – The Trade
JP Morgan has been handed a fine of $900,000 by US regulators for overcharging clients for clearing and exchange services.
Outgoing CFTC Chief Warns Against Rollback of Postcrisis Financial Overhauls; Focus on market liquidity, central clearinghouses, automated trading, cyberattack risks, Timothy Massad says
Nina Trentmann – WSJ
Timothy Massad, the outgoing chairman of the Commodity Futures Trading Commission, warned the incoming Donald Trump administration against rolling back postcrisis financial regulation.
Market takeaways from Donald Trump press conference
Beneath a Starbucks and adjacent to a Gucci shop, Donald Trump stood at the podium and uttered a request for respite. “Gimme a break,” he said, during his combative press conference in the atrium of Trump Tower. The dollar, biotechs and shares in Lockheed Martin themselves endured a bruising time on Wednesday, however investors were left short on policy details on revving up the US economy. Instead much of the press conference was dominated by Russia and the intelligence controversy, and Mr Trump’s business relationships, leaving the so-called Trumpflation trade bereft of fresh impetus for at least a little longer.
Binary trading group winds down after regulatory issues; Cyprus and Israel-based Banc de Binary had attracted inexperienced investors
Chloe Cornish – FT
Banc de Binary, a controversial and high-profile global online trading platform that sponsored Liverpool Football Club, is renouncing its licence after incurring regulatory penalties.
Why Most Economists Are So Worried About Trump
Justin Wolfers – NY Times
If the November election was intended as a rejection of elites, of expertise and of the sort of technocratic advice that economists often give, it’s a punch that has landed.
‘Muddled Brexit’ Threatens London’s Future, Mayor to Warn May
Thomas Penny – Bloomberg
Sadiq Khan rallies support for U.K. to stay in single market; Capital should have more control over its economy, mayor says
London Mayor Sadiq Khan will call on the U.K. capital’s business and local government leaders to press for “privileged” access to the European Union’s single market after Britain quits the bloc.
City of London lobbying group drops demand for EU ‘passport’; ‘Equivalence’ deal now seen as simplest way to preserve links after Brexit
Jonathan Ford – FT
The City of London has retreated from demanding continued access to the single market in any post-Brexit deal with the EU, according to its principal lobbying group.
Exchanges, OTC and Clearing
NYSE To Expand Floor Trading To All U.S. Equity Securities in 2017
Highest quality market model to deliver greater choice
The New York Stock Exchange (NYSE), part of Intercontinental Exchange (NYSE:ICE), today announced plans to expand its floor-based trading operations, offering investors even greater access to trade all U.S. securities for the first time with NYSE’s unique and proven market model.
Tabb Options Liquidity Matrix – US Options Volume Falls in December
US listed options volume declined in December as traders pulled back after an active November propelled by the surprise election of Donald Trump. Volume totaled 327.5 million contracts in December 2016, a 14.5% decline from November’s 383.2 million contracts.
NCDEX proposes hybrid options trading
Business Standard News
With options trading in commodities about to start, the National Commodity and Derivatives Exchange (NCDEX) has asked the Securities and Exchange Board of India (Sebi) to allow derivatives that have elements of the European and American systems. However, Sebi will approve European-style options, in which the date of expiry is pre-determined and in sync with the expiry of the relevant futures contract.
Nasdaq December 2016 Volumes, 4Q16 Est. Revenue Capture
Nasdaq today reported monthly volumes for December 2016, as well as quarterly volumes and estimated revenue capture for the quarter ending December 30, 2016, on its investor relations website.
CBOE Vest Launches CBOE Vest S&P 500 Enhanced Growth Strategy Fund (ENGIX)
CBOE Vest, an investment manager focused on Target Outcome Investment strategies, today announced it has launched the CBOE Vest S&P 500 Enhanced Growth Strategy Fund (ENGIX). The fund is designed to track the CBOE S&P 500 Enhanced Growth Index Balanced Series (SPEN).
GF International Asset Management Launches First ETF on London Stock Exchange
London Stock Exchange
London Stock Exchange today welcomes the GF International-FTSE China A UCITS ETF to list in London. The ETF listed by GF International Asset Management, a subsidiary of GF Fund Management, is the first ETF to track the FTSE China A Index, which is part of the FTSE Global China A Inclusion Index Series, and the first ETF from a Chinese asset management firm based in Europe.
New instruments of the week: 02/2017
Kindly note the instrument setup information in this circular for the Eurex Bonds trading platform
Mnuchin to Divest Stakes in 43 Investments to Avoid Conflict
Saleha Mohsin – Bloomberg
U.S. Treasury Secretary nominee Steven Mnuchin, who would be among the richest men to hold the job this century, plans to divest his interests in 43 companies and investments to avoid conflicts.
Donald Trump’s colossal error on jobs during his press conference
Steve Liesman – CNBC
Donald Trump wasn’t asked much about the economy during his press conference on Wednesday, but when he was, the president-elect managed a rather colossal error.
What Wall Street wants from Trump
Ben McLannahan and Barney Jopson – Financial Times
When President George W Bush embarked on a drive to loosen financial rules in 2003, two of the top US bank regulators posed for a photo with industry lobbyists. They stood behind a stack of papers tied with red ribbons, four of them holding garden shears. Another held a chainsaw.
Another Goldman Executive Is Said to Be Going to Trump Administration
Kate Kelly and Maggie Haberman – NY Times
Dina H. Powell, who runs many of Goldman Sachs’s philanthropic initiatives, will soon leave the company for a new role as adviser in the Trump White House, according to multiple people familiar with the matter.
Investing and Trading
U.S. fund investors, countering trend, favor bonds over stocks: ICI
Trevor Hunnicutt – Reuters
Investors injected the most cash into U.S.-based bond funds and pulled the greatest amount of money from stock funds since the Nov. 8 U.S. presidential election during the latest week, Investment Company Institute data showed on Wednesday.
SocGen’s Albert Edwards: Turmoil this year could be as bad as 2008 financial crisis
Permabear Albert Edwards, strategist at Société Générale, has warned the risk of a recession in 2017 is much higher than people anticipate and the year could see similar levels of financial turmoil to those suffered in 2008. Speaking at Société Générale’s annual global strategy presentation, entitled Are investors in denial or do fiscal fireworks mark yet another ‘new era’?, Edwards told investors a recession is highly likely this year due to large corporate debt loads in the US.
Minimum variance indexing—an antidote for the seasick
Tom Goodwin – FTSE Russell Blog
In a world where significant market volatility and drawdowns have become common-place, market participants are eager to find a means of maintaining equity market exposure while attempting to save themselves from the motion sickness associated with wild market swings. According to the 2016 FTSE Russell smart beta survey, risk reduction is the second highest investment objective when evaluating smart beta strategies. And where there is index demand, a variety of options will inevitably be created to satisfy it—among them is minimum variance indexing.
Schmelzing: Perfect Storm Can Quickly Turn Bond Market
Paul Schmelzing, visiting scholar at Bank of England, and Peter Dixon, global equities economist at Commerzbank, offer historic perspective on the current bond bull market. They speak with Bloomberg’s Francine Lacqua on “Bloomberg Surveillance.”
The Red Zone
Jamie Farmer – S&P Indexology
In grid-iron football, The Red Zone refers to the area between the 25 yard line and the goal line, the last remaining ground the offense must battle through in order to score a touchdown. This is a somewhat apt metaphor for what we’re currently witnessing with the Dow Jones Industrial Average.
Bank ETFs still favored as investors see growth and Trump bump ahead
Ryan Vlastelica – MarketWatch
Exchange-traded funds that track the financial sector, one of the most popular and successful trades of 2016, have maintained their upward momentum in the new year, with investors continuing to pour money into the group.
Bond investors rebel against weaker deal terms
Eric Platt in New York – Financial Times
Buried within the 170-plus pages of marketing materials for a bond to be sold by Fibria Celulose, a Brazilian pulp manufacturer, is a paragraph that could cost investors. The clause details how bondholders will be deprived of certain premiums if the company breaches its covenants — extra cash to which investors have long been accustomed. Having first appeared in corporate bond documents last autumn, similar language has since appeared in a dozen sales, including delivery company FedEx and insurance broker Marsh & McLennan.
Activist hedge funds profit amid market volatility
Lindsay Fortado – Financial Times
The two largest activist investors in Europe, Cevian Capital and The Children’s Investment Fund, were among the best performing fund managers last year even as stockpicking rivals struggled amid volatility in markets. Cevian, which holds stakes in ABB, RSA and ThyssenKrupp, returned 19.4 per cent, while TCI, Sir Chris Hohn’s hedge fund, made 13.5 per cent, according to people familiar with the funds.
European court rejects UBS appeal against bail in French tax case
Swiss bank UBS (UBSG.S) has failed to persuade the European Court of Human Rights to overturn an order that it must post 1.1 billion euros ($1.17 billion) bail in a French case about whether it helped clients avoid tax.
Clearpool launches new corporate identity
Clearpool unveils their new corporate identity with a new website and logo as part of a corporate rebranding initiative announced today.
Brussels and London form ‘fintech bridge’
Jemima Kelly – Reuters
A delegation from Belgium’s financial technology sector came to London with its finance minister this week to set up a “fintech bridge” with the British capital that will enable cooperation on the burgeoning sector.
A Profile of Level Trading Field; If Apple built visual trading tools similar to the likes of Bloomberg, it would look like Level Trading Field
When we saw Level Trading Field at the Innovators Pavilion at the 2016 FIA Expo, we knew we had to take a deeper dive into the platform. With no user guide needed, much like the iPhone, Level Trading Field can be quickly employed by traders. To further understand Level Trading Field’s parallels to Apple, we asked Lanre Sarumi, the company’s CEO, to break down what makes his platform unique
Bank partners with IBM to launch first blockchain service in China
Chris Brown – The Stack
Postal Service Bank of China (PSBC) has selected IBM as a partner for its blockchain asset custody system, launched this week. This represents the first instance of blockchain asset custody deployment in China.
Northwestern Mutual launches $50 million fintech venture fund
Anna Irrera – Reuters
Northwestern Mutual Life Insurance Co [NMLIC.UL] has set up a $50 million corporate venture fund to invest in fintech startups, in a bid to expand its digital offering and capabilities.
U.S. plan to ease Wall Street rules may not be worth cost for banks: Fitch
Leading U.S. banks may find that a Republican plan to ease restrictions on Wall Street is not worth the additional cost of capital, a report from Fitch Ratings said on Wednesday.
SEC Blesses Negotiable Mutual-Fund Fees
Jason Zweig – WSJ
Ever since 1940, mutual-fund commissions have been non-negotiable. That could soon change.
JP Morgan Securities to pay $900,000 for supervision failures -CFTC
The U.S. Commodity Futures Trading Commission said on Wednesday it ordered J.P. Morgan Securities LLC to pay $900,000 to settle charges it had failed to properly supervise employees over fees charged to customers trading on the Chicago Mercantile Exchange.
****SD: CFTC release here
JPMorgan Ordered to Pay Damages for Firing Whistle-Blower
Nathaniel Popper – NY Times
JPMorgan Chase inappropriately retaliated against a former employee who raised questions about the bank’s sales tactics and investment products, the Labor Department found.
L3 Technologies to pay $1.6 million to settle record-keeping charges: SEC
L3 Technologies Inc (LLL.N) has agreed to pay a $1.6 million penalty to settle charges it failed to maintain accurate books and records and had inadequate internal accounting controls, the U.S. Securities and Exchange Commission said on Wednesday.
****SD: SEC release here
CFTC Issues Order of Registration for ICE Endex Markets B.V. to Permit Trading by Direct Access from the U.S.
The U.S. Commodity Futures Trading Commission (CFTC) announced today that it has issued an Order of Registration to ICE Endex Markets B.V. (ICE Endex), a Foreign Board of Trade (FBOT) in Amsterdam, Netherlands. Under the Order, ICE Endex is permitted to provide its identified members or other participants located in the U.S. with direct access to its electronic order entry and trade matching system.
AQMetrics Adds MiFID II Readiness Enhancements To RegTech Solution – Leading Cloud-Based Risk And Compliance Platform Adds Features To Help Buy-Side And Sell-Side Better Prepare For MiFID II Obligations
Leading RegTech company, AQMetrics, today announced new enhancements to its end-to-end risk and compliance solution as part of its award-winning cloud-based platform. These enhancements will help both buy-side and sell-side firms better prepare for MiFID II (Markets in Financial Instruments Directive II), a year in advance of the regulatory deadline of January 2018.
ESMA Calls for Consistent Application of MIFIR Product Intervention Powers
The European Securities and Markets Authority (ESMA) has issued today an Opinion regarding the scope of the product intervention powers under the Markets in Financial Instruments Regulation (MiFIR). These powers can be exercised by both national competent authorities (NCAs) and ESMA from 3 January 2018.
FY 2017 President’s Budget, February 2016
The annual budget prepared for the Congressional Committees on Appropriations requests the resources estimated to ensure sufficient regulation and protection of the futures, options, and swaps markets for the current fiscal year.
Russian banks spooked as large firms get direct access to Moscow markets
Major Russian banks fear a loss of business when large companies gain direct access to currency and money markets next week under new rules that supporters say will boost liquidity on the Moscow Exchange (MOEX.MM).
Brazil Surprises With Deep Rate Cut, Signals New Easing Pace
Mario Sergio Lima – Bloomberg
Brazil slashed its benchmark interest rate in a surprisingly aggressive move, as policy makers ratcheted up their efforts to jumpstart the country’s shrinking economy.
Turkey’s Central Bank Said to Tighten Liquidity to Prop Up Lira
Onur Ant – Bloomberg
Turkey’s central bank is taking more steps to prop up a tumbling currency by forcing banks to borrow at a higher rate, said a person with direct knowledge of the matter. The lira surged against the dollar.
Sebi may lower broker fee to Rs 15 per transaction of Rs 1 cr; Markets regulator is expected to see an increase in its overall fee income in current fiscal
Sebi is looking to lower broker fee to Rs 15 per transaction of Rs 1 crore as part of calibration of various other fees collected by the regulator from different market intermediaries.
Hong Kong’s forex market benefits from a yen for hedging; City stands to gain on Asia rivals if it can keep its newfound liquidity going
Jennifer Hughes in Hong Kong – FT
Remember when the dollar plunged from ¥135 to ¥115 in a week? Anyone who went through those heart-stopping days in 1998 does. Foreign exchange is a market whose steady action is taken for granted until it suddenly isn’t. Witness more recently the pound’s plunge last October when it lost 6 cents against the dollar in two minutes for no clear reason.
The Latest Gamble in Life Insurance: Sell It Online; Life insurers are making it easier to get policies online, often waiving a medical exam and instead relying on digital prescription-drug, motor-vehicle and other records.
Leslie Scism – WSJ
In October, Dan Finkelstein, a 37-year-old father of three, set out to explore buying life insurance. He went online, and to his surprise in about 20 minutes he was the owner of a $750,000 policy.
Chicago Mayor Pushes Moody’s to Rescind City’s Junk-Bond Rating
Jordyn Holman – Bloomberg
Chicago is stepping up its battle with Moody’s Investors Service ahead of a $1.2 billion bond sale next week.