First Read

Solidifying an American foothold: LSEG’s UnaVista and MTS platforms look to expand
Spencer Doar – JLN

The London Stock Exchange Group has plenty of reasons to be in the news due to its pending merger with Deutsche Boerse, but while all of those discussions take place, parts of the LSEG family are making moves of their own.

The two arms in motion are MTS, a bond trading platform, and UnaVista, a back and middle office platform for reconciliation, reporting, matching and validation. Both are in a similar situation — they have a large presence in Europe but not so much in the United States. For example, MTS is dominant in EU sovereign bond trading and UnaVista handles some 70 percent of all the UK’s MiFID reporting.

Read the rest here.


John Lothian News Spotlight

The Future of FinTech

Against the backdrop of a volatile global political and economic climate, we see technological advancement and adoption of disruptive mediums moving at an aggressive pace. Which technologies are “winners” and where should you focus your energy? Here are several outlined in this new whitepaper by Nasdaq.

Click HERE and fill out the short form for a link to the whitepaper



Debating Whether Dodd-Frank Is Worth Saving
Tyler Cowen & Noah Smith – Bloomberg
President Donald Trump wants to dismantle much of the Dodd-Frank Act of 2010, which was designed to prevent another financial crisis. The law barred banks from many profitable but risky businesses, forced them to add loss-absorbing capital, and required them to make detailed plans for how to shut down in a crisis. Critics say it made banks wary of lending by overburdening them with rules, hampering the economic recovery. Bloomberg View columnists Tyler Cowen and Noah Smith met online to debate Trump’s proposal.

**JK: An interesting discussion of where we go from here.


FidessaVision Fire Rooster
Outlook for capital markets in 2017. Fidessa’s Steve Grob visits Chinatown to talk about key issues facing the markets this year.

**JK: I want one of Steve’s fortune cookies.


Blackstone chief refuses National Gallery’s offer for painting
James Pickford and Javier Espinoza – Financial Times
A US hedge fund manager who paid more than £30m for a rare Florentine masterpiece has refused to sell it to the National Gallery because he would make a loss of more than $10m on the fall in the value of the pound.

**JK: I see a multi-leg, cross-asset class trade here.


US derivatives industry anticipates modest Dodd-Frank changes; Wholesale repeal of post-2008 financial crisis rules finds little industry appetite
Joe Rennison and Philip Stafford – FT
Contrasting with the message from the Trump administration, the US derivatives industry is not advocating a wholesale repeal of post-2008 financial crisis rules.

**JK: Scalpel, not a saw.


Tuesday’s Top Three
The top read story yesterday was about the banishment of FXCM, in FXCM banned by CFTC after taking positions against clients. Second went to Jessica Darmoni’s piece When Building Your Network, Ask These Simple Questions. Third went to the NY Times piece Michael Bloomberg on How to Succeed in Business


MarketsWiki Stats
93,384,163 pages viewed; 22,333 pages; 203,550 edits
MarketsWiki Statistics


Lead Stories

NYSE Told Major Outage in 2015 May Have Broken Securities Rules
Brian Louis -Bloomberg
Securities and Exchange Commission investigators believe the New York Stock Exchange violated the law during a 3 1/2-hour outage on July 8, 2015, which froze one of the world’s biggest financial markets. SEC enforcement officials sent the NYSE a Wells notice, the market’s owner Intercontinental Exchange Inc. said in its annual report, indicating those staffers will recommend SEC commissioners approve an enforcement action against the company.

The Race to the Speed of Light Is Accelerating
John Detrixhe – Bloomberg
Tower purchases a 5% stake in the company, while IMC owns 20%; New Line Networks, Vigilant also build microwave networks
Tower Research Capital LLC has bought a stake in a company that builds microwave radio systems for buying and selling in electronic markets, helping the network operator compete in a race to transmit data at speeds ever closer to the speed of light.

Rolling Back the Fiduciary Rule: a Primer on Making (and Unmaking) a Regulation
Crow & Cushing: Counselors at Law
?During the first weekend of the Trump Presidency, the President promised one of the ways he would stimulate growth in the economy was to cut federal regulations by 75%, or “maybe more.” A January 20, 2017 Executive Order required that, for every new regulation it proposed, a federal agency needed to identify at least two existing regulations to be repealed. The Code of Federal Regulations, the repository for existing rules, is approaching 200,000 pages.

White House memo confuses Wall Street on fate of fiduciary rule
Sarah N. Lynch and Elizabeth Dilts – Reuters
Conflicting signs from the White House have left brokerage firms and lobbyists unsure whether a controversial rule governing retirement advice will ever be put in place, but they are taking no chances and complying anyway.

SEC eyes charges over glitch that hit NYSE trading; Parent ICE says it will fight any action over hold-up it admits was ’embarrassing’
Gregory Meyer and Philip Stafford – FT
US regulators are seeking to charge the New York Stock Exchange over a technology glitch that halted trading on the equity market for more than three hours in 2015, the Big Board’s owner has disclosed.

Blankfein Says Goldman Would Take More Risks If Regulators Eased Up
Dakin Campbell – Bloomberg
Lloyd Blankfein said he’d like to operate Goldman Sachs Group Inc. with less capital as growth picks up and the rebound in fixed-income trading appears set to continue.

Biggest US banks have more than $120bn of ‘excess’ capital; Large buybacks and dividends could be on the way under Trump administration
Ben McLannahan -FT
The biggest banks in the US are sitting on more than $120bn of “excess” equity capital, according to Morgan Stanley, much of which could end up in bumper buybacks and dividends under the administration of President Donald Trump.

The World Is Still Recovering From Its Oil Hangover
Ben Eisen – WSJ
Investors may be paying less attention to crude these days, but it’s becoming clearer than ever how much the nearly two-year tumble in oil prices has rippled across the financial markets.

Commentary Why hedge funds may never be able to beat the market again
Ben Carlson – CNBC
Where has all the alpha gone? One of the biggest factors that investors have to deal with when turning their philosophy into a strategy is trying to figure out where their opportunity set lies. Competition in the markets has never been stronger, making it harder than ever to earn the elusive market outperformance that so many institutional investors actively seek.

Banks Are Finally Sprouting Anew in America; Eight groups have filed applications in recent months with FDIC to open new banks
Rachel Witkowski – WSJ
Startup banks are close to coming off the endangered species list. Eight groups have filed applications in recent months with the Federal Deposit Insurance Corp. to open new banks, spurred by an improving economy and an expected deregulatory push by Republicans in Washington.

Exchanges, OTC and Clearing

Deutsche Boerse, LSE merger costs top $375 million
Deutsche Boerse (DB1Gn.DE) and London Stock Exchange (LSE.L) expect their planned merger to cost more than 350 million euros ($375 million) in fees for bankers, lawyers, accountants and public relations, according to a regulatory filing made while doubts swirl about the 25 billion euro deal.

London Stock Exchange and Deutsche Boerse confident European regulators will wave through £21bn mega merger
William Turvill – City AM
The London Stock Exchange (LSE) moved one step closer to its £21bn mega-merger with German exchange Deutsche Boerse yesterday, formally submitting concessions to competition regulators in Brussels.

OCC Welcomes MIAX PEARL Options Exchange
Press Release
OCC, the world’s largest equity derivatives clearing organization, today congratulated MIAX on the launch of MIAX PEARL, which began operations on Monday. This successful launch brings the total number of U.S. options markets to fifteen.

Deutsche Börse and LSE offer narrow concessions to Brussels; Exchanges gamble that sale of French unit will be enough to win approval
Philip Stafford and Rochelle Toplensky – FT
Deutsche Börse and the London Stock Exchange Group have gambled on winning approval from Brussels with only limited concessions, indicating that the groups are confident of overcoming antitrust concerns about their EUR29bn tie-up.

LSE/Deutsche Börse: M&A payday
Financial Times
The advice M&A bankers give their clients is veiled in secrecy. Not so their fees, which are published either after deals complete, or as running estimates when transactions are long drawn out. Read ’em and weep, lesser professionals. At the top end, bankers to the EUR30bn merger of London Stock Exchange and Deutsche Börse can expect to make EUR172m. PR advisers would come away with only EUR7.6m.

German Dark Pool Closes Three Years After Major Brokers Revolted
John Detrixhe – Bloomberg
Morgan Stanley, Credit Suisse withdrew amid trading quirk; Incoming European rules will limit dark-pool market share
Deutsche Boerse AG is closing its dark pool for stocks, a sign the venue never recovered after major brokers unplugged from it three years ago.

Bats Acquisition Nearly Complete
Markets Media
The Chicago Board Options Exchange has one last hurdle to clear before it can complete its planned acquisitions of Bats Global Markets, by the end of the first quarter. which it announced in late September 2016.

MGEX Reports 15 Open Interest Record Days
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), has recorded the 2nd-best open interest total following Monday’s activity with 90,525 contracts, making it the 15th-consecutive record the Exchange has reported.

NCDEX tightens deposit operations at warehouses audit checks
Business Standard
The National Commodity and Derivatives Exchange Ltd (NCDEX) on Tuesday said it has decided to tighten deposit operations at warehouses audit checks to ensure the quality of deposits.

More than 1bn Euro notional volume traded in Total Return Futures; 12 of the 21 listed maturities -up to March 2022- have been traded by market participants. Current open interest stands at 31155 contracts.
In line with current market convention the EURO STOXX 50® Index Total Return Futures trade in „spread” in basis points and allow the implied repo rate associated with cash basket replication to be traded for the first time. All maturities are actively quoted by three Market Makers providing constant liquidity.

Single Stock Futures: Introduction of two SSFs; Single Stock Dividend Futures: Introduction of one SSDF
The Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG took the following decisions with effect from 13 February 2017:

Hedge Fund That Made 56% in FX Backs New Trading Platform
Chanyaporn Chanjaroen, Netty Idayu Ismail and Klaus Wille – Bloomberg
Spark Systems is backed by Dymon, Singapore’s central bank; City-state wants to grab a bigger slice of global FX trading
The $5.1 trillion-a-day foreign exchange market’s newest upstart trading venue has big ambitions to bring more of the world’s currency transactions to Asia. It also has some big-name backers.


FIS Reports Fourth Quarter and Full-Year 2016 Results
Press Release
FIS, a global leader in financial services technology, today reported that fourth quarter revenue increased 30.4 percent on a reported basis to $2.4 billion, from $1.9 billion in the prior year quarter. Net earnings from continuing operations attributable to common stockholders was $207 million, with a margin of 8.5 percent, compared to $105 million in the prior year quarter. Diluted EPS from continuing operations was $0.63 compared to $0.35 in the prior year quarter, an increase of 80.0 percent.

Ancoa delivers AWS hosted market surveillance platform to Convergex
Ancoa, provider of contextual surveillance and insightful analytics for exchanges, regulators, and buy & sell-side firms, today announced that Convergex, an agency-focused global brokerage and trading related services provider, has deployed Ancoa’s market surveillance platform to monitor all trading activity across its domestic (U.S.) and international cash equities and options brokerage businesses. The deployment monitors trading activity of all lit and dark venues including Millennium, Convergex’s proprietary ATS.

Broadridge Reports Results for the Second Quarter and First Six Months of Fiscal Year 2017 Broadridge
“Broadridge delivered another solid quarter,” said Rich Daly, Broadridge’s President and Chief Executive Officer.

Fidessa Group Adds Former Aveva Boss Richard Longdon To Board
Fidessa Group PLC on Wednesday said it has appointed Richard Longdon to its board as a non-executive director and senior independent director.

Blockchain Technology Market
Press Release
This research report provides an in-depth analysis of the global blockchain technology market based on type, application, and geography. The global blockchain technology market is categorized based on types into public blockchain, private blockchain, and consortium blockchain. The application segment for the global blockchain technology market are financial services and non-financial sector. The report analyzes each of these segments for the various geographies considered under the scope of the study.

A Few Minutes With FINRA—Report on Distributed Ledger Technology: Implications of Blockchain for the Securities Industry
Haimera Workie, FINRA’s Senior Director for Emerging Regulatory Issues, leads viewers through FINRA’s report on the implications of distributed ledger technology—providing a definition of the technology, discussing how it is being used, and explaining key implementation and regulatory considerations for broker-dealers.

Funding to bitcoin, blockchain start-ups grows to $550 million in 2016
Zee Business
Bitcoin has continued to be sought after as an important investment tool in 2016, especially with the geo-political and economic unrest in many parts of the world. Bitcoin and blockchain technology start-ups received $550 million in funding from investors in 2016 from almost no investment in 2012, according to a CB Insights report.

ChartIQ Joins Fidessa’s Partnership Program
Dan DeFrancesco – WatersTechnology
ChartIQ, which provides charting and advanced data visualization solutions, has joined Fidessa’s Partnership Program, which was launched in September 2015 with the goal of offering its users access to third-party tools and technologies.


Republican grandees make case for US emissions tax; Plan to tackle climate change could hand American families $2,000 each in dividends per year
Ed Crooks in New York – FT
A group of former senior US officials from past Republican administrations has backed a tax on carbon dioxide emissions, with revenues used to pay hundreds of dollars to every American citizen each year, as the way to make the conservative case for tackling the threat of climate change.

Barney Frank: Trump’s Plan to Kill Wall Street Reform Act Could ‘Crash’ the Financial System
Joseph Hincks – Fortune
When President Donald Trump signed an executive order Friday to peel back the 2010 Dodd-Frank Wall Street Reform Act, the big banks rallied. Shares of the seven largest by market capitalization on the S&P 500 shot up by $35.4 billion, Fortune’s Lucinda Shen reported.

NYC protesters march on Goldman Sachs, JPMorgan for Trump ties
Elizabeth Gurdus – CNBC
Protesters marched on Goldman Sachs’ headquarters in New York on Tuesday in a rally against Wall Street’s involvement in President Donald Trump’s administration.

Factbox: Impact of Trump tweets on company shares mostly short lived
President Donald Trump’s tweets on various companies have drawn much attention, but with the Dow .DJI hitting a record high on Tuesday and the S&P 500 .SPX also poised to hit a fresh peak, the impact on the shares of those companies has been mostly short lived.

Investing and Trading

Index Performance Announcement: CTAs start 2017 in the red
Societe Generale
Societe Generale Prime Services today announces the January 2017 performance data for its SG CTA indices. In a disappointing start to the year after a challenging 2016, all SG CTA indices posted negative returns in January. The flagship SG CTA Index, SG Trend Index, and SG CTA Mutual Fund Index were all in the low negative territory, down -1.13%, -1.16%, and -0.87% respectively. Conditions were even more challenging for short term traders, with the SG Short Term Trader Index posting -4.07%.

Big Oil Loses Its Mojo
Spencer Jakab – WSJ
The oil bust is over and producers are spending again to boost output, but the industry’s giants are changing how they replenish their reserves. That might make Big Oil less attractive to investors in the long run.

Index Basics: Calculating an Index’s Total Return
Reid Steadman – S&P Dow Jones Indices Indexology Blog
Total return indices deserve more attention. They more closely represent what an investor participant actually takes home: the return of an index, plus dividends paid and reinvested in the index. Their better-known counterparts, which only track price changes in securities—often called “price return indices”—get all the fanfare (see “Dow Hits 20,000 for the First Time”). Total return indices, on the other hand, are often quietly downloaded and placed in a chart halfway through a financial advisor’s presentation.

Sharks snap up multi-factor at Inside ETFs
Rolf Agather – FTSE Russell
The sharks were circling last week in Hollywood, FL – but not in the warm blue waters off the beach. They were indoors at the Inside ETFs annual conference.

Fear in a time of Trump: How stock-market investors think about risk
Mark DeCambre – MarketWatch
Fear. It is one of the prevailing themes Wall Street is focusing on as they survey a U.S. stock market that has staged a steady, albeit measured, assault on all-time highs over the past few months and as President Donald Trump settles deep into his chair in the Oval Office.

Orange juice futures leave sour taste for investors; Prices stay high in the physical market while forward contracts fall
Emiko Terazono – FT
Investors are turning sour on orange juice futures. After touching a record high in November, the orange juice futures market has fallen by almost a third. However, physical prices — which also rose last year — remain at record highs due to supplies being constrained.

Top Oil Trader Vitol Paid Staff Dividend of $820 Million in 2015
Andy Hoffman and Javier Blas – Bloomberg
350 employees split payout after bumper year for trading house; Total remuneration to board increased more than sixfold
Vitol Group, the world’s biggest independent oil trader, paid its top executives and staff a special dividend of $820 million in 2015, regulatory filings show.

Demand for Treasuries Is Now a ‘Made in the U.S.A.’ Phenomenon
Luke Kawa, Liz McCormick and Tracy Alloway – Bloomberg
Buy American, hire American. In the world’s biggest debt market, domestic purchasers have been faithfully fulfilling the first half of President Donald Trump’s inauguration decree.

Hedge Fund Scammed 9/11 Officers, Ex-NFL Players, NY Attorney-General Says; Lawsuit filed against RD Legal Capital in Manhattan federal court Tuesday
Rob Copeland – WSJ
Former New York City police officer Elmer Santiago was living in the back of his Jeep when he learned that a hedge fund could help pay his medical bills from the Sept. 11 terrorist attacks, according to his attorney.


How the ECB’s purchases have changed European bond markets; With about EUR1.5tn in assets, the central bank hopes to kick-start continent’s economy
Thomas Hale – FT
The European Central Bank now holds more than EUR1.5tn of assets, which it has bought as part of purchases designed to kick-start the continent’s economy. Late last year, it announced it would extend purchases at the end of March, albeit reducing the rate from EUR80bn to EUR60bn a month.

Even if Fiduciary Rule Changes or Dies, Fund Firms’ New Share Classes Will Stay; To better position themselves for rule, many mutual-fund companies have designed new share classes
Daisy Maxey – WSJ
New mutual-fund share classes meant to help financial advisers comply with the fiduciary rule will move forward at some fund firms regardless of the outcome of the Labor Department’s review of the regulation.

Big banks to hold more capital if buffers included in stress tests: U.S. analysts
Lisa Lambert – Reuters
Including funds that banks set aside to cover potential losses, known as capital buffers, in the annual stress tests that U.S. regulators administer to financial institutions would lead to big banks holding more capital, the federal office that monitors risks to the financial system said on Tuesday.

Bundesbank chief rejects ‘absurd’ claim of euro manipulation
Claire Jones – Financial Times
The president of the Bundesbank has decried US accusations that Germany is a currency manipulator, highlighting the risk of a clash between Washington and Berlin over Donald Trump’s protectionist rhetoric.

Hedge Fund Short Bets Are Going the Wrong Way… Again
Chris Dieterich – MoneyBeat – WSJ
The biggest short bets just keep going wrong. The 50 stocks in the S&P 500 that hedge funds are shorting most often rallied 6% last month, while the benchmark index itself rose just 1.8%, according to the prime services unit of Credit Suisse.

Citigroup gets bond settlement agent license in China
Citigroup Inc’s (C.N) China unit said on Tuesday that it had received the so-called “Type A” bond settlement agent license from China’s central bank, allowing it to add to its offering of sales, trading and research in the fixed-income business.

China’s ICBC overtakes Wells Fargo as world’s most valuable bank brand, says survey
Maggie Zhang – South China Morning Post
The Industrial and Commercial Bank of China has for the first time surpassed Wells Fargo to become the world’s most valuable banking brand, helping China itself become the No 1 country in terms of aggregate banking industry brand valuation, an industry report said.

E*Trade not moving to match Schwab’s price cuts: CFO
Elizabeth Dilts – Reuters
Discount brokerage E*Trade does not plan to follow its competitor Charles Schwab’s price cuts, the online trading platform’s chief financial officer said on Tuesday at Credit Suisse’s Financial Services Forum.

Citron’s New Short Strategy: Chumming For Trump
Owen Davis – Dealbreaker
We’ve written plenty on the career of the Trump-tweet algorithm, from its promising rise to its broader acceptance to its shameful end as an ad firm’s puppy-saving gimmick. Though the strategy seems like a no-brainer (and it is), the big issue with whipping up code that trades on the president’s tweets is how infrequent they are. To make the tactic worthwhile, you’d have to be able to somehow predict Trump’s tweeting in advance. Or better yet, make him tweet.

Deutsche Bank investment banking head Urwin in talks to leave: WSJ
Deutsche Bank AG’s (DBKGn.DE) investment banking chief Jeffrey Urwin is in talks to leave the role, and the bank is in discussions to name finance chief Marcus Schenck to run the unit, the Wall Street Journal reported, citing people familiar with the matter.


Trump banking review raises fears for global standards talks
Huw Jones – Reuters
President Donald Trump’s review of post-crisis banking rules could sound the death knell for new global standards now being finalised and rip apart a common approach to regulating international lenders, bankers and regulators said.

The Technology Impacts of Mifid II (Part 1)
Mifid II, set to come into force at the start of January 2018, will have far-reaching consequences for large numbers of European market participants, not only from an operational perspective, but also, significantly, in terms of their technology stacks. In the first installment of this three-part series, Ullink’s Richard Bentley explains how, where and why the consequences of the Directive will be most keenly felt.

ESMA says legal issues could affect blockchain deployment
Hayley McDowell – The Trade
The European Securities Market Authority (ESMA) has suggested legal issues that stretch beyond those contained in financial regulation could affect the deployment of blockchain technology.

Risk Alert: The Five Most Frequent Compliance Topics Identified in OCIE Examinations of Investment Advisers
Topic: The five most frequent compliance topics identified in deficiency letters sent to SEC-registered investment advisers.

Judge defers ruling on dismissal of Cooperman insider trading case
Suzanne Barlyn – Reuters
A U.S. judge on Tuesday held off ruling on whether to throw out a government complaint against billionaire investor Leon Cooperman and his firm, Omega Advisors Inc, after the defendant’s attorneys requested a dismissal, in a case that could set a legal precedent on insider trading.


2 Experts On US Trade & Emerging Markets: Don’t Believe Hype
Dimitra DeFotis – Barron’s
Investors need to avoid the hype and keep focused on competitive advantage theory and the nuances of the U.S. trade profile says Cumberland Advisors.

PwC: Emerging economies expected to dwarf developed markets by 2050
Pensions & Investments
Emerging economies could be twice the size of developed markets by 2050, growing to make up almost 50% of world gross domestic product, said a PricewaterhouseCoopers report.

China Central Bank Said to Call Bitcoin Exchanges for Talks
Bloomberg News
Exchange representatives meeting officials on Wednesday; Topics to be discussed said to include money laundering
China’s central bank is holding a closed-door meeting with several domestic bitcoin exchanges on Wednesday, people familiar with the matter said, heightening concerns that regulators will tighten their oversight of trading in digital currencies.

U.K. Banking Expansion Is Firmly on This Swedish CEO’s Agenda
Hanna Hoikkala – Bloomberg
Handelsbanken CEO says demand from small businesses is growing; Britain is Handelsbanken’s biggest market after Sweden
The man running Svenska Handelsbanken AB, one of Sweden’s biggest banks, sees no reason to let Brexit upend his expansion plans in the U.K.

How China Lost $1 Trillion
Keith Bradsher – NY Times
It’s a lot of money — but it’s shrinking. On Tuesday, China’s central bank said its foreign exchange reserves slipped to $2.998 trillion in January. While they dropped only a modest amount from December, the fall still put the reserves below the psychologically important $3 trillion level. Three years ago, they were at nearly $4 trillion.


Brexit Risks 30,000 U.K. Jobs and 17% of Bank Assets, Study Says
Gavin Finch – Bloomberg
About $1.9 trillion of assets could move to EU, Bruegel says; Estimates based on no U.K. access to EU single market
Global banks in London may have to relocate 1.8 trillion euros ($1.9 trillion) of assets to the continent after Britain withdraws from the European Union, putting as many as 30,000 U.K. jobs at risk, according to Brussels-based research group Bruegel.


Karthik Sankaran’s guide to macroeconomics, in verse
Financial Times
The following guest post is a compilation of limericks about macroeconomics and finance from Karthik Sankaran, the director of global strategy at Eurasia Group.

How to raise financially savvy kids
Chris Taylor – Reuters
Wondering why our kids are not so great with money? Just look in the mirror; it’s because adults are often financial train wrecks themselves.

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